The Merck-Banyu Joint Venture

Introduction In August 1983, the U.S.-based pharmaceutical giant Merck & Co., Inc. acquired Banyu Pharmaceutical, a major producer of penicillin and antibiotics in Japan, as one of the first acquisitions done by a non-Japanese company. “Upon conversion of the bonds, Merck would own 50.02% of the company” (Harvard Business Review, 1989). Both companies have been active leaders and investors in R&D projects; the constant innovation was especially important in the U.S. in regard of the patent law restricting ownership to 17 years (Harvard Business Review, 1989). The acquisition of Banyu Pharmaceutical arose out of the two companies’ long history of corporation of thirty years, and had itself been kept quiet by both firms until the final step …show more content…
Evaluate the Merck-Banyu Joint Venture, and discuss licensing and exporting as an option to enter the Japanese Market for Merck. What are the risks about? Merck had already partly achieved its primary goal of being the first or second in terms of market share in North America and to some extent in Europe, however, by far not in each of the major markets across the world. In Japan it only held the 33rd place in terms of market share. By acquiring Banyu Pharmaceuticals, Merck created the possibility of importing medicine from the U.S., as well as having an entrance into the Japanese pharmaceutical market.
To enter a foreign market like the Japanese one, Merck had to face certain barriers that were put up by the Japanese government hindering foreign import of medicine that had yet to be tested on the local population. Since Japan still was in need of foreign investments, its government had allowed U.S. pharmaceutical firms to import medicine into the country as long as it had prior been tested on Japanese living in the United States. This, however, created further costs for Merck, questioning the profitability of entering such a …show more content…
market” (Harvard Business Review, 1989), while increasing their shares in the Japanese market to 3.2%. On the other hand, Banyu allowed Merck to gain easy access to the needed raw materials for its production as there was a “continued importance of penicillin after the war” (Harvard Business Review, 1989). Additionally, Merck would be able to decrease (distribution) costs through this investment; mainly due to the low amount of sale representatives employed, which were paid “straight salaries” with no commission (Harvard Business Review,