Download - Johnson & Johnson pp
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