Executive summary
The external environment of an organization greatly determines its ability to succeed in the market. Organizations possess little control over the factors operating in this environment and must therefore strive to conform to its prevailing conditions. This will involve the formulation of strategies that increase the chances of capitalizing on the opportunities while simultaneously reducing the threats present in the market. The strategies utilized by Johnson & Johnson have greatly contributed to its success. With the changing times, whether the company continues on its success path will depend on how well it formulates strategies that are in line with fluctuations in the market.
Introduction
Whether or not an organization accomplishes its missions and goals depends on the strategies that it utilizes to conduct operations. An organization has to formulate and carefully implement strategies that are consistent with the prevailing conditions in the market. This can only be done by anticipating changes in the external environment then customizing the internal environment to comply with the changes that have been identified. The only condition to this process is that all the activities must be undertaken with values of the company in the background to avoid any clashes of interests. Johnson & Johnson has been very successful in conducting its operations in the global market for over a century. However, changes in the market are threatening to impact negatively on its operations and possibly reduce its level of profitability. This paper will aim at conducting a detailed SWOT Analysis and mission statement evaluation before passing recommendations on the strategies that it should adopt to protect its competitive advantages and increase revenues.
Johnson & Johnson
From its inception in 1886, Johnson & Johnson has grown to be among the leading multinationals in the global as well as pharmaceutical and consumer goods markets with annual revenues estimated at $24.6 billion as of 2008. It is listed in the New York Stock Exchange and is also among the most profitable companies in the world having made it to the Fortune 500 list. Its headquarters are in New Brunswick, New Jersey in the USA from where it manages its operations spanning 175 countries and roughly 120,000 employees.
The company has diversified its investments so much that it boasts of up to 250 subsidiaries. Currently it mainly operates in three major market segments; pharmaceutical, Medical equipments, and consumer goods markets. Some of the subsidiaries have been acquired over the years and include McNeil Laboratories, Janssen Pharmaceutica, Cilag, and Pfizer while others were chartered from within the company’s operations (Weintraub & Einhorn, 2007). With each the diversifications and acquisitions, the company has been able to increase its product offerings, market penetration, and distribution network reaching out to markets that were previously not served effectively by its operations.
Johnson & Johnson supplies numerous products to the market. The products include bandages, medications, baby products, contact lenses, surgical, and skin and beauty products. It presents the products in numerous brands such as Acuvue, Band-Aid, Clean & Clear, K-Y, Johnson’s Baby, REACH, and Tylenol among many more others.
Perhaps the unique thing about the company is its extensive use of the internet as a communication tool. It has heavily embraced the internet and currently has roughly 29,000 domains. These have been very helpful in reaching out to its consumers and especially during crises involving the recalls of its products that the company initiated in 1982 and 2010 for which it was praised for effectively managing the both crises. Furthermore it is also concerned about the conservation of the environment and has initiated green initiatives aimed at utilizing natural resources economically.
SWOT Analysis
SWOT Analysis provides a detailed examination of all the factors in both the internal and external environments of an organization that contribute to its success. It starts with the internal analysis which centers on the factors within the internal environment that either result in strengths or weaknesses. Focus then shifts to how the two can contribute to either opportunities or threats respectively in the external environment.
Like many multinationals, Johnson & Johnson has massive operations in different countries. In order to guarantee its success in the market, it is mandatory that the management performs a SWOT Analysis. The identified strengths will provide the way forward in effectively capitalizing on the opportunities that are emerging in the market. The weaknesses on the other hand are crucial in sealing the weak points that could lead to negative impacts on the organization due to the operations of threats in the external environment.
The following is a SWOT Analysis summary of Johnson & Johnson that will be used in the discussions.
Strengths
As a multinational, Johnson & Johnson has been in the market long and is well experienced in conducting operations. Its massive resources have been critical in funding heavy investments that the company has made and which also contribute to its revenues. As a result of this, it enjoys reduced costs due to large scale economies. The company is also involved in intensive research and development programs that yield quality and innovative products that it has introduced in the market. Innovative products have high value addition levels that lead to increased satisfaction of consumer needs which is the first step towards attaining loyalty of the consumers as is the case with Johnson & Johnson (JOHNSON & JOHNSON, 2003).
The company has diversified its investments and apart from the traditional pharmaceutical market that used to form a sizeable portion of its investment it is now deeply involved in the medical equipments and consumer goods. This has had the effect of increasing its revenues as well as reducing its investment risks. In case of low performance in one market, the company is able to utilize the profits from the other markets to subsidize the ailing one (Birger, 2001).
With the patents that Johnson & Johnson has acquired it has been able to prevent other operators from imitating its innovations. An example of this is presented in its 2007 suit of Abbott Laboratories for selling one of its drugs, Humira, without its authorization in which it won and was compensated heavily. Finally it has also embraced e-commerce fully and has been able to increase the level of customer relationships and the effectiveness of its marketing.
Weaknesses
The company also has its own share of weaknesses. Despite having diversified its operations, it still relies heavily on the sale of drugs. This increases the risks for the company and could lead to negative effects in the event of malfunctions in the drug market. As a company operating in the pharmaceutical industry it relies heavily on the innovations it comes up with and acquires patents for. However, it has been the victim of patent infringements in many a cases though it has managed to win almost all of its suits against infringers. The negative side of this is that the compensation it receives does not fully cover other costs such as the exposure of its formulas to the market and other companies might utilize them to come up with competing products.
This is gives rise to generic products that further worsened the chances of enjoying monopoly over its innovative ideas. Generic drugs are often much cheaper which could result in the loss of sales as consumers opt for the cheaper substitutes. The company also has massive operations that despite having numerous benefits also pose challenges in the form of coordination problems resulting in the various divisions operating in manners not consistent with its missions and goals. Finally the company has already attained the maturity level in the life cycle of an organization which is characterized by slow growth rates that is being witnessed in the company.
Opportunities
Various opportunities have been presented in the market for which the strengths identified in Johnson & Johnson might aid in the capitalization. The acquisition of other small companies especially the most recent one involving Pfizer presents opportunities for growth and increasing operations in other markets (Company Spotlight: Johnson & Johnson, 2006). Apart from increased operations, the distribution network is also made much more effective when the distribution networks of these companies are integrated into the company’s. Furthermore, it stands to benefit from cost reduction as the massive operations will lead to large scale economies.
The globalization of economies has also reduced barriers to international trade and Johnson & Johnson has the opportunity to further expand into markets that it had previously not entered. Its massive resources and wealth of experience will come in handy in executing such missions that could lead to higher revenues. With the last global recession and financial crisis now in the past, the company also stands chances in increasing revenues especially because consumers will now be able to afford its premium prices.
The global pharmaceutical market has also been experiencing significant growth. In fact, many governments dedicate huge portions of their budgets to health care and a company such as Johnson & Johnson which deals is in the market stands higher chances of recording higher profits. This is also boosted by the innovative products it provides that could increase customer satisfaction therefore increased consumer loyalty (Bittar, 2003). The patents that it has acquired will also provide security to these products therefore lower chances of loosing sales to competitors.
Threats
A number of threats are also present in the market. Despite economies recovering from the effects of the last global recession and financial crisis, the company will find it tough to attain maximum revenues due to the heavy regulation of the industry. Authorities treat the industry with extreme caution as slight malfunction could have serious effects on the health of consumers and Johnson & Johnson has to put in place expensive measures to comply with all the regulations. This is also the case with its last product recalls that have created the need for undertaking heavy investments to make its processes much more efficient. Furthermore, the recalls could also dent its corporate and brand image making it difficult to convince consumers of the quality in its products (Voreacos et al., 2011).
There are also threats in the form of loss of market share. There are many multinationals in the market which heightens the competition and Johnson & Johnson could lose its market share to these operators that are able to match its resources and strategies. The presence of counterfeits and generic drugs could also attract its loyal customers due to their low prices further threatening its market shares.
Johnson & Johnson Vision and Mission
Unlike many other companies, Johnson & Johnson does not have an explicitly stated mission statement but in place has a value statement which it refers to as “Credo”. In the statement, the company has addressed the interests of all its stakeholders from the consumers, employees, community, and stockholders.
The consumers receive the most attention as they are responsible for its success and are affected more by its products. The company aims at providing consumers with high quality products that meets their needs and expectations and respond punctually to their orders and queries. It also strives to offer reasonable prices by controlling costs ensuring third party sellers do not charge exorbitant prices.
The employees’ welfares are also attended to and are provided with fair compensation and opportunities as well as optimal working conditions. Employees are also treated as individuals to ensure that their rights are not violated and also to help them balance their work and private lives. To the community, the company hopes to behave as a responsible member by undertaking operation in manners to improve its welfare and also consistent with ethics (O’Reilly & Lieber, 1994). This also includes paying taxes promptly, engaging in charity, and conservation of the environment. Finally there are stockholders for who it aims at increasing their wealth by undertaking viable investments and continuous improvement of operations to increase profits.
Extent of mission fulfillment
Johnson & Johnson has done a splendid job in ensuring that it has met all of its obligations towards the stakeholders. The company is a leading multinational with numerous products that are innovative and attend to the needs of consumers. Through the research and development strategies it conducts, it has been able to provide quality products that meet the needs of the consumers. Despite the two product recalls it has undertaken, the company is still committed to providing quality products as it effectively handled the crisis to prevent further harm to consumers and has improved its processes to prevent such incidents from occurring in future (Mitroff & Anagnos, 2000). However, it failed on its obligation to protect consumers from harm due to consumption of its products as seven consumers in Chicago lose their lives by consuming one of its drug, Tylenol, which had been contaminated. By embracing the green concept, it is actively reducing its costs therefore higher chances of charging reasonable prices in future.
The human resource strategy at Johnson & Johnson has been well executed and attends to the interests of employees. There are fair opportunities and every employee receives fair treatment that meets their individual needs. In fact Johnson & Johnson has been named as among the best organizations that are sensitive to the needs of working mothers.
The company has embraced corporate social responsibility and is actively involved in the conservation of the environment. It has done away with plastic packaging in addition to the reduction of energy consumption by relying on solar from its plant in Pennsylvania. It is also involved in community work and currently assists athletes by funding the National Athletic Trainers’ Association alongside other well wishers.
Johnson & Johnson has been able to increase the values of stockholders investments significantly. Its massive investments in diversified fields are consistent with their needs in addition to the acquisitions and research and development programs that could further increase the revenues to the delight of stockholders.
Johnson & Johnson future strategies
Johnson & Johnson passes as an innovative company that has managed to attain success in the market in the last century thanks to its strategies. However, times are changing creating the need to think of adopting alternative strategies lest its competitive edges are eroded by the fluctuations in the external environment.
The first strategy the company should consider embracing is charging low prices for its products. The last recession impacted negatively on the demand level in the market and companies with high price strategies are at a disadvantage. Johnson & Johnson has to adopt a low price strategy if it is to appeal to these cash strapped consumers. The only setback to such a strategy is that it would demand the cutting of operational costs without which the profit margin could be negatively affected. But this should not be a drawback to adopting the strategy as the company has a wide global market which could be quite effective in implementing the strategy. The reason for this is demonstrated by the effects that the price reduction will have on the consumers. With a lower price the demand increases and consequently the sales level will also rise and could more than offset the reduction in price therefore maintaining or even increasing the level of profitability. On the other hand, the company could also consider other avenues that could increase revenues from its products should this prove difficult. One of the techniques that could be employed involves licensing third party companies to produce generic versions of its products like many other multinationals are doing. The company could then receive royalties from every sale made by the third party companies therefore increasing revenues (DeRoo, 2011).
Another strategy is the globalization of the production process. A majority of multinationals are moving their plants to markets that have lower labor costs and China among other Far East countries is a good example of such markets. With low operation costs, they are able to charge much lower prices without interfering with the profit levels. This would also imply sourcing raw materials from markets where they are much cheaper. However, this does not warrant the compromising of quality of inputs as it could prove catastrophic to the quality of final output.
As it has been aforementioned, the company has already attained maturity stage. This is also true for a majority of its products that have also reached the maturity level in the product life cycle. At these stages, both the companies and products start recording slow growth before proceeding to the next level where the sales begin to decline. The reason behind this is that competition has increased in the market to a level that there are many substitutes that eat into the market shares of older products and companies such as Johnson & Johnson. To avoid experiencing this, Johnson & Johnson has to initiate intensive research and product development programs in all of its products. This will involve the adoption of a differentiation strategy that will aim at making the newly developed products unique from those of competitors (Ilić, Milićević, & Cvetković, 2010). It will also result in high addition of value that could trigger demand for them in the market. For the strategy to work, the company will also be required to engage in extensive and aggressive marketing campaigns that will increase the level of consumer awareness concerning the new features and innovations in the products. This is one of the way by which the company could avoid stagnation in the market and increase the chances of growth and higher profits.
Conclusion
Johnson & Johnson has been in the market longer than a majority of its competitors if not all. Having survived more than a century in the highly competitive market, the company has proved that it is able to adapt to market changes by employing appropriate strategies. The SWOT Analysis has manifested the various points that have contributed to its numerous competitive edges. The company has to continue improving on these factors especially the innovative aspect of its products as they can assure survival into the future. It has also revealed its weaknesses and possible threats that could result which are not serious if countered by appropriate measures.
The missions that are described in its credo have effectively considered the fulfillment of its obligations to various stakeholders. The company has strived to ensure that it meets all of the demands apart from the misfortune involving recalling of harmful products. It is of utmost importance that it performs proper process upgrading and their consistent maintenance to prevent such occurrences in future. Finally the manner in which it will respond to the changes that are being witnessed in the market will greatly determine its level of profitability in future. Various strategies have been suggested including adopting lower prices, globalization of production, and differentiation all which are aimed at protecting its competitive edges and increasing profitability. With their careful implementations, the organization will have nothing to worry about losing revenues and market shares as the threats from the market will have been extinguished.
References
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