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Strategy Statement

Discuss about the HR Strategy Plan For Merck for Blue Ocian Canada?

Merck is a pharmaceutical and chemical company incorporated in 1668. It is the world’s oldest science and technology company. The group employs around 39,000 employees who work tirelessly to create technologies that makes life better– from biopharmaceutical treatments to cure cancer, innovating systems for scientific research and manufacture, to liquid crystals for smartphones and LCD TVs. As a HR consultant to Merck, i would develop a strategic statement, then based on SWOT analysis followed by with strategic alternatives which we will evaluate and draft a strategic plan for Merck.

Strategy Statement - the mission, vision and values of Merck id defined here to give a better understanding of the company’s objectioves.

Mission & Vision - The company motto is to “Make great things happen”. The group want their employees to excel and have a great career opportunity. In their vision, the company pursues its goals to be the leading global company in the healthcare industry. It is committed to deliver the best innovations and solutions for the future.

Values - The company strives to achieve success by sticking to their core values of courage, achievement, responsibility, respect, integrity, and transparency. These values guide the company when doing business with customers, business partners and employees.

Strategic goals - Merck is committed to innovate and deliver superior quality high-end outputs in the Healthcare, Life Science and Performance Materials business sectors. The company aspires to increase the good market position in new markets in the future. The strategic HR goals include developing a goal-oriented, performance-driven corporate culture that features a global talent development process and a performance-related, market-oriented compensation structure. The company is focused on recruiting talent, building their loyalty and retaining them for the long term.

SWOT Analysis - Albert S Humphrey strategic tool for analysing the external and internal strength and weaknesses of Merck.

Strength –

Strong R & D department – The Company spent around $ 7.5 billion in its R & D in 2013. It received a nod from the FDA for Keytruda which is an immuno-oncology drug crucial for the treatment of advanced melanoma skin cancer. (Casey, 2014)

Global presence in 146 companies across 665 countries. (Ar2014.merckgroup.com, 2016)

Brand reputation and loyalty. (Ar2014.merckgroup.com, 2016)

Focussed on developing employee’s individual potential and harness them for continuous growth. (Ar2014.merckgroup.com, 2016)

Weakness –

Demographic challenge - Average employee age in the company is 40 years. Hence in coming 15 years, bulk of the highly experienced and qualified workforce shall superannuate.

SWOT Analysis

Patent expiration of drug Fosamax and asthma drug Singulair. (Knowledge@Wharton, 2016)

Opportunity –

Experienced and highly qualified workforce. (Ar2014.merckgroup.com, 2016)

Diverse product line. (Ar2014.merckgroup.com, 2016)

Mergers, acquisitions and joint ventures. (Ar2014.merckgroup.com, 2016)

Threat –

Over-Bulged Workforce size - Currently, Merck has 50000 employees worldwide, with presence in 146 companies in 665 countries. But major workforce in Europe, (32%) which at present is having sluggish market, giving 0 to negative returns to the company. Emerging markets in Europe employs 31% of works workforce whereas revenue contribution from this part of the world doesn’t accounts to the workforce employed. (Facts, 2016)

Declining sales resulting in fall in quarterly revenue by 2.5%, due to the appreciation of dollar and declining sales of its Remicade arthritis treatment. (Staff, 2016)

Novartis buys EU right in Pfizer’s Remicade - Novartis being a rival company is clearly seen as a threat to Merck. (Garde, 2016)

As defined by Glueck, “Strategic Management is a stream of decisions and actions that lead to the development of an effective strategy or strategies to help achieve corporate objectives.” (Sekhar, n.d.) The HR function has a crucial strategic role in monitoring and combining business opportunities, motivating the workforce, enhancing their strengths and developing business groups that have the same vision and convert them into profit. (Boxall and Purcell, 2003) The company comprises diverse product line. Hence an effective HR strategy is needed to align product line to collectively achieve the group’s goals and objectives. Merck’s future HR strategies should focus on the following –

Outsource strategy - The Company’s EU division currently employs 32% of the current workforce. Given the reducing revenues and the sluggish market of Europe, it is required to reduce the workforce in this continent. A strategy can be developed to outsource the clerical / backend operations presently being run at EU offices to BPO’s located in Asia Pacific. A reduction of even 8 to 10% of the employee strength can result in lower wage bill for the company. (Facts, 2016)

Recently Novartis reduced its worldwide pharmaceutical division workforce from 65000 employees to 59000, thereby, paving an industrial move towards downsizing. This might as well be followed by Merck too, as Novartis is a rival threat, thereby reducing the company’s employment budget. (Garde, 2016)

Cost-Focus strategy - The reduction in the company’s profits resulted being lower than the industry’s average of 6.2%. The reduced profits have also impacted the company’s earnings per share negatively. (Lee, 2016) Taking into account the sliding bottom lines in the revenues, a need has arisen now for overhauling of the existing manpower. The company should retain workforce in the profitable business divisions only. It should foster in developing a golden handshake program for employees in divisions having lower bottom lines.

HR Strategy Plan

Blue Ocean Strategy – One of the key visions for Merck is to be able to provide innovation solutions in the future. But with time, the level of competition also increases. Blue Ocean Strategy can be used to create unknown markets where there are no existing competitions for the group. Blue Ocean Strategy (BOS) deals in pursuing and creating new demand achieved by the process of product differentiation and reduce costing. (Blueoceanstrategycanada.com, 2016) Merck’s innovation in 3D printing human tissues and Organ-Chips ensures that they are in the lookout of new avenues to enter into new market. Their collaboration with Organovo Holdings, Inc for 3D tissues bio-printing and Emulate Inc for Organ-Chips to improve models of human inflammatory diseases requires Merck to build up a robust R & D department. It requires hiring of qualified personnel in the field. (Sevenson, 2015) (WIRE, 2015)

Organisation Development and Training strategies -In 2011, the group took a strategic decision to achieve women percentage up to 25-30% in management positions. Currently, women occupy 26% in the management positions. This requires providing proper infrastructure of baby daycare for mother employees as well other gender specific requirement for this group. (nexxar - digital reporting evolved, 2016)

Acquisition and Merger strategies - The recent acquisition and integration of AZ Electronic Materials, strategic alliance with Pfizer in immuno-oncology and agreement to acquire the U.S. life science company Sigma-Aldrich shall also lead to increase in talent pool for the group. The new employees becoming a part of Merck family have to be oriented and properly aligned with company’s objectives, culture / values, and mission.

Rewards and Feedback Strategies – Having a proper appraisal and reward strategy is very important to keep the workforce motivated to achieve the company goals. A robust appraisal needs to be in place to develop a positive, performance-oriented culture integrating the organisation values in relation to excellence, innovation, performance, team spirit and quality. There should be an optimum combination and grades of reward provided to cater to the diverse culture of the organisation which meets the needs of the business, employees and the economic and competitive market. An equally efficient feedback system is to be formulated, so that the employee’s suggestions and grievances are duly heard and implemented upon.

By implementing the above mentioned strategy plans, Merck will be able to have the right size of workforce needed and rise from the clutches of diminishing returns. The plan will give Merck group the right boost to work up the ratings in the industry level and feature as the leading pharmaceutical company.

References

Ar2014.merckgroup.com, (2016). Annual Report 2014, Merck KGaA, Darmstadt, Germany. [online] Available at: https://ar2014.merckgroup.com/highlights [Accessed 21 Feb. 2016].

Blueoceanstrategycanada.com, (2016). What is BOS? | Blue Ocean Strategy Canada. [online] Available at: https://www.blueoceanstrategycanada.com/about-bos/what-is-bos.aspx [Accessed 24 Feb. 2016].

Boxall, P. and Purcell, J. (2003). Strategy and human resource management. Houndmills, Basingstoke, Hampshire: Palgrave Macmillan.

Casey, M. (2014). The 10 biggest R&D spenders worldwide. [online] Fortune. Available at: https://fortune.com/2014/11/17/top-10-research-development/ [Accessed 24 Feb. 2016].

Facts, M. (2016). Topic: Merck & Co.. [online] www.statista.com. Available at: https://www.statista.com/topics/2356/merck-and-co/ [Accessed 22 Feb. 2016].

Garde, D. (2016). Novartis buys EU rights to Pfizer's Remicade biosimilar, targeting Merck. [online] FierceBiotech. Available at: https://www.fiercebiotech.com/story/novartis-buys-eu-rights-pfizers-remicade-biosimilar-targeting-merck/2016-02-12 [Accessed 21 Feb. 2016].

Knowledge@Wharton, (2016). The Strategy Behind the Pharma M&A Rush -- Knowledge@Wharton. [online] Available at: https://knowledge.wharton.upenn.edu/article/trying-recapture-magic-strategy-behind-pharma-ma-rush/ [Accessed 24 Feb. 2016].

Lee, U. (2016). Here's What to Expect When Merck (MRK) Releases its Latest Earnings. [online] TheStreet. Available at: https://www.thestreet.com/story/13338170/1/here-s-what-to-expect-when-merck-mrk-releases-its-latest-earnings.html [Accessed 21 Feb. 2016].

Merck KGaA, G. (2016). Products - Industries - Applications - The Merck Group. [online] Merckgroup.com. Available at: https://www.merckgroup.com/en/products/products.html [Accessed 21 Feb. 2016].

nexxar - digital reporting evolved, V. (2016). Merck Corporate Responsibility Report 2014 - Diversity and inclusion. [online] Reports.merckgroup.com. Available at: https://reports.merckgroup.com/2014/cr-report/employees/diversity-and-inclusion.html?cat=b [Accessed 22 Feb. 2016].

Sekhar, G. (n.d.). Business policy and strategic management. [S.l.]: I K International Publi, p.6.

Sevenson, B. (2015). Organovo & Merck Enter Multi-year Research Partnership for 3D Printed Human Tissue. [online] 3DPrint.com. Available at: https://3dprint.com/60245/organovo-merck-3d-print/ [Accessed 24 Feb. 2016].

Staff, C. (2016). Merck posts earnings beat, revenue miss. [online] CNBC. Available at: https://www.cnbc.com/2016/02/03/ [Accessed 22 Feb. 2016].

WIRE, B. (2015). Emulate Announces Expanded Collaboration with Merck to Use Organ-Chips in Drug Discovery and Development Process for Inflammatory Diseases | Business Wire. [online] Businesswire.com. Available at: https://www.businesswire.com/news/home/20151221005506/en/Emulate-Announces-Expanded-Collaboration-Merck-Organ-Chips-Drug [Accessed 24 Feb. 2016].

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