It was the joint efforts of three brothers, Robert Wood Johnson, Edward Wood Johnson and Edward Mead Johnson that lead to the inception of Johnson & Johnson in 1886 at New Brunswick, New Jersey. Even today the company strongly follows the Credo, which was formulated by its founder Robert Wood Johnson as philosophy that guides their business. It is a multinational firm established in 60 countries with over 275 companies over the world and is mainly diversified in three different fields namely Consumer Healthcare, Medical Devices & Diagnostics and Pharmaceuticals. Johnson & Johnson has an asset of $131.19 billion. (jnj.com) With all the companies that it owns, it comprises as the largest and the most diverse medical devices and Diagnostics Company, the sixth largest consumer health company, sixth largest pharmaceuticals company, and the sixth largest biologics company.
The company has been driven by innovation from their inception. One of their first products was a first aid kit for treating small injuries, which could be used by anyone. The use of child care products was introduced by them in 1894, which is highly successful till date. It was in the year 1924 that Johnson & Johnson started their internationalization, expanding their operations to the United Kingdom. This was extremely successful expansion and it added a great boost to the company’s growth. This carved a path for further expansion internationally into British colonies like South Africa in 1930 and Australia in 1931 and neighbouring country of Mexico in 1930.With the Robert Wood Johnson II taking the leadership of the company he changed the company’s Global strategy and made the company as a decentralized family of companies. Their operations were further expanded into Argentina and Brazil in 1937 flowed by the formation of Ortho Research Laboratories Inc. and Ethicon Inc. in New Jersey.
In 1957 they established their operations in India, the first expansion into Asia. In the 1959 there were many acquisitions by the company, McNeil Laboratories in Fort Washington, United States, Cilag AG in Switzerland followed by acquisition of Janssen Pharmaceutica in 1961, it was considered one of the most innovative firm then. (jnj.com) In the late 70’s and 80’s Johnson & Johnson enters into new health care markets such as diabetes management, vision care and mechanical closure of wounds. This created the possibilities for more expansion, and they entered into China and Egypt. The late 90’s was followed by a series of acquisitions; some of them were Centocor, Cordis Corporation, Kodak’s Clinical Diagnostics and Neutrogena Corporation. The expansion into Eastern European market and Russia was a major move.
In 2002 they acquired Tibotec-Virco, a firm which helps patients with non curable diseases such as Tuberculosis and AIDS. A major acquisition was Pfizer Consumer Healthcare in 2006. The main goal for them was to follow their Credo, which has been immensely successful. The internationalization strategy was to adapt to changing global markets and basically decentralize their operations. This was what mate them Strengthen their Global Presence. Most of their international expansion was through large acquisitions of established firms. Their steady growth shows how they have captured markets all over the world. They use mainly use adaptation strategy, hence they are focused on the particular target market and have different methods of operations in different markets.
With over 275 companies under one roof Johnson & Johnson group of companies is one of the largest in the world. The Data sets provided gives us a clear idea of how the network is connected from the parent to its subsidiaries. The main objective is to identify how the main subsidiaries are connected to the parent.
(Fig. 1) Subsidiaries
The above figure depicts the layout of how the main subsidiaries of Johnson & Johnson are connected. Generally nodes with higher centrality measures cannot be considered as main subsidiary, hence a series of analysis is done on the identified subsidiaries using network analysis techniques.
The main subsidiaries of Johnson & Johnson are different in each scope of their diversified areas. The Consumer Health Segment is under Johnson & Johnson brand name and they are established in more than 60 countries and are having individual ties with each country and they have their own presence by themselves without any strategic tie ups. However, the administration and finance department seem to have many ties with subgroups within the organization as well as external sources.
The Pharmaceutical segment is also one of the largest networks, with Janssen Pharmaceutica which is their main subsidiary. As a main subsidiary, they operate with a number of companies under this banner. Cilag which is also a big company is under the Janssen Pharmaceuticals. Crucell which is a firm developing vaccine is also under the Janssen group. Galapagos which is a joint venture between Crucell and Tibotec deals with the research and development in pharmaceutical industry and is a major contributor to the innovations achieved by Janssen Pharmaceutical.
The Medical Devices & Diagnostics segment is the largest and the most diverse segment in the world. Johnson & Johnson have one of the biggest companies in terms or Research and development under this segment. Some of their subsidiaries are Animas Corporation, Cordis Corporation, Depuy Synthes companies of Johnson & Johnson, Ethicon, Ethicon Endo Surgery, Janssen Diagnostics, Johnson & Johnson Vision Care, mentor and Ortho-Clinical Diagnostics. Most of these are directly connected to the parent firm, but they also seem to have feeble ties within themselves.
The comparison of different centrality measures such as Degree, Betweenness, Eigenvector, Closeness and other analysis such as Density, K-cores, Structural Holes, and subgroup division Algorithms like Girvan-Newman, Fractions will help us identify how the parent subsidiary network is formed.
The complete network Density or the Average Matrix Value is 0.003 for the given data set. The Standard Deviation of the Density is 0.058 and the average weighted degree is 1.278
(Fig. 2) Degree Centrality
The above figure shows the degree of each node with respect to its size, the highest degree is Johnson & Johnson with 119 ties, followed by Indaver with 30 ties Indaver BV with 18ties, Cilag Holdings AG with 17 ties, Johnson & Johnson management limited with 16 ties, Johnson & Johnson International Finance with 15, Synthes Holdings AG with 14 and Crucell N.V. with 12. Indaver has higher degrees than the subsidiary of Johnson & Johnson, though it is not its subsidiary. Janssen pharmaceutical is one of the share holder with Indaver, which provides them with waste management solutions, they have helped them to cut CO2 emission by 270 tonnes annually (Indaver Sustainability Report, 2013).The main subsidiaries of Johnson & Johnson have also higher degree centrality. The labelled nodes were identified to have the higher degree.
(Fig 3) Eigenvector Centrality
Eigen vector centrality is measured with respect to the connectivity of nodes with higher degrees. This is effective in helping to identify firms with more social importance or higher level firms such as management and operations level. The key observations from this centrality are that all the nodes they represent the Main subsidiaries of Johnson & Johnson, have higher eigenvector values, as they had connectivity to nodes with higher degrees, Cilag, Depuy Synthes, Crucell, Janssen Pahrmaceutica, Ethicon, Apsis, all of them have higher eigenvectors as they are the main subsidiaries and are connected with nodes with higher degree.
(Fig 4) Betweeness
Betweeneess represents the nodes that are involved in linking major nodes to lesser connected nodes, thereby making a strong coordination within a network. This identifies the nodes of the network that are bridges between the stronger and the weaker connected nodes.
The analysis from fig 4. implies that companies such as Adimmune Corporation, Taiwan Biotech, Indaver, Galapagos , Janssen Pahrmaceutica, Crucell , have very high betweenness and are majorly involved in coordination of work between firms.
(Fig 5) Closeness
The closeness determines how close the next node is to the main node, hence the nodes at the periphery of the network are more closer to the next node inside the network. The nodes with lesser closeness are more harder to be reached for any communication.
Fig. 5 shows the different closeness of each node. Nodes of higher degree were not really close to each subset of nodes. Nodes with higher betweenness had proportional farness, which mean they had very low closeness. The lower closeness nodes were mostly the major subsidiaries of Johnson & Johnson.
K- Core Analysis
The K-core analysis identifies nodes of a network that are more connected to other nodes in other parts of the network. The analysis provided us with three k values 1, 2 and 3. This is helpful to identify the core network which is more important than the other nodes.
(Fig 6) K-Core Analysis
In the above figure the nodes in re have a k value of 1. These nodes are mainly in the periphery of the network and are lesser connected to the main network, the sub nodes connected to them have degree 1.
(Fig 7) K-Core Analysis with k value 2
These nodes in fig. 2 have a k value of 2, these are mainly the nodes which bridge the main core to the other network. The labelled nodes are the subsidiary of Johnson & Johnson which are in the sub-core.
(Fig 8) K-Core Analysis with k value 3
The above figure show the core network of the organization, these nodes are more connected the main node that the others with their connected nodes having higher degrees than others. Hence the labelled nodes are the major nodes that are involved in the functioning of the organization.
The observations of the k-core analysis are that the subsidiary such as Cilag, Ethicon, OMJ pharmaceuticals, Depuy, forms the major core of the organization. The main core also consists of investor management firm, which helps the organisation fund innovations that are much needed for the growth of the company. Turnbull Investment Company plays an important role in handling investments of Johnson & Johnson.
Sub Group Analysis
This algorithm helps in sorting out different community of structures within a network that forms a cohesive sub group. The main objective is to identify different subgroups in a large network by removing important nodes and leaving only the sub group intact. Fig. 9 clearly shows the division of subgroups that having different colour.
Indaver , Adimmune Corporation, Prime Oil Service Corporation, Taiwan Biotech Co. Ltd., these are external companies that have ties ups or technology sharing with Johnson & Johnson.
Other Subgroups that are divided are subsidiaries of Johnson & Johnson, some of them are Janssen Pharmaceutica, Synthes Inc., Crucell N.V., Johnson & Johnson Holding Gmbh, Johnson & Johnson Financial Services Company, Johnson And Johnson Management Limited. These firms form the major subgroup in the network.
(Fig 9) Girvan Newman Algorithm
The Factions sub grouping is another method to find the subgroups within a network. Here again we are able to input the number of groups to be divided. An estimate of 38 clusters could give an idea of how many major subgroups that existed in the network. Fig 10 shows the outcome of the factions sub grouping.
(Fig 10) Factions
From the analysis and the network datasets, the parent Network is Identifies as Johnson & Johnson, and some of the major subsidiaries are Janssen Pharmaceutica, Cilag, Depuy Synthes, Animas Corporation, Apsis, Mcneil Products, Crucell, Ethicon, Ethicon Endo surgery, Cordis Corporation, Mentor.
Implications of the network structure on the innovation activity
Johnson & Johnson has been a firm driven by innovation since its inception. As the outcomes of innovation influences the lives of many people Johnson & Johnson has managed to reach its products 175 countries. From the network structure it is evident that subsidiary firms are maintained with independent operations and the operations of the firms is decentralized. Pharmaceutical companies owned by them are independent by themselves for any innovations involved. They don’t seem to have influence on the other subsidiary firms.
Firms such as Apsis, Ethicon, Ethicon Endo, Depuy, Synthes, have innovation activity of their own and are developing their own products, and do not reply upon other firms which are owned by Johnson & Johnson. These firms that deal with Medical Devices and Diagnostics are specific upon their product line and are bound to deliver their targets. Almost all the firms in this segment have Research and Development facilities of their own and do not rely on other investments from external sources. Many joint ventures within its network of subsidiaries have been beneficial for Johnson & Johnson, like Depuy Synthes, the collaboration between them has given birth to subsidiaries like Depuy Spine, Depuy Mitek, Depuy Orthopaedics, and Depuy Products. This shows the strength of Johnson & Johnson as the largest and the most diverse organization in the world.
The Pharmaceutical segment which is under Janssen Pharmaceutica, has some firms like, Crucell, Cilga, and McNeill. These companies carry out innovations on their own as well. But they tend to have a collaborated structure within them and they are bound to share technologies with external firms outside their network, In order to share risks and benefits. Crucell have a technology sharing strategy with Adimmune Corporation. Whereas Janssen Pharmecutica are dependent on Indaver for waste management solutions. There are many benefits of collaborations and technology sharing.
Johnson & Johnson is a firm with high collaborations within their firms, different companies within their firms have self sustainable resources to develop alliances with other firms, this allows them to grow to a higher potential than the parental firm. This has been the major reason for the vast expansion of Johnson & Johnson into many markets.
Scope for further improvement in Innovation
As there is no end for innovation the firms has been actively involved in various innovation programs that currently changing the trends in the world. One of the simplest innovations that changed the world was the Band-Aid. It just changed the way people have been treating wounds. The list of innovated products by Johnson & Johnson is vast. They are a firm which are totally depended upon innovation.
Technology sharing within the companies within the firm must be initiated within all firms to enhance the ties within partnering firms.
As on date they are the Sixth largest Consumer healthcare company, Their Target must be to become the number one company in the world. Only inventing more products will help them reach their target. Setting up more Research and Development programmes in underdeveloped countries will help in opening up new ventures for the firm, as well as then targeted area.
Then development of vaccines for new virus that have been identified can be implemented. Viruses such as HIV, Ebola, Swine Flu, and Bird Flu are on the rise, Johnson & Johnson must capitalize these opportunities and innovate new vaccines for cure. Hence the pharmaceutical companies must take combined efforts to make the firm strengthen its capacity.
Diabetes is believed to be increasing in the younger population, hence controlling drugs and prevention methods or early diagnostics can be innovated.
Setting up Innovation center in local market will help in bringing up more innovations into the firm, as only local people will understand the need of the local market. This could help them to leapfrog their position as to become the number one Consumer Healthcare Company.
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