JOURNEY TO MERCK CO

& INC

History of Merck Co & Inc

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Merck and Schering-Plough recently merged to create a new company. Today, It is the second-largest
pharmaceutical company in the world. Merck is also a global leader in
consumer products and animal care.
Both Merck and Schering-Plough have a long and rich history of working
to improve people's health and well-being. Through the years, the
researchers have helped to find new ways to treat and prevent illness from
the discovery of vitamin B1, to the first measles vaccine, to cold remedies
and antacids, to the first statins to treat high cholesterol. Merck’s scientists
also have helped develop many products to improve animal health,
including vaccines and antibiotics.

How Merck Operate

We believe in operating openly, honestly and with the highest degree of ethics and integrity. This
includes:
• making sure that the company complies with all applicable laws and regulations globally
• continually reinforcing our overall commitment to ethical business practices and behavior, at
every level of the company, through the Merck Office of Ethics and our company's code of
conduct; and
• Safeguarding individual privacy expectations through our global privacy program.

Diversity at Merck
Merck values the diverse contributions of its employees around the world, and is committed to creating a
workplace that is open, welcome and respectful of all of its employees.

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 TIME LINE

• Merck & Co. traces its origins

to Friedrich Jacob Merck who purchased a drug store in Darmstadt, Germany in 1668
• Emanuel Merck who took over the store several generations later, in 1816.
• Emanuel and his successors gradually built up a chemical-pharmaceutical factory that produced
in addition to raw materials for pharmaceutical preparations a multitude of other chemicals.
• In 1891, George Merck established his roots in the United States and set up Merck & Co. in NY
as the US arm of the family partnership, E. Merck (named for Emanuel Merck), which is now
Merck KGaA.
• Merck & Co. was confiscated in 1917 during World War I and set up as an independent company
in the United States.
• Between the wars and during World War II, the company was led by George W. Merck, who
oversaw America's germ-warfare research at Fort Detrick. Today, the US company has about
51,000(S&P NetAdvantage) employees in 120 countries and 31 factories worldwide.
• It is one of the top 7 pharmaceutical companies worldwide, much larger than its German
ancestor, which currently employs around 32,800 people in 62 countries.
• In 2005, CEO Raymond Gilmartin retired at the age of 64 following Merck's voluntary
worldwide withdrawal of Vioxx. Former president of manufacturing Richard Clark was named
CEO and President of the company.
• In November 2009, Merck merged with Schering-Plough in a US$41 billion deal. As a result of
the merger, the company will use the trade name Merck in the United States and Canada and
elsewhere use the trade name MSD.
• During the early months of 2010, Merck's stock began a slow slide downward. The stock peaked
at 41.03 on January 20, 2010. By April 22, 2010, the stock had fallen to 33.77, a loss of 17.7%.
This loss of stock is almost equal to the loss of 17.6% the American pharmaceutical company
Pfizer had during this same time period. The slide is most likely caused by the speculation of
passage and the eventual passage of the Health Care and Education Reconciliation Act of 2010
on March 21, 2010.

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JOURNEY TO MERCK
PAKISTAN

4
 HISTORY OF MERCK PAKISTAN
MERCK TODAY
Merck runs its operating business in four divisions: Merck Serono, Consumer Health Care, Liquid
Crystals, and Performance & Life Science Chemicals.

The Merck Serono division markets prescription medicines. It discovers, develops and manufactures
both chemical and biological molecules. Merck holds strong positions in neurodegenerative diseases and
oncology. In addition, the division markets fertility treatments, a field in which we are the market leader,
growth hormones, as well as a broad portfolio of classic products, especially for cardiovascular diseases
and metabolic disorders.
The Consumer Health Care division offers over-the-counter products for preventive health care and
the self-treatment of minor ailments.
Liquid Crystals division focuses on the development of molecules for printable organic electronics, on
the use of alternative energy, as well as on lighting materials for energy-saving LEDs (light-emitting
diodes) and OLEDs (organic LEDs). Merck is the global leader in the liquid crystals market.
Performance & Life Science Chemicals, the second division within the Chemicals business sector,
mainly supplies specialty chemicals to regulated markets, for example the pharmaceutical, cosmetics and
food industries. Analytical and scientific laboratories use our reagents and test kits. Moreover, the
division is the market leader for pearl luster effect pigments a highly specialized niche within the
pigment market.

THE FUTURE
Merck will continue to operate in both Pharmaceuticals and Chemicals and to focus on specialty
products. We will also continue to invest significantly in research and development. We want to grow
both organically and through acquisitions. We will adhere to our conservative finance policy.

MERCK PRODUCTS
Pharmaceuticals Products

• LODOPIN tablets contain amlodopine, which is widely used for the treatment of high blood
pressure and both stable and unstable angina. LODOPIN (Amlodopine) is globally known for its
efficacy and long-term clinical use, and therefore enjoys the confidence of medical professionals
worldwide
• Cefomerc IM / IV Broad-Spectrum Third generation Cephalosporin injection contains
Cefotaxime Sodium. Effective against gram negative and gram positive pathogens.

Chemical Products:

• Merck for Pharma: Innovative products from Merck support you in all phases of pharmaceutical
manufacture - from research through industrial-scale production to quality control.
• Merck for Food: Optimum safety and quality for all foods: Merck
supplies cleaning and disinfecting solutions, raw materials, products and
documentation for in-process and quality controls.

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 • Merck for LCDs & Emerging Technologies: Merck makes communication visible - with high-
tech chemicals and materials for LCDs and OLEDs, organic semiconductors, OLED components
and etching pastes.
• Merck for Biosciences: State-of-the-art life science products: our offer ranges from development
to large-scale manufacture of many reagents for
research.
• Merck for Cosmetics: Beauty through Merck: We
supply a wide range of special raw materials for use in
skin care and decorative cosmetics.
• Merck for Printing, Plastics, and Coatings: Packaging is
crucial. Merck supplies novel effect pigments for the
plastics, printing and coatings industries, with a wide range
including decorative and functional pigments

Introduction to Merck
(Private) Limited, Pakistan
Merck (Private) Limited is a subsidiary of Merck KGaA Germany in Pakistan. It has been working in
Pakistan since 1974. The business in Pakistan is controlled by the Managing Director, a nominee of
Merck Germany. Presently Mr. A. Baqy Khan is the Managing Director. In Pakistan, Merck (Private)
Limited is looking after 2 main business groups namely:

1. Pharmaceuticals
2. Chemicals

Pharmaceutical products are produced in Merck Quetta factory and Merck Pharmaceuticals located at
S.I.T.E, Karachi. They are then distributed through a network of dealers all over Pakistan. Chemical
business group is called “Performance and Life Science Chemicals” (PLS Chemicals) and is composed
of three main segments

A. Chemicals
B. Diagnostics
C. Pigments

The products of PLS Chemicals are not produced in Pakistan but are imported and then supplied to our
valued customers through a network of Chemical and Diagnostic dealers. Some of the products are
customized and are only meant to cater customers need in Pakistan and are labeled under Merck
(Private) Limited. The Dealers for Chemicals and Diagnostics are restricted to look after the business
they are assigned for, however, in some cities the business of Chemicals/Diagnostics is looked after by
the same dealer.

VALUES OF MERCK

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Our business is preserving and improving human life. We also work to improve animal health. All of our
actions must be measured by our success in achieving these goals. We value, above all, our ability to
serve everyone who can benefit from the appropriate use of our products and services, thereby providing
lasting consumer satisfaction.

We are committed to the highest standards of ethics and integrity. We are responsible to our
customers, to Merck employees and their families, to the environments we inhabit, and to the
societies we serve worldwide. In discharging our responsibilities, we do not take professional or
ethical shortcuts. Our interactions with all segments of society must be transparent and reflect the
high standards we profess.

We are dedicated to the highest level of scientific excellence and

commit our research to improving human and animal health and the
quality of life. We strive to identify the most critical needs of
consumers and customers, and we devote our resources to meeting
those needs.

We expect profits, but only from work that satisfies customer

needs and benefits humanity. This depends on maintaining a
financial position that invites investment in leading-edge research
and that makes it possible to effectively deliver the results of that
research.

Our ability to excel depends on the integrity, knowledge, imagination,

skill, diversity and teamwork of our employees. To this end, we strive
to create an environment of mutual respect, encouragement and
teamwork. We also strive to reward commitment and performance
and be responsive to the needs of our employees and their families.

CODE OF CONDUCTS
Our values and standards are the
basis of our success. They always
have been. They always will be.

The people who use, recommend or prescribe our products have

placed their trust in us. No matter how strong our reputation, we

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must re - earn that trust every day by practicing the values and standards that have guided this company
for more than 100 years.

We work hard to make sure that the integrity of this company remains a priority for everyone at Merck
every day, at every level of our company. Our code of conduct, which we publish for employees under
the title Our Values and Standards, helps to make sure that our employees understand what is expected
of them, and provides guidance on business standards and practices.

DISCOVERY AND DEVELOPMENT

Bringing important medicines and vaccines to people around the world
through breakthrough science. This is the heart of what we do.

The work we do in our labs has helped to save and improve countless lives. Thanks to our world-class
researchers, state-of-the-art technologies and unrelenting focus on scientific excellence, Merck is at the
forefront of discovering and developing new ways to treat and prevent disease.

Scientific discovery and development have always been the cornerstones of

our company. Today, we conduct research in a broad range of therapeutic
categories – including cardiovascular disease, infectious diseases, vaccines,
cancer, neurology and women’s health. And, to help achieve our goal of
saving and improving lives around the world, we are expanding our
capabilities in new areas, such as biologics.

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 PHASE-I

STRATEGIC FORMULATION

STRATEGIC MANAGEMENT:

According to Fred R David, “It’s an art and science of formulating, Implementing and evaluating cross
functional decision making that enable an organization to achieve its objective”

ACCORDING TO MERCK (PVT) LIMITTED PAKISTAN:

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In MERCK Pakistan Strategic Management is the most important thing for them because they believe if
company don’t have any plan (that is they were referring to mission & vision statement) it cannot go
anywhere. It is the need of today’s world.

STRATEGIC PLANNING (INTUTION OR ANALYSIS)

Analysis and intuition provide a basis for making strategy formulation decisions. For Merck Pakistan, it
is purely done on the basis of analysis for Merck there is no such thing as intuition because they are
concern with fact and figure which they have gathered from different sources. Being in pharmaceutical
and chemical business there is no chance of being taking a risk in quality and quantity therefore all the
decisions taking in Merck Pakistan are purely based on analysis. Specially, chemicals from Merck are
important component of process chain from drug development to industrial production. Merck ensure
reliable analysis in research and dependable production processes.

STRATEGIC PLANNING PROCESS AT MERCK

Strategic planning process at Merck is a continuous process. Merck take its principle decisions annually.
Yearly meeting in a remote place with the CEO’s and upper management is took place where the revival
of strategy as well as solution to the major problems are discussed. The issues regarding suppliers, raw
materials need planning which is done annually. The decisions are team decisions and are taken by
regional team having 10-15 members. Vision and mission of Merck never changes but codes of conducts
are changes according to strategy.

RESPONSIBLITIES FOR STRATEGIC PLANNING IN MERCK

Step
1. Prepare to plan
2. Review/ Revise/ validate
Mission, Vision and Values
Typical Board and Staff Roles
and Responsibilities
Full board makes commitment,
establishes planning committee
to develop approach and timeline
Board, usually with input from staff
and/or membership (Board should
approve final vision and mission
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Consultant Contribution
• Experience in charting out
planning processes
• Guidance regarding typical
timelines and best practices
• Board education regarding the
value of planning
• Expert facilitation of process
• Education regarding the
definitions of vision, mission and

3. Gather relevant data and
stakeholder input
4. Set goals/develop plan
framework
5. Write the strategic plan
6. Review draft plan
7. Approval of final strategic plan
Vision of Merck
“Focused on today, positioned for tomorrow”
LONG TERM OBJECTIVES
• Multiple sourcing and form it from different regions.
• To increase the market share of the Merck.
statements)
Board and Staff
Board and Executive Staff
Staff and/or relevant board
committees. At this point, the
development of more refined
objectives and action steps is
typically delegated to those who
will be doing the work.
Board has primary responsibility to
see that the plan hangs together, is
realistic and reflects board
priorities.
Board
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values
• Guidance regarding how to craft
effective statements
• Expertise regarding methods for
gathering input
• Assistance in designing data
collection tools, conducting
outreach, gathering feedback
• Independent third party to listen to
stakeholders and synthesize
comments
• Research on peer organizations or
trends
• Expert facilitation
• Retreat design to ensure time is
used efficiently
• Assistance in reaching consensus
regarding strategic priorities
• Template for planning and
education regarding terminology
• Template
• Education regarding how to write
measurable objectives
• Coaching
• Outside accountability to keep the
process moving
• Facilitation and guidance
• Reality check: an outside reviewer
who can comment on use of jargon
or areas where the plan is unclear
• Ask some of the same questions
your funders will ask you—identify
plan weaknesses in time to correct
 • Assess Merck supplier satisfaction from over 160 global suppliers.
• Measure overall satisfaction of Merck suppliers.
• Merck’s accessibility to the suppliers.

SHORT TERM OBJECTIVES

• Identify strengths and weaknesses in Merck’s negotiation processes.

• To increase our sales.

Mission Statement of Merck

We, the management and employees, are striving for entrepreneurial success. Entrepreneurial success
starts with people. Our goal is to operate a worldwide business that produces meaningful benefits for
consumers, our market partners and our community.

Through efficient research and development, production and marketing of pharmaceutical and chemical
specialties, we want to extend opportunities to our customers. To achieve this, we focus our endeavors
on business areas where we can achieve a competitive advantage through the excellent quality of our
products, systems and services. Our objective is to establish permanent business relationships and not
merely short term success.

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On the basis of these principles, we operate as an independent and profit oriented enterprise. We expect
a high level of performance from each other, and reward this accordingly. We wish to secure an
acceptable return on capital for our investors.

We respect the cultural distinctions and national interests of all

countries in which we operate. We strive to achieve positive
recognition for our company within the community. Merck attaches
particular importance to its responsibility for safety. We have an
obligation to respect the environment.

We will deal honestly and constructively with one another. We regard

open communication, both internal and external, as a fundamental
prerequisite for reaching an understanding of our common goals and
for giving meaning to what we do. We shall not be constrained by
borders between business areas or countries. All employees, male or
female, have equal opportunities to develop their careers.

All of us make a personal contribution to the company‘s entrepreneurial success through our mutual
initiative, creativity and sense of responsibility.

EVALUATION OF MERCK
MISSION STATEMENT

Customer Product and Service Market

yes yes yes
Technology Concern for survival and growth Philosophy
and profitability
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 no yes yes
Self Concept Concern for Image Concern for Employee
No yes yes

THE MERCK STRATEGY…

SUSTAIN-CHANGE-
GROWTH
• Specialty businesses within Pharmaceuticals and Chemicals will remain our fields of endeavor.
• In both business sectors we will grow by means of our own resources as well as through
acquisitions. We want to be among the fastest growing companies in our markets and strive for
“quality growth” with revenue growth exceeding cost increases.
• We diversify our risks within an integrated company operating in two business sectors. A
portfolio of emerging businesses, highly successful products and cash cows as well as our global
presence balances the risks of our businesses.
• Our core competencies are a culture of innovation, awareness for high quality products, customer
focus and reliability.
• Our business is global. Therefore, the divisions, as units with operating responsibility, run their
businesses globally. However, the countries retain a degree of independence that facilitates local
entrepreneurship.
• We measure financial success by operating result and free cash flow as a percentage of total
revenues. Maintaining an investment-grade rating is a defining factor for our financing

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 framework. Our strong balance sheet enables us to finance growth while maintaining a risk
buffer.
• We enable our employees to share in the company’s success.
• Our claims regarding Corporate Responsibility and Compliance do not stop at country borders as
they are derived from the Merck values.
• Pharmaceuticals
• Pharmaceuticals consist of Merck Serono and Consumer Health Care. We want to expand both
businesses.
• Within Merck Serono we will achieve the key competitive edge by innovating for the benefit of
patients. Our focus in research and development is on oncology, neurodegenerative diseases and
on autoimmune and inflammatory diseases.
• We want to strengthen our position as leading biotech innovator. We will obtain a further
competitive edge through our expertise in chemistry and through the cross-fertilization of
biotechnology and chemical know-how.
• We will improve our market position through targeted acquisitions and an active licensing policy.
Regionally, we will focus on expanding our businesses in the United States and Japan as well as
China and India.
• Consumer Health Care will be expanded further organically and via acquisitions. Our focus is on
four health themes: Mobility, Everyday Health Protection, Women’s and Children’s Health as
well as Cough and Cold. We will extensively invest into our strategic brands in scale markets
with growth potential, predominantly in Latin America and Asia.
• Chemicals
• With a portfolio of dynamically growing businesses in strongly expanding markets and a stable
business in mature market segments, Chemicals contributes essentially to balancing
entrepreneurial risk.
• In the liquid crystals market, our goal is to maintain our leading position in the long term. We
want to play a similarly active role in related and new display technologies in order to translate
our technological competence and our customers’ expertise into new businesses.
• Performance & Life Science Chemicals will continue focusing on profitable sub-segments in
markets where - due to governmental regulations or high quality standards - safety and quality
outperform low-cost alternatives. Customer-centric innovative solutions are the key factors for
the continuously profitable growth of this business. Special attention will be given to expand our
market presence in biosciences and bio manufacturing tools.
• We want to acquire businesses that are complementary to existing customer relations or
technology platforms. Our regional focus is on China, India and the United States.
• To address future growth fields, we are developing new businesses and technology platforms
within Advanced Technologies. Our focus is on technologies such as solid state lighting, organic
electronics, mobile energy and photo voltaics.

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EXTERNAL ENVIRONMENT
PEST ANALYSIS

1) POLITICAL:

• Trade with India cause sometimes great trouble to Merck. India is one the supplier of the Merck
but due to political conditions and Pakistan-India relationship it creates issues to transact.

16
 • Government type and government stability also affect Merck.
Musharraf’s Era, political environment was stable for the growth of
business.
• Rules of Laws and regulations are also involved in organization’s
growth. The five-year anti-dumping duty imposed on Pakistani
manufactured goods by the European Union came to an end. This was
opportunity for the Merck.

• Due to unstable political condition and the tenure of the government in

Pakistan, it has adversely affected the firm’s long term as well as short
term strategy. From Merck Pakistan perspective, there are no such subsidies or levies that are
provided to this sector from the government, instead they have increased the tax rate.

2) ECONOMICAL

• Growth, inflation and interest rate all effect performance of

Merck.
• Globalization has become one of the major opportunities for
Merck. Now Merck have many suppliers from all over the
world which has reduced the reasons of being black mail by
suppliers.
• There is a lot of economical pressure on Merck; Merck can not increase their prices due to its
responsibilities of being in pharmaceutical business but the tax by the government of Pakistan
is increasing day by day.
• All these economic factors have a common theme that is increase in price, which will
ultimately hit the cost, the burden transferred on final consumer.

3) SOCIO-CULTURAL

Merck Pakistan is very much concerned with issues related to cultural and social aspect. Because Merck
considers Pakistani diverse culture as an opportunity, they always try to bring such products which align
with cultural and social aspects.

4) TECHNOLOGICAL

Merck is at the forefront of discovering and developing new ways to treat and
prevent disease. Scientific discovery and development have always been the
cornerstones of Merck. Today, Merck conduct research in a broad range of
therapeutic categories including cardiovascular disease, infectious diseases,
vaccines, cancer, neurology and women’s health. And, to help achieve their
goal of saving and improving lives around the world, they are expanding their
capabilities in new areas, such as biologics.

Before Merck develop a new medicine or vaccine, they need to understand the
basics. How exactly does the disease or condition work? And which
mechanisms have the potential to help prevent or treat it. It takes a long time to identify a potential new
treatment. Teams of scientists might screen thousands of compounds to identify a promising lead. That

17
compound will then need to be refined, optimized and tested in clinical trials before Merck can apply for
regulatory approval.

Drug discovery is often an expensive and high-risk undertaking. Merck spend billions of dollars each
year to discover and develop medicines and vaccines that can help people around the world.

Before they may receive approval for use, medicine and vaccine candidates undergo rigorous and
systematic testing in volunteers. This process is designed to evaluate whether a new product should be
approved for use in the broader population. Each clinical trial is designed to answer certain research
questions. They follow strict, predefined protocols to ensure safe and accurate results.

COMPETITORS
Merck Pakistan is not operating in Pakistan as an individual entity focused on pharmaceuticals and
chemicals. It has its operations in this nation along with many competent players, each trying to win the
game. Some focused in trying to gain a share, others are trying to become a market leader and enjoy the
benefits attached to. Merck is a multinational corporation and Merck Pakistan is its operating company.
It faces competition from not only locals but as well as other multinationals. That is why Merck is very
much concerned with it, and so they keep a thorough look out of their competitors. They keep
themselves updated they usually face extreme level of competition but this level varies from one
category to another. Competitors of Merck include the following:

• GlaxoSmithKline
• Pfizer Inc.

In chemicals Merck has a competitive advantage at liquid crystals. Merck has a copyright on making the
liquid crystal. Merck is the world's leading liquid crystal supplier for the display industry. Merck is the
leading supplier for the two most advanced liquid crystal technologies used in modern displays - Vertical
Alignment (VA) and In-Plane Switching (IPS). (CPM is referred to appendix)

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INTERNAL
ENVIRONMENT
Merck Pakistan after analyzing the external environment then focuses on the good and weak points of its
internal factors which in turn are assessed through free flow of information from top to bottom and
bottom to top. Their interaction with their retailer and suppliers helps them assess their strengths and
weaknesses accordingly. Employees of Merck play an important part in order to evaluate and asses the
information regarding the internal environment.
This section of the strategic environment is a realistic analysis of Merck's internal resources. The
following internal traits portray a resource-based view of Merck's core strengths and weaknesses.

1) RESEARCH AND DEVELOPMENT

The foundation of Merck’s strength, and the engine of its growth, has always been the novel medicines
Merck discover and develop to meet the healthcare needs of patients, physicians and payers. Merck’s
franchises continue to drive growth, supported by new products, indications, formulations and clinical
trials. At the same time, they are rapidly building their capacity to successfully compete in new
therapeutic areas such as diabetes, insomnia and cancer and new vaccine markets.

2) CONSUMER HEALTH PRODUCTS

Through Merck’s consumer health products, they strive to enhance the quality of life for people and their
families around the world. Each day, millions count on one or more of their industry leading brands that
help prevent or treat various common conditions. These include household names such as CLARITIN
for allergies, COPPERTONE for sun care, DR. SCHOLL'S for foot care, and many more.

3) LIQUID CRYSTAL

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Merck is the world's leading manufacturer of LCD materials. By
continuously developing customer specific liquid crystal mixtures,
together with display manufacturers Merck make the communication
technologies of tomorrow possible. They offer innovative materials for
security, identification and photovoltaic. By innovation, creativity and
entrepreneurial thinking Merck has become number One in Liquid
Crystals worldwide with more than 2500 patents in the field of liquid crystals, their mixtures and display
applications. (IFE referred in appendix).

STRATEGY
IN ACTION

LONG TERM OBJECTIVE:

For Merck Pakistan long term objective means a step towards their vision. In Unilever Pakistan strategy
documents is done for minimum 5 to 6 years. On OPCO functional documents based on 2 years because
for them 5 to 6 years is the maximum period to achieve the long term objectives.

INTEGRATION STRATEGY:
Merck Pakistan is currently using strong forward integration but for backward integration
has some lacking because they don’t own their supplier.

• FORWARD INTEGRATION:

Merck Pakistan has a strong control on over their distributor or agents.

Merck Pakistan uses joint businesses plan with their distributor, this is
basically a written document which contain all information regarding to
their distributor strength and weaknesses. After analyzing the strength and
weaknesses of distributors, Merck Pakistan assigns the distribution task
according to their strength; Secondly Merck Pakistan holds the contract with
their distributor which bound their distributor to dispatch product of Merck
Pakistan only.

• BACKWARD INTEGRATION:

Merck Pakistan does not control their supplier because at the same time they are interacting with the
various suppliers, but they want to make a long term relationship with their supplier, if any supplier
wants to dictate their price to Merck Pakistan, Merck Pakistan starts to find out new vendor.

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INTENSIVE STRATEGY:
Merck Pakistan normally used all these strategies the proportion of each / division varies from one
another. Merck Pakistan will be looking out some past trend, secondly is there any space for product
innovation or not. When it comes to product development and penetration it is happening in all the
categories.

DEFENSIVE STRATEGY:
Merck Pakistan normally doesn’t use defensive strategy they usually follow aggressive strategy which
called as “ATTACK or COUNTER ATTACK STRATEGY’. But past experience has state that they
have used Retrench and Divesture strategy.

• RETRENCHMENT:

Merck Pakistan doesn’t use retrenchment strategy on their employee in order to reduce cost, they have
very tight policies over their cost but they have applied this thing on certain division/category, this is
something that every organization has to go through otherwise we will be far away from the market.
According to Merck Pakistan if this type of scenario occurs they usually implement two kind of
approach:
• Minimize the cost.
• Double the sale

• DIVESTURE:

Merck Pakistan has divesture one of its pharmaceutical products not because of its low growth but it was
strategy came from Merck Global that this line should be divested. Therefore, to align their strategy with
the Global strategy Merck was bound to divest it.

DIVERSIFICATION STRATEGY:
Merck Pakistan is currently using this strategy in two ways that is related diversification strategy and
unrelated diversification as Merck is consider more toward sustainable growth and profit, it’s kind of
risk diversification.

DIFFERENTIATION STRATEGIES:
Merck Pakistan is a huge organization that why they are implementing many strategies at the same time.
Currently they are working on eleven strategies. Differentiation strategy helps Merck Pakistan to keep an
edge over other competitors. They have an edge on:

• PRODUCT QUALITY.

• LEVERAGE WHICH UNILEVER IS HAVING DUE TO BEING MULTINATIONAL.

• DISTRUBUTION NETWORK

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 PHASE-II

IMPLEMENTATION

22
STRATEGY IMPLEMENTATION
POLICIES
Strategic Document is formulated at Merck Global, and then it is divided into regions and subdivided
into countries, sub clusters according to their regional strength. Then in to clusters (that is Subcontinent)
it is further divided into countries that is Pakistan, India, Philippines, Singapore, South Korea, Taiwan,
Thailand and Vietnam etc , then the CEO of these sub cluster discuss with the other CEOs and then a
final Strategic document for each and every country is declared. This strategic document is again
forwarded to the MERCK GLOBAL for approval. After its approval, it is then received in Merck
Pakistan level. It is being split into functions, when this is split into function every individual in this
organization has his own document in which his contribution in that strategy is written clearly and at the
end of the year, each individual is being assessed in the middle and at the end of the year on the basis of
those target which lead them toward increment or bonuses. Implementing strategy practically is a
different thing as it comes from document, Merck Pakistan is quite concern about this fact because if any
issue is raised by Merck Pakistan Limited on strategy implementation this will go on sub cluster level
then on cluster level and lastly on Merck global.

CHANGING POLICIES:
General policies regarding to strategy implementation or other issue remains the same but it does not
mean that they will not change. Yes, Merck aligns them with the modern values. In the past, it was
termed as code of ethics but now it is termed as values. Merck has 5
different values which are discussed every year. There are different
terminology uses at different level for employee safety and it is one
such example of the term as “Value”. Merck general policies such as
HR policies, Accounting Policies etc. are in line with the general
policies of Merck Global which, in turn, are localized to Pakistan
perception due to Merck of various countries have different legal
structures and policies.

RESOURCE ALLOCATION:
Resources are being allocated for different category according to their span of the brand because there is
a possibility that for a small brand there may be one brand manager and for other brand, many managers
and working staff. There is no specific tool used for allocation of resources in Merck Pakistan. They

23
only allocate according to the size of the category and on the other
hand Merck annually pursues benchmarking exercise.

MANAGING CONFLICT:
In Merck Pakistan every person to whatever age group he or she
belongs to, has no tool as such for conflict management. In Merck
Pakistan, arise of conflicts between 2 persons are sought amongst
themselves, if it does not help then the first manager tries to resolve it
between two or more individual who have conflict. If this goes beyond
his control then they refer to HR conflict team {the person who has
given the information is the VP of this team}, then action is being taken whether to move that person out
of the department or not. At professional level conflict are different. Conflict also arises outside the
Merck which are mainly with the suppliers. These are always sort out by the managers.

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 PHASE-III

EVALUATION

EVALUATION & CONTROL

CONTROL PROBLEM:
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There is always a control problem in every organization if any organization denies this that there is no
control problem they are lying. Organization goes on changing in term of control if any organization has
reduced its structure it means they are controlling over their control problem. Merck Pakistan has a very
lenient structure, they use to have a very flat structure 2-4 years ago, and this is something which every
organization has to go through otherwise they will be out of market.

STRATEGIC FOCUS:

Yes, Merck Pakistan keeps a tight strategic focus and all of its control system
such as {budgeting system, performance evaluation etc.} support the strategic
focus. In addition to that all agencies, partners & customers also give an
indication of the responding strategies.

EVALUATION OF STRATEGIES:
In Merck Pakistan strategies are being evaluated through: SIA (Strategies in
Action), on functional level it is being evaluated on monthly basis. At a Merck
global level, it is done on quarterly basis. Financial statements are the best
evaluator for them. They do not use balance scorecard system but they have
separate tools and technique. Merck Pakistan evaluation mean getting a sense
of direction.

CONTINGENCY PLANNING:
On every plan or strategy, there lies a contingency for every process, after all this entire procedure is a
man made and probability is that it might fail not by one’s own personal factor but from highly volatile
external factor(s). Things, which are moving properly from last 10 years it, might fall down to ground,
for every successful organization they should have a contingency plan. And Merck does have plans “B”.

STRATEGIES VISIBLE OR HIDDEN:

According to Merck Pakistan strategic management should be visible or
hidden both, it totally depends upon the strategic process. If organization does
not have an effective process then it should be hidden and on the other hand, if
your organization really has an effective process such as Merck Pakistan limited then it should be visible
strategic management process.

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27
 PHASE-IV

RATIO ANALYSIS

PROFITABILITY RATIOS
Gross Profit Margin indicates the relationship between net sales revenue and the cost of goods sold.
The Gross Profit Margin of 77.49% shows that 22.51% of Sales becomes the part of Cost of Sales. Thus
showing that the Product Cost is very low and Company is very efficient in managing Raw Materials at
lower cost.

Pre-Tax Profit Margin is a measure of the operating efficiency of a company. Pretax margin is usually
expressed as a percentage of revenues. Since pretax margin evaluates the relationship between operating
income and revenues, it is also considered a measure of the profitability of the company. The margin of
6.27% shows a good operating efficiency of Merck (Pvt) Ltd.

Return on Assets measures the company's ability to utilize its assets to create profits. Merck (Pvt) Ltd.
is generating net income which is 2% of its total assets.

Return on Equity is a measure of how well a company is able to return a profit using the shareholder’s
investment. ROE of 0.65 is a satisfactory as shareholders perspective.

Net Profit Margin measures net profit as portion of Sales. The net profit of 4.96% of Sales.
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 LIQUIDITY RATIOS
Current Ratio provides an indication of the liquidity of the business by comparing the amount of
current assets to current liabilities. A business's current assets generally consist of cash, inventories,
accounts receivable, and marketable securities. Current liabilities include accounts payable, current
maturities of long-term debt, accrued income taxes, and other accrued expenses that are due within one
year. In general, businesses prefer to have at least one rupee of current assets for every rupee of current
liabilities. The current ratio of 1.96 shows a tremendous liquidity position of Merck (Pvt) Ltd..

Quick Ratio also measures the liquidity position of the business in more deeper aspect. The quick ratio
compares the cash plus cash equivalents and accounts receivable to the current liabilities. The primary
difference between the current ratio and the quick ratio is the quick ratio does not include inventory and
prepaid expenses in the calculation. Consequently, a business's quick ratio will be lower than its current
ratio. It is a stringent test of liquidity. The liquidity position Merck (Pvt) Ltd. is at high satisfactory level
as shown by the quick ratio of 1.36.

Reinvestment Ratio measures how much a company reinvests its operating cash flows into capital
expenditures. The ratio of 0.12 shows that 12% of the cashflows from operating activities were used for
capital expenditures in 2009.

Debt Coverage Ratio determines the ability of the company to generate cash from operations in order to
pay off its liabilities. The ratio of 5.25 shows that Total Liabilities are 5.25 times the Operating Cash
flow.

Cash flows ROA measures how much operating cash flows a company is generating from its assets.
Merck (Pvt) Ltd. is generating operating cash flows of 0.08 pound from each pound of its assets.

ACTIVITY MEASURES
Asset Turnover takes an overall focus on how the company uses all of its assets to generate revenues. A
higher number is desired because it indicates that each pound of asset is producing a greater amount of
revenue. The ratio of 0.46 shows that each pound of asset is generating 0.46 pound revenue.

Accounts Receivable Turnover is similar to assets turnover; however it focuses a more specifically on
accounts receivable and its effect on revenue. This ratio shows how effective a company is with
extending credit for credit sales as well as collecting these debts from customers. The ratio of 4.12
indicates the company is efficient.

Day’s Sales in Accounts Receivable is linked closely to accounts receivable turnover. It indicates the
average time in days that it takes to make a collection on a credit sale. The fewer days needed to collect,
the better the efficiency. The collection period is 89 days approx that should be made better by
producing efficiency in payment collection area.

Inventory Turnover
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Inventory turnover is a measure of how often within a year that inventory is sold and replaced. It is
calculated by dividing cost of goods sold by inventory. Merck (Pvt) Ltd. should work in this area as
inventories are sold and replaced just 1.46 times in a year.

Day’s Sales in Inventory

The day’s sales in inventory ratio is closely related to inventory turnover. It quantifies how long your
inventory remains in storage. Lower numbers indicate higher turnover and therefore are considered more
efficient. Inventory holding time is 250 days which shows huge cost incurring at storage and insurance
too.

LEVERAGE RATIOS
Debt Ratio

The debt ratio indicates how much debt a company has relative to its assets. Merck (Pvt) Ltd. has £0.43
relative to assets of £1.

Debt to Equity Ratio

The debt to equity ratio is a measure of what proportions of debt and equity are used in its financing. It is
also a measure of a company’s financial leverage. Merck (Pvt) Ltd. is depending much on debts and
hence the ratio is 12.73 which show that the debt financing is 12.73 times more than equity financing.

Leverage Ratio

The leverage ratio indicates the extent of asset financing from the shareholder’s. Merck (Pvt) Ld.
depends largely on debts. The assets are 29.57 times more than equity.

Times Interest Earned Ratio

The times interest earned ratio gives shows how well a company is able to pay its interest expenses with
earnings before taxes. The ratio 4.62 represents that 4.62 times over the interest expense can be paid with
the earnings before interest.

Times Interest Cash Flow from Operating Activities Coverage Ratio

Times interest cash flow is similar to the times interest earned ratio. However, instead of comparing the
company’s ability to pay interest with EBIT, this ratio compares how well the company can pay interest
with operating cash flows. Interest can be paid 10.20 times from Operating Cash Flows. ( Income
statement, balance sheet and other financial schedule are enclosed in appendix).

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 PHASE-V
REFERENCES

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 REFERENCES

http://www.ft.com/cms/s/0/ebdf4164-5797-11df-855b-00144feab49a.html
http://www.merck-chemicals.pk/about-merck
pakistan/c_1Aab.s1OVx8AAAEmoUs2QJlX?IsLocalCategory=true
http://www.merck.pk/en/index.html
http://www.merck.pk/en/company/company.html
http://magazine.merck.de/en/index.html
http://www.merck.de/en/index.html
www.merck.com/product/home.html
http://www.merck.pk/en/company/merck_in_pakistan/merck_in_pakistan.html
http://pharmexec.findpharma.com/pharmexec/News+Analysis/Pfizer-and-Merck-
Bullets-Dodged/ArticleStandard/Article/detail/668828?contextCategoryId=43753
http://en.wikipedia.org/wiki/Merck_&_Co,_Inc.

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PHASE VII

APPENDIX

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