Case study on Merck

Made by- Charanjeet singh Eshan chhagotra

Jitendra sawan

Back ground:

• Merck has been one of the top pharmaceutical firm of the world.

• The firm is about to loose some of its top medicines like “Vasotac” and “Mevacor” to generic knock-off versions due to expiration of their patents.

Possible solutions:

• The company can go in for mergers like several other companies like Rhone-poulenc and Hoecht have done.

• Stick to its core competency (i.e) “Creativity and Innovation”

New product process:

• As seen in the case when it had a direct rivalry with the similar drug named celebrexx made by

Monsato in camparision to its Vioxx(as both were supposed to alleviate pain with minimum side effects on stomach). The Merck company lost the battle of early launch due to its late response model for its improvement and development team.

• As far as marketing is concerned, Merck is real fast in it, as it develops cross functional teams and starts marketing early in the development process only.

• Through the new process development Merck is able to stand out from the crowd of pharma company as it is giving a specialized and patented medicine which a patient cannot get from any other pharma company. Besides this, the company manufactures certain highly critical patented drugs.

This helps it to capture the untapped market of such drugs.

Vioxx case:

• Vioxx case is actually a replica of the process through which any drug is being manufactured.

• It requires detailed analysis and a series of tests like test tubes, lab mice test and then clinical trial. So over all its quite a time consuming process.

• As it is its core competency “to innovate and to be creative” so Merck should focus on it, with the only change in its process that is, to make the response model of its improvement and development more faster to respond.

Risks with product development:

• Risk of product getting rejected in the trials only.

• Lots of money being at stake in the R&D.• Other company might beat you in the final

market reach time for the similar drug.• The medicine can become obsolete with some

other powerful medicine being developed before our’s.

Major tribulations in the pharmaceutical industry

• Patent Expiration• Rapid decline in revenues • Ever increasing drug resistance of the diseases

Porter: Five Strategic Forces

Porter Model Applied

• Barriers to Entry – Large economies-of-scale barriers in R&D– Significant marketing required at global scale– High Risk inherent in the drug development

process– Increasing threat of new entries from

biotechnology companies• Bargaining Power of Suppliers– Mostly Commodities– Individual Scientists may have some personal

leverage

Porter Model Applied

• Bargaining Power of Buyers– Buying Process is price sensitive – Large power of buyers – plan sponsors with an

incentive to contain costs– Mail-order pharmacies obtain large discounts on

volume drugs– Large aggregated buyers – hospital suppliers, large

distributors, government institutions

Porter Model Applied

• Threat of Substitutes– Generic drugs weakening branded drugs– More than half the patent life spent on product

development and approval process– Technological development is making imitation

easier – reverse engineering– Consumer aversion to chemical substances erodes

the appeal for pharmaceutical drugs

Porter Model Applied

• Intensity of Rivalry– Global Competition Concentrated Amongst fifteen large

companies– Most companies focus on certain types of disease therapy– Competition amongst incumbents limited by patent

protection– Competition based on price and product differentiation– Government intervention increases rivalry– Strategic alliances establish collaborative agreements

among industry players– Very profitable industry, but declining margins

Thank you