Strategic Analysis of Merck & Co.: Corporate Strategy Report

This report provides a comprehensive analysis of Merck & Co.'s corporate strategy within the global pharmaceutical industry. It begins with an overview of the industry and then conducts an external analysis using PESTLE and Porter's Five Forces frameworks to assess the competitive environment. Th...Read More

Corporate Strategy

Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY ..................................................................................................................................1
Overview of global pharmaceutical industry..............................................................................1
External analysis .........................................................................................................................1
Internal analysis ..........................................................................................................................6
Evaluation of corporate strategy of selected organisation ..........................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Corporate strategy can be described as multi-level tactic which is undertaken by an
organisation for defining its goals as well as structure their approach for accomplishing them in
an effective manner (Abratt and Mingione, 2017). Formulation of corporate strategy is
considered as important as it describes what an organisation has to do for fulfilling their mission
strategically. In order to develop an intense understanding about the differential aspects of
corporate strategy, Merck & Company is taken into account. Merck & Company is an American
based pharmaceutical company which runs its operations on a global level and has its
headquarters at Rahway, New Jersey, United States. This comes under pharmaceutical industry
which operates globally.
This project demonstrates an understanding of global pharmaceutical industry and
differentiated factors which are considered as important for assessing varied opportunities and
threats in a strategic manner. This also delves into internal analysis with the aid of value chain
and VRIO analysis. It also evaluate formulation and execution of strategy undertaken by chosen
organisation.
MAIN BODY
Overview of global pharmaceutical industry
Company chosen for the project is Merck & Company which operates in pharmaceutical
industry. This industry discovers, develops, manufactures and market drugs which are used as
medications for patients. Organisations operating in this industry are subject to make compliance
with large variety of regulations which essentially governs testing, safety as well as efficacy in
regards with manufacturing and marketing of pharmaceutical drugs (Andersen and Andersson,
2017).
External analysis
PESTLE analysis can be termed as a strategic technique which is used for scanning and
evaluating varied macro forces which are present in environment (Banerjee, 2017). PESTLE
analysis in accordance with Merck & Company is as follows:
Political factors- In relevance with United States, political landscape is stable and
government provide enough support to drug manufacturing establishment. USA government
provide subsidies to pharmaceutical organisations in order to keep the essential drugs in reach of
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commoners. This situation is considered as an opportunity for Merck & Company as they can
survive effectively in competitive market.
Economic factors - United States is considered as one of the largest economy, however,
GDP rates have turned towards a negative flow in regards with aftermath of global pandemic.
This has impacted global economy and varied sectors of America such as corporate finance,
labour market, pharmaceutical industry and many more. Average healthcare expenses of people
in USA has been increased after effects of Covid-19. Enhanced awareness of healthcare practices
during and after the global pandemic are considered as an opportunity for Merck & Company
which aid them in increasing their profit margins.
Social factors- In relevance with USA, due to indulgence approach of people, they are
facing varied health related issues such as diabetes, thyroid, obesity and many more. Due to
global pandemic, people are also got aware of their health practices and take help of medications
and drugs in a significant manner. A graph following shows how people of USA are taking their
health seriously. This has shown that people of USA are becoming aware of their health issues
from past few years. They are also focusing on healthy habits like exercise and fulfilling their
dietary needs which led to decrease in demand of pharmaceutical medications (Basu, 2017).
This can be threat for Merck & Company as lower demands of their medications can affect their
profitability.
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Illustration 1: Percentage of U.S. adults that thought select health issues were most
important for the U.S. as of 2019 and 2022
Source: Statista. 2022
Technological factors- In context to USA, varied innovative technologies are adopted by
pharmaceutical companies which help them in pre-clinical development, lead discovery and
many more. Merck & Company has made huge innovations in adopting new digital sciences for
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enhancing their processes more effective. They have invested € 2.3 billion in their research &
development department in 2019 which help them to leverage innovative practices (Merck,
2020). They have employed a Global Data Science team for leveraging advanced analytics and
machine learning. This act as an opportunity for Merck & Company for increasing their viability
as well as customer base.
Legal factors- In context to USA, government tends to formulate varied laws for
controlling the fraud in respect to expiration as well as manufacturing dates for the batch of
pharmaceutical drugs. Merck & Company faces legal disputes in respect to patent infringement
which was claimed by JNC Corporation in 2020. They face legal risks in context to product
liability, compensation, data protection and patent law (Todorov and Akbar, 2018). Merck &
Company has been sued for lots of patent and trademark infringement which can hamper
company's reputation in a long run. This can be a threat for Merck & Company as these
allegations can deteriorate their brand image and viability in market.
Environmental factors- In relevance with USA, carbon footprint is increasingly
enhancing due to production of medications and drugs which has adverse impact on environment
in a significant manner. Manufacture of drugs led to creation of differential biotechnological
pollutant which are considered as harmful for health of biodiversity (Brewster, 2017). In
accordance with Merck & Company, they are collaborating with Johnson & Johnson for
manufacturing the vaccine for safeguarding people from covid pandemic. They have announced
their commitment to curb the carbon emission by 30% till 2030 in an effective manner (Merck,
2021). This commitment can act as an opportunity for Merck & Company as this can elevate
their position in the eyes of public in a strategic manner.
Porter five forces can be described as a framework which is used for evaluating
competitive environment as well as industry attractiveness in regards with an organisation
(Brønn and Brønn, 2018). All the forces of Porter five force analysis in relevance with Merck &
Company are mentioned below:
Competitive rivalry- In context to pharmaceutical industry, competition rivalry is high as
it can drive down their prices as well as can reduce their overall productivity. In order to deal
with this situation, managers of Merck & Company can collaborate with their competitors as
well as can build sustainable differentiation.
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Threat of new substitutes- In relevance with pharmaceutical industry, threat of
substitutes is high as there are various organisations which manufactures and market same
medications under different brand name (Yadav, Han and Kim, 2017). This situation can be
managed by managers of Merck & Company through understanding of core needs of customers
in an effective manner.
Threat of new entrants- In relevance with pharmaceutical industry, threat of new
entrants is high as they can bring innovations with the adoption of advanced technology. This
high threat of new entrants should be tackle by manager of Merck & Company through
enhancing their capabilities and investing their huge resources in research and development.
Bargaining power of customers- In context to pharmaceutical industry, bargaining
power of customers is moderate as medications are administered by doctors to them. They have
to buy the medications and prescribed drugs irrespective of their cost. In order to maintain
bargaining power of buyers as low, managers of Merck & Company should develop generic
medicines by lowering their cost.
Bargaining power of suppliers- In regards with pharmaceutical industry, supplier power
is high as they are in a dominant position and they can negotiate with organisations for extracting
higher prices. This can be managed by managers of Merck & Company by building effective
supply chain through making collaboration with multiple suppliers. They can also perform varied
experiments by bifurcating their product design in order to gain competitive advantage.
Internal analysis
Resources poses by Merck & Company
Patient and caregiver resources- These resources are held be Merck & Company
through which they believe in perform their tasks ethically and responsibly. This is considered as
a strength to them as they provide essential support to their patients when they needed.
Patents- Merck & Company has registered numerous patents in regards with animal
health, pharmaceuticals and vaccines. Under the perspective of vaccines, it has registered many
patents such as Ervebo, Gardasil, Vaxneuvance and many more. There are many charges on
Merck & Company in relation to patent infringement which can hinder their position in the
market.
Innovation centres- Managers of Merck & Company is mandate to invest in regards with
innovative technologies at their innovation centres. Their innovation centres are built on the idea
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of creating visionary products as well as services which are meant for future (Chen and Et. Al.,
2019). These innovation centres are taken as a strength for Merck & Company as it aid them in
bringing innovative products in a strategic manner.
Research and development department- Managers of Merck & Company invests their
huge resources in their research and development department in order to manufacture
differentiated products with reduced cost. This is a strength for Merck & Company as it help
them to make their position viable as well as gain competitive edge.
Human resources- Merck & Company has a talented pool of dedicated workforce which
led them to innovate and fulfil their responsibilities and jobs in an effective manner. This is
considered as a strength for Merck & Company as it help them in enhancing culture and
leadership practices in an effective manner.
Value chain analysis can be described as a practice which is used for evaluating varied
activities in regards with specified chain in order to assess opportunities in a strategic manner
(Horwitch, 2021). Value chain analysis in relevance with Merck & Company is discussed
below:
Primary activities
Inbound logistics Operations Outbound
logistics
Service Marketing and
sales
Profit
Firm infrastructure Human resource management
Procurement Technology
Support Activities
Primary activities of Merck & Company are mentioned below:
Inbound logistics- In relevance with Merck & Company, occurrence of raw materials
and their storing activities are considered as inbound logistics practices.
Operations- Operational activities are concerned with production process whereby raw
materials are transformed into specified outcomes in a strategic manner.
Outbound logistics- These activities are concerned with distribution of products to end
users in an effective manner. In accordance with Merck & Company, activities in relation to
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outbound logistics can be considered as strength for Merck & Company whereby they deliver
their pharmaceutical products to end users.
Innovation skills- Their innovative practices can be taken as a strength for Merck &
Company as it help them in registering more patents on their brand name.
Supporting activities are those which are used by company for supporting their varied
operations and processes in an effective manner (Kraus, Rehman and García, 2020). Evaluation
of supporting activities in accordance with Merck & Company is discussed below:
Human resource management- In context to Merck & Company, human resources are
considered as their strength as they help them in brining innovative practices in regards with
their pharmaceutical products and vaccines.
Technology- Managers of Merck & Company has an atmosphere of technology-driven
which thrives them to produce advanced products.
Competences in relevance with Merck & Company
Competencies can be understood as capabilities which is upheld by an organisation for
attaining a competitive edge in market. VRIO framework can be understood as an internal
analysis framework which is used by organisations for identifying advantages as well as varied
resources which help them in gaining competitive edge (Menz and Barnbeck, 2017). VRIO
analysis in relevance with Merck & Company is as follows:
Competencies Valuable Rare Inimitable
Brand positioning 
Patents  
Product portfolio   
Innovative practices   
Technology   
One major competencies in relevance with Merck & Company is their advanced
technology which help them in thriving the business environment and introduce new as well as
effective products in the market in a strategic manner.
This is considered as valuable as they have used this for developing varied
pharmaceutical products and registering numerous patents in regards with vaccines. This is
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considered as rare as they have taken a patent for their technology which curbs any other
company to use it. Their used technology and innovation centres have been invested huge funds
which make it expensive for competitors to copy it. These resources are organised and have full
support in context of an establishment.
TOWS analysis is strategic framework which is used by organisations for assessing their
internal environment in an effective manner (Oppenheimer and Tuths, 2019).
TOWS analysis in context to Merck & Company is as follows:
Threats
 Social factors whereby people are
adopting healthy practices can led to
reduce the profit margins of Merck &
Company. Lacking in relevance with making
compliance with legal laws can also be
threat for Merck & Company.
Opportunities
 Political stability and provided subsidy
by USA government act as an
opportunity for Merck & Company.
 Making compliance with environmental
laws and practices in relation to curbing
carbon footprint from their production
can act as an opportunity for Merck &
Company.
Weaknesses Allegations in relation to patent
infringement can be a weakness for
Merck & Company as it led to hamper
their brand image in market.
Strengths
 Merck & Company has a strength of
numerous innovative centres which led
them to bring innovative practices.
 Managers of Merck & Company have
invest huge resources in making their
R&D department effective which is
considered as their strength.
Evaluation of corporate strategy of selected organisation
Corporate strategy which is undertaken by Merck & Company is to become vibrant
science as well as technological-driven organisation. They want to aim innovative science as
well as technology based sectors by 2022. They are planning to grow their operations through
expansion programme by prioritizing organic avenues while lowering debt as well as develop a
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cost conscious culture. By 2022, they are planning to introduce their new medicines namely,
Mavenclad and Bavencio which can contribute significantly in their earnings. In order to expand
their operations, managers of Merck & Company has planned to acquire Acceloron Pharma Inc.
for strengthening their cardiovascular pipeline. Evaluation of formulation and execution of
presented corporate strategy through SAF perspective.
Suitability- This aspect is considered as effective for organisations and help them to have
ascertaining whether a strategy is worthful or not (Pidun, 2019). In order to understand the
suitability of acquisition decision Merck & Company, TOWS matrix is mentioned below:
Factors Strengths
 Innovation capabilities
 Adoption of advanced
technologies
 Huge R&D department
which continues perform
research for new
medications.
Weaknesses
 Allegations in regards
with patents
infringement.
Opportunities
 Political stability is
considered as an
opportunity as they can
enjoy the benefits of
provided subsidies.
 Compliance with
environmental laws
present a better
position of their
company in the eyes of
public.
 Working in a
technological-driven
environment is an
S-O strategy
Corporate strategy of acquiring
Acceleron enhance innovative
capabilities and technological-
driven practices of Merck &
Company.
W-O strategy
Acquiring strategy of Merck
& Company provides them
viable positions which can
reduce the impact of their
weakness of allegations in
context to patent
infringement.
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opportunity for Merck
& Company as it aid
them in enhancing their
operations.
Threats
 Increased awareness of
healthy and adoption of
healthy practices can
led to reduce profit
margins of Merck &
Company which is
considered as a threat.
 Non-compliance of
legal laws in regards
with patent
infringement can be a
threat for Merck &
Company.
S-T strategy
Acquiring strategy of Merck &
Company can be combined with
their threat of increased healthy
practices of people.
W-T strategy
Acquisition strategy of
Merck & Company can be
impacted in a negative basis
with alignment of threat of
patent infringement
allegations.
Acceptability- Stakeholder analysis is framework which help organisational managers in
ascertaining the vested interest as well as their authoritative position in regards with a specified
project of an establishment (Rugman and Verbeke, 2017). In order to test the acceptability of the
selected corporate strategy, a power/interest matrix in relevance with Merck & Company is
mentioned below:
Factors Level of Interest
Level of power
High Low
High Investors Employees
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Low Government Customers
Investors hail from the group of high power and interest as they have invested their
resources in the acquisition project of Acceleron. Investors also want a specified return for their
investment. They get highly affected by the formulated corporate strategy of Merck & Company
of expanding their business avenues as their investment are also indulged in their other
processes.
Employees of Merck & Company are categorised in group of low power and high
interest. They do not have any power to say between the decisions of top management. However,
their salary and varied other compensation benefits are closely depends on the strategic
development strategies and decision of Merck & Company. They are highly interested in
company's decision of acquisition of Acceleron and building their capabilities in an effective
manner.
Feasibility- Corporate strategy of Merck & Company to acquire Acceleron is feasible for
the company and it will be implemented till the fourth quadrant of 2022. Negotiation and varied
transferable skills are needed for implementing their corporate strategy of expanding their
business avenues. This acquisition is considered as feasible for them as it can help them in
strengthening their cardiovascular portfolio as well as pipeline which will help Merck &
Company to continue their legacy in same field. This acquisition will take place in $11.5bn of
worth (Merck to buy Acceleron for about $11.5 billion in rare-disease drugs push. 2021). This
deal provides Merck & Company for developing a rare diseases drug called as Sotatercept which
will help them in enhancing their sales opportunities in coming years. They are using corporate
bonds for implementing this acquisition process of Acceleron.
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REFERENCES
Books and Journals:
Abratt, R. and Mingione, M., 2017. Corporate identity, strategy and change. Journal of Brand
Management. 24(2). pp.129-139.
Andersen, T. J. and Andersson, U., 2017. Multinational corporate strategy-making: Integrating
international business and strategic management. In The responsive global organization.
Emerald Publishing Limited.
Banerjee, S. B., 2017. Corporate environmentalism and the greening of strategic marketing:
Implications for marketing theory and practice. In Greener Marketing (pp. 16-40).
Routledge.
Basu, S., 2017. Corporate purpose: Why it matters more than strategy. Routledge.
Brewster, C., 2017. The integration of human resource management and corporate
strategy. Policy and practice in European human resource management, pp.22-35.
Brønn, C. and Brønn, P. S., 2018. Corporate strategy. The International Encyclopedia of
Strategic Communication, pp.1-18.
Chen, H. and Et. Al., 2019. Complementarity in open innovation and corporate strategy: the
moderating effect of ownership and location strategies. IEEE Transactions on
Engineering Management. 67(3). pp.754-768.
Horwitch, M., 2021. The emergence of value-creation networks in corporate strategy. In US-
Japan Science and Technology Exchange (pp. 188-218). Routledge.
Kraus, S., Rehman, S.U. and García, F. J. S., 2020. Corporate social responsibility and
environmental performance: The mediating role of environmental strategy and green
innovation. Technological Forecasting and Social Change. 160. p.120262.
Menz, M. and Barnbeck, F., 2017. Determinants and consequences of corporate development
and strategy function size. Strategic Organization. 15(4). pp.481-503.
Oppenheimer, M. F. and Tuths, D. M., 2019. Nontariff Barriers: The Effects on Corporate
Strategy in High-technology Sectors. Routledge.
Pidun, U., 2019. Corporate Financial Strategy. In Corporate Strategy (pp. 229-252). Springer
Gabler, Wiesbaden.
Rugman, A. and Verbeke, A., 2017. Global corporate strategy and trade policy. Routledge.
Todorov, K. and Akbar, Y. H., 2018. Strategic management in emerging markets: aligning
business and corporate strategy. Emerald Group Publishing.
Yadav, P. L., Han, S. H. and Kim, H., 2017. Sustaining competitive advantage through corporate
environmental performance. Business Strategy and the Environment. 26(3). pp.345-357.
Online:
Merck, 2020. Innovation and digitalization. [Online] Available through:
<https://www.merckgroup.com/en/cr-report/2019/products/innovation-and-digitalization.html>
Statista. 2022. Most important health issues facing the U.S. according to U.S. Adults 2022.
[Online] Available through: <https://www.statista.com/statistics/986209/most-important-health-
issues-facing-america-us/>
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Merck, 2021. Merck publishes 2020/2021 Environmental, Social and Governance (ESG)
Progress Report. [Online] Available through: <https://www.merck.com/stories/merck-publishes-
esg-progress-report/>
Merck to buy Acceleron for about $11.5 billion in rare-disease drugs push. 202. [Online]
Available through: <https://www.cnbc.com/2021/09/30/merck-to-buy-drugmaker-acceleron-for-
about-11point5-billion.html>
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