Johnson & Johnson (J&J) is a major healthcare company that operates in three distinct business segments: pharmaceuticals, medical devices, and consumer health products (Johnson & Johnson case study). The Covid vaccination from Johnson & Johnson, which was initially promoted as a single injection, lost favor in the United States and other developed nations in part due to its association with a rare but serious blood-clotting problem (Robbins, et al, 2022). Currently, J&J proposed a settlement of $8.9 billion for talc cancer claims. The $8.9 billion deal would rank with those reached by cigarette corporations and, more recently, opioid makers as one of the most significant litigation settlements ever in the United States, assuming it is accepted by the court and a majority of the claimants (The economic times, 2023). The settlement is set to compensate the ten thousand claimants over the twenty-five years through its subsidiary. In addition, Claims that metal-on-metal hip implants increase blood levels of metal ions, resulting in groin discomfort, allergic reactions, bone degradation, and tissue death, have also drawn attention to the products in the company. About 10,400 lawsuits have been filed against the firm in the US regarding these allegations and the Pinnacle device (Bellon, 2019). J&J disputes consumer complaints over its Pinnacle products, claiming that it developed, tested, and marketed the goods ethically and responsibly.
The business structure of the corporation has undergone substantial modifications recently, including the spinoff of various business units. J&J decided to spin off its Consumer Health division to major in the large pharmaceuticals and Covid-battered medical devices businesses (Mishra and Carl, 2022). The main aim of the separation of the J&J organization was to increase the management focus on the effectiveness of addressing the changing industry to meet the needs of the New Consumer Health Company patients and clients (New Brunswick, 2021). The company’s multi-year reorganization process culminated in this spin-off, which created the two distinct business divisions of Pharmaceuticals & Medical Devices and Consumer Health. After the spin-off was finished in July 2020, J&J Consumer Inc. became a publicly traded business on the New York Stock Exchange. The spin-off was a component of a bigger plan to concentrate on three core companies and assist J&J in being more inventive and agile. The purpose of the change was to enable the corporation to develop into growing markets like biopharmaceuticals and digital health while concentrating more on its core activities. The Consumer Health business will still be run by J&J, but it will now be a separate, publicly traded company. A bigger plan to improve J&J’s operations, restructure its corporate structure, and establish a more effective corporate governance structure included the spin-off of the Consumer Health division.
The action was also designed to set up money that could be invested in start-ups and other growth-oriented ventures. Shares of J&J Consumer Inc. increased by more than 8% the day after going public, indicating that the spin-off was warmly accepted by the market (Johnson & Johnson case study). Since then, the value of the company’s shares has increased, and as of October 2020, the stock is trading at a price that is more than double its IPO price. Overall, it looks that J&J’s decision to spin off its Consumer Health division was a wise one since it has enabled the company to concentrate on its core businesses, simplify operations, and free up cash for investments. To stay competitive in the rapidly evolving healthcare industry, J&J will need to maintain its current level of attention on its core business and make investments in growth opportunities.
Porter’s five forces is an external analysis framework that is suitable for the J&J analysis. This is because, porter’s five Forces help them understand the threat of new entrants in the industry, the threat of substitute products and services in the industry, rivalry among existing players in the industry, the bargaining power of buyers of Johnson & Johnson, and lastly, the bargaining power of suppliers of Johnson & Johnson. To achieve above-average profits compared to other players in the industry in the long run, Johnson & Johnson needs to develop a sustainable competitive advantage. Industry analysis using Porter’s Five Forces can help Johnson & Johnson to map the various forces and identify spaces where Johnson & Johnson can position itself (Johnson & Johnson BDR, 2018). J&J can tackle the threat of new entrants by creating economies of scale to lower the fixed cost per unit and also by understanding the pressing need of the consumer rather than what the consumer is buying. According to Fern Fort University, (2017), J&J can also tackle the rivalry among existing players by collaborating with competitors to increase the market size rather than just competing for a small market. Through the creation of a large base of customers, J&J can deal with the bargaining power of buyers. This will lead to the reduction of buyers’ bargaining power and also provide J&J a chance to streamline its sales and production process. Lastly, J&J can deal with the bargaining power of suppliers by building an efficient supply chain with multiple suppliers. (Fern Fort University, 2017). By analyzing these five forces in their external environment, J&J strategists can receive a full picture of what impacts their profitability. Therefore, they can shape those forces in their favor.
On the internal analysis, the SWOT strategic analysis is suitable for J&J analysis. This is an analysis of its strength, weaknesses, opportunities, and weaknesses. Johnson & Johnson’s strengths include global dominance since J&J has more than 265 operating companies in more than 60 countries globally. Highly influential as it influences the economic wellbeing of many countries, with high experience of over 130 years. J&J understands what it takes to target the market completely. Johnson & Johnson’s weaknesses include unethical operations. Lawsuits against the negative effects of Johnson & Johnson’s Xarelto, talc-based baby powder, opium-addictive Norman drug, and many more are projected to cost about $15 billion. Most importantly, each lawsuit erodes trust and taints its reputation (Kuchler, 2019). A lack of diversification by J&J can lead to great losses. This is because J&J is involved in only three major divisions. Overdependence on successful products is also another weakness of J&J. The opportunities of J&J are based on the Extensive product portfolio whereby, their wide range of products enhances the company’s stability and superiority in the market. Strong community engagement whereby, Johnson & Johnson engages fully in international affairs as a concerned global citizen in matters that affect global health. The threats of J&J are the political and economic changes around the globe. They alter the company’s operations and may result in losses in cases of inflation.
Johnson & Johnson pursues a diversified corporate strategy. This means that the firm has over the decades expanded its businesses into multiple markets, products, and services (Johnson & Johnson, 2021). Due to this strategy, J&J has been able to remain competitive in a variety of companies. It has also enabled the pharmaceutical firm to spread its risk across multiple markets. J&J operates in three major business segments which are consumer health products, pharmaceutical products, and medical devices. Johnson’s diversified corporate strategies involve both vertical and horizontal integration strategies. The matter has helped Johnson & Johnson to increase its revenues in a short period with low risk. (Johnson & Johnson, 2021). The acquisition of Centocor allowed using biotechnological in the development of new drugs that would further be manufactured, distributed, and marketed.
Johnson & Johnson’s organization uses a decentralized structure with increased employee engagement at all levels of management. A decentralized structure is implemented so that each operating unit may adjust to the requirements of the various populations in each place. In a decentralized system, power is distributed throughout the organizational hierarchy. With more than 130,000 people, Johnson & Johnson is a huge organization, thus the pyramidal structure is likewise rather tall (MBA, 2021). An organizational structure with several levels of leadership and communication links is called a tall organizational structure. Tall, decentralized systems are typically ineffective due to a lack of communication between various levels and parts. However, Johnson & Johnson is one of the few significant businesses that has benefited from this structure by adjusting to the regional demands close to each business unit. The Johnson & Johnson Strategic Framework’s Strategic Principles of a long-term decentralized organizational approach are linked to the company’s varied organizational structure (Johnson & Johnson, 2021). Based on the course work, a decentralized structure is ideal for Johnson and Johnson Company. This is because less top-management control and a diminished corporate image are the two key drawbacks of a decentralized structure. These two drawbacks, however, actually work in Johnson & Johnson’s favor since the business can use its decentralized structure to create a happy workplace, which improves its public image. Additionally, it might be expected that Johnson & Johnson CEO Alex Gorsky neither wants nor has the time to manage 130,000 workers alone. Instead, the decentralized organization consists of several operating units, each of which includes various operational and administrative divisions.
Johnson & Johnson Company is currently set on a decentralized structure. Even as it diversified into numerous new business sectors, J&J has maintained its focus on the healthcare industry according to its mission statement. Additionally, it has forced the organization to manage its various companies using a decentralized strategy. The majority of its remote subsidiaries across its three divisions were acquired primarily to the promise shown by some exciting new goods it has in the works. As a result, each of these units was given almost complete authority to create and improve upon its best-selling products for the benefit of its clients (Johnson & Johnson, 2021). Many people think that J&J’s autonomy has cultivated an entrepreneurial mindset that has kept the company fiercely competitive as those around it have failed. The business units’ comparatively high level of autonomy has also given the company the flexibility to act quickly on new opportunities (Johnson & Johnson, 2021). Everyone’s steadfast adherence to the values outlined in the credo was deemed to be strong enough to give essential guidance throughout these units.
The VRIO uses organizational characteristics to determine whether the business can utilize its assets for development and competition. To acquire a competitive edge over rival companies in the market, Johnson & Johnson commonly uses the VRIO analysis to design competitive approaches based on its core competencies and resources. The resources and capabilities of an organization are examined using the VRIO framework to ascertain whether they are a source of competitive advantage. Value, Rarity, Imitability, and Organizational are the four pillars of the system (HIRANO, et al, 2017).
Value: Valuable competencies aid Johnson & Johnson in taking advantage of opportunities and thwarting challenges from the internal and external environment. These skills enable a firm to move forward, evolve, and flourish (Fern Fort University, 2022). J&J’s core skills are extremely valuable since they enable the business to create cutting-edge goods and services that cater to customer wants. Its superior research and development capabilities enable it to generate new, high-quality goods and services that are tailored to the needs of various clients. Additionally, it has a competitive advantage over rivals thanks to its well-known brand, extensive distribution network, and global presence.
Rarity: Numerous rivals control important resources in the sector in which Johnson & Johnson operates. Therefore, valuable assets by themselves cannot give a sustained competitive advantage. For Johnson & Johnson to remain viable in the sector, rare resources are needed (Fern Fort University, 2022). Johnson & Johnson won’t be able to successfully compete in the market if it lacks the unique resources necessary to flourish in the sector. Only a small number of companies in the sector have created and/or possess uncommon competencies, which provide Johnson & Johnson with a competitive edge. Its tremendous capabilities in research and development allow it to produce goods and services that are challenging for rivals to imitate. Additionally unique and challenging for rivals to imitate are it’s widespread brand recognition and visibility. The possession of rare resources can also give Johnson & Johnson a competitive edge over rivals who lack them. J&J has a competitive edge thanks to the rarity of its fundamental competencies.
Imitability: A valuable and scarce resource can give Johnson & Johnson a temporary competitive edge because all of its rivals will want to duplicate or imitate it. If the resource is challenging for competitors to replicate, this creates a long-lasting competitive advantage. Johnson & Johnson can achieve imitability through product innovation, the elimination of service delivery pain spots, and an efficient post-sale maintenance approach (Fern Fort University, 2022). It is challenging to replicate J&J’s fundamental competencies. It’s popularity and global reach have taken decades to create, and its research and development capacities are quite advanced. Due to the significant financial needs, it is also challenging to reproduce its extensive distribution network.
Organizationally: Even if Johnson & Johnson possesses all the important resources that are both uncommon and challenging to duplicate, this won’t necessarily translate into a long-lasting competitive edge. Possessing the organizational skills, knowledge, and structure to take advantage of the resources is essential to creating a sustained competitive advantage (Fern Fort University, 2022). Johnson & Johnson won’t be able to fully utilize all of its resources if it is not structured on its advantages. J&J has the tools and skills necessary to maximize the value of its core strengths. It can take use of its competitive edge thanks to a solid leadership group, highly skilled workers, and effective procedures.
The VRIO research makes it abundantly evident that J&J’s fundamental skills result in a long-lasting competitive advantage. VRIO competencies lead to a sustainable competitive advantage since the company has the organizational capacity to take use of its core competencies, which are unique, uncommon, and challenging to replicate. This enables the business to maintain its competitive edge and competitiveness.
The key issues facing J&J were encountered from the quality control with its divisions as it tried to become more involved with the initiatives of its business units. With its latest artificial hip, its medical devices section was having issues (Johnson & Johnson, 2021). The equipment was finally recalled, but not before rumors started to spread that business leaders may have kept information a secret to protect company revenues. The consumer products unit experienced major problems that exacerbated the medical devices section’s troubles, causing it to recall several of its products, including the largest children’s medicine recall in history. The Johnson & Johnson vaccine was put on hold by the CDC and the US Food and Drug Administration (FDA) in April 2021 (Johnson & Johnson, 2021). After a tiny number of recipients of the Johnson & Johnson vaccine had Thrombosis with Thrombocytopenia syndrome (TTS), a blood-clotting illness, the suspension was made out of an excess of caution. The CDC and FDA have determined that the Johnson & Johnson vaccine’s proven benefits surpass its known and potential hazards after carefully examining all available vaccine data.
The main problem that Gorsky faced was the demand to split up J&J into smaller units in several divisions (Johnson and Johnson, 2021). Despite its tremendous scale, the business has had trouble staying inventive and competitive in the face of a constantly shifting industry. The competition from counterfeit pharmaceuticals, pressure on prices, and a dearth of new goods have all contributed to a fall in J&J’s sales and profits in recent years. The corporation has also seen a string of product recalls, which have affected both its reputation and financial results. Finally, J&J’s pharmaceutical division, which has lagged in creating innovative medicines and technology, accounts for a large portion of the company’s product portfolio.
I would recommend that Joaquin Duato, the current CEO, and the J&J team based on the corporate strategies implement the following strategies:
- Invest in Research and Development: To create new products and technologies, J&J should concentrate on investing in research and development. In the face of shifting markets, this will support the company’s ability to maintain innovation and competitiveness.
- Increase attention to Emerging Markets: To take advantage of the growth potential of emerging markets, J&J should intensify its attention on them. This will lessen the company’s dependency on established markets and help it diversify its revenue sources.
- Leverage Distribution Channels: To expand its reach and penetration, J&J should make use of its current distribution channels. The business will be able to expand its consumer base and boost revenues as a result.
- Create a Stronger Brand Identity: J&J should concentrate on expanding its clientele and growing its market share.
- Improve Quality Control: To decrease the amount of product recalls, J&J should concentrate on strengthening its quality control procedures. The business’s reputation and financial success will be maintained as a result.
- a greater sense of brand identity to set itself apart from rivals. This will facilitate the development of a devoted customer base for the business.
References
Bellon, T. 2019. J&J, U.S. states settle hip implant claims for $120 million. Reuters, January 22, https://www.reuters.com/article/us-johnson-johnson-settlement/jj-u-s-states-settle-hip-implantclaims-for-120-million-idUSKCN1PG26K.
Fern Fort University. (2022). What is an Organization for Johnson & Johnson? Defining Organization in VRIO. http://fernfortuniversity.com/term-papers/vrio/c/39-johnson—johnson.php
Fern Fort University. (2017). Johnson & Johnson Porter Five Forces Analysis. http://fernfortuniversity.com/term-papers/porter5/analysis/1838-johnson—johnson.php
HIRANO, C. P. M., IKEGAMI, D. P. J. J., & TAKEUCHI, N. CONTINUOUS GROWTH: Implications from Johnson & Johnson 57164004-AKINOBU INAHASHI STRATEGY OF GLOBAL BUSINESSES. https://core.ac.uk/download/pdf/286959526.pdf
Johnson & Johnson, Annual Reports, Bluestein, Will Johnson & Johnson’s New Innovation Centers Toward Its Future? Fast Company, February 10, 2014; FDA, Janssen COVID-19 Vaccine, FDA.gov, 2021.
Johnson & Johnson BDR. (2018). Johnson & Johnson BDR (Brazil) Porter Five Forces Analysis. https://embapro.com/frontpage/porterfiveanalysis/1974-johnson-johnson-bdr
Kuchler, H. (2019, September 5). J&J: The next target of anger over America’s opioid crisis? Financial terms.
MBA knowledge base. (2021). Case Study: Johnson & Johnson Company Analysis. https://www.mbaknol.com/business-analysis/case-study-johnson-johnson-company-analysis/
Mishra, Manas, and Carl O’Donnell. J&J expects a jump in COVID vaccine sales in 2022, eyes device deals. Reuters. https://money.usnews.com/investing/news/articles/2022-01-25/j-j-expects-up-to-3-5-billion-in-covid-vaccine-sales-this-year
New Brunswick. (2021). Johnson & Johnson Announces Plans to Accelerate Innovation, Serve Patients and Consumers, and Unlock Value through Intent to Separate Consumer Health Business. https://www.jnj.com/johnson-johnson-announces-plans-to-accelerate-innovation-serve-patients-and-consumers-and-unlock-value-through-intent-to-separate-consumer-health-business
Robbins, R. et al. 2022. J&J pauses production of its Covid vaccine despite the persistent need. New York Times. https://www.nytimes.com/2022/02/08/business/johnson-johnson-covid-vaccine.html
The Economic Times. (2023). JOHNSON JOHNSON. https://economictimes.indiatimes.com/news/international/business/johnson-johnson-proposes-8-9-billion-settlement-of-talc-cancer-claims/articleshow/99255035.cms?utm_source=contentofinterest&utm_medium=text&utm_campaign=cppstNew
write