Introduction
1) Overview of J&J
Johnson and Johnson (J&J) is a global American pharmaceutical, medical devices and consumer packaged goods manufacturer founded in 1886. It is one of the largest healthcare companies in the world. Plus, it also one of the most respected companies in the United States, consistently winning prestigious awards. J&J is highly diversified and has 250 subsidiary companies operating in over 57 countries worldwide. About half of J&J revenues are located outside the United States, and generates through its network of operating companies and its marketing organization. Apart from their main products, J&J’s products ranging from toiletries, soaps and shampoos.
2) J&J Medical
J&J Medical’s Global Expansion
1) Global Expansion Strategy-Expansion Throughout Company History
J&J was founded by the Johnson brothers in 1886. At first, they started selling medical products and sterile surgical dressings in New Brunswick, New Jersey Since the early 1900s, J&J had pursued a steady diversification. J&J purchased Chicopee Manufacturing Corporation in 1916 to secure the increasing need of textile material. They started going international to Canada and England in 1919 and 1924, respectively. Diversification continued with introduction of adhesive bandages, baby creams and feminine hygiene products. J&J concentrated on expansion overseas, and by the time of 1946, they already had established their company in Mexico, South Africa, Australia, France, Belgium, Ireland, Switzerland, Argentina and Brazil. While expanding to other countries, J&J also broaden their pharmaceutical and medical products. In 1946, from family-owned firm, they went public as a trading company. J&J steadily continued their growth for two decades to Zimbabwe, Austria, Sweden, the Philippines, Colombia, Puerto Rico, the Netherlands, India, Scotland, Pakistan, Zambia, Venezuela, Italy, Malaysia, and Portugal. During the process, they created new companies such as ETHICON, a separate division for surgical products, purchased McNeil Laboratories, Inc., which was an expansion into pharmaceuticals, and in 1959 J&J acquired Cilag-Chemie and two years after that, Janssen Pharmaceutica. In 1973, J&J started expanding into women’s sanitary products and toiletries through acquisition of a German firm, Dr. Carl Hahn. During 1977, manufacturer kidney dialysis and intravenous treatment products, Extracorporeal Medical Specialties, became part of J&J. In the 1980s, most of the company growth came from the acquisitions and internally developed businesses such as LifeScan Inc. and Penaten, a leading market leader in Germany. Plus, J&J formed Ethicon Endo-Surgery Inc. out of internal businesses. J&J diversified into vision care business by acquisition of Frontier Contact Lenses in 1981. They also penetrated the Chinese market in 1981. In 1989, J&J entered into a joint venture with Merck & Co. Inc. and develop out-to-counter (OTC) version of Merck’s prescription medications. It was initially to meet the demand in the United States market, but later expanded to European countries and Canada. To consolidate the company’s research in rapidly growing biotechnology field, Johnson and Johnson formed Ortho Biotech Inc. During the early 1990s, J&J grew relatively at a low pace partly due to the difficult economic climate, but until the purchase of RoC SA of France J&J received a boost in their skin care line. Johnson and Johnson had acquired Neutrogena Company, which was a significant acquisition. In 1995, Eastman Kodak Company was acquired, and two years after, Johnson and Johnson combined Ortho Diagnostics Systems unit with operation from Eastman Kodak, forming Ortho-Clinical Diagnostics Inc. Other companies that Johnson and Johnson acquired were Indigo Medical, Biopsys Medical Inc. and Cordis Corporation. Johnson and Johnson aggressively continued their acquisition program by purchasing DePuy.They merged with Centocor Inc., a major biotechnology firm, in 1999. Also during that year, Johnson and Johnson acquired S.C. Johnson & Son Inc. Finally, J&J joined with GE Medical System unit, Baxter International Inc., Abbott Laboratories and Medtronic Inc. in a joint venture to create a global internet-based purchasing exchange for healthcare providers. Nowadays Johnson and Johnson had expanded into diverse area such as biopharmaceuticals, orthopaedic devices, and Internet publishing.
Analysis of J&J’s Expansion
Johnson & Johnson is “broadly based” and “big and small at once.” In other words, although Johnson & Johnson is a huge corporation and has an enormous impact on the global environment, each operating company of the corporation functions as its own small business, according to the local needs and demands. This decentralized management strategy has not only contributed to Johnson & Johnson’s engaging business setting, but also to its global marketing strategies and operations all over the world. Furthermore, by being both “big and “small,” the company has been able to pay attention to little details of each community and become flexible in their operations. In addition, Johnson & Johnson, as it deals with health needs of diverse communities around the world, it is vital to consider and recognize differences in race, nationality, and backgrounds. Therefore, the company tries to attract and retain employees who are familiar with each region so that they can freely communicate, focusing on each customer’s needs. The decentralized management has, without a doubt, set Johnson & Johnson apart from numerous other companies of similar size and has enabled the company to become the world’s most wide-ranging producer of health care goods that is, at the same time, very sensitive to local needs.
To put it in another perspective, Johnson & Johnson is a “locally responsive company,” using the multi-domestic strategy. As mentioned before, Johnson & Johnson’s subsidiaries operate with autonomy with accordance to the preferences and demands from local markets. To successfully apply this multi-domestic strategy and allow each division to adjust its products or services to meet the local standards, it is very significant to decentralize decision making process. Johnson & Johnson has successfully achieved decentralized decision making and fully benefited from its multi-domestic strategy. For instance, one of the benefits that the multi-domestic strategy has is liberation of local R&D. For companies like Johnson & Johnson, R&D is critical and adapting to local conditions has granted the company greater presence and value in a region it is operating in.
Although the multi-domestic strategy has many helpful benefits for a global company, it also has some shortfalls. Inconsistency of the company’s values at the headquarters and overseas is one example of the limitations of the multi-domestic strategy. To add, the strategy often creates too much power and liberation for a local subsidiary, and local operations sometimes do not follow the decisions from the headquarters. This creates a managerial gap and often leads to greater costs or loss of a company. Johnson & Johnson also has experienced the limitation in the past when they first launched the famous pain reliever, Tylenol. Since it took a long time to persuade the local operation to launch the product, the launch dates of the product between the United States and Japan were extremely far apart, resulting in confusion among customers.
Global Organizational Structure
Johnson & Johnson has three business segments: consumer, medical devices and diagnostics, and pharmaceutical.Having three different segments allows the company to stay market-focused and it also enables employees to have a direct influence on the business that they work for. Each business segment operates with independence and focuses on its own area, extending its reach globally. Regardless of the location, each operating companies in each segment hires local employees, addresses local conditions, and work with local business leaders to generate the most beneficial impact. Additionally, leaders in each business segment have the responsibility of creating and applying business plans, budgets, resource allocation, and new product launches.
Johnson & Johnson also has what is called a Group Operating Committee; the committee provides global strategic leadership in each segment and makes strategic investment decisions. The next level of management is the global management team which is responsible for the selection and positioning strategy of various products. Moreover, they are assigned with an incredibly essential job of identifying success models which can be shared across the organization. Lastly, the corporate headquarters has a vital role in supporting all the operating companies overseas. With a broader perspective, the Johnson & Johnson headquarters make sure that each operating company implements the most effective strategies (See Exhibit 4).
With the systematic management alignment mentioned above, Johnson & Johnson strives to be one of the most successful global enterprises in the world. The company has a “big-company impact,” but has “small-company environments” which enables the company to satisfy both the employees and the customers, at all locations.
2) J&J Medical Korea
Johnson and Johnson Medical Korea was established in 1988 and is now the top leading healthcare company in Korea. J&J Medical Korea specializes in medical devices and diagnostics business, providing doctors, nurses and hospitals with technologies they need to restore health to people who suffer from pervasive and chronic conditions. J&J Medical Korea holds six brands: ETHICON ENDO-SURGERY, Cordis, Depuy, ETHICON, LifeScan, ASP. ETHICON was the first to enter Korea in 1966 on a pure import basis, so some say that J&J Medical became a complete, fully-fledged medical device company of Korea in 1988. Since its establishment, J&J Medical Korea has faithfully pursued its mission: providing comprehensive range of innovative products through customer focus. The relative proportion of J&J Medical staff reflects such strategic concentration – approximately 75 percent of its staff is either in Sales or Marketing department (See Exhibit 2).
How J&J Medical Embodies its Vision into the Korean Market
– A unique, B to B, client-oriented market
The distribution and sales process of medical device firms in Korea is not known to the public and most firms are highly cautious not to disclose their distribution and sales strategy as well. What we do know, however, is a high proportion of transactions occur between J&J Medical product specialists (sales staff) and medical faculty counterparts, mainly doctors and nurses. The patients as the end-users, therefore, have little or no power to pull suppliers to their own needs. This is a highly specialized market which requires a thorough understanding of surgical skills and technology. In this aspect, end-users have limited accessibility to product information, which explains why transactions take place between the supplier to a second supplier, or from a business to another business. Multinational companies including J&J Medical are market leaders with up to 64 per cent market share and such MNEs have strict guidelines to keep their sales policies to themselves. As a result, experts point out that sales data remain in veil but there is nothing much the government can do since they can simply choose to exit the market. Likewise, J&J Medical maintain confidentiality in sales and client information which illustrates the importance customer relations and sales techniques in the medical device market. Assuming J&J has full autonomy over its sales strategy from screening its lists of clients to pricing schemes, we can expect lobbying and other informal pressures to a certain extent as well. This is another probable explanation for the unique sales strategy of medical device distributors and entails a convincing implication on the following strategy of J&J Medical Korea.
Volunteer Projects and Social Service
J&J Medical devotes its PR effort to become a socially responsible company in parallel to its global credo. Articles on Naver deal with either new devices or social contributions including mental health, fighting breast cancer campaigns, and aiding the deprived in North Korea. It is evident that J&J puts significant weight on developing and preserving a clean and positive image to gain a stronger nationwide support. Such campaigns broadly target all Korean patients and potential customers as unlike the US, the majority of the population receive insurance-funded treatment. The implication of this strategy is quite simple. Creating a noble first-impression and diverting media attention from J&J’s private matters in its sales affairs. In this manner, J&J Medical Korea can attempt to maintain its reputed image and attract further attention from the public.
Looking into the Future of J&J Medical
1) Strengths and Weaknesses
J&J has come so far. However, the purpose of this paper is not to merely focus on past glories of the company. Based on its past judgements and its results, the aim is to provide fruitful recommendations to the management of the company. To do this, there needs to be a firm analysis on the strenghts and weaknesses of the company.
One of the strongest points of J&J is based on the fact that the company and its executives uses the adaptation of entrepreneurial values in operating the company. This firm ground on which the executives stand on helps J&J retain an edge within the marketplace, as it provides a core value for the giant company to operate in coordination around the world. The size of the company is another strong factor. Worldwide sales for J&J have grown 14% in the year 2008, indicating a strong position for the global group.While this figure shows that J&J is running strong, it also indirectly implies how J&J is able to gain an economies of scale in the global market, not to mention its lobbying power as a major corporation.
This also enables J&J to utilize various problem solving techniques in order to challenge the standard practice and capitalize on growth through emerging markets, which enables associated growth. However, challenges have been faced within J&J, where a reduction in the market demand for key products has been identified. Another internal weakness across the industry, and not isolated to J&J, would be the level of theft and counterfeiting of drugs managed through internal personnel.
The closed-culture of the medical industry is also a factor which J&J should take into consideration to maintain its strong position in the market. Let us, then, see what position J&J should take and what plans it should implement.
2) Future Recommendations
The current situation of J&J, should be analyzed carefully to come to a realistic recommendation. As mentioned before, the characteristic of the industry influences the executive decisions of J&J greatly. For example, there is increasing pressure within pharmaceutical markets to reduce prices in line with medical budgets and maintain patent expirations to ensure generic programmes are updated within critical path movements.
To overcome this industry-created risk, J&J has recently highlighted new developments in pharma products with five undergoing regulatory review which provides the opportunity to grow the existing product portfolio. This should continue, and development into new functions of medical devices and diagnostics is preferred, as it will provide new markets to entry which will result in business growth.
In terms of promoting cooperation and cultural exchange within the company – which is extremely important considering the global spreadout of the company – the use of independent offices working as standalone unit should be contiuned. This provides the opportunity to develop concepts with cultural considerations which can prove important when taking a product to global markets.