Johnson & Johnson – 2009

I. Statement of the Problem

Johnson & Johnson is a comprehensive strategic management

casethat includes the company’s calendar December 31, 2008 financial statements,compe

titor information and more. The case time setting is the year

2009. Sufficientinternal and external data are provided to enable students to evaluate curr

entstrategies and recommend a three-year strategic plan for the company.Headquartered

in New Brunswick in the U.S. state of New Jersey, Johnson & Johnson is traded on the

New York Stock Exchange under ticker symbol JNJ.

II. Statement of objective

Short-Term

 Maintained image to increase sales in a much wider scope of products and operation

 Remicade treatment for rheumatoid arthritis rose.

 To reduce costs in order to maintain reasonable prices.

 Long-Term

 Offers a wide variety of products and services to hospitals, retailers, and families and

continues to hold some of the most well-known titles in medicine and

medical technologies.

 Developments into drugs geared toward the treatment of HIV and continued

advancement in the field of cancer treatment.

 Offers prescription drugs for some of the world’s most serious illnesses.

 Achieving a skilled, high performance workforce that is reflective of the diverse

global marketplace.

III. AREAS OF CONSIDIRATION

SWOT ANALYSIS

Strength

 J&J offers a wide variety of products and services to hospitals, retailers, and

families.

 The company does business in three segments: pharmaceutical, medical devices

and consumer products.

 In July 2009, J&J purchased an 18.4 percent stake in Irish biotech company Elan

Corp. in order to gain access to the US$3 billion market for Alzheimer’s disease

treatments. The effectiveness of the drug could help the company’s sales by

US$25 billion.
  In 2009, J&J acquired the small cancer drug-developer Cougar Biotechnology for

about US$894 million in cash. Cougar has an excellent drug for late stage

prostate cancer.

 At the end of 2008, J&J reported US$7.6 billion in research and developments

expenditures, which was a slight decrease from 2007.

Weaknesses

 A sale for pharmaceutical segment was down from 2007 to 2008 by 1.2percent.

 Patent on many of their popular and high volume drugs is about to expire.

 Increase in total liabilities by approximately US$4.8 billion from 2007 to 2008.

 In recent years, have not introduced any new innovative product unless by

acquiring other companies.

 Per 2009 data, the company’s quarterly sales dropped by 5.3 percent from the

same period in prior year.

Opportunities

 Smaller companies are coming up with new and innovative drugs. This creates an

opportunity for larger drug companies to acquire or form a joint venture with

smaller companies.

 Larger organizations have better purchasing power in buying raw material.

 More consumers are becoming health conscious by taking more vitamins and use

better brand health related products.

  Despite years of research, companies still spend money for developing new drugs

for health issues related to cancer, heart problems, HIV and Alzheimer’s.

Threats

 The cost of R&D has been increasing at an astounding rate, rising currently at a

rate of eightfold per year.

 Due to economic downturn, there have beensevere changes in the behavior and

spending patterns of purchasers of healthcare products and services.

 Introducing a new drug into the market can take 10 to 15 years and require

extensive amount of money to get it tested and receive FDA approval.

 Often, drugs could have side effects which create negative publicity and/or force

the company to recall the drug or remove it from the shelves.

IV. ALTERNATIVE CAUSES OFF ACTTION

The U.S. Congress has been discussing plans to pass a national healthcare program which

could impact the drug companies and how they do business in the United States. If the healthcare

reform is passed, more individuals could afford to

havehealth insurance and accordingly use products or services prescribed by theirphysician.

On the other hand, there may be some requirements in regards to lowering prices on products or

services by the drug manufacturers.

Alternative Strategy 1

Increase R&D in the pharmaceutical segment by $75 million; will result in 8% projected

sales increase.

Alternative Strategy 2

Continue to improve on product recalls; this will give a better quality perception to

consumers and medical personal.

Alternative Strategy 3

Improve cross-sell techniques of diversified products.

V. RECOMMENDATION

Johnson & Johnson should take alternative strategy 1, since huge amount of sales of the

company are coming from the segment of Pharmaceuticals it will be effective for the company to

invest in research and development. Research and development is the lifeblood of health-care

companies. In terms of cost it will become an advantage for Johnson & Johnson once they

become the technological leader in the segment. Being a pioneer of a unique product increases

buyer value because of differentiation Johnson & Johnson should take alternative strategy 1,

since huge amount of sales of the company are coming from the segment of Pharmaceuticals it

will be effective for the company to invest in research and development. Research and

development is the lifeblood of health-care companies. In terms of cost it will become an

advantage for Johnson & Johnson once they become the technological leader in the segment.

Being a pioneer of a unique product increases buyer values due to differentiation.

Strategy Objectives Plans/ Programs

- Students could -To understand cooperative - Cooperative

benefit from teaching learning as a research-based Learning

one another school practice it is first

necessary to understand what
cooperation is
Glaiza Rose M. Patoc

BSTM A3

CASE STUDY II