Merck Sharp & Dohme Argentina Case Study Report - Business Development

This report presents a case study analysis of Merck Sharp & Dohme Argentina, Inc. (MSD), a subsidiary of Merck & Co., Inc. The study examines MSD's marketing and operational strategies, highlighting the company's transformation from a traditional business to a more progressive model under new leadership. It delves into the challenges MSD faced, including issues of hierarchy, lack of communication, and an outdated work culture, and the subsequent reforms implemented. The report also includes a financial analysis, competitive analysis, and strategic analysis, comparing MSD's situation to that of Douglas Pharmaceuticals Limited, a New Zealand-based pharmaceutical company. Recommendations are provided for both MSD and Douglas, focusing on improvements in marketing and operational strategies, with an emphasis on fostering openness, communication, and innovation within the organizations. The study aims to provide unbiased advice by combining MSD’s strengths and weaknesses and suggesting areas for growth and development in the pharmaceutical sector.

Merck Sharp & Dohme Argentina, Inc. (A)
Case Study Report
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Abstract
This report examines Merck Sharp & Dohme Argentina, Inc. (A), in abbreviated form it is
known as MSD. The focus of this report is on the company's Marketing and Operation
strategy. By revealing the difficulties that Merck Sharp & Argentina, Inc. (A) has
encountered and how it came out of it, it tried to identify the problem and make relevant
suggestions for the challenge it face.
And applied to a local New Zealand’s company "Douglas", both of them are involved in
same Pharmaceutical sector and have almost the same business model. Both of these
company has very strong ethics and work culture. It will try to provide an unbiased advice by
combining MSD’s strengths and weaknesses.
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Table of Contents
1. Abstract
2. Introduction
3. Background Information
4. Situation Analysis
3.1 Marketing strategy
3.2 Operation strategy
3.3 Financial analysis
3.4 Competitive Analysis
3.5 Strategic Analysis
4. Recommendations for MSD
5. Recommendations for ‘Douglas’
5.2 Suggestions
5.2.1 Marketing strategy
5.2.2 Operation strategy
6. Conclusion
References
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1. Introduction
Merck Sharp & Dohme Argentina, Inc. (A) was founded in 1891, is a subsidiary of Merck &
Co., Inc., Kenilworth, NJ, USA. MSD transform itself from an old style business to a
progressive and forward looking company due to the initiative taken by it management.
Management took the initiative of changing the existing structure of its organisation to
disintegrate the decision making process and give more power to every employees of
company and be more open in receiving input from all level of employees. Instead of rigid
hierarchy, which was prevailed, more flexible system adopted, where decision making not
remain confined to higher authority of company. MSD were functioning as a pyramid-shaped
organisation and decision were taken and relationship maintained vertical structure, where
nobody know who is doing what. Complete lack of cross coordination with little sharing of
information. Employees were not supposed to do any kind of innovation without the
permission of higher management. No openness, no innovative thing was prevailing due to
discouragement of higher authority. (Thepharmaletter.com, 2019) Any advancement in
organisation was based on personal relationship developed over the years, no merit to talent
and innovative ideas were given, company was plagued with nepotism. Managers lacked
professional education and innovative ideas due to prevailing work culture.
In above background company took strong and bold initiative to reforms the work culture
under its new leadership appointed for the same purpose to take this task on urgent basis.
After taking charge as Managing director of MSD, her initial research found a few things and
felt that the new business environment in Argentina warranted a more competitive presence
there and sought to bring it subsidiary upto the same standards expected in other countries.
To compare and implement a few things of same nature as in MSD, this report selected the
company "Douglas Pharmaceuticals Limited" as a local pharmaceutical company in New
Zealand for this research project to provide advice on its development strategy. Douhglas
pharmaceutical products are produced in New Zealand and Haiti in a modern technology and
marketed across many country factory certified by the New Zealand government. It is a
globally promoted company.
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2. Background Information
MSD is a fast-growing company. Through strict control over product quality and innovative
marketing methods, its products account for a significant market share in Uruguay, Prague
and Argentina. MSD, it has a state-of-the-art development facility and a production plant for
its production processes. MSD policies reflect its values and business goals. It has an
effective corporate governance structure and it operate in a way that is open, honest and
transparent. (Thepharmaletter.com, 2019)
MSD always remain in forefront in implementing newest technique to its R&D laboratory to
serve the mankind in most appropriate manner. MSD has taken its initiative to a new level
through its medicine and vaccine, which can help society to lead a better health for present as
well as upcoming generation. MSD values the diverse contributions of its employees and
create work place that is open, welcome and respectful for all employees. These values and
principal are at the heart of MSD’s work ethics. (msd.com. 2019)
It works to attract and retain diverse suppliers whether it is large or small in all types of
markets around the world. It works closely with the global network to provide the highest
level of service to its customers and achieve a win-win business relationship. MSD takes
more than having the right mechanisms, standards and training in place to ensure an open,
ethical business environment. It works ethics make sure to live up to its own high standards.
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3. Situation Analysis
3.1 Marketing strategy
Most of MSD’s managers , had worked previously in sales department and later on promoted
to the post of managers, very few rep hold a college degree and many of them, being a sales
rep was nothing a professional proud of, because of disrepute it brought by the management
and Union. Majority of sales representative in company belong to tightly control union.
With the advent of new management, company reorganised into business units around key
product lines and related activities. Each unit was responsible for carrying out the multiple
tasks that had been performed independently by the silos. (The term used to describe parallel
functions, like sales, marketing, finance and research). New management completely
eliminated post of marketing director and sales director’s prominence reduced drastically.
Sales and marketing director considered as 2nd and 3rd most powerful post right below the
managing director. In old system, hierarchy level was sales director m regional manager,
district manager and sales rep. In new structure regional manager merged into district
manager. MSD’s management was plan for flattening hierarchy, integrating sales with other
function like marketing, and empowering lower level managers with responsibility for
decision making. Looking at Argentinean prevailing work culture and political situation, all
of these features were seems decidedly uncharacteristic for a company operating in
Argentines, especially in the pharmaceutical industry, which decides life and death for a
normal human being. (msd.com. 2019)
3.2 Operation strategy
There was a severe lack of communication among various division of company; lack of
communication has created more opaque kind of situation in company. It also affected
company’s performance in long run, because mistrust was going up. The company's work
efficiency is reduced. Low communication between department lead to Internal and external
organisations are prone to conflicts. Internal contradictions are of low trust between
distributors and suppliers. Both lack awareness of the overall interests. The apparent
contradiction is that distributors and retailers are reluctant to take risks and do not give up the
first order transportation mode. With the replacement of old management trust deficit is
going down gradually over the time and now more openness is prevailed in organisation.
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Trust among various stakeholders increases exponentially. Due to poor management MSD’s
business had deteriorated.
3.3 Financial analysis
Financial analysis refers to the performance indicator for stakeholders to evaluate a
company’s liquidity, activity, financial structures, profitability and market value (Avakmovic
& Avakumovic, 2016). Avakmovic and Avakumovic (2016) also stated that financial
analysis has a significant contribution to the quality decision-making process for a company’s
further success.
MSD’s financial performance over the years has improved due to adoption of new work
culture and openness to accept changes according to circumstances. Douglas Pharmaceutical
also growing in a fast paced manner due to growing market reaches in various subcontinent.
MSD’s total revenue from all across world in 2018 was $ 42.3 billion and revenue from Latin
America was at $ 1.9 billion. MSD’s total R&D expenses in 2018 were $7.9 billion
excluding restructuring and merger related expenses.
In 2017 Douglas revenue grew $36.6MM to $225.8MM. For 2018 TIN200 it were placed 5th
for growth and only beaten by industry stalwarts Datacom and Fisher & Paykel Healthcare,
and fast growing FinTech companies Xero and PushPay. It is the third year in a row Douglas
has made the Top 10 companies for revenue growth.
3.4 Competitive Analysis
As both companies, MSD and Douglas, expanded and changed their product lines, strategic
focuses and the development of technologies brought rapid changes in the market, it forced
the companies to innovate and adapt to the new market needs. This intended to expand its
product lines to the industry. The industry was considered as a differentiated oligopoly,
which, several firms dominated a specific market with differentiated products with certain
attributes, formulation and charge a premium price for these attributes (Kolter & Keller,
2012). Under the new strategy, the company refocused on the healthcare industry for a
growing market share.
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3.5 Strategic Analysis
The strategic analysis was conducted through a company’s internal and external analysis. The
internal analysis was used to diagnose the company’s current situation, while the external
analysis aimed to identify the new opportunities based on the company’s current situation
(Morosan, 2010). For MSD and Douglas, although the company’s circumstances were
different from each other, the changing environment brought both companies new
opportunities and challenges. From a political aspect, most governments supported the
globalization by reducing tariffs and providing government support to foreign companies.
The overall political stability increased; therefore, it gave companies opportunities to enter
the new national market. However, political change also lowered the barriers of
internationalization, which meant that a competitive level would rise. The global financial
crisis has led the Great Recession in the global market, and this increased the unemployment
rate and decreased the total expenses in most countries.
As the purchasing power cracked, companies faced huge challenges to maintain their profit.
From the social aspect, cultural barriers were reduced by increased communications through
new technologies and international travel. Moreover, customers’ attitudes had shifted from
product-oriented toward service-oriented, which meant that people are willing to pay a
premium for experiences. As the technologies were developed faster than ever, investments
to R&D were imperative to keep the company innovative. Online shopping had challenged
traditional distribution channels, while informative websites and user-generated content also
influenced customers’ purchasing decisions. The increased awareness about global warming
and climate change had shift customers’ attitudes toward more healthy products.
In the internationalization course, the company needs to integrate the resources from both the
local and global markets to conduct transnational operations including investing, producing,
organizing and planning international marketing activities domestically and abroad.
According to Kim (2010), there are two common approaches to brand internationalization.
The first approach is to manufacture domestically but the products are sold abroad. The
second approach, which is relatively widely used by most of the world’s famous companies,
is to set up branches in foreign countries to achieve all-round expansion. There are also some
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well-known multinational companies that even have no production capacity and are passed
on to some foreign companies with low local production costs
4. Recommendations for MSD
Prevailing work culture in Argentina was such that it led to unethical problems in MSD.
MSD culture at that time was completely unprofessional. It lacks openness, lack of
transparency, rigid hierarchy, lack of professionalism, outdated way of working and top
management indifference attitude to improve the situation. These problems are being
addressed by new management and things are gradually improving in the company and
situation is expected to get complete transformation in coming months. Sharing of
information needed to be improved; more openness required in system, Management has to
be disintegrate the system and should promote more flexible eco-system for more productive
ideas to come and innovation take place in organization. Communication among various
division required to be improved and creativity should be encouraged.
5. Recommendations for ‘Douglas’
5.1 Background
Douglas is a New Zealand based company engaged in the field of Pharmaceutical industry. It
was founded in 1967 It has manufacturing plant in Auckland and Fiji. Douglas exports its
product to more than 40 countries across the world. (Bloomberg.com, 2019)
5.2 Suggestions
New Zealand based company ‘Douglas’ is very efficient pharmaceutical company, but it
needs to be expanded even further to new areas to market its products. It has world class
manufacturing unit in Auckland and Fiji , which if required further extended to third world
country to capture the market. (Douglas.co.nz. 2019)
5.2.1 Marketing strategy
Global market share needs to be improved in other unexplored regions where business
opportunity exits, logistical services support needed to be improved. Improving customer
relationship and receiving feedback for availability of its products in retail chemist shop.
Online availability of its product for easy access to customer should be devised through
various online portals. Distribution centre need to be further boosted, to reach even in bigger
areas of globe.
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5.2.2 Operation strategy
Product range and R& D expenses needed to be upgraded further. Quality and reliability of
the packed products should be maintained at any cost, to win the trust of even larger
customer. Douglas business development team is focused on growth, and proof of its success
is the rapid increase in global market share. Douglas Pharmaceutical Limited has, constantly
targeting new markets where it sees commercial opportunities for its many products.
(Douglas.co.nz. 2019)
Local safety standards should produce all production processes for the product. At the same
time, companies need to classify products by production method, product type, etc. Help
companies manage products. Developing effective CRM team and coordinate the relationship
between the company and its customers. Accurately target market demand and customer
demand to reduce uncertainty and production risk. Attract new customers, increase market
and improve the company's core competitiveness.
6. Conclusion
Douglas is New Zealand based very advanced technique equipped company. It has strong
presence in more than 4o countries, but its presence in many developing countries still
lacking where its demand could be very high. It has to focus in these unexplored areas and
expand it market share even further. Douglas needs to upgrade its logistical support system
and improve its R&D expenses as well for more advance research and development to cater
the need of various kind of disease in third world countries. Customer feedback system also
needed to be addressed.
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References
msd.com. (2019). How We Operate. [online] Available at: http://www.msd.com/about/how-
weoperate/home.html [Accessed 22 Jul. 2019].
Douglas.co.nz. (2019). Douglas Pharmaceuticals. [online] Available at:
https://www.douglas.co.nz/what-we-do/commercial/commercial-capabilities [Accessed
22 Jul. 2019].
Bloomberg.com. (2019). Bloomberg - Are you a robot?. [online] Available at:
https://www.bloomberg.com/research/stocks/private/snapshot.asp?privcapid=11899573
[Accessed 22 Jul. 2019].
Thepharmaletter.com. (2019). Argentina Is "Pharma Industry's Top Problem" - Pharmaceutical
industry. [online] Available at: https://www.thepharmaletter.com/article/argentina-is-
pharma-industry-s-top-problem [Accessed 22 Jul. 2019].
Avakmovic, J., & Avakumovic, J. (2016). Method of financial analysis and impact on the quality of
decision making. EuropeanEconomics,35(2), 23-30.
Kotler, P., & Keller, K. (2012). Marketing management (14 nd). London, UK: Pearson.
Kim, J.-W. (2010). The relationship between international diversification and global brand value: Is
it linear? One way? Country-of-origin dependent? Journal of Global Business Issues, 4,
11-21. doi:http://doi.org/10.1057/jibs.2008.87
Morosan, I. (2010). The strategic analysis in the modern management of the company. University
Economic Series,10(3), 189-195.
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