Metric for Success
Oschmann explains that Merck's strategy for this important geography is still a work in progress. The company will proceed
at a deliberate pace to capitalize on lessons derived from Schering-Plough's extensive exposure in developing countries, where
many of the acquired company's key country managers have been retained, as well as from the practices of leading competitors.
The basic metric for success is ambitious: to achieve revenue growth at a rate that matches or exceeds the underlying expansion
of the markets where Merck chooses to engage.
This does not imply the approach is entirely ad hoc—Oschmann and his management team are committed to a set of business fundamentals
that will shape daily decisions taken in the field.
First is to build the business as a reliable, high-quality source of customer-focused product and service solutions. The root
objective is put product in the service of outcomes, and to raise the standard of care in line with rising incomes, based
on an assessment of where Merck's portfolio can best address the prevalent health challenges of each market. It is a combined
business and societal objective, where the "quality product" brand underpins the larger corporate reputation, which is in
turn critical to retaining the confidence of government and other powerful emerging market stakeholders.
Says Ramesh Subrahmanian, Merck's President for Human Health in the Asia-Pacific Region, "we're not just blanketing the markets
with pills that we sell indiscriminately. Instead, the goal is to carefully differentiate our portfolio from the competition
by following the patient into unmet areas of medical need."
"Across the Board" Innovation
The distinctive contrasts and challenges of doing business in emerging markets can lead to new ways to innovate. Here, the
emphasis is on the processes and platforms by which medicines and adjacent health technologies are developed, packaged, priced,
promoted, manufactured and distributed. Long term, Merck believes that success in these still-developing states will drive
business models in the US and Europe, for example by creating a better understanding of how rival companies compete in growth
segments like branded generics and follow-on biologics.
"What's exciting about this assignment is that emerging countries are not living under the health management approaches adopted
in the mature markets during the last century," says Oschmann. "There is room for experimentation. Of course, there is potential
for reducing costs, but we are investing for the return we see from these countries acting as a springboard for innovation—new
commercial opportunities that can ultimately be applied anywhere."
India: Making Up for Lost Time
One place where Merck is exploring new supply and delivery platforms is rural India, which accounts for about a fifth of the
total market, but is almost totally ignored by the local generic industry—hence an opportunity for big pharma if it can get
the product mix, pricing and distribution right. "And don't we have a similar problem here in rural North America?" asks Oschmann
One way Merck may single itself out from the competition is to maintain this focus on innovation—all through the supply chain.
"Creating novel service approaches to backstop the provision of medicines is a key differentiator of value in emerging markets.
We intend to do that with our offerings."
It also requires addressing the level of resources management wants to commit to conducting R&D and related clinical activities
in high-growth places like China and India. Other companies are ahead of Merck here, which has opted for the "virtual engagement"
approach as opposed to building dedicated brick and mortar facilities. The company is reevaluating options to invest as part
of the current global restructuring of R&D activities, under which emerging markets are likely to get a larger share of the