Johnson And Johnson Case Analysis

Johnson and Johnson Case Analysis

Introduction:

Johnson and Johnson, commonly called J&J for short, is one of the world's well known, largest, most decentralized and most diversified health care companies. Since 1887, Johnson and Johnson has been producing, manufacturing and selling products related to human health and well-being. Today J&J has over 200 autonomous operating companies and do business globally specializing in consumer products, medical devices and diagnostics, and pharmaceuticals. Consumer products are the company's most recognizable segment, including popular brands like Tylenol, Johnson and Johnson Baby Shampoo and Band-Aid. The medical devices and diagnostics segment manufactures products including surgical equipment and contact lenses. The largest of the three segments is pharmaceuticals.

Johnson and Johnson is poised for growth on many fronts. Their short-term outlook is bright due to a lead position in the drug-coated stent market. They should also see a substantial increase in prescription drug sales from the recently enacted Medicare regulation, which will grant prescription drug coverage to more Americans. In the long run, J&J should see consistent sales growth fueled by the aging demographics in the United States. Moreover, the medical supplies and services needed by the elderly population will increase simultaneously with the aging of the large baby boomer population. While there is no doubt that J&J is a corporation that has gone a long way and due to its reliability, culture and growth will continue to do well, analyzing the effectiveness of their current strategy is still essential. The question of whether J&J should become more centralized in order to adapt to the changing hospital industry needs to be addressed. Because of the changes in the hospital sector and because of the changes that distributors underwent in order to meet the hospital changes, J&J inevitably needs to change as well and become more centralized. While I do not think it is possible or even necessary for J&J to become completely centralized, J&J should consider the benefits of becoming more centralized. If J&J continues to be as decentralized as they are they will have a hard time adapting to change, communicating within the organization and contact within the organization will decrease as well.

In the recommendation portion of this case analysis, I will be suggesting that the best way for J&J to become more centralized yet not completely decentralized would be to rely on clusters of companies rather than on continuously spinning off and making more and more decentralized autonomous sub-companies. My "cluster" approach would bunch together companies that are similar in nature, working on similar goals, performing similar functions and have similar customer bases.

General Environment and Industry Analysis: Potential Opportunities and Threats

The external environment consists of opportunities and threats. J&J can greatly benefit from taking advantage of opportunities. An opportunity that J&J can benefit from is the changes in Medicare insurance that have recently been enacted providing increased medical coverage to seniors with Medicare by covering prescription drugs. An article that I read in the Wall Street Journal stated that the new plan increases prescription drug coverage for senior citizens dramatically. This should increase the amount of prescription drug use in the U.S. Since pharmaceutical sales is J&J's largest segment, increases in prescription drug use can potentially increase sales and profits for J&J. Another opportunity that J&J can take advantage of is catering to the healthcare needs of the baby boomers who are expected to be seniors in the near future. The population of people ages 65 and older is expected to grow by 30% between 2004 and 2015. Currently senior citizens account for 1/3 of the total prescription drug. As the baby boomers age and become senior citizens J&J can increase sales by providing for their health care needs. A growth in Americans over 65 can lead to a growth in pharmaceutical sales for J&J. Furthermore