JOHNSON & JOHNSON: STRATEGIC

ANALYSISPresented by:Thea Lindquist, Delaney Begin, Kylie Hoffman, Miguel Perez, & Kelly Young

OBJECTIVESAnalyze the external opportunities and threats of Johnson & Johnson.Analyze the internal strengths and weaknesses of J & J.Identify the Business- Level Strategy.Identify the Corporate- Level Strategy.Make recommendations for Johnson & Johnson’s future.

BACKGROUNDJohnson has been operating since 1886, and currently operates in 60 countries and employs 128,700 people worldwide. They have an increasing industry growth, with increasing annual sales growth from 65 billion dollars in 2011 to 78.1 billion dollars in 2013.. They distribute consumer products, prescription products, and medical devices and diagnostics.

INTRODUCTIONThis analysis focuses in on their consumer product segment.Their consumer products consist of baby care, hair and skin care, wound care and topicals, oral care, over-the-counter medications, nutritionals, and vision care. Their name brand products that they own and distribute are comprised of popular brands, such as, Listerine, Neutrogena, Tylenol, Splenda, Band-Aid, Aveeno, Sudafed, Acuvue, and many more.

EXTERNAL ANALYSIS

Johnson & Johnson

Threat of SubstitutesMedium/High

 -Threat of generic prescription drug substitutes -FDA requirements-Consumer preference for generic drugs-Big box retail stores (Target and Wal-Mart)

 

Threat of RivalryMedium

 

-Many competitors (Unilever, Pfizer Inc., Novartis, -Industry leader in pharmaceuticals and health products - increasing annual sales growth from 65 billion dollars in 2011 to 78.1 billion dollars in 2013.

 

Threat of SuppliersLow

-Strong & stable relationship with suppliers-Access to raw materials-Supplier diversity program-Technology patented to stimulate innovation - Suppliers unlikely to forward integration

 

Threat of BuyersLow

-Products are patent protected-Advantage in cost & prices-Customers are fragmented-Technology patented to stimulate innovation -80% of distribution to buyers dependent on distributors and contractors. -Diversified company

 

Threat of EntryLow Threat

 -Economies of scale- 275 companies in 60 countries-Technology patented to stimulate innovation -Product differentiation-Brand loyalty and brand recognition with customers- Government policies

 

EXTERNAL ANALYSIS:PORTERS FIVE FORCESThreat of Entry is low:Economies of scale275 companies located in 60 countries around the world, along with 71.3 billion dollars in sales in 2013.

Cost advantages independent of scale Patent technology

DifferentiationBrand identification and brand loyalty

Government policiesAnti-trust & competition laws, Environmental laws & regulations

EXTERNAL ANALYSIS:PORTERS FIVE FORCESThreat of Suppliers is low:Unlikely suppliers integrate forwardFirm has purchased $1.88 billion dollars from suppliers Differentiated product Access to raw materials Firm is significant to suppliersSupplier Diversity Program

EXTERNAL ANALYSIS:PORTERS FIVE FORCESThreat of Buyers is low:Buyers for focal firms outputMany companies rely on J&J Differentiated ProductProducts are patent protected Product is significant to buyer 80% of distribution to buyers dependent on distributors and contractors.

EXTERNAL ANALYSIS:PORTERS FIVE FORCESThreat of Rivalry is medium: Large number of competitorsUnilever, Abbott Laboratories, PfizerIncreasing growthAnnual sales growthFastest growing pharmaceuticals company

EXTERNAL ANALYSIS: PORTERS FIVE FORCESThreat of Substitutes is medium to high:PharmaceuticalsGeneric prescription drugs Store brand drugs

EXTERNAL ANALYSIS: COMPLEMENTORS

Consumer Products:Luvs and Pampers compared to J&J diaper rash cream

Toothbrush and mouthwash brands compared to J&J’s Listerine

EXTERNAL ANALYSIS:GENERAL SEGMENTS

Demographic trends Baby boomer generation

Political/legal conditions FDA regulations

Cultural trends All-natural products

Technological changes IBOT license

Specific International Event Ebola/Virus outbreak

EXTERNAL ANALYSIS: MATURE INDUSTRY STRUCTURE Industry characteristics: Technology stands existFDA regulations

Increasing international competitionOutsourcing to small low-cost producers overseas

Industry exit is beginning Healthcare reformAntibiotic research and development

INTERNAL ANALYSIS

Resources of Johnso

n & Johnso

n

Reputation

Economies of Scale

Policy

choices

Technology

Patents

Human

Resources

Advertising

Strategies Is it Valuable?

Is it Rare? Is it costly to

Imitate? Is it supported

by the Organization?

INTERNAL ANALYSIS: RESOURCESReputation and Brand

LoyaltyValuable because it mitigates threat of Rivalry & SubstitutesCostly to imitate and rare because of unique historical conditionsSustainable Competitive Advantage

Resource

V R I OReputat

ion& Brand Loyalty

INTERNAL ANALYSIS: RESOURCESMarketing & Advertising

StrategiesMitigates threat of SubstitutesExploits brand loyalty and reputationEmphasizes “Caring” for familiesRare & Costly to imitate because few companies have been in business for as long as they have

Resource

V R I O

Marketing & Advertising

INTERNAL ANALYSIS: RESOURCES

Economies of ScaleReduces threat of new entrantsExploits opportunity of increased profits for the firmA new entrant would have to invest heavily to reduce their cost to compete with same low-cost position as Johnson & JohnsonCostly to imitate because of social complexity and patents

Resource

V R I O

Economies of Scale

INTERNAL ANALYSIS: RESOURCESLearning Curve EconomiesMitigates threat of suppliersExploits the opportunity of maintaining customer loyaltyRare and costly to imitate because of unique historical conditionsAllows them to move down the learning curve successfullySuppliers wouldn’t jeopardize sales with Johnson & Johnson

Resource

V R I O

Learning Curve Econom

ies

INTERNAL ANALYSIS: RESOURCES

Human Resources & Policy Choices

Mitigate threat of rivalry and substitutesRare because of constant innovation and first-mover pioneersCostly to imitate because of employee loyalty and training

Resources

V R I O

Human Resource

s & Policies

INTERNAL ANALYSIS: RESOURCES

Technology & Patents Important resources that help with other resources in maintaining a sustainable competitive advantageBut, they are not rare or costly to imitatePatents only last a certain amount of years before other companies can begin to make generic products that imitate Johnson & JohnsonTechnology is valuable, but not rare or costly to imitate

Resources

V R I O

Technology &

Patents

BUSINESS LEVEL STRATEGY75% Differentiation Strategy25% Cost Leadership Strategy

BUSINESS LEVEL STRATEGYDifferentiati

onAdvertising

Brand LoyaltyProduct Mix

Human Resources

Cost LeadershipEconomies of

ScaleLearning

Economies of scale

Policy Choices

BUSINESS LEVEL STRATEGYEconomic value achieved through advertising Consumer marketing strategies. “Johnson & Johnson: More than a century of caring”. Emphasize highest care and quality products.

BUSINESS LEVEL STRATEGYCustomer brand loyalty Brand recognition. “To build long-term equity of their brand by building sustainable customer loyalty and building shareholder value over time”.Product mix vital for to compete with rivals.

BUSINESS LEVEL STRATEGYConsumer ProductsBaby care

Hair and skin careWound care

Oral careOver-the-counter

medicationsNutritionalsVision care

Name Brand

ListerineNeutrogena

TylenolSplendaBand-AidAveenoSudafed

BUSINESS LEVEL STRATEGY: POLICY CHOICES

Sourcing raw

materialsTeam up

w/ suppliersToxicolog

y assessm

ent

Clinical evaluatio

nIn-use

testing Continua

l evaluatio

n

CORPORATE LEVEL STRATEGY

Consumer Products

Pharmaceuticals

Medical Devices

CORPORATE LEVEL STRATEGY Vertical Integration Vertical Integration

• Vertical Integration

• Product Differentiation

• Operational Scope of Economies

VERTICAL INTEGRATION: VALUE CHAIN

Market & advertise

Distribute final

productPackage & label

Manufacture &

develop ingredien

ts

Raw materials

from suppliers

Research &

develop

Forward vertically IntegratedReduced transaction costQuality and consistency controlGood reputation and trustworthy

reputation

PRODUCT DIFFERENTIATION Related Corporate Diversification

Related-Constrained: less than 70% of firm revenues comes from a single business, and different businesses share numerous links and common attributes.

The three markets share similar inputs, production technologies, distribution channels and similar customers.

InnovationContinuous innovation with technologies in all aspects of product manufacturing

Hiring successful managers that committed to producing these results

OPERATIONAL ECONOMIES OF SCOPE: ACTIVITY SHARING

Common Quality Control

System• FDA

Regulations• Research and

Development

Common Advertising

Efforts• Shared

Consumer• Related to

Health Field Field

Common Distribution Channels

• Retailers• Hospitals

OPERATIONAL ECONOMIES OF SCOPE: CORE COMPETENCIES

Managerial &

Technical Know-How

Identify

Develop

Acquire

Market Products

Consumer Goods

Pharmaceuticals

Medical Devices

Strategies Threats Mitigated

RECOMMENDATIONS:FORWARD INTEGRATE FURTHER

Open Kiosks Distribute

Vending Machines

Decrease Rivalry

Increase Barriers To Entry

RECOMMENDATIONS:CONTINUE EBOLA TREATMENT RESEARCH

Bacteria Killing Hand Sanitizer

Strategies Threats Mitigated

Decrease Rivalry

First Movers

RECOMMENDATIONS:CREATE REWARD OR INCENTIVES PROGRAM

Strategies Threats Mitigated

Rewards Card Scans At

Multiple Retailers

Redeemable Coupons And Discounts

Decrease Rivalry