Johnson & Johnson of today

For the fiscal year 2010, ended December 2010, Johnson & Johnson reported a

total revenue of $61.6B and net earnings of $13.3B.

Johnson & Johnson has interests in a broad spectrum of the health care market

and takes a decentralized approach to managing its 250 operating companies

and franchises. In the company's continuing effort to diversify its business and

increase profits, Johnson & Johnson is constantly acquiring new companies.

The company consists of three major divisions: consumer healthcare, medical

devices, and pharmaceuticals.

Pharmaceuticals (36% of 2010 Revenue, $7.1B Net Earnings)

The Pharmaceutical division oversees prescription medications distributed to retailers,

wholesalers, and health care professionals. It uses the same business model and faces similar

challenges as other major pharmaceutical companies.

Johnson & Johnson's pharmaceutical portfolio contains seven blockbuster drugs (sales over $1B

worldwide): Remicade for the treatment of Crohn's disease and arthritis; Procrit for anemia;

Risperdal is an antipsychotic; "'Levaquin" is an antibiotic; Concerta treats ADHD; "'Velcade"' for

multiple myeloma; and "'Aciphex"' for acid reflux. Three of these drugs will face generic

competition by 2011 and two more will lose patent protection by 2014.

Medical Devices and Diagnostics (40% of 2010 Revenue, $8.3B Net

Earnings)

Johnson & Johnson is the world's largest developer and manufacturer of medical treatment and

diagnostic devices. This segment includes a wide variety of equipment and supplies used mostly

in the professional fields, by physicians, nurses, therapists, hospitals, diagnostic laboratories and

clinics. Major franchises in this division include: Depuy" products for reconstructing joints and

skeletal injuries; Ethicon surgical instruments and accessories; and Cordis stents, catheters, and

guidewires.

Consumer Health Care (24% of 2010 Revenue, $2.3B Net Earnings)

Consumer products are non-prescription health care products marketed directly to the general

public. Johnson & Johnson has diverse franchises in over-the-counter pharmaceuticals and

nutritionals, skin care, baby & kids care, and women's health products. This division includes

some of the company's most recognizable brands such as Tylenol, Neutrogena, Band-Aid,

Lubriderm, Visine, and Neosporin.

Research and Development ($6.8B in 2010)

Researching and developing new drugs is the single most important consideration when

identifying the prospects of any pharmaceutical company. A successful drug pipeline is critical

because former blockbusters losing patent protection must be constantly replaced by new viable

drugs. Johnson and Johnson is unique in that it has a more diverse revenue stream than many of

its competitors, but its pharmaceutical division is still a large segment of the company.

(http://www.wikinvest.com/stock/JOHNSON_%26_JOHNSON_(JNJ)

The Johnson & Johnson Story:

HISTORY: 1950 to Present

Company History:

One of America's most admired companies, Johnson & Johnson (J & J) is one

of the largest healthcare firms in the world and one of the most diversified. J & J

generates about half of its revenues outside the United States, through its

network of 250 operating companies in 51 countries and its marketing

organization that sells in more than 175 countries.

1950’s:

The younger Robert Johnson, who came to be known as 'the General,' had

joined the company as a mill hand while still in his teens. By the age of 25 he

had become a vice-president, and he was elected president in 1932.

The General firmly believed in decentralization in business; he was the driving

force behind J & J's organizational structure, in which divisions and affiliates

were given autonomy to direct their own operations. This policy coincided with

a move into pharmaceuticals, hygiene products, and textiles.Under the General's

leadership, annual sales grew from $11 million to $700 million at the time of his

death in 1968.

In 1943 Johnson wrote a credo outlining the company's four areas of social

responsibility: first to its customers; second to its employees; third to the

community and environment; and fourth to the stockholders. On the heels of the

credo came the company's change from family-owned firm to public company,

as J & J was listed on the New York Stock Exchange in 1944.

In 1954, Johnsons Baby Shampoo with NO MORE TEARS formula was

launched in the market. It was the first mild and soap-free shampoo for babies.

In 1959 J & J acquired McNeil Laboratories, Inc., maker of Tylenol

(Acetaminophen), a prescription only drug. J&J launched Tylenol as an OTC

medication the following year. Also in 1959, Cilag-Chemie, a Swiss

pharmaceutical firm was purchased.

In 1961, J&J bought Janssen Pharmaceutica, makers of the major antipsychotic

drug Haldol, which had been introduced in 1958.

The General retired in 1963. His immediate successor was Philip Hofmann.

Hofmann was another firm believer in decentralization and encouraged the

training of local experts to supervise operations in their respective countries.

Foreign management was organized along product lines rather than

geographically, with plant managers reporting to a person with expertise in the

field.

1960s—80’s: Increased Promotion of Consumer Products

James Burke became president of J & J's Domestic Operating Company in

1966, first introduced Carefree and Stayfree sanitary napkins into a market that

was dominated by Kimberly-Clark. Under Burke's direction, Instead of only

Women’s magazines advertising, J & J took a more open approach and

advertised Carefree and Stayfree on television. By 1978 J & J had captured half

of the market.

Ever since J & J had acquired McNeil Laboratories, Tylenol had been marketed

as a high-priced product. 1975 saw Tylenol being introduced as a mass market

product. Having slashed its price, J&J ended up beating not only Datril, but

number one Anacin as well.

J & J had always maintained a balance between the many divisions in its

operations, particularly between mass consumer products and specialized

professional products. No single J & J product accounted for as much as five

percent of the company's total sales. With Burke at the helm, consumer products

began to be promoted aggressively, and Tylenol pain reliever became J & J's

number one seller.

In May 1977 Extracorporeal Medical Specialties, a manufacturer of kidney

dialysis and intravenous treatment products, became part of the corporation.

Three years later, J & J acquired Iolab Corporation, maker of ocular lenses for

cataract surgery, and entered the field of eye care. In 1981 the company

acquired Frontier Contact Lenses and renamed it Vistakon. The increased in-

house development of critical care products resulted in the creation of Critikon,

Inc., in 1979.

In September 1982 tragedy struck J & J when seven people died from ingesting

Tylenol capsules that had been laced with cyanide. Advertising was canceled

immediately, and J & J recalled all Tylenol products from store shelves.

Creating the disposable contact lens category

Johnson & Johnson bought the rights for the Danlens technology which

provided an entirely new standard of precision, eliminating the hydration

distortions common to traditional hard state manufacturing. The result was a

high quality lens that was virtually 100% repeatable and reproducible,

combining excellent vision with comfort and convenience.

In 1987, Vistakon (J&J’s vision care subsidiary) changed the vision care

industry forever with the invention of ACUVUE, the world’s first disposable

soft contact lens. Patients and practitioners alike embraced the idea of throwing

contact lenses away after one week of wear. The popularity of the Acuvue

lenses helped propel Vistakon into the number one position in contact lenses

worldwide.

There were a number of other important developments in the second half of the

1980s. In 1986 J & J acquired LifeScan, Inc., maker of at-home blood-

monitoring products for diabetics. That same year, the company expanded its

world leading position in baby care products through the acquisition of Penaten

G.m.b.H., the market leader in Germany. In 1989, J & J and Merck formed a

joint venture to develop OTC versions of Merck's prescription medications.

1990’s: Daily disposable breakthrough

By 1994, ACUVUE® and SUREVUE® accounted for nearly two-thirds of all

new patients coming into contact lenses within the US contact lens market.

The next huge breakthrough in the contact lens market came in 1995 with the

introduction of 1•DAY ACUVUE - the world’s first daily disposable contact

lens. Some of the benefits were an unsurpassed level of comfort at that time,

healthy crisp vision, convenience and cost elimination for cleaning solution

products. Johnson & Johnson Vision Care was the first contact lens

manufacturer to advertise the benefits of contact lens wear to consumers

through mass media – the response was remarkable.

Dealmaking in the 1990s and Beyond

J & J was able to counter increasing criticisms of rising healthcare costs in the

United States and around the world in the 1990s due in part to the company's

longstanding history of social responsibility. The company pioneered several

progressive programs including child care, family leave, and 'corporate

wellness' that were beginning to be recognized as healthcare cost reducers and

productivity enhancers. In 1992 J & J instituted its 'Signature of Quality'

program, which urged the corporation's operating companies to focus on three

general goals: 'Continuously improving customer satisfaction, cost efficiency

and the speed of bringing new products to market.'

Due to a relatively slow pace in the early 1990s, a series of acquisitions

followed in the mid-1990s. The skin care line received a boost in 1993 through

the purchase of RoC S.A. of France, a maker of hypoallergenic facial, hand,

body, and other products under the RoC name. Neutrogena Corporation was

acquired in 1994 for nearly $1 billion. J & J spent another billion dollars in

1995 for the clinical diagnostics unit of Eastman Kodak Company. In 1997 J &

J combined its existing Ortho Diagnostics Systems unit with the operations

acquired from Kodak to form Ortho-Clinical Diagnostics, Inc. (LifeScan

remained a separately run diagnostics company.)

Another subsidiary that grew through acquisitions in this period was Ethicon

Endo-Surgery, Inc., which had been spun off from Ethicon in 1992 to

concentrate on endoscopic, or minimally invasive, surgical instruments. J & J

acquired Indigo Medical, which specialized in minimally invasive technology in

urology and related areas, in 1996.

Another large acquisition occurred in 1996 when J & J bought Cordis

Corporation which manufactured cardiovascular stents, balloons, and catheters.

In 1995, U.S FDA approved the OTC version of Merck's Pepcid that was

developed by the Johnson & Johnson-Merck joint venture.

The company's aggressive program of acquisition continued in the late 1990s,

beginning with the 1998 purchase of DePuy, Inc. for $3.7 billion. DePuy was a

leader in orthopedic products, such as hip replacement devices.

In October 1999 J & J merged with major biotechnology firm Centocor, Inc. in

a $4.9 billion deal to bolster its drug R & D efforts. Soon after the merger with

Centocor was completed, the FDA approved a key Centocor-developed drug,

Remicade, for the treatment of rheumatoid arthritis. Also in 1999 J & J acquired

the dermatological skin care business of S.C. Johnson & Son, Inc.--which was

primarily made up of the Aveeno brand.

Despite its late 1990s troubles, J & J reported record results for 1999, earning

$4.17 billion on revenues of $27.47 billion. Net earnings had nearly quadrupled

since 1989, while net sales nearly tripled over the same period. The year 2000

got off to a rough start for the company, however, as it was forced to withdraw

from the market a prescription heartburn medication, Propulsid for its serious

side effects.

The New Millennium

In 2002, William C. Weldon became Chairman and CEO of

Johnson & Johnson, only the eighth person to lead the Company since its

founding. Under his leadership, the Company entered new therapeutic areas

such as HIV/AIDS, and health and wellness. Also in 2002, Johnson & Johnson

acquired Tibotec-Virco BVBA to help address the vast unmet needs of patients

with HIV/AIDS and other infectious diseases such as tuberculosis.

In 2006, Johnson & Johnson acquired Pfizer Consumer Healthcare for a cash

deal of $16.6 Billion, which brought in heritage consumer brands such as

LISTERINE Antiseptic (first formulated in 1879), BENGAY, BENADRYL,

NICORETTE line of smoking cessation treatments, and SUDAFED cold, flu

and allergy products and more.

In 2010, the Company supported the United Nations’ Millennium Development

Goals to improve the health of mothers and children in developing countries. As

a founding sponsor, Johnson & Johnson helped launch the United States’ first

free mobile health service, providing health information via text messages for

pregnant women and new mothers.

In 2011, Johnson & Johnson celebrated 125 years of caring and looks to the

next 125 years of transforming care for patients, consumers and communities

around the world.

Key Dates:

1954: Johnson’s Baby Shampoo with NO MORE TEARS formula enters the

market.

1959: McNeil Laboratories, Inc. (McNeil Labs) is acquired.

1960: McNeil Labs introduces Tylenol as an over-the-counter (OTC) pain

reliever.

1961: Janssen Pharmaceutica is acquired.

1963-73: Under Chairman and CEO Philip B. Hofmann's leadership, operating

companies launched new treatments for schizophrenia, family planning and

personal care.

1975: Through a significant price decrease, Tylenol is transformed into a mass-

marketed product.

1976 to 1989: During James E. Burke's tenure as Chairman and CEO, the

Company entered new areas of health, such as vision care, mechanical wound

closure and diabetes management.

1982: Tylenol tampering tragedy occurs.

1987: Johnson & Johnson is a founding partner in Safe Kids Worldwide. The

first national and then global campaign to reduce accidental childhood injury.

1988: Acuvue disposable contact lenses are introduced. The first disposable

contact lenses that can be worn for up to a week, thrown away and replaced

with a fresh pair.

1989: J & J and Merck formed joint venture to develop OTC versions of

Merck's prescription medications.

1994: Neutrogena Corporation is acquired.

1995: Merck and J & J launched Pepcid AC; company acquired the clinical

diagnostics unit of Eastman Kodak Company.

1996: J & J acquired Cordis Corporation.

1998: DePuy, Inc. is acquired, and a companywide restructuring is launched.

1999: Centocor, Inc. merged with J & J.

2002: WilliamC.Weldon became the Chairman and CEO of

Johnson & Johnson.

2002: Company entered new therapeutic areas such as HIV/AIDS and

Tuberculosis and acquired Tibotec-Virco.

2006: Johnson & Johnson acquired Pfizer Consumer Healthcare.

2010: The Company supported the United Nations’ Millennium Development

Goals to improve the health of mothers and children in developing countries.

2011: Johnson & Johnson celebrated 125 years of caring.

Role of Marketing Mix in building J&J:

Product

Johnson and Johnson products are in three main categories:

Pharmaceuticals, Medical Devices & Diagnostics, and Consumer Health

care.

The following are examples of the Johnson & Johnson product

inventory: Feminine hygiene, Denture care, Contraceptives,

Immunology, First aid, Family planning, Oncology, Nutritionals,

Diabetes care, Neurology, Vision care, Allergy cold and flu treatment,

Women’s Health, Medical devices and diagnostics.

Price

In the United States, Johnson and Johnson strives to keep their net price

increases for health care products within the Consumer Price Index

(CPI).

Johnson and Johnson works with governments to develop differential

pricing approaches to help more people access their medical products.

J&J companies and government agencies are also entering other types of

risk-sharing agreements in order to help people gain access to new

therapies at affordable prices.

Place

J&J products are available across all categories of distribution channels

across it’s 175 countries of operation. J&J products are widely

distributed through advertising & promotional activities, good product

visibility and availability in the market. J&J provides good visibility,

consumer offer to the shoppers, better service to retailers, good

competitive schemes, and better quality products at reasonable rates.

Thus, making its brand effective in the market in terms of other brands.

Promotion

Johnson and Johnson offers special discount coupons on products such

as baby care, and contact lens.

Johnson & Johnson is involved with many causes and advertising

campaigns that encourage healthy lifestyles. Key initiatives include: The

Campaign for Nursing's Future, Having a Baby Changes Things, and

Because We Care We Act (China).

What has made J&J different?

Process

Johnson and Johnson employs what they call a “decentralized

management approach”. Employees are encouraged to be

entrepreneurial with the understanding that they will benefit from

focusing on customer needs and providing solutions.

Johnson and Johnson seeks to turn insights into innovative new products

and sometimes whole new businesses. Their goal is to capitalize on

scientific breakthroughs, marketing insights and manufacturing expertise

easily across the full range their businesses. With more than 250

operating companies have a local window into emerging customer

needs, scientific developments, and technologies throughout the world.

The Executive Committee of Johnson & Johnson is the principal

management group responsible for the operations and allocation of the

resources of the Company. This Committee oversees and coordinates the

activities of the Consumer, Pharmaceuticals and Medical Devices and

Diagnostics business segments. Each subsidiary within the business

segments is, with some exceptions, managed by citizens of the country

where it is located.

People

William C Weldon is Chairman & Chief Executive Officer of Johnson &

Johnson.

Johnson and Johnson has a Global Diversity and Inclusion program with

a goal of achieving a skilled, high performance workforce that is

reflective of the diverse global marketplace (workforce).

Johnson & Johnson was ranked #2 among Diversity Inc. Magazines Top

50 Companies for Diversity.

The company has ranked high Working Mother Magazines’ Top One

Hundred Companies for Working Mothers or 24 years.

Johnson & Johnson Marketing:

Product Development

Developing a new product is a time-consuming and costly endeavor. The

company currently holds almost 54,000 patents domestically and

internationally. For pharmaceutical products, hundreds of thousands of

candidate compounds must be screened to identify a handful of potential drugs.

Even fewer of these candidate drugs are found to be effective at treating a

disease. The drug must then pass strict safety standards in several series of

clinical trials. Over-the-counter products, such as Johnson & Johnson's Tylenol

or LifeScan blood glucose monitors, are also subject to FDA regulation and

approval. Medical devices, such as products by DePuy and Cordis, also must

undergo clinical trials in order to meet efficacy and safety requirements.

Branding

J&J has 92 consumer product brands.  As a consequence, the company spends

an enormous amount of money on marketing.  J&J spent $19.8 billion on

“selling, marketing and administrative” expenses with yearly revenues of about

$62 billion.  (By contrast, Apple spent $5.5 billion in “selling, marketing and

administrative” to make $65 billion.)

Why does J&J have so many brands?  The answer lies in the belief that

branding is the most strategic thing a consumer product company can do.  J&J

invests heavily in creating, publicizing, and advertising their brands.

Advertising Age estimated global measured advertising expenditure of $2.25bn

in 2009, making Johnson & Johnson the world's #8 advertiser. 

Brand Architecture

Brand architecture can be defined as “the way the pieces of the brand portfolio

are structured, managed, and perceived in terms of how they relate to each other

and add value to the organization” (Reference:Petromilli, Morrison, and Million, 2002, p. 22).

There can be different approches to Brand Architecture like Branded House

(Exa: Virgin group with Virgin Mobile, Virgin TV, Virgin Phone & Virgin

Broadband, all under one umbrella brand) or House of Brands (Exa: P&G

having Pringles, Tide, Pantene, Pampers, Duracell etc in their brand portfolio).

J&J Brand Architecture is essentially a HYBRID / COMBINATION

architecture. Example

In practice, brand architectures have become increasingly complex over the past

decades, often due to large-scale mergers, acquisitions, and expansions into new

markets. In J&J, when it comes to brand portfolio strategy, many factors are

considered including the vision, values, positioning, opportunities, consumer

perceptions, market trends, and competitor positioning, related to corporate and

product brands. These considerations have been critical for strategically

building a extremely strong brand equity for J&J.

Trust

J&J Marketing and overall company philosophy has been based on customer

trust. For Johnsons Baby, the mission is to cultivate deep personal trust &

understanding mothers and babies relationship.

J&J concern for societal interests is summarized in a company document called

“Our Credo”, which stresses honesty, integrity and putting people before profits.

J&J would rather take a big loss than ship a bad batch of one of its products.

The Tylenol tragedy of 1982 and the company’s swift recall of Tylenol,

strengthened consumer confidence and loyalty. Although J&J believed that the

pills had been altered in only a few stores, not in the factory, it quickly recalled

all of its products and launched an information campaign toinstruct and reassure

consumers. The recall cost the company $100 million in earnings. However, this

paid off in the long run and Tylenol continued to remain the nations leading

pain releiver brand.

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