Business Environment

Business Environment Research - Merck & Co., Inc.
Susan Brenner
Mgt. 521
May 16, 2011
Heather Rideout

Merck & Co., Inc. Business Environment

Merck & Co., Inc. is one of the Big Pharma companies operating worldwide.   The term “Big Pharma” is used to describe companies with revenue in excess of $3 billion or in combination with research and development expenses in excess of $500 million.   Merck and Schering-Plough merged in November 2009 to create a new company. Today Merck & Co., Inc. is the second-largest health care company in the world.   Merck is also a global leader in consumer products and animal care (Merck, 2011).   According to 2009 revenues, Merck’s rank is 6th, Johnson & Johnson’s rank is 7th, and Eli Lilly & Co.’s rank is 8th (Roth 2011).    

Financial Health of Merck & Co., Inc.

Determining the financial health of any organization requires a review of three important accounting documents; income statement, balance sheet, and cash flow.   A comparison to other similar companies is imperative.   In this paper, Merck is in comparison with Eli Lilly (Lilly), and Johnson & Johnson (J&J).
The income statement reflects the company’s profits.   Important components are:
1) Total Revenue – value of sales of goods. Total revenue has nothing to do with profit.   The revenue figure is important because a business must bring in money to turn a profit. If a company has less revenue, all else being equal, it is going to make less money (Kennon, 2011).  
For the period ending March 2011, Merck shows total revenue of $11.6 billion, Lilly shows $5.84 billion and J&J shows $16.8 billion.   The comparatively large amount of revenue that J&J shows can be attributed to their diversity into medical devices and diagnostic equipment and their expansive consumer product line.
2) Gross Profit – the difference between total revenue and cost of acquiring that revenue.   For the period ending March 2011, Merck shows gross...