UNIVERSITY OF BOHOL

PROFESSIONAL STUDIES

CASE 26 – MERCK & CO. INC.,

CASE STUDY

November 26, 2022

Report submitted to:

Dr. AMMON DENIS R. TIROL, DM, CPA
as partial fulfillment of the requirements in
BA207 – BUSINESS POLICY
First Semester AY 2022-2023

KEZIAH REVE B. RODRIGUEZ

MASTER OF SCIENCE IN BUSINESS ADMINISTRATION
Case 26 – Merck & Co. Inc.,
BA207 Business Policy
University of Bohol Graduate School and Professional Studies

Table of Contents
Introduction 4
The History of Starbucks Corporation 4
Organizational Profile 5
Product 5
Services 6
Vision 6
Mission 6
Components of Starbucks Mission 6
Goals 6
PESTEL Analysis 7
Political Factors 7
Economic Factors 7
Social Factors 7
Environmental Factors 8
Legal Factors 8
External Factor Evaluation (EFE) Matrix 8
Competitive Analysis: Porter’s Five Forces Model 9
Rivalry among existing competitors: High to Moderate 9
Bargaining power of buyers or customers: Moderate to Low Pressure 10
Bargaining power of Suppliers: Low to Moderate Pressure 10
Threat of substitute products or service: High 10
Threat of new entrants or new entry: Moderate 10
Competitive Profile Matrix 11
Internal Environment Analysis 12
Corporate Resources – Marketing 12
Corporate Resources - Research and Development 13
Corporate Resources- Operation management 13
Corporate Resources - Human Resource Management 13
Financial Aspect 13
Internal Factor Evaluation (IFE) Matrix of Starbucks Corporation 14

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Case 26 – Merck & Co. Inc.,
BA207 Business Policy
University of Bohol Graduate School and Professional Studies

Starbucks Coffee and its Competitors 15

Starbucks Strategy 16
Rapid store expansion Strategy 16
Product Line 16
Coffee Purchasing Strategy 16
Employee Training and Reorganization 16
Culture of Starbuck Corporation 17
Starbucks Corporation – Analysis Summary 17
Recommendation 18
Conclusion 18
References 19

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Case 26 – Merck & Co. Inc.,
BA207 Business Policy
University of Bohol Graduate School and Professional Studies

Executive Summary

Merck currently puts too much emphasis on economic profitability and seems to
have forgotten their philosophy: do it for the people, not profit. Investing in Ivermectin as a
cure for River Blindness will be less risky if they can gain media attention about the deadly
disease and put on display their efforts to save suffering humans. Merck will gain
consumer loyalty if they make the better “moral” decision and researchers' morale will
remain high. This will also work as an impetus for restructuring review boards to mimic the
company philosophy.

Case Analysis

The Merck Philosophy

Merck was founded on the idea that what they do as a company should focus on helping
people and not revolve around massive economic profits. It is the company philosophy that if they
continue to research new drugs for the people, “profits will follow.” This philosophy has a positive
outward appearance, but the challenge is to ensure that the inward appearance is the same. The
current opinion on Drug companies such as Merck in the United States is not healthy. The societal
outlook is that drug companies overcharge for their medicines (patent laws and copyright allow
them to do so) and are singly concerned with economic profit. Merck could go a long way if then
can prove that it is not their only motivation.

Research at Merck
The freedom that Merck gives to its researchers in the laboratory can be both an
advantage and a disadvantage. Researchers are encouraged to “think of their work as a quest to
alleviate human disease and suffering world-wide.” The environment leads to high levels of
employee morale which can lead to greater innovations. However, some of these innovations
could be costly to attain.

At Merck, thousands of researchers labor over drug development. Once a discovery is

made, they continue with the preliminary research and then bring the idea to a panel of head
researchers and executives. The head of research then meets with scientific advisors and
potential programs are “analyzed on the basis of the likelihood of success, the existing market,
competition, potential safety problems, manufacturing feasibility and patent status.” All these
elements deal with the economic profitability of drugs. Merck makes decisions as to what drugs
to develop almost entirely based on economic value.

In the United States, there is a program called the “Orphan Drug” program that
encourages the development of drugs for rare diseases that affect less than two hundred
thousand Americans. This inspires drug companies like Merck to continue to fund drug programs
that do not always promise the largest economic returns by offering tax benefits and exclusive
marketing rights. Internationally, however there is no such program.

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Case 26 – Merck & Co. Inc.,
BA207 Business Policy
University of Bohol Graduate School and Professional Studies

The Stakes
Merck encourages researchers to publish their work and share their ideas. This
publication of research, however, can be tricky, as it makes their knowledge available to
masses. If Merck does not actively develop a cure for River Blindness, another company
might swoop in and find one first. If another company can claim that they found a cure to
River Blindness, which affects 85 million people, while Merck swept the project under the
rug it can potentially cast a very negative image on the company, while it will have
detrimental reputational and economic repercussions.

Recommendations

Merck can do a lot of good by actively working to dispel negative images of multinational
drug companies and set themselves apart by proving they are indeed thinking first about the
people and second about profits. We suggest Merck does this by going straight to the media to
encourage coverage of River Blindness to directly educate the population. It is my belief that the
majority of America is not informed enough of the disease to understand the true goal of
investing in Ivermectin. Through education, it is possible to cast Merck’s cause as a noble one.

To do this, we recommend Merck to look towards the “Orphan Drug” program in the US.
Organizations, such as the World Health Organization, they should be convinced to provide similar
incentives towards the development of drugs that cure prevalent diseases in third-world places.
By showing the world that Merck wants to help tackle a global issue, the company will receive a
lot of attention and respect, of which will eventually benefit economically. This added loyalty
could stimulate the demand for drugs domestically as more people are willing to invest in the
company’s cause. Although the decision to invest in Ivermectin in the short run might not
encourage the highest economic return on profits, it is my belief that it is possible to petition for
funding from the World Health Organization. We do not think Merck should overlook the power
of a motivated people, and if River Blindness receives the media attention it deserves, the people
will be motivated and Merck will find the funds it needs. Additionally, the risk could be even lower
than it seems: if the company

does not turn an economic profit in the short run, a newfound positive image will have

lasting effects.

Further more, Investing in drugs like Ivermectin, employee morale will remain high

because their will be an atmosphere in which researchers will truly feel as if the work they

do can improve the human condition. In order to sustain the high levels of morale that lead

to innovation it seems imperative that Dr. Vagelos fund the research of this potentially life

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Case 26 – Merck & Co. Inc.,
BA207 Business Policy
University of Bohol Graduate School and Professional Studies

saving drug.

One structural improvement to the Merck Company involves evolving the research

review panel to reflect the company’s philosophy. The critical flaw in the review panel is

that never once is a drug judged based on the ability to help people. Every drug is based on

likelihood that it will return a profit. Based on these standards, people suffering from

diseases like River Blindness never stand a chance of receiving a cure. Merck’s future

success depends on introducing review boards that also consider the magnitude at which a

drug can help people, which also will take into consideration the long-term image of the

company. By incorporating this additional facet of research evaluation in conjunction with

the evaluation of economic profitability, Merck will make not only make good economic

decisions but also good moral decisions (reflected by public image and brand name loyalty).

Of course the company should not completely ignore drug research for some of the deadly

domestic diseases. If Merck is to be successful in their research on economically not sound

drugs they must also have drugs considered to be “money makers”. These drugs are

imperative not only because they will bring in the largest profits, but they will also be the

recipients of demand spikes based on newfound consumer loyalty that will result from a

campaign to solve diseases such as River Blindness and the like.