Vidhi Sanghavi
Roll No:39
Subject: Business Policy
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Yes, Merck should develop Mectizan

Intangible Gains:

Merck would benefit from many intangible features by associating its brand with such sensitive public cause.

Consumers: The initiative of distributing the drug for free would position Merck in the top of mind for consumers since the company is seen not anymore as a “just-for-profit” company but actually an organization that is really committed in improving the healthy of the people around the world. Consumers are also benefited by the fact that competitors may try to imitate Merck and similar initiatives may be deployed in the future. This program also helps to set up new and better standards for public health campaigns.

Public Relations: It is important to highlight that although this program would run in Africa, where the consumer market in terms or revenues is not as big as in the developed countries, this program was able to generate huge traction among several important media companies around the world and millions of people would be “impacted” by the program features.

Competitors: another intangible benefit for Merck is that this program helps the company to distinguish itself from the other big multinational pharmaceutical companies, leveraging also the relationship with suppliers and clients due to this uniqueness. It also signalize to competitors that Merck has very “deep pockets” for sustaining such a program and this may deter the competitors of entering in markets / products where Merck is established or is developing capabilities.

Strategy to be followed
Partnership
Partnership Gains: If Merck partners with another organization there can be synergies that reduce the cost of the production and/or distribution of Mectizan. In short, Merck’s core competencies involve the production of the drug, as they already have manufacturing facilities, suppliers, etc. It is important to highlight that for this case, we are not considering the R&D costs involved with this drug, since in reality it was found by accident and more important, it already is a sunk cost for Merck at the time of their decision.
Other organizations, particularly nonprofits and NGO’s delivering community based aid to African countries, have distribution advantages as they already have access to the affected communities.
Looking at the issue from the partners’ point of view, Merck has an extreme competitive advantage in producing the drug. Remembering that we are assuming the partner is not another pharmaceutical company, if a partner wanted to produce the drug they would need to invest in manufacturing facilities as well as hire employees that no how to manage this production as well as apply for all the necessary licenses and drug trials. These are only a few items they will need to invest in, and therefore it can easily be seen why it would not be feasible for a partner to take on the production.
Conclusion
Merck can correctly utilize partners to produce Mectizan and still make a small profit. This is done by doing two things: finding the correct partners that produce valuable synergies and identifying and quantifying intangible benefits.