May 8th–Visiting Merck Group

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May 8th, 2013 an exposure of Liquid Crystals at Merck- a global pharmaceutical and chemical family enterprise

On the second day of our stay in Koblenz, we spent the whole day at Merck Group, a global and also the world’s oldest pharmaceutical and chemical enterprise.

We had a remarkable lecture in the morning, the company was founded in 1668, and now it is in its 13th generation of succession, while family owns an interest of about 70% via the general partner. In terms of family business succession, it is common for family businesses to survive less than three generations; however, Merck has proved that the business can be successful in a family way. In addition, we were also given how they found one of Merck’s major successful products, which is liquid crystals. Since 1904 Merck has had liquid crystals in its sales program in order to support science than anything else.

We had the production and facilities tour after, which included the chemical and pharmaceutical production as well as the pharmaceutical development labs. They showed us what production equipment they use in the labs and the processes of monitoring the pills.

We also visited their Warehousing & logistics and most interesting part was the history presentation at Merck museum. In the museum exhibits, there are sets of utensils for making up prescriptions, a comprehensive collection of pharmaceutical and chemical packaging materials, and cases of medical samples as well as pharmacy vessel.

The presentation was followed after the visiting of the museum, which was a fascinating discussion about family business which that gave us a better understanding of family business and how to keep the succession of the business.

As a family business, one of the most important things would be the succession of the business. Merck has been working very hard to keep the company stay within the family business. First, a strong brand name is one of the precious assets for the company. Merck is a high quality brand name around the world since the company was founded by Friedrich Jacob Merck in 1668. The company began with as a small pharmacy run by the Merck family and they produce medicines and chemical products as their major business later on. Their products have very high quality, credibility, innovative and customer loyalty as well, which is one of the reasons that the company can maintain its success within the family business. Secondly, Merck distinguishes itself from its competitors by building their own culture and maintain true to itself. The company’s culture fosters long-term oriented and an entrepreneurial spirit.

On May 10th, we had a lecture about strategic renewal in the family business during succession. Family business needs to deal with not only the external competition but also the internal challenges, specifically the relationship between family members. The close bonds between family members can be one of the biggest competitive advantages for company’s succession. The Walter Rau Group is one of the cases that we learned.  The company is a family owned and family led food producing company in Germany, however, the challenge of the transition they faced was big and family members are in disagreement about how and who to inherit the company. I still remember how one of the family members defines success. He thinks that success is family members are still talking to each other, that is, strong family involvement and a better relationship are necessary to a family business. A better relationship between the family members makes the transition easier and the companies with close family bonds have more opportunities to outperform than the one that does not have the bonds. That is why Merck is still within its family generations.

As well, communication is one of the key factors of running family business successfully. Family members must encounter a lot of new challenges during the growth of the family business, so they need to talk through and tack the challenges as well as solve the arguments together in order to operate the business successfully and maintain the succession.

What’s more, the business must clearly know the company not only pursue production and sales objectives, but also meet the social responsibility to maintain the long-term development of the business. No matter how the environment changes, the company should remain the company’s social responsibility. For example, the 250th anniversary of Merck is overshadowed by World War I, the company still held the same rights to the rest of the subsidiaries as we have learned during our tour.

Through the entire tour in Europe, we have visited few family businesses and also had presentations and lectures about family business. A big portion of enterprises in Europe are family businesses, which means the succession of these firms is very crucial to the European economy. Therefore, the transfer should be a big concern of family business in Europe. I believe that the key of the business succession should be family first and business second even though people may have different opinions at this point. The business is not only about the business itself, most part is about the people within the business, therefore, the succession or failure of the business cannot decide by the owner solely. The major components of succession of the business mainly focus on managing the family member relationship and family dynamics instead.

One the one hand, family business, such as Merck can successfully manage their succession plans and keep the family and business harmony while they are transferring the business so that they can maintain the business succession.  On the other hand, some businesses cannot reach the same because they fail to deal with the relationship between family members and hard to balance the harmony within the company. Hence they may end up with selling the company or only survive less than three generation like most of the family businesses.

In short, business succession is the biggest problem that many family businesses are facing and successfully transfer is crucial for every family business.  However, it is not easy to keep the long-term success in practice. If they want to do so, they have to learn how to better deal with the relationship among the family members as well as confront the arguments in order to maintain the succession of the businesses.

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