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Johnson and Johnson Company Analysis
Transcript of Johnson and Johnson Company Analysis
Yi Shi Johnson and Johnson Current Issues and Solutions General Environment Industry analysis Porter's Five Forces Competitor analysis General Environment
Porter's Five Forces
Competitor Analysis Technological Segment Opportunity
“Worldwide costs of research and development activities amounted to $7.7 billion, $7.5 billion and $6.8 billion for fiscal years 2012, 2011 and 2010.”
Developments in technology help develop new product, improve existing products to deliver high quality and innovative products.
New products introduced within the past five years accounted for approximately 25% of 2012 sales Economic Segment Threat
Numerous economic factors like Interest rates, unemployment rates, affect disposable income which affects individual spending habits of our consumers and this affect the company success.
The health of the economy is connected to the health of Johnson and Johnson. However, many of these factors that affect us we have no control over
Johnson and Johnson uses financial instruments to hedge the risk of foreign exchange rate changes on cash flows using forward contracts and swaps. Thus changes in the LIBOR could have a negative affect on the company. Political/Legal Segment Threat
Political processes and legislation influence environmental regulations with which industry must comply. Government legislation can also have a significant impact on the governance of operations.
The Economic impacts of the Affordable Care Act, Product liability laws, and FDA regulations are just a few examples of the impacts. Global Environment Segment Demographic/ Sociocultural Segment Solutions Earnings had declined in the fourth quarter of 2010 which could be resulted from the depressed economy
17 Recalls since September 2009 has impacted reputation
McNeil consumer healthcare case is the most serious one that caused the company to close down until 2011 Current Issues Revamp the quality control, use a single framework for all the three major divisions.
CEO himself will take the report for the new system directly.
The company would appoint chief quality officers for each of the three divisions for the quality control. Business Strategy Tangible Resources Intangible Resources Capabilities Organizational Resources Strong:
Expanded rapidly after the WW II to Europe, Latin America and Asia Pacific with over 50 countries.
World’s largest and most comprehensive manufacturer of health care products.
Organized into segment of business.
275 operating companies
selling products in more than 60 countries Technological resources Strong:
Continuously designate new products to the market with numerous
Baby organic harvest lotion
Daily moisturizer with SPF 30
Diverse in the health care business through acquisition as early as in 1959. Also expand the existing ones. Opportunity
Regardless of the demographics of the consumers that Johnson and Johnson have the segments of the industries that it participates in are things all people need regardless of age, race, gender and so on. They have such a wide variety of products that appeal to just about every consumer. Opportunity
Demand for health care in markets such as China and India is growing three or four times faster than developed markets such as the U.S.
About 55 percent of business comes from outside the United States, and will continue to grow.
looking forward the focus will be expanding the presence to help more people and delivering health care in a sustainable way globally. Johnson and Johnson is the world's largest healthcare company. It has been a company since 1886 and has popular products that are used worldwide like band-aid and Tylenol to name a few. It products fall into three segments: pharmaceuticals, medical devices, and consumer products. It is also a global company with 275 subsidiaries in 60 countries
Johnson and Johnson has been successful and profitable for over 75 years. Going forward we will analyze the current position and issues related with the company. Market size: Large with over 127,000 employees worldwide
Three business segments:
With $25.4 billion in worldwide sales in 2012, and the eighth-largest pharmaceuticals business in the world.
Medical devices and Diagnostics
With $27.4 billion in worldwide sales in 2012 making it the largest medical technology business in the world.
With $14.4 billion in worldwide sales in 2012 making it the sixth-largest consumer health care business in the world.
Life cycle phase: Maturity. Johnson and Johnson have been a company since 1886 The Threat of New Entrants – High Barriers to Entry
1. Extensive Manufacturing Capabilities
2. Patents Protection & Research
3. Economies of scale – High Capital Requirement The Threat of Substitutes – The Rise of Generics
1. Upcoming patent expiration's
2. Loss of sales
The Food and Drug Administration (FDA):
Generic drugs must be bioequivalent to their brand name
counterparts, making them serious substitutes. The Bargaining Power of Buyers – Influence of
1. Buyers: Patients, Medical Doctor, Pharmacists,
Hospital Boards, Insurance Companies.
2. Patients’ switching costs---Low, Pay Extra Money
Johnson & Johnson’s main tool ---Brand Name
3. Other Buyers: have considerable bargaining power,
choose what to provide. The Degree of Rivalry – Fierce and Changing
1. Rivalry is especially intense in saturated
2. Innovation---key driver of competition
3. An increasing number of players—United
States, Japan, China, and India. Current Strategy
Benefit from Collaboration:
Cost Reductions, and Good Relationships
Differentiation and Resource Allocation
Emerging Market : China, Brazil and India
Large consumer base Response Profile
Pfizer Inc., Novartis AG, Covidien plc
Level of competition:
health care industry is fairly high
Increasing Number of Players Human Resources Strong:
Knowledgeable top executive members with all the employees engaged, caring and committed to the company.
The employees joined with the acquisitions may be less engaged as the rest of the employees at first
The diversity of our employees helped us to learn different people in the world and helped us to target different customer segments. Innovation resources Strong:
Acquisition action expanded our brand diversity and upgrade the level of innovation.
25% of the global revenue comes from the new innovated products.
Tried to set up the innovation centers to accelerate cutting edge science into healthcare solutions Reputational Resources mix strong and weak:
Rank as the world’s most respected company by Barron’s Magazine.
Rated No.1 in 2010 on the Global Reputation Pulse ratio.
First corporate awarded the Benjamin Franklin Award.
From 1999 to 2004, the company illegally marketed drugs including antipsychotics to Omnicare. Core Competencies Various product lines with all kinds of different health care products.
Global company with 275 operating centers and over 127,000 employees worldwide in 60 countries.
Decentralized management process with three product segments.
Acquisitions actions to expand the company’s product diversity.
Efforts spent on the R & D section. Currently, J &J spends 12% of its sales revenue on it which is over $7 billion. Research & development:
Create value through innovation Product diversification
Global reach and local focus
Excellence in decentralized mgt
Human resource:Motivation employee with company vision The business-level of Johnson & Johnson is considered to be Integrated overall low-cost and differentiation strategies
“In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers’ orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit.” Financial resources Strong:
Total assets: $102,908 million
Total stockholder equity: $56,579 million
Net tangible asset: $24,569 million
Net Income: $13,334 million
Cash and cash equivalents: $19,355 million(Till Jan. 2011) Capabilities