james burke a career in american business

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THE BAD NEWS

Sep, 29, 1982, 4 deaths reported in suburbs Chicago , cause unknown.

Sep, 30, 1982, 1 more death.

Sep, 30, cause confirmed: Cyanide() poisoning Extra-Strength Tylenol Capsules.

The product by J&J

CEO: James Burke

OutlineThe Company: J&J

The CEO: Early Life, Career in J&J

The Product: Tylenol

Action and Question

J&J, early history

Founded 1886, New Brunswick, New Jersey

Founder: 3 brothers, James, Edward Mead, Robert Wood Johnson

Products: Antiseptic surgical dressing, Band-Aids

Major health product company

1926, most modern textile mill

1933, Robert II, called for a federal law increasing wages as well as reducing working week

1940, Credo, public and social responsibility (to customer, employees, community and stockholder), product quality

decentralized(resp&credit) , trust

Tied to every perspectives of regular concerns of business

Affiliate company

Balance btw (manufacturing, marketing), (financial, operating), (consumer, product) no single product > 5% of total revenue

Profit through just and ethical behavior

J&J, 1976 ~ 1981

1977: disposal diapers, sales > 100M

1977: baby shampoo, best-selling

1978: acquired kidney dialysis, $35M, heart valve lab, $26M

1979: acquire Technicare, CAT machine and ultrasound scanner, $125M

1981: 74/500 largest U.S. Industrials

4 Segments: Consumer, Professional, Pharmaceutical, Industrial

$5,400M Sales, $468M earning ~ from overseas

Blue-chip growth stock on Wall Street

CEO's Vision:
Commitment to science and technology
Broadening its base in the health-care field

Tylenol's victory at consumer product over fight with Datril.

OutlineThe Company: J&J

The CEO: Early Life, Career in J&J

The Product: Tylenol

Action and Question

James Burke's Early Life

FamilyFatherMotherCollege of Holy GrassMAEconomics'421925, FebBorn Rutland VermontCatholichigh school

HBSMBA

turn-onmoralbizcorrupt

work'49WW-IINavyOkinawaMBA ProgramRevisionability and understanding(ethic, public relationship & Responsibility)P&Gsalesbrand management1953J&JProduct DirectorBand-AidsAdvertisingCompany3 VenturesDouble salarySth wrongNo doubtChallenge'473.5YrFamily company ??

James Burke's Career in J&J

Director of Band-Aids, bored, Quit, political battle

Director of New product

Micatin, Liquiprin

Nose Drop, cough medicine, chest rub

The General's congratulation, mistake paid

Acting director of advertising, merchandising of the operating company

Financial's trouble, mentor

VP of product management for the operating company

1962, President of Baby and Proprietary Product company

The General's challenge

1964, executive VP for consumer products

1965, President of Domestic operating company

Dumped Baby Liquid Creama lot $ loss

1975, The Credo Challenge

1976, chairman and CEO

Credo Challenge

We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services.

We are responsible to our employees, the men and women who work with us throughout the world.

We are responsible to the communities in which we live and work and to the world community as well.

Our final responsibility is to our stockholders.

In meeting their needs everything we do must be of high quality.We must constantly strive to reduce our costsin order to maintain reasonable prices.Customers' orders must be serviced promptly and accurately.Our suppliers and distributors must have an opportunityto make a fair profit.

Users (1)

..... everything we do must be of high quality.

.... strive to reduce our costs in order to maintain reasonable prices.

Customers' orders must be serviced promptly and accurately.

Our suppliers and distributors must have an opportunity to make a fair profit.

Employee (2)

.... be considered as an individual.

...respect their dignity and recognize their merit.

...sense of security in their jobs.

... fair and adequate Compensation, working conditions clean, orderly and safe.

Feel free to make suggestions and complaints.

Equal opportunity for employment, development and advancement for those qualified.

.... provide competent management, and their actions must be just and ethical.

Communities (3)

... good citizens - support good works and charities and bear our fair share of taxes.

... 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

Stockholders (4)

Business must make a sound profit.

We must experiment with new ideas.

Research must be carried on, innovative programs developed and mistakes paid for.

New equipment must be purchased, new facilities provided and new products launched.

Reserves must be created to provide for adverse times.

When we operate according to these principles, the stockholders should realize a fair return.

OutlineThe Company: J&J

The CEO: Early Life, Career in J&J

The Product: Tylenol

Action and Question

Tylenol

Developed by McNeil

'60~'70: a prescription drug, a generic compound, advertised through medical trade journal, doctors, pharmacists as a gentler-to-stomach alternative to aspirin.

1970, Superb opportunity: lower price retail market.

Early '70, study questioned aspirin.

'72~'74: sales of acetaminophen in retail mkt, 5% -> 13%, J&J accounted for 90%.

Hospitals trust Tylenol, most used, trusted by doctors.

1981: named as 1/15 top marketing success product

Brand Market Share

Advertising Expenditures, 1976~1981($000)

Threaten from Datril/Bristol-Myers>> price 1/3 cut>> 11.5% $1 less ($20M, 1% share)1976, J&J advertising 1976, Extra-Strength Tylenol, the most potent 1976, Tylenol 18.2% share1979, Tylenol 25% share, ES 70%'76~81: won 4 lawsuitsTylenol Sales1981: > $400M1983: e $500M

OutlineThe Company: J&J

The CEO: Early Life, Career in J&J

The Product: Tylenol

Action and Question

ACTION

CEO: took charge of management at corporate level.

FACT:

Cyanide was the cause.

In random capsules in the bottles of Extra-Strength Tylenol

Batch number MC2880 at a McNeil plant, total 93,000 bottles containing 4.7M capsules

A small amounts of Cyanide were used in QA testing, requested by FDA. Clarification with media.

Sales and Earning ($M)salesearning

19762522.5205.4

19772914.1247.3

19783497.3299.1

19794211.6352.1

19804837.4400.7

19815339467.6

Market Share, 1975In $680M retail market B

Anacin0.153

Bayer0.123

Bufferin0.123

Tylenol0.106

Excerdrin0.085

Other0.41

Market Share, 1981In $1.2B Retail Market F

Anacin0.14

Bayer0.11

Bufferin0.1

Tylenol0.35

Excerdrin0.09

Other0.21

AHPSterling'sBristol-MyersJ&J

BrandAnacinBayerBufferinExcedrinTylenol

1976$29,889$15,581$14,233$15,841$4,204

1977$33,981$17,995$12,922$16,252$12,721

1978$34,290$22,510$14,183$16,196$16,988

1979$39,671$25,072$14,818$15,959$23,670

1980$43,513$23,519$14,430$17,297$26,495

1981$44,641$24,650$20,321$19,603$36,766

total$225,985$129,327$90,907$101,148$120,844

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