Universidad EAFIT

International Business Department

Internationalization in emerging markets

Midterm 2

Presented to

Carolina Ardila Lopez

By

Manuela Gil Urrea

Pedro Garro Vásquez

Sebastián Pineda López

Stefanía Raigosa Cadavid

October 27, 2020

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Tabla de contenido

Introduction...............................................................................................................................3

Background...............................................................................................................................3

International expansion............................................................................................................4

Conclution..................................................................................................................................8

References................................................................................................................................10
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Introduction 

Johnson & Johnson is a leading global brand of medical devices, pharmaceuticals, personal

care, perfume and baby products. The objective we have with this work is to explain how J&J

can expand to new or emerging markets, in this case we will analyze the market of Egypt and

Nigeria and how J&J can see an opportunity for expansion in these countries; these being

countries with an underdeveloped medical products industry or that are not its strong

commercial.

According to the World Bank's Doing Business 2020 index, Nigeria is ranked 131 in the

possibility of doing business in the country, the west African nation moved up 15 places from its

2019 spot and has been tagged as one of the most improved economies in the world for running a

business. While Egypt ranks 114th in the World Bank's Doing Business 2020 index, climbing

positions over the previous year, which ranked 120.

Background

Johnson & Johnson is an American multinational company, founded in 1886. Manufacturer of

medical devices, pharmaceuticals, personal care, perfume and baby products. Its common stock

is a component of the Dow Jones Industrial Average and it was ranked 37th in the 2018 Fortune

Index on the list of America's 500 Largest by Gross Income.

Its headquarters are located in New Brunswick and New Jersey. The corporation is made up

of some 230 subsidiary companies that operate in more than 57 countries, whose products are

sold in more than 175 countries. Johnson & Johnson brands are numerous in medications and

first aid supplies such as Band-Aid, Clean & Clear, Listerine, Neutrogena, Sinutab, and Splenda.
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International expansion 

With the objective of market growth and maximizing profits in order to be responsible to their

stockholders, J&J adopted the business strategy of global standardization. Choice of global

standardization strategy is because J&J’s focus is placed on lowering costs and there is limited

need for customization of products for it, generally the same other than slight changes in the

products’ packaging.

It can be then said that Johnson & Johnson's has an international business strategy, rather than

a global one, that is driven by the standardization of their products and services in which there is

a big effort to achieve a high global integration but where the local responsiveness factor is not a

major determinant of it.

The market entry mode implied in Johnson & Johnson’s international strategy is through

equity investment in subsidiaries in the countries the company aims to enter. This allows them to

operate in each market as if they were local companies, with minimum involvement and

coordination from the parent company.

This type of entry mode would mean for J&J a Greenfield investment to establish new wholly

owned subsidiaries, which, although it can often mean complex and potentially costly to get

going, it is also able to provide the company full control of the operations and gives them the

most potential to generate above average returns. (Hitt, A. 2009. Strategic Management

Competitiveness and Globalization, Nelson Education Ltd.)

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And since we are talking about achieving high levels of standardization in the fabrication of

pharmaceutical products as well as offering the same medical professional services, although it is

believed that "Wholly owned subsidiaries and expatriate staff are preferred in service industries

where close contact with end customers and high levels of professional skills, specialized know

how, and customization are required." (Hitt, A. 2009. Strategic Management Competitiveness

and Globalization, Nelson Education Ltd.); this will not be necessarily in the case of J&J as they

have already established an international portfolio of products and services which are offered

similarly across all markets.   

What does apply in full strength, is the fact that a Greenfield investment in any market

constitutes a high risk due to the costs of establishing a new business in a new country. (Hitt, A.

(2009), Strategic Management Competitiveness and Globalization, Nelson Education Ltd). No

matter the size of the multinational, if it wants to succeed in a new market, they will most likely

need to acquire knowledge and expertise of the existing market through third parties, consultants,

business partners or even competitors. It is also worth considering that this entry strategy

generally takes much more time due to the need of establishing new operations, distribution

networks, and the urge to learn and implement appropriate marketing strategies to compete with

the existing rivals. (Bartett, C.A, Ghoshal, S. and Beamish, P. (2008) Transnational

Management: Text, Cases and Readings in Cross-Border Management. 5th Ed, McGraw-Hill

Higher Education)

Another factor is that in most of the markets J&J enters, there are already well established

firms already in operations or other big competitors that want to enter the region, which could

make the formation of a subsidiary via acquisition a viable alternative too. The major downfalls

for J&J regarding this approach however, include: First, the fact that integrating two
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organizations can prove difficult due to the different organization cultures, control system, and

relationships. And second, by applying acquisitions, some companies significantly increased

their levels of debt that in some cases may lead to bankruptcy. (Hitt, A. (2009), Strategic

Management Competitiveness and Globalization, Nelson Education Ltd).

Finally, the theories of internationalization for these emerging economies that would most

appropriately frame the entry modes approached for J&J when entering new markets, would be

mainly two.

First, it could be argued that the Exchange rate theory in Emerging Markets would apply for

the case of J&J in the sense that thanks to it being a multinational company based in the U.S it

would mean that the capital flows for investing in assets and financing the operation in the new

markets is in dollars, which is the most powerful currency in the world, and even more compared

to those in emerging markets. This would give J&J the advantage in terms of raw materials

acquisition and labor force costs in the new market.

Second, the Eclectic Paradigm tells us the main elements J&J would have to consider when

entering the new markets via subsidiaries, including, ownership advantages like managerial

skills, trademarks and production techniques which they own; the location advantages like the

raw materials and low wages or taxes they would very likely encounter in the emerging markets.

Finally, J&J’s internalization advantages would tell them that their own production is more

appropriate to achieve their internationalization strategy, rather than producing through a

partnership arrangement such as licensing or a joint venture.  

 
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Company's Target Market

Johnson & Johnson target households for home care products, health care products, and

personal care products for the people who are hygiene conscious; among their brands, they want

to attract mostly doctors, nurses, patients, parents and every person interested in their products

and services.

The company that for more than 130 years has aimed to keep people well at every age and

every stage of life; “they strive to improve access and affordability, create healthier

communities, and put a healthy mind, body and environment within reach of everyone,

everywhere” (Johnson & Johnson, n.d.) For this reason, they have established prices for their

different brands which are in the reach of middle class people, who can easily afford it and

represent the majority of the market´s customers. Thus, according to Bhasin (2019) the

company's products are distributed of the following way:

 Customers of Johnson’s baby care products are almost all the parents with medium

income and the pension earning grandparents.

 Clean & Clear works in the anti-acne market and has developed its presence among the

teens.      

 The Neutrogena targets youths and working professionals both male and female who trust

dermatologists when it comes to skin care.   

 The customers of Band-Aid are from all segments and people from all age groups and are

a top-of-the-mind product.
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To target the market, “the company has considered demographic (education-income-

occupation), geographic (urban-rural-further city wise segmentation), and behavioral (lifestyle)

factors to seek out the consumers” (Bhasin, 2019). That way, knowing that the company has

targeted the middle-class people to sell their products, it is important to mention that they should

establish their brands and distribute and sell their products in emerging markets due that these

ones are mostly represented by middle class people. They need to consider the country's income

level, whether it is high, that country's middle class is different from that of the emerging

markets. 

To fulfill this target market demands, the company should maintain its traditional products

with good prices, create experiences and sometimes being innovative caring about the

functionality and quality of their products in order to make these middle-class people loyal to the

company's products. In the given emerging markets, we can find a low percentage of this

population. In Nigeria, the middle class make up 19% while in Egypt make up 30% of the total

population.

Conclusions

Johnson & Johnson is one of the main multinational manufacturer of medical devices,

pharmaceuticals, personal care, perfume and baby products companies around the world.

Consequently, thanks to its huge participation in the international market and its variety in their

line of products, Johnson & Johnson has a middle-class target market of almost every age, in

which thanks to its lower and reasonable prices, they seek to attend the different cultures and

ages through a standardization process of their products, entering to this different markets
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through equity investment in subsidiaries; Thus, allowing them to operate in each market as if

they were local companies and since its headquarters are located in USA, its capital flows for

investing in new markets are made in the most powerful currency, letting them to have advantage

in the acquisition of raw materials and labor force costs in the new market.

.
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References 

 Benson, M. (2014). Johnson & Johnson’s Global Business Strategy Promotes Growth.
Retrieved from: https://marketrealist.com/2015/03/johnson-johnsons-global-business-

strategy-promotes-growth/ Johnson & Johnson. (n.d). About Johnson & Johnson.

Retrieved from: https://www.jnj.com/about-jnj

 Johnson & Johnson. (n.d). Johnson & Johnson Highlights Strategies for Growth Through
Differentiated Medicines, Transformational Pipeline and Global Product Launches.

Retrieved from: https://www.jnj.com/media-center/press-releases/johnson-johnson-

highlights-strategies-for-growth-through-differentiated-medicines-transformational-

pipeline-and-global-product-launches

 Johnson & Johnson. (n.d). Our Business. Retrieved from:

https://www.jnj.com.ph/products

 Marketing91. (2019, May 29). Marketing strategy of Johnson and Johnson. Retrieved
from: https://www.marketing91.com/marketing-strategy-of-johnson-and-johnson/

 UKEssays. (November 2018). Johnson and Johnson. Retrieved from:

https://www.ukessays.com/essays/marketing/johnson-and-johnson.php?vref=1

 UKEssays. (November 2018). Johnson Johnson Global Strategy and Future

Recommendations Marketing Essay. Retrieved from

https://www.ukessays.com/essays/marketing/johnson-johnson-global-strategy-and-future-

recommendations-marketing-essay.php?vref=1
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 Vault. (n.d). Johnson & Johnson. Retrieved from: https://www.vault.com/company-

profiles/personal-care/johnson-johnson