Chapter 7 Diversification

     Diversification is the degree in which a firm conducts business in more than one arena. As I have mentioned in a previous blog post Merck is in many different areas of business which are pharmaceutical, life science tools, animal health, and specialty chemicals. Having Merck in these four different areas allows the company to have success in each area or if one area has a few bad quarters they can offset than by positives quarters in the other areas.

     I think we have all heard the saying don't put all your eggs in one basket and that saying fits perfectly with what diversification is not.  In 2010, the pharmaceutical accounted for nearly 90% of all revenue with animal health, consumer care, and specialty chemicals accounting for the other 10%.  Now that may sound like didn't follow the diversification method, but if you dig deeper you can see they did. Since Merck is an international company not all sales come from one place with 44% of revenue from US, 29% in Europe/Middle East/Africa, 8% in Japan, and 18% in emerging markets.  Since each region has different requirements for pharmaceutical sales, not all eggs are in one basket.

Source
Revenue