1. JOHNSON & JOHNSON:
STRATEGIC ANALYSIS
Presented by:
Thea Lindquist, Delaney
Begin, Kylie Hoffman,
Miguel Perez, & Kelly
Young
2. OBJECTIVES
Analyze 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.
3. BACKGROUND
Johnson 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.
4. INTRODUCTION
This 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.
5. EXTERNAL ANALYSIS
Johnson & Johnson
Threat of Substitutes
Medium/High
-Threat of generic prescription drug substitutes
-FDA requirements
-Consumer preference for generic drugs
-Big box retail stores (Target and Wal-Mart)
Threat of Rivalry
Medium
-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 Suppliers
Low
-Strong & stable relationship with suppliers
-Access to raw materials
-Supplier diversity program
-Technology patented to stimulate innovation
- Suppliers unlikely to forward integration
Threat of Buyers
Low
-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 Entry
Low 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
6. EXTERNAL ANALYSIS:
PORTERS FIVE FORCES
Threat of Entry is low:
Economies of scale
275 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
Differentiation
Brand identification and brand loyalty
Government policies
Anti-trust & competition laws, Environmental laws &
regulations
7. EXTERNAL ANALYSIS:
PORTERS FIVE FORCES
Threat of Suppliers is low:
Unlikely suppliers integrate forward
Firm has purchased $1.88 billion dollars from suppliers
Differentiated product
Access to raw materials
Firm is significant to suppliers
Supplier Diversity Program
8. EXTERNAL ANALYSIS:
PORTERS FIVE FORCES
Threat of Buyers is low:
Buyers for focal firms output
Many companies rely on J&J
Differentiated Product
Products are patent protected
Product is significant to buyer
80% of distribution to buyers dependent on distributors and
contractors.
9. EXTERNAL ANALYSIS:
PORTERS FIVE FORCES
Threat of Rivalry is medium:
Large number of competitors
Unilever, Abbott Laboratories, Pfizer
Increasing growth
Annual sales growth
Fastest growing pharmaceuticals company
10. EXTERNAL ANALYSIS:
PORTERS FIVE FORCES
Threat of Substitutes
is medium to high:
Pharmaceuticals
Generic prescription drugs
Store brand drugs
12. 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
13. EXTERNAL ANALYSIS:
MATURE INDUSTRY STRUCTURE
Industry characteristics:
Technology stands exist
FDA regulations
Increasing international competition
Outsourcing to small low-cost producers overseas
Industry exit is beginning
Healthcare reform
Antibiotic research and development
14. INTERNAL ANALYSIS
Resources
of Johnson
& Johnson
Reputation
Economies
of Scale
Policy
choices
TechnologyPatents
Human
Resources
Advertising
Strategies
Is it Valuable?
Is it Rare?
Is it costly to
Imitate?
Is it supported
by the
Organization?
15. INTERNAL ANALYSIS: RESOURCES
Reputation and Brand
Loyalty
Valuable because it
mitigates threat of Rivalry &
Substitutes
Costly to imitate and rare
because of unique historical
conditions
Sustainable Competitive
Advantage
Resource V R I O
Reputatio
n
& Brand
Loyalty
16. INTERNAL ANALYSIS: RESOURCES
Marketing & Advertising
Strategies
Mitigates threat of Substitutes
Exploits brand loyalty and
reputation
Emphasizes “Caring” for families
Rare & Costly to imitate because
few companies have been in
business for as long as they have
Resource V R I O
Marketing
&
Advertisin
g
17. INTERNAL ANALYSIS: RESOURCES
Economies of Scale
Reduces threat of new entrants
Exploits opportunity of increased
profits for the firm
A new entrant would have to
invest heavily to reduce their cost
to compete with same low-cost
position as Johnson & Johnson
Costly to imitate because of
social complexity and patents
Resource V R I O
Economi
es of
Scale
18. INTERNAL ANALYSIS: RESOURCES
Learning Curve Economies
Mitigates threat of suppliers
Exploits the opportunity of
maintaining customer loyalty
Rare and costly to imitate
because of unique historical
conditions
Allows them to move down the
learning curve successfully
Suppliers wouldn’t jeopardize
sales with Johnson & Johnson
Resource V R I O
Learning
Curve
Economi
es
19. INTERNAL ANALYSIS: RESOURCES
Human Resources & Policy
Choices
Mitigate threat of rivalry and
substitutes
Rare because of constant
innovation and first-mover
pioneers
Costly to imitate because of
employee loyalty and training
Resources V R I O
Human
Resources
& Policies
20. INTERNAL ANALYSIS: RESOURCES
Technology & Patents
Important resources that help
with other resources in
maintaining a sustainable
competitive advantage
But, they are not rare or costly to
imitate
Patents only last a certain
amount of years before other
companies can begin to make
generic products that imitate
Johnson & Johnson
Technology is valuable, but not
rare or costly to imitate
Resource
s
V R I O
Technolo
gy &
Patents
23. BUSINESS LEVEL STRATEGY
Economic value achieved through advertising
Consumer marketing strategies. “Johnson & Johnson: More than a
century of caring”.
Emphasize highest care and quality products.
24. BUSINESS LEVEL STRATEGY
Customer 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.
25. BUSINESS LEVEL STRATEGY
Consumer Products
Baby care
Hair and skin care
Wound care
Oral care
Over-the-counter
medications
Nutritionals
Vision care
Name Brand
Listerine
Neutrogena
Tylenol
Splenda
Band-Aid
Aveeno
Sudafed
26. BUSINESS LEVEL STRATEGY:
POLICY CHOICES
Sourcing raw
materials
Team up w/
suppliers
Toxicology
assessment
Clinical
evaluation
In-use
testing
Continual
evaluation
29. VERTICAL INTEGRATION: VALUE
CHAIN
Market &
advertise
Distribute
final
product
Package &
label
Manufactu
re &
develop
ingredient
s
Raw
materials
from
suppliers
Research &
develop
Forward vertically Integrated
Reduced transaction cost
Quality and consistency control
Good reputation and trustworthy
reputation
30. 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.
Innovation
Continuous innovation with technologies in all aspects of product
manufacturing
Hiring successful managers that committed to producing these results
31. 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