Andrei Gololobov Laura Mc Mannis Svetlana Grimes JJ

Andrei Gololobov Laura Mc. Mannis Svetlana Grimes

J&J: A Brief History �Founded in New Brunswick, New Jersey by James and Edward Mead Johnson in 1885 ◦ Began selling surgical dressings ◦ (1921) Band-Aid & Baby Cream �Industry Strategy: Decentralization �Expansion ◦ (1940 s) Ortho Birth Control & Ethicon Endo Surgery ◦ (1959) Tylenol (Developed by Mc. Neil Labs) ◦ (1970 s) Consumer Goods �Beyond ◦ Expanding portfolio with mergers and acquisitions

J&J’s Dilemma �Diversification across three industries ◦ Pharmaceutical Preparations ◦ Medical Devices ◦ Cosmetics/Toiletries �Three industries require three different strategies �Must balance its industry strengths while competing against less-diversified competitors

J&J’s Dilemma Revenue of Johnson & Johnson and its competitors 2009 Revenue for Industries (billion $) Company Johnson & Johnson Pfizer Merck & Co. Abbott Laboratories Boston Scientific Bristol Myers/Squibb Medtronic INC. Procter & Gamble Unilever Pharmaceuticals Medical Devices Consumer Goods Other Total 22, 520 50, 009 27, 428. 30 16, 486 23, 574 15, 803 61, 897 50, 009 27, 428. 30 14, 279 30, 765 18, 808 8, 188 18, 808 15, 817 (2010) 78, 938. 00 57, 074. 30 15, 817

Current Industry Conditions �Pharmaceutical ◦ ◦ ◦ ◦ Preparations Large, powerful sector ($145. 4 billion in 2008) Dominated by well-established firms Frequent mergers and acquisitions Safety regulations and patent concerns Bulk revenue generated by Blockbuster Drugs Remained resilient in wake of the recession Moderate commercialization

Current Industry Conditions �Medical ◦ ◦ ◦ ◦ Devices Diverse range of products Technology driven Incremental innovation Powerful source of future growth potential Frequent mergers and acquisitions Business to business transactions Low commercialization

Current Industry Conditions �Cosmetics/Toiletries ◦ ◦ ◦ Sensitive to economic fluctuations Brand image is very important Safety and ethical concerns from consumers Sensitive to recessions Looking for ways to the life of a brand �Rebranding �Globalization ◦ Heavy commercialization

Assessment of present strategy � By Accounting criteria: Z-score From 8. 37 in 2005 to 4. 90 in 2009 Total Trading Cycle 195 days in 2005 133 days in 2007 180 days in 2009 By Financial criteria: Total shareholder return is 11. 3 while competitors like Merck only 1/3 of it

Marketing, Management & HR �Global expansion (BRIC countries) �Bigger spending on this function than on R&D �Trends in healthcare �New launches of innovative products �M&A �Restructuring �Taking care of business and its people

SWOT �Strengths: Diversity, Total revenue growth, Sales and Marketing capabilities, Robust financial capabilities �Weaknesses: High reliance on small molecule drugs, Small input from in-house R&D �Opportunities: Leverage therapeutic coverage of Medical devices and Health care divisions, Broaden position in Biologics, Concerta and Invega �Threats: Failure of launch portfolio to deliver

Core Capabilities �Reputation by Quality �Best in Class �Talented People �Innovative Products �Robust Pipelines �Global Presence

Competitive Strength & Managing for Sustainable Growth �Endurance and consistency in management approaches �Four strategic principles: 1) Being broadly based in human health; 2) Operating in a decentralized manner; 3) Managing for the long term; 4) Staying focused on people and values.

Zeroing in on tactics �Pharmaceuticals division: i. Redesigning priorities to support core products ii. Redeploying major resources to maximize opportunities with new products and solutions iii. Investing in prioritized internal and external development opportunities to ensure a strong product succession pipeline iv. Exploring new business models while continuing investments in emerging markets

Planning for Action �Harvesting industrial/consumer division revenue and create new products and markets �Investing in biomedicals �Cross-selling strategies �Facilitate access to health care; Help in improving long term sustainability of health care system

Driving Forces for Change �Pharmaceuticals ◦ Innovation ◦ Technological Advancements ◦ Globalization �Medical Devices ◦ Innovation & Technological Advancements together �Cosmetics/Toiletries ◦ Consumer wants ◦ Innovation ◦ Globalization

Competitive Forces Most Prevalent �Pharmaceuticals ◦ Intensity of Competitor Rivalry ◦ Threat of Substitutes ◦ Customer Bargaining Power �Medical Devices ◦ Threat of Substitutes ◦ Intensity of Competitor Rivalry �Cosmetics/Toiletries ◦ Bargaining Power of Customers ◦ Intensity of Competitor Rivalry

Strength of Company within Industry �Pharmaceuticals ◦ JNJ ranked 7 th ◦ Could slip out of top 10 due to recalls ◦ Abbott Laboratories ranked 10 th �Medical Devices ◦ JNJ ranked 1 st ◦ Acquisitions �Cosmetics/Toiletries ◦ JNJ 1 st in skincare ◦ Repositioned selling strategy

Keys to Success �REMAIN DIVERSIFIED �Pharmaceuticals ◦ Innovate New Products ◦ Focus on Longevity ◦ Eliminate Recalls �Medical Devices ◦ Maintain Market Share ◦ Technological Advancements �Cosmetics/Toiletries ◦ Keep Doing What you Know ◦ Meet Consumer Demands

Overall � Stands its own in regards to the industries it competes in. �Overcome the lack of proper internal controls in certain divisions. �Strategic framework to achieve greatness, but it must execute it more efficiently and effectively. �Don’t stray from roots