Merck 2014 Annual Report Download - page 55

50 GROUP MANAGEMENT REPORT → FUNDAMENTAL INFORMATION ABOUT THE GROUP → Objectives and strategies of the Group
OBJECTIVES AND STRATEGIES OF THE GROUP
In 2007, Merck KGaA, Darmstadt, Germany, launched a trans-
formation process aimed at securing its future through profit-
able growth in highly specialized niche markets within today’s
Healthcare, Life Science and Performance Materials business
sectors of Merck KGaA, Darmstadt, Germany.
This process started with the large-scale acquisitions of Serono SA
in 2007 and the Millipore Corporation in 2010. In 2011, the com-
pany embarked on the “Fit for 2018” transformation and growth
program with a new executive management team. In the first
phase, the company created the foundation for profitable growth by
introducing a new leadership organization and a comprehensive,
Group-wide efficiency program. The second phase, which started
in 2014, is aimed at successively implementing the growth options
identified by establishing three strong platforms for sustainable
profitable growth. Merck KGaA, Darmstadt, Germany, is building
on its core competencies:
→ Closeness to existing businesses
→ Innovative strength
→ Customer proximity (to offer tailored solutions)
→ Focus on specialty businesses
Moreover, the company is aiming to expand its business model
systematically and continuously to include new technologies and
partnerships. In 2014, three important milestones were achieved in
the implementation of the Group strategy:
→ Through the acquisition of AZ Electronic Materials, which was
completed in May, the product base and new customer offer-
ings were expanded by new technologies.
→ With the announcement of the planned acquisition of Sigma-
Aldrich in September, the foundation was laid for enhancing
the Group’s position in the attractive life science industry. The
aim
of the planned merger is to offer customers a broader
range of products and services as well as the industry’s leading
e- commerce platform.
→ With the November announcement of the agreement with
Pfizer on a strategic alliance for anti-PD-L1, the Group wants
to accelerate its presence in immuno-oncology by combining
the strengths and capabilities of the two companies in the
highly
competitive anti-PD-1/anti-PD-L1 space. Up to 20 im-
muno-oncology
clinical development programs are planned
for commencement in 2015, including up to six pivotal regis-
tration studies. The alliance also has the potential to accelerate
the company’s entry into the U.S. oncology market through
the co-promotion of Xalkori®.
In line with its strategic agenda and focus on three growth plat-
forms, effective January 1, 2015, the company organizationally
repositioned itself. The previous four divisions have been replaced
by three business sectors:
→ Healthcare
comprises the Biopharmaceuticals, Consumer Health,
Allergopharma and Biosimilars businesses.
→ Life Science consists of the Life Science business.
→ Performance Materials corresponds to the business of the same
name.
The strategic transformation into a specialist for innovative
high-tech solutions in Healthcare, Life Science and Performance
Materials is reflected by the composition of sales. Within the
Healthcare business sector of Merck KGaA, Darmstadt, Germany,
the Biopharmaceuticals business today generates more than
65 – 70 % of its sales with biopharmaceuticals. In 2006, there was
only one such product, Erbitux®, which accounted for less than
10 % of sales. The classic Chemicals business has increasingly
become a premium materials business that offers Merck KGaA,
Darmstadt, Germany, customers a wide range of value-adding
products. Today, high-tech materials and life science tools make
up around 80 % of sales in the Life Science and Performance
Materials business sectors of Merck KGaA, Darmstadt, Germany.
In 2006, the share was around 30 %.
GENERAL PRINCIPLES
AND GROUP STRATEGY
The year 2018 will mark the 350th anniversary of Merck KGaA,
Darmstadt, Germany. The general principles of the “Fit for 2018”
transformation and growth program and the Group strategy are
to serve as a compass beyond 2018 as well.
General principles
In its business endeavors, the company orients towards general
principles. They help those responsible within the company to
shape strategic plans and to make decisions.
The structure of Merck KGaA, Darmstadt, Germany, with
members of the Merck family as personally liable partners requires
the Group Executive Board, whose members are also personally
liable partners, to pay special attention to the long-term develop-
ment of value. Therefore, sustainability plays a special role at the
company. The objective is to align the long-term development of
the company with the legitimate interests of shareholders, whose
engagement in the Group is normally of a shorter duration. That