Presented To:

Prof. G Ahmad Rana

Presented By:
•Rana Arslan Sarwar
•Hashim Rana
•Zeeshan Tauqeer
•Mugheeth Khan
•Syed Faraz Ali
•Adeel Tariq
•Khurram Tariq
" Allah Never Inflicts
A Disease Without
Providing A Cure ..."
Prophet Muhammad (PBUH)
Merck Pharmaceutical Co.
Introduction

• Merck is an American legend and icon of a firm.

• Global pharmaceutical co.
• Founded in 1891.
• Headquarters: Whitehouse Station, New Jersey, United
States.
• Core Business is Discovery, development, manufacture
and marketing of products to improve Human and
animal health.
• It sells its products through drug wholesalers,
retailers, hospitals etc.
• Merck is a global pharmaceutical enterprise with
around 40,000 employees in 64 countries.

•
Richard T. Clark, President &
CEO
History
Slogan
History
History
History
History
Organizational Hierarchy
Vaccine Segment
Mission Statement
Mission Statement
Goals/Objectives

• EMPLOYEE-RELATED GOALS:
• Implement or improve the Talent Management Process to identify
and promote talented employees.
• Increase the proportion of women in senior management positions

• Environmental goals
• Achieve an ISO 14001 Group certificate by the end of 2010.
• Increase waste recycling ratio (recycled waste: total waste) by20% to
at least 57% by 2010.
• COMMUNITY GOALS:
• Combat drug counterfeiting by supplying the compact
mobile laboratory GPHF-Minilab®.
•
PESTLE analysis

• POLITICAL:
• Political instability and a deteriorating law and order situation in the
country are other concerns. The drug manufacturers find it
extremely difficult to cope with the situation.
•
ECONOMIC:
• Almost 95% of raw materials used by the pharmaceutical industry of
Pakistan are imported from different parts of the world. The rapid
devaluation of the Pakistan Rupee against major currencies of the
world, (e.g. 60% against USD) has made the imported raw
materials much costlier.
• Social
• With its large population, growing economy and increasing health
awareness among the population, Pakistan should be regarded as a
significant emerging market for pharmaceutical firms
PESTLE ANALYSIS:

• TECHNOLOGICAL:
• Technologically this industry is facing some
problems like lake of electricity, repair of latest
equipments and research environments.
• LAW:
• In pharmaceutical industry the Intellectual
Property Protection is a major concern
regarding law.
PORTER’S 5 FORCES MODEL:
• Rivalry among Existing Firms:
• the rivalry among the existing firms is high and
these firms are one to one competing with each
other in every area.
• Threat of new entrants
• Huge investment, a large number of competitors, political
instability, government regulations, laws and a huge
amount for research and development are some of
many threats for a new entrant in pharmaceutical
industry so the threat of new entrants is low in this
industry
• Threat of substitutes:
• patents for the new medicine formulas that this medicine
will be produced only by a particular company having
the patent. So in the case of many medicines it is low
and as a whole It is moderate.
•
• Bargaining power of customers
• Bargaining power is low because customers are not very
aware of medicines and only use the particular
medicine prescribed by the doctors.
• Bargaining power of suppliers
• As in Pakistan about 95% of raw material for the
medicines is imported from countries such as china,
India, Germany, Japan, United Kingdom and
Netherlands. Many companies started producing it
locally so the bargaining power of supplier is low as
there a large number of suppliers available in the
market.
Strategy Formulation
Framework
Stage 1: The Input Stage
Internal Factor Evaluation Matrix
 Internal Factor Evaluation
Matrix
Key Internal Factors Weight Rating Weighted
Score
Strengths
•Strong R & D. .20 4 .80
•Highly Experienced Top Management having a wealth .10 4 .40
Weaknesses
of knowledge. .
•Goodwill as CSR. .10 4 .40
•Dissatisfied employees & shareholders. .15 .15
•New Products are very successful. .10 3 .30
•Expensive medicines because of advertisement .15 13 .45
•Regular Innovation -1st Mover Advantage. .05 .15
expenses. 3
•Revenue is dropped by 50% in 2003. .10 .30
•Lack of Product Diversity. .05 3 .15
3

Total
1 . 00
3 . 10
External Factor Evaluation Matrix
External Factor Evaluation
Matrix
Key External Factors Weight Rating Weighted
Opportunities Score
•Increase in Aging Population . .20 3 .60
•Global expansion . .20 2 .40
•High Growth Rate Industry ( 8 . 4 % rate ).
•PhRMA
.05 3 .15
offered voluntary advertisement .
.10 2 .20

Threats
•Litigation & investigation Issues . .15 4 .60
•Competitors . .15 3 .45
•Changing Govt . regulation .
•Patent Expiry of medicines.
.10 3 .30
.05 3 .15

Total
1 . 00
2 . 85
Competitive Profile Matrix (CPM)
Competitive Profile Matrix
(CPM)
Merck Co. Pfizer Inc. J & J Inc.

Critical Success Factor Weight Rating W. Rating W. Rating W.

Score Score Score

•Advertisement .15 4 .60 3 .45 3 .45

•R & D .15 4 .60 3 .45 2 .30
•Management Experience .10 4 .40 3 .30 3 .30
•Litigation & Investigation .10 2 .20 4 .40 4 .40
•Market Share .15 2 .30 4 .60 3 .45
•Goodwill .10 3 .30 4 .40 4 .40
•Financial Position .12 3 .36 4 .48 3 .36
•Product Diversity .13 2 .26 3 .39 3 .39

Total 1.00 2.87 3.47 3.05

Stage 2: The Matching Stage
 CSR of Merck Co:

•
• Merck proactively promote the
public interest by
encouraging :
– Community growth &
Development,
– Voluntarily eliminating
practices that harm.
• Nearly $ 26 million spent:
– Tsunami in in southeast
asia, 26th Dec. 2004.
– Earthquake in Pakistan
8th oct 2005.
•

http://www.duke.edu/web/soc142/team2/images/merck2.jpg
SWOT Matrix
SWOT Matrix

Strengths ----- s Weakness ---- W

•Strong R & D . ( S1 ) •Dissatisfied Employees &
•Highly Experienced Top Management Shareholders . ( W1 )
Having A Wealth Of Knowledge . ( S2 ) •Expensive Medicines Because Of

•Regular Innovation - 1st Mover Advertisement Expenses . ( W2 ).

Advantage . ( S3 ) •Net Income Is 1 Billion Less In

•Goodwill Is Reduced ( S4 ) 2004 Than In 2003 . ( W4 )

Opportunities----o SO Strategies ---- so WO Strategies ----- s

•Phrma Offered Voluntary Advertisement. •Through R & D , Merck Can Get More •Merck Co . Can Reduce Its Expenses By

(O1) Market Share . ( S1 , O4 ). Using Phrma . ( O1 , W2 ).

•Experienced Management can attract •Merck Can Increase Its Goodwill
•Increase In Aging Population. (O2)

•Joint Ventures With Pfizer & J & J. (O3) competitors for Joint ventures .( S2 , S4 , Through Joint Ventures With J & J .
•High Growth Rate Industry (8.4% Rate). O3 ) ( O3 , w3 ).
•Through Innovation , Merck Can Get More
(O4)
Market Share . ( S3 , O4 ).
Threats------t ST Strategies ---- s WT Strengths ----- s
•New CEO Should Handle Litigation •Merck Can Make Short & Long - term
•Litigation & Investigation Issues .
( T1 ) Issues With His Experience . ( S1 , T1 ). Agreements With Its Competitors To
•Strong R & D Can Be Used To Compete Make Its Employees & Shares Satisfied .
•Competitors . ( T2 )

•Local Competitors . ( T3 ) With Competitors . ( S1 , T1 , 2 ). ( W1 , t2 , 3 ).

•Merck Can Stop Producing Risky
•Patent Expiry of medicines.(T4 )
Products Like Vioxx Etc .
 SPACE MATRIX:
Internal Strategic position External strategic position
Financial strengths(FS) Environmental Stability(ES) Y’
Y
ROI
• +4 •Technological changes -3
• Leverage +3 •Rate of inflation -5
•Liquidity +3 •Demand variability -2
Competitive
•Working capital Advantage(CA) +4 Industry
•Price range of Strength(IS)
competing products -2 X
•X’
•Cash flow +4 •Barriers to entry into market -2
Market share
•Inventory turnover
-3 •Growth potential +5
•Product quality +2
-2
•Competitive pressure
•Profit potential -3
+5
•Earnings per share +5 •Ease of exit from market -2
•Product life cycle -3 •Financial stability +4
•Price earnings ratio +4 •Cash elasticity of demand -4
•Customer loyalty -4 •Technological know-how +3
•Risk involved in business -2
•Competition’s capacity utilization -2 •Resource utilization +3
•Average -2.77
•Technological know-how -2 •Ease of entry into market +2
•Control over suppliers and distributors -2 Productivity, capacity utilization
• +2
•Average -2.86 Average
• 3.43
As 0.855 and 0.57 lay in the aggressive quadrant of space matrix graph so the firm’s
strategies will be aggressive .e.g. Market development, market penetration, product
development and diversification
•
Graph
IE Matrix
 IE Matrix
IFE Score
4.0 3.0 2.0 1.0

I II III
EFE Total W . Score

IV V VI
4.0
2.0

VII VIII XI
1.0
3.0
BCG Matrix
BCG Matrix

Serono

Consumer health care

BCG matrix(Pakistan)

•Sangobion •Buscopan Plus

•Concor •Neuromet
•Glucophage
•Evion

Wintogeno
BCG matrix(Pakistan)

Erbitux Diabion
Flexagel saizen
Nasvin

Zetia
The Grand Strategy Matrix
 The Grand Strategy Matrix

Rapid Market
Growth

Consumer Health Care Serono

•Horizontal Integration •Horizontal Integration
•Market Penetration
II I
•Market Penetration
•Divestiture •Market Development
Weak •Liquidation •Product Development Strong
Competitive
Position

III IV
Competitive
Position
Slow Market
Growth
Stage 3: The Decision Stage
The Decision Stage
Quantitative Strategic Planning
Matrix (QSPM)
 QSPM of Merck Co.
Joint Ventures withRestructuring
J&J. for
reducing costs.

Key Factors Weight AS TAS AS TAS

Opportunities
•Increase in Aging Population. .20 3 .60 1 .20
•Global expansion. .20 4 .80 2 .40
•High Growth Rate Industry (8.4% rate). .05 4 .20 2 .10
•PhRMA offered voluntary advertisement. .10 1 .10 4 .40

Threats
•Litigation & investigation Issues. .15 - -
•Competitors. .15 3 .45 1 .15
•Changing Govt. regulation. .10 2 .20 1 .10
•Patent Expiry of medicines. .05 1 .05 3 .15

Strengths
•Strong R & D. .20 4 .80 3 .60
•Highly Experienced Top Management having a wealth of knowledge. .10 3 .30 3 .30
•Regular Innovation -1st Mover Advantage. .05 3 .15 3 .15
•New Products are very successful. .05 4 .20 3 .15
•Goodwill as a CSR. .15 1 .15 1 .15

Weaknesses
•Dissatisfied employees & shareholders. .15 1 .15 1 .15
•Expensive medicines because of advertisement expenses. .15 1 .15 4 .60
•Revenue is dropped by 50% in 2003. .10 2 .20 1 .10
•Lack of Product Diversity. .05 2 .10 2 .10

TOTAL 4.60 3.80

Core competencies analysis

• Merck’s core competencies are innovative strength, fast and efficient

market penetration, high-quality products and processes,
customer focus, excellent command of logistic processes and
superior service.
• It has become the first pharmaceutical company to export medicines
to Afghanistan after the establishment of the new government in
that country.
• Highly Experienced Top Management having a wealth of knowledge.
• Producing soft gelatin in Pakistan.
• Goodwill in Corporate Social Responsibility.
• 1st Cholesterol Lowering Drug. (Zetu)
•
CORPORATE CULTURE

• Merck having a corporate culture that creates trust and makes innovation possible, a strong
customer focus, responsible handling of natural resources, and social commitment have always
been the keys to Merck’s success.
• In April 2007, the Executive Board enacted the Merck Social Charter. This is binding on the entire
Merck Group. It reinforces our claim to treat all employees fairly and in compliance with local
laws and regulations. In the following areas, we have committed ourselves to certain standards
that apply to all our sites worldwide:
• • Wages and salaries
• • Working hours
• • Freedom of association
• • Non-discrimination and equal opportunity
• • No child labor
• • No forced labor
• • Prevention of abuse and harassment
• • Prevention of bribery and corruption
• Our success is based on courage, achievement, responsibility, respect, integrity, and transparency.
These values determine our actions in our daily dealing with customers and business partners
as well as in our teamwork and our collaboration with each other." By believing in Courage,
achievement, responsibility, respect, integrity, and transparency
STRATEGIES UNDERTAKEN AT THE

• Corporate level
• Each year, typically in the summer, senior top management set aside a
specific period to develop, discuss and refine the Company’s long-
range operating plan and overall corporate strategy. In the fall, the
Board typically reviews the Company’s overall annual performance
and considers the following year’s operating budget and capital
plan.
• BUSINESS UNIT LEVEL
• To keep in touch with employee perspectives about our culture, Merck
conducts an annual Culture Assessment that measures Merck’s
progress toward becoming a high-performance organization
• FUNCTIONAL LEVEL
• Merck implemented a global flexible work arrangement policy and
launched tools to increase access to such arrangements worldwide.
• Merck outlined steps in the Company’s ongoing efforts to reduce its
cost structure, increase efficiency and enhance competitiveness as
part of our overall strategy to regain an industry leadership
position
• As part of the 2008 restructuring program, Merck expected to
eliminate approximately 7,200 positions – 6,800 active employees
and 400 vacancies – across all areas of the Company worldwide by
the end of 2011.
•
MANAGEMENT STRATEGIES

• HRM
•Merck Serono, a division of Merck, Germany, announced that it has won

the prestigious "Human Capital Leadership Award" 2008 for

"Strategic HR Leadership" by the Society for Human Resource
Management (SHRM).
•Merck Serono itself achieved total revenue growth of 7.4% in 2007 and

9.7% in the first quarter of 2008 - which was faster than that of the
overall pharmaceutical market.
• Decision Making
• Merck is constantly faced with tough decisions on which products to
invest in and how to allocate resources to functional areas. All
these decisions are made under mounting pressure from the
environment, with limited resources and staff, and with
substantial uncertainties over drug discovery and development
• TQM
• Merck believes that all world should have access to quality, affordable
health insurance coverage.
• Merck believes that action toward health system reform and coverage
for the uninsured should be built on the following broad
principles:
• Motivation and incentive techniques
Motivation & Incentives:
•

• The pharmaceutical sales representatives at Merck call it motivation

• 1. Motivate and inspire employee behavior that fosters a high-
performing culture through a lean and flexible business model.
• 2. Align the interests of our senior executives with those of our
shareholders to ensure prudent short-term actions that will benefit
the long-term value of the Company.
• 3. Base salary and benefits
• 4. Annual cash awards
• 5. Severance and change in control
•
MARKET ANALYSIS

• SEGMENT AND TARGET MARKET:

• Merck target market are patients who need/want cure , they are also
focuses on HIV/aids patients
• 7 P’S:
• PRODUCTS:
• MERCK SERONO:
• In this category they make products for Oncology, neurodegenerative
diseases, fertility, endocrinology, autoimmune and inflammatory
diseases, Cardio Metabolic Care
• CONSUMER HEALTH CARE:
• Products for Everyday health protection, mobility, women’s and
children’s health, cough and cold come under this.
•

•
 • PRICE:
• In high income countries Merck is having competitive prices.
• In middle income countries, Merck provides vaccines at significantly
reduced prices, while in the least developed countries of the world,
•Merck sells our two of our vaccines, GARDASIL and ROTATEQ, at

prices at which we do not profit.

• PROMOTION:
•From 2005 to 2007 Merck Marker supported a health advocacy program

on Pakistani national television

• PEOPLE:
•Merck more focusing on poor peoples especially in African countries

•Merck can focus on HIV/aids people

•
Products of Merck Co.

• VACCINES
– RotaTeq
– COMVAX
– M-M-R
Products of Merck Co. (Pak)
• Competitive analysis
• If we see in global market Merck has some major
competitors .e.g. GSK, Sanofi Pasture, Wyeth having
23%, 26% and 12% market share respectively. And
merckis having 16%(2009)
• The Merck/Schering-Plough tie-up would give the
group 5.6 per cent of the world's pharmaceuticals
market, pushing GSK into third place in the global
league, with a 5.4 per cent share, according to
Datamonitor/IMS Health.
tie-up would give the group 5.6 per cent of the world's pharmaceuticals market, pushing GSK into third place in the global league, with a 5.4per cent share, according

• MARKET SHARE:
•

Pakistan Share% Growth%

Merck 2.89 16.6

Pharmaceutical
FINANCIAL STRATEGIES
Cash flow
INCOME STATEMENT
 • Cost/ expenditures
• They have a couple of major costs as follows:
• R&D
• Advertisement
• PROFITS:
•
EUR Millions Jan-jun2010 Jan-jun2009
•
Profit 381.5 170.1

REVENUES:

EUR million 2nd quarter2010 2nd quarter2009 Jan-jun2010 Jan-jun2009

Total revenue 2,208.0 1,909.7 4,306.9 3,768.2
 • RATIOS:
• EPS
•

•
• LIQUIDITY
•

DEC 31st 2009 DEC 31st 2008 DEC31st 2007 DEC31st 2006

Current Ratio 1.80 1.35 1.23 1.20

Quick Ratio 1.03 0.65 0.97 0.95

Cash Ratio 0.61 0.38 0.67 0.68
• TURNOVER RATIOS
• Net working capital turnover: 3.20%
• Fixed asset turnover: 1.08%
• Total assets turnover: 0.6%
• Inventory turnover: 7.8%
• Receivables turnover: 2.6%
• ROI
• Total return on investment of Merck is 15.9%
•
OTHER STRATEGIES

• R&D:
• Merck has always invested heavily in research and development. n
2005, it amounted to € 713 million, in 2006 to € 752 million.
Around 80% of our R&D spending is attributable to the
Pharmaceuticals business sector, which has an R&D budget of
approximately € 1 billion following the integration of Serono. Our
R&D activities focus on future trends and the needs of society. It is
also the key growth driver of business. Merck invested almost $5
billion annually on R&D in 2006, 2007 and 2008.
• Merck’s R&D model is designed to increase productivity and improve
the probability of success by prioritizing the resources of Merck
Research Laboratories.
• PROCUREMENT:
• Merck’s Global Procurement department introduced new Detailed
Supplier Ethical Assessment questionnaire for suppliers of new
products and services globally.
•
year
•
2008 2007 2006 2007
• procurement 100
Merck
employees who have 100 100 0
•
been trained in
supplier diversity (%)
•
• Achieve 100 percent completion of Merck’s pre-selection Detailed
Suppliers Ethical Assessment by potential suppliers of new
business globally by 2010.
• PRODUCTION:
• Merck is committed to seeking ways to reduce the cost of our
medicines and vaccines, and thus increase affords ability and
access.
• Merck’s supply strategy combines the best skills and talents of our
internal manufacturing organization with those of external
manufacturers who provides with specialized skills and/or
expertise and types of manufacturing services
• In recent years, we have concentrated our internal manufacturing
capabilities on core competencies and leveraged external
capabilities. This focus has, and will continue to, shift some
operations historically conducted internally to our external
suppliers. We currently project that external manufacturers will
eventually provide up to 35 percent of Merck’s manufacturing
volume.
•
CONTROL PROCEDURES

• MARKETING CONTROL:
•

– Understand the customer’s perspective.

– Anticipate and outsmart the competition.
– Concentrate on selected audiences and behaviors.
– Define the product’s distinctive value to selected audiences.
– Plan for sequenced growth throughout the product’s life-cycle
– Shape customer’s perceptions.
– Ensure that execution is efficient, consistent, and well
integrated.
– Track results and re-evaluate decisions.
•
• Production control
• Acquiring Schering Plough left Merck with 91 manufacturing
facilities. Phasing out of activities at the eight plants, coupled to
other actions taken since the merger, will leave Merck with a
network of 77 facilities which it will supplement with contract
manufacturing deals.
• Of the eight sites Merck is cutting four are in Latin America. Merck
will end manufacturing at facilities in Azcapotzalco and Coyoacan,
Mexico and Brazil. It is also looking to sell its facility on Argentina.
Quality control
•
• Merck believes that all world should have access to
quality, affordable health insurance coverage. Without
coverage, millions of people are denied access to
needed health care including prescription medicines
and other basic services. Without coverage, our health
care system will not deliver its full value to all. Merck
believes that action toward health system reform and
coverage for the uninsured should be built on the
following broad principles:
•
• HR control
• The company received the Society for Human Resource
Management's Strategic HR Leadership Award. The honor
recognizes an HR department that plays a key role in driving the
performance and reputation of an organization by leveraging
human capital. Communicate often with employees--via webcasts,
meetings, newsletters and other tools--to ensure acceptance.
Redefine stock incentives and retention plans. Following an audit
of total rewards, HR professionals created an interim
compensation and benefits philosophy Harmonize performance
management systems with different philosophies
PROBLEM SECTION

• MAIN PROBLEM ACCORDING TO THE

MANAGEMENT:
• As Merck is working in 64 countries world wide in diverse cultures.
So the management of Merck is facing problems in handling the
different ethnic and social racial conflicts. Among employees and
managers.
• Dissatisfied employees & shareholders. Because of retirement plan
issues and false statements about Vioxx.
• Expensive medicines because of intense advertisement.
• Revenue is dropped by 50% in 2003 & Net Income is 1 billion less in
2004 than in 2003.
• Higher expenses on Selling & Administrative.
•
PROBLEM SECTION

• Main problem according to our

analysis:
• Strong dependence on the American market -
Most of Merck’s operations, 60% of its sales, is
concentrated in the United States.
• Government Pricing.
• Patents
•
STRATEGIC ALTERNATIVES

• SOLUTION TO SOLVE PROBLEMS:

• To remove the conflicts b/w employees and managers the basic need
to fill is to improve and polish the interpersonal skills of managers
and providing employees a friendly environment to work in.
• To make their employees satisfied they need to improve their
retirement plans in the favor of employees that are more suitable
of the retired employee.
• They should have a proper check on their advertisement campaigns as
well to avoid ethical conflicts regarding customers.
• To reduce cost they should have an improvement in their promotion
(advertisement) sector that will help them in better advertising
their medicines with low cost. And will help them to reduce their
prices.
• To meet their 2010 goal of 4 billion sales now they have to work hard
from top to bottom by making new strategies and avoiding
previous mistakes.
• As they are working in 64 countries world wide they should not only
focus in American market but they should give a equal importance
to each market in they are working in the field of operations and
revenue.
• Government pricing is also a hurdle b/w company’s revenue to
remove this Merck has to make good relation with Govt officials by
diplomatic ways
•
STRATEGIC ALTERNATIVES

• Evaluation of solutions:
• By making above solutions for Merck’s problems,
there will be a better image of the company in
eyes of employees, customers and stakeholder.
•
•
Recommendations
Recommendation
Recommendation