Johnson & Johnson
Johnson & Johnson
1. January 26, 2011 earnings had declined in the fourth quarter of the previous year and lowered its estimates for its earnings for 2010 a. Due to the depressed economy and to a string of product recalls: 7 recall since September 2009
2. Problem surf at McNeil Consumer Healthcare: recall an estimated of 136 million bottles of children’s Tylenol, Motrin, Benadryl, and Zyrtec
3. Excoriated by the Food and Drug Administration for failing to catch McNeil’s quality problems a. Causing the company to close down the factory until 2011
4. The company began to have acquisitions
5. Operating companies enjoy unit of autonomy to preserve an entrepreneurial culture
6. William Weldon, the firm’s chief executive, have been thinking about taking steps to be more actively involved with its far-flung business units
7. The concern about quality have pushed the firm to try to find a more effective method of running its businesses without stripping them to their relative autonomy.
8. Since 2008, J&J has made 8 acquisitions
a. $1.1 billion acquisition of Mentor Corporation, allowing the firm to make a substantial move into the growing field of cosmetic drugs and devices 9. The company has a unique structure and culture
10. The independence has fostered an entrepreneurial attitude that has kept J&J intensely competitive, by responding swiftly to emerging opportunities 11. The firm is quite proud of the considerable freedom that it has given to its different business unit and execute their own strategies 12. However, the firm is consider no longer be allowed to operate in near isolation since Weldon believes the company can profit by working together 13. The firm plans to foster better communication and more frequent collaboration among J&J disparate operations a. James T. Leneham, vice chairman and president of J&J, set up groups that draw people from across the firm to focus their effort on specific diseases, reporting every 6 months on potential strategies and projects 14. The company has apply some changes to its corporate oversight of its supply chain and manufacturing 15. The firm’s diversified portfolio of products spread across various areas of the heath care have helped it to weather the problems that it has encountered
1. Lack of a well-established vision
2. Decentralized quality control system
3. No energy among the 3 units of the company
C. Strategies solutions implement by the company
1. Horizontal Integration
2. Related Division
3. Reorganization (Retrenchment Strategy)
V. SWOT Analysis
1. Brand Recognition
2. World admired company
3. Brand Presence in form of advertising media
4. It is triple A company
5. Excellent distribution networks
6. Good reputation
7. Recognized in different countries
8. Autonomy in order preserves an entrepreneurial culture throughout the organization.
9. Unique Strategies that allowed working with their own resources.
1. Maintaining of global brands caused problems since some retailers can cause sale of expired products.
2. Over expansion can be problematic
4. Lack of exact vision and mission
5. Fail to have a good quality control on certain products such as bottle of children’s Tylenol. C. Opportunities:
1. Acquisition of smaller companies increasing brand presence. 2. Expansion in different countries
3. Global innovation
4. To create more centralized form of quality control
5. To be more actively involved with its far-fling business units. 6. Increase collaboration between its different units
7. Division made company to add its lineup products like allergy and work with the production of treatment to prostate cancer 8. Benefit from the combination of its knowledge in drugs, devices and diagnostics since few companies can match its reach and strength.
1. Competition from generic industries.
2. Competition of new entrants of other companies with better quality and lower cost of products. However, there are few that can reach its level of production.
3. Bio- Technological Expansion
VI. Porter’s Five Forces Analysis
A. Threat new entrants: is consider low since high barriers to entrant because it is required a high investment. It is difficult to replicate in the industry B. Threat of substitute: is extremely high because the rise of generic by producing similar products that makes company loose sales. C. Bargaining power of buyers: is consider to be moderate because it plays an important role because they tend to switch easily to generic versions. Also, buyers are price sensitive and prefer cheaper products that can be used as a substitute
D. Bargaining power of suppliers: is low because the company has many suppliers, and little power, lack of extra suppliers in case that a supplier causes shortage and late delivering materials. E. The intensity of rivalry: few companies can create and produce at the level of J&J, Few companies can compete at the level J&J given the quality, diversification and prices of the company. Reduce competition through acquisition. Also, the growing production of the pain reliever segment makes of J&J a company difficult to compete with
VII. Value Chain Analysis:
A. Inbound Logistics: the company is very effective when taking into account the movement among the different operating acquisitions of the company. The numerous amounts of business facilities around the world makes easier and faster the movement of raw materials and inputs. More efficient ways to transport their inputs by coordinating schedules and locations to pick up products in the least number of travels and shortest routes possible. J&J encourages suppliers to measure their energy use and greenhouse gas emissions, and to develop and publicly report on their emissions. In 2012, 139 of the 156 suppliers they approached have chosen to participate in the program. B. Operations: the company take into account the environment by decreasing the energy and carbon emissions. Energy and carbon dioxide (CO2) emissions reduction program for more than 25 years. Policy on Sustainable Design and Construction which provides comprehensive guidelines for incorporating sustainability into the design and construction of all new facilities and major renovations.
Renewable materials in the packages of its products. Employees work in buildings powered with clean energy. 12% of its sales or almost $7 billion is spent on about 9000 scientists working in research laboratories around the world. There are materials that the Johnson & Johnson Family of Companies are actively seeking to eliminate including polyvinyl chloride (PVC). C. Outbound Logistics: always want to reduce the cost and the impact on the environment by using hybrid cars. More than 2,000 hybrid vehicles in the distribution process of its products. Distribution Trucks are equipped with refrigerators that maintained the drugs and products safe from the environment temperature. D. Services: Services such as installation, repair, and parts supply in the division of Medical Devices. E. Marketing and Sales: J&J ranks number 9 among the U.S Companies that spent the most in advertising with 2.03 billion dollars.
Consumer products are marketed to the general public and sold both to retail outlets and distributors throughout the world. Pharmaceuticals are distributed directly to retailers, wholesalers, and health care professionals for prescription use. Medical devices are distributed to wholesalers, hospitals, and retailers both directly and through surgical supply and other distributors. Keep its net price increases for health care products within the CPI. Special discount coupons on packages denominated Health Essentials, which includes products like Band-aid, Listerine, Acuvue, etc. Differential pricing approaches to help more people access its medical products.
A. Vision Proposed: “Johnson and Johnson strives to position in the health care industry not only as the largest but the most comprehensive multinational corporation that fulfills current, upcoming, and unmet needs of people throughout the world”. B. Mission Proposed: “We aim to make the world a better and healthier place through everything we do. We strive to provide our customers with high quality products and to reduce our costs to maintain reasonable prices. We must be mindful of ways to help our employees fulfill their personal and family responsibilities. Our suppliers and distributors must have an opportunity to make a fair profit to make our supply chain as effective as possible. We must encourage civic improvements and better health and education. We must maintain in good order the property we are privileged to use, protecting the environment and natural resources. We must provide competent management, and their actions must be just and ethical. Our final responsibility is to our stockholders. Business must make a sound profit.”
C. Objectives Proposed:
1. To be the top-ranked company supplier to our customers the health care industry. 2. To coordinate more efficient ways to transport their inputs by coordinating schedules of travels with the shortest routes possible. 3. To implement a flexible working hour’s program directed to employees that have the need to attend their personal and family responsibilities. 4. To increase the market penetration in rural areas by twenty percent of its current sales on this segment for the following three years. 5. To extend the scope of the Energy and Carbon dioxide emissions reduction program to the eighty percent of all manufacturing companies of its product all over the world for the upcoming five years. 6. To increase the number of hybrid vehicles used in the distribution process from 2000 to 3000 in order to reduce costs and the environmental impact of its operations. 7. To actively seek to eliminate hazardous materials including polyvinyl chloride (PVC) in the medical devices products and the containers of other products. 8. To increase the market sales of our consumers products division from twenty three percent to thirty percent over the next ten years. 9. To increment net income of the whole company by 1.2 billion dollars over the next three years.
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