Johnson & Johnson Case Analysis

 

 

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Johnson & Johnson Case Analysis

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04/20/21

Johnson & Johnson Case Analysis

Competitive analysis

Johnson and Johnson have maintained an exceptional growth track record most companies in the sector can claim. The company is a major health care business worldwide, with a market cap of $276.7 billion, with annual sales of over $82.6 billion, generating a company profit of $16 billion. Johnson and Johnson’s three segments have competitive advantages, which supports continued growth and high margins (Johnson and Johnson, 2021). The three segments enjoy scale and size competitive advantages, which enable the company to have an excellent connection with the government and suppliers worldwide. Their research and development significantly benefit their pharmaceutical and medical devices segments, putting them ahead of their competitors, which an expenditure of over $8.5 billion annually. Likewise, its consumer segment has a competitive advantage through its brand-based products. Johnson & Johnson is a worldwide know brand, which includes Neutrogena, Band-Aid, Listerine, Tylenol, Zyrtec, Motrin, and Aveeno, and Johnson’s Baby Powder. (Raymonds, 2015).

Issues

Being the world giant world health care company, Johnson and Johnson’s company has tons of issues. Their empire is famous across the globe, supplying drugs, medical equipment, and health care services. In the wake of the covid-19 pandemic, and the race to develop its vaccine, Johnson and Johnson face vaccine production issues. The company was in the process of producing 100 million of its 24 million vaccines when the issue of facility compliance emerged. One of the major issues currently facing the company is 15 million doses of covid-19 vaccine with wrong ingredients mixing, a fatal human error (Reichert, 2021). The company has faced numerous lawsuits, including the Huffington Post Investigation, which has put the company at the center of governmental investigations and scandals. Forcing the company to recall most of their products for quality checks. Additionally, several consumers have sued the company for putting profits ahead of people’s interests (Compton, 2020). The company’s strength as a world-renowned brand is enabling them to operate in diverse communities that consume its products.

SWOT Analysis

Strengths

  • Huge budget for research and development which is a critical component of drug development
  • Stable market performance with increasing dividends for the past 6 decades
  • Global presence gives Johnson and Johnson a global reach in over 60 countries
  • Diverse products in three segments, pharmaceuticals, medical devices, and consumer health products
  • Constant revenue stream approximated at more than $82 billion putting them at a dominant position in the sector

Weaknesses

  • Uneven revenue distribution across their three segments, with 50.7% from pharmaceuticals.
  • Significant low revenue generated from consumer health products
  • Give kickbacks to physicians to boost prescription drug tenders
  • Unstable market leading to market fluctuations in exchange rates
  • Price war resulting in declining sale prices

Opportunities

  • With their sound financial backups, the company may increase market share through acquisition and merger
  • Through their R & D, they are in a position to introduce new products
  • Expansion to Asia is a great opportunity to increase sales with the swelling continent’s population

Threats

  • Impacts of government regulations hindering launching of new products, such as Covid-19 vaccines
  • Johnson and Johnson has been facing numerous harmful product recalls, this might lead to long-term reputation harm (Haque, n.d.).

Corporate Culture

Johnson and Johnson is one of the most know multinational corporations operating in over 60 countries, with 275 subsidiaries. The pharmaceutical and medical devices giant company has over 135,000 staff worldwide. The corporate culture adopted by the company is a form of divisional organizational structure, which provides better coordination and control. The company is at the forefront of maintaining a healthy culture, which puts the company ahead in the health care sector. According to Johnson and Johnson (n.d.), “we must constantly strive to provide value, reduce our costs and maintain reasonable prices.” Communication is often consistent and clear concerning the support the company offers with its policies, services, and programs. Johnson and Johnson’s leadership is committed to their words, sending a stronger message across the board to employees. The employees respect the motivating messages and opinions originating from the wellness team (Johns Hopkins University, 2015). Generally, the company operates in three independent segments pharmaceutical, medical devices, and consumer, which suites their divisional structure that provides total control and coordination (Sobiya, n.d.).

Leadership

The company nurtures a culture of commitment to ethical behavior and excellence. Hence, the leadership is focused on organizational culture that embraces high ethical standards, and core competencies. The company executives build strong ethical standards through their CREDO. The company’s CREDO was established by Robert Johnson over six decades ago. Johnson and Johnson CREDO has four focal points, including communities, employees, customers, and shareholders (Dess. Et al., 2015). The company’s policy gives the leadership responsibility to its vast global product consumers. Irrespective of the huge losses, the company leadership has the responsibility to protect its consumers from harmful products (Dess et al., 2015). When the current CEO Alex Grosky replaced Weldon in 2012, he had to uphold the CREDO standards (Johnson & Johnson, 2018). He was familiar with the history, beliefs, and demanding leadership laid down by the founding fathers of Johnson and Johnson since he had worked for the company in a different capacity. The company leadership understands the responsibility they shoulder being good citizens that support charities, and good works, better education, and health, and bear global citizens fair share of taxes (Johnson & Johnson, n.d.).

Conclusions & Recommendations

Johnson & Johnson has gained a leadership market share in consumer products, pharmaceutical, and medical devices worldwide. The competitive sustainability, and future growth is invertible for Johnson & Johnson’s repertoire, in order to keep steady growth, the company maintain, or better their business strategy of low diversifying its products, and lowering costs. Likewise, through heir research and development, the company need to focus on utilizing arbitrage opportunities in countries with lower costs. This will enable the company to capitalize on value-chain activities in order to optimize the three strategic advantages, including cost reduction, performance enhancement, and risk reduction (Dess et al., 2015).

Financials

-Ending 2020 Reports

Total Assets: $174.89 million

Total Liabilities: $19.22 billion in debt

Stockholders’ Equity: $63.27 million

Current Ratio: 1:21

Quick Ratio: 0.99

Market Cap: $414.31 billion

References

Compton, K. (2020). Johnson & Johnson. From https://www.drugwatch.com/manufacturers/johnson-and-johnson/

Dess, Gregory, Alan Eisner, Gerry McNamara. Strategic Management: Text and Cases, 8th Edition. McGraw-Hill Learning Solutions, 09/2015. VitalBook file. From https://online.vitalsource.com/books/1259278212/epubcfi/6/118[;vnd.vst.idref=case31]!/4/2/84/[email protected]:89.5

Haque, F. (n.d.). SWOT analysis of Johnson and Johnson. From https://www.thestrategywatch.com/swot-analysis-johnson-johnson-jnj/

Johns Hopkins University (2015). Johnson and Johnson From https://www.jhsph.edu/research/centers-and-institutes/institute-for-health-and-productivity-studies/_docs/promoting-healthy-workplaces/JNJ.pdf.

Johnson & Johnson (2018). Our Leadership Team. From https://www.jnj.com/leadership/alex-gorsky

Johnson & Johnson (n.d.). Our Credo. From https://www.jnj.com/credo/

Johnson and Johnson (2021). What You Need to Know About Johnson & Johnson’s 2020 Fourth-Quarter and Full-Year Earnings Report. From https://www.jnj.com/latest-news/what-you-need-to-know-about-johnson-johnsons-2020-full-year-earnings-report

Raymonds, B. (2015). Johnson & Johnson Offers High Returns and Stability for a Bargain. From https://www.thestreet.com/opinion/johnson-johnson-offers-high-returns-and-stability-for-a-bargain-13251710

Reichert, C. (2021). Johnson & Johnson confirms vaccine production issues. From https://www.cnet.com/health/johnson-johnson-confirms-vaccine-production-issues/

Sobiya (n.d). Divisional Structure: Examples, Advantages & Disadvantages. From https://www.advergize.com/business/divisional-structure/

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