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Johnson & Johnson is an American multinational corporation that was originally founded in 1886 by three brothers: Robert, James and Edward Johnson. Initially they only specialised the first antiseptic wound treatment, the company has since grown and become one of the largest and most well-known companies globally (jnj.com, 2019). Johnson and Johnson has over 250 different companies located in 60 countries around the world, sells products in over 175 countries and employs over 130,000 people. They are currently ranked 37th in the Fortune 500 list and have traded their shares on the NYSE since 1944. The Company has a current market capitalisation of $324.78 billion (jnj.com, 2019), (Fulmer, 2001).
Johnson & Johnson, through all of its operating companies and subsidiaries, it is one of the world’s largest and widely based manufacturers of health care consumer products. However their primary source of revenue comes from the development, manufacture and distribution of pharmaceuticals and medical devices (Revenues & Profits, 2019). In 2014 of the total revenue of $74.3B, $14.5B came from consumer products (19.5%), $32.3B from pharmaceuticals (43.5%) and $27.5B from medical devices (37%). In the following year of 2015 there are similar distributions. A total revenue of $70.1B with $9.5B coming from consumer goods (13.5%), $35.4B from pharmaceuticals (50.5%) and $25.1B from medical devices (36%) (Digital.hbs.edu, 2019).
J&J has grown significantly since 2015 with total revenues in 2018 reaching $81.6 billion. 6.7% more than in 2017 and $11.5 billion more than in 2015 (jnj.com, 2019).
J&J is a leader across the consumer, healthcare and pharmaceutical markets and has developed a business model to provide innovative products to advance the health and well-being of the global population. To do this the company operates in three different segments, each with their own target markets (Revenues & Profits, 2019).
Consumer Healthcare Segment
J&J has a huge variety of consumer health products ranging from baby care, skin/oral care, OTC (over the counter) pharmaceuticals and womens health. Some well known products include: the Johnsons baby range, Listerine, Neutrogena, Aveeno and Clean & Clear (jnj.com, 2019). Its OTC medicines include: Tylenol, Sudafed and Benadryl. These products are marketed to the general public and are sold to retail outlets and distributors across the world. OTC products are able to be sold without the prescription through retail pharmacies (Cleverism, 2019).
Pharmaceutical Segment
J&J runs its pharmaceutical business as Janssen Pharmaceuticals. The Janssen pharmaceuticals company offers products for five major therapeutic areas: oncology, immunology, neuroscience, infectious diseases, cardiovascular and metabolic diseases. Within the pharmaceutical industry, J&J utilises direct and indirect channels to influence the prescribers such as doctors or other HCPs to prescribe new medicines to patients and to get new patients for existing medications by making patients aware about their diseases. Products are sold to wholesalers, hospitals and government agencies (jnj.com, 2019).
Medical Devices Segment
J&J offers a range of innovative medical devices and solutions used mainly by HCPs in the fields of orthopedics, neurology, vision and diabetes care, infection prevention and cardiovascular disease. After getting regulatory clearance, J&J and subsidiaries work to get the procedure approved and then work with wholesalers to influence hospitals and HCPs to buy devices (Cleverism, 2019).
Johnson & Johnson: Credo
J&Js model is based around their Credo. The Credo is a management document written by former-chairman, Robert Wood Johnson, over 75 years ago (Yacovone, 2007). The Credo states that the companys primary responsibility is to the people who use their products, secondary is to their employees, thirdly is their responsibility is to the communities where they operate, and the final responsibility is to their shareholders (Murphy, 2005). And as a result, J&J historically has deployed an operating strategy to invest in people and innovation, both through their own employees and external parties through acquisitions (Fulmer, 2001). The Credo symbolises that the company recognises it responsibilities to its customers, employees, the environment, community and shareholders. It proposes that the company pays its fair share of taxes and does not advocate for tax-dodging or maximizing profits at any cost (Digital.hbs.edu, 2019).
Value
Johnson and Johnson provides value to its customers in the following ways:
- Brand reputation and industry standing: Being one of the largest and most well known companies in the world, associated with a range of high profile and quality brands.
- The size of its sales and marketing reach, with the company operating extensively throughout the world and collaborating with a network of retailers and distributors to increase its presence.
- Commitment to innovation and development, substantial funds are given to aid research and development activities to be able to provide up-to-date care to its consumers.
- Affordability and Accessibility of its products to people of all backgrounds and classes (jnj.com, 2019), (Cleverism, 2019).
Decentralised Management Approach
A strategy that has allowed J&J to create and sustain a competitive advantage in the healthcare industry is their approach to decentralise management. Once they have acquired a company they allow them to operate on their own except for some minor organisational changes. Overall they seem to take a backseat. This is one of the principles that has allowed this company to honour its business model of providing innovative healthcare products to help the global population (Fulmer, 2001), (Digital.hbs.edu, 2019).
SWOT analysis
Strengths
- Trusted brand: J&J is trusted by many medical practitioners and consumers worldwide. Their focus on tailoring business to local markets has helped them to stay relevant and meet consumer demands.
- Largest Healthcare provider: From pharmaceutical products to Consumer healthcare products, J&J operates in three segments: consumer goods, pharmaceuticals, and medical devices. Johnson & Johnson has committed itself to caring for people and has earned huge rapport with consumers over the years (Bhasin, 2019).
- Supply chain: It has extensive distribution system aimed at making products available to retailers, supermarkets and pharmacies.
- Brand Awareness: Johnson & Johnson have strong presence within each product segment. They have a large number of brands/subsidiaries to choose from which is helping them to occupy large shelf space of the stores.
- Brand equity: Ranked 79th highest brand in the world in 2016 (SWOT & PESTLE, 2019), (Jacobs, 2019).
Weaknesses
- Conflict with partner companies: Due to the nature of their business in merging via acquisitions they have accrued quite the size and a huge product portfolio, which has potential to cause complications in the organisation. This will likely be taken into account when entering into a merger.
- Litigation: The company has been involved in many litigations over the years. In 2010 J&J board was sued by shareholders and there was a scandal over the use of the red cross symbol. Litigations such as these can negatively affect their brand image and will spread quickly (SWOT & PESTLE, 2019).
- Dependence upon the Success of Launch Products: Newly launched products are vulnerable to the uncertainty of regulatory review.
- Reliance on Drug Discovery: J&J is impacted by generic competition and is therefore reliant on the discovery of new drugs to replace those patents which have expired (Jacobs, 2019)..
Opportunities
- Wide Range of Cross-selling Opportunities: J&J is in a position to develop a lot of cross selling opportunities. Maximizing the balance between pharmaceuticals, diagnostics, and medical devices could mean increased revenue (Bhasin, 2019).
- Potential in Biology: The addition of new biologicals to its portfolio and the current genomic revolution could drive the future growth of the company as small molecule drug patents expire.
- Changing lifestyle: With the increase in literacy rate worldwide there is a greater concern over health and issues which therefore means an increased demand for medical products which is beneficial for J&J (SWOT & PESTLE, 2019).
Threats
- Intense Rivalry: Due to the presence of strong global competitors such as GlaxoSmithKline, Roche or AstraZeneca which provide alternative or substitute products, J&J is facing heavy competition. Generic competition is increasingly becoming an issue.
- Harmful Ingredients: J&J products have been found in the past to have contained ingredients which could be toxic. These ingredients are banned in the US and in other countries. These public scandals have affected the brand image of Johnson and Johnson.
- Government Regulation: Government regulatory procedures over the contents & export/import tariffs play a crucial role in the success of companies in these industries to which J&J is no exception (SWOT & PESTLE, 2019).
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