Johnson & Johnson SWOT Analysis

Introduction

Johnson & Johnson is an American company manufacturing pharmaceuticals, medical devices, and consumer packaged goods worldwide. It was founded in New Brunswick, New Jersey, in 1886; its headquarters are still there though it has subsidiary companies all over the globe. The company name is synonymous with its baby care products though it has wide range of products not only pharmaceutical but also in the allied segments of diagnostic devices and surgery.

Their well-known OTC products are Tylenol, Motrin, Johnson’s baby oil, visine, Bengay, Neutrogenga skin care products and Band-Aid bandages (MBA Lectures, 2010). After starting in 1896, the company expanded first to Canada in 1919 and later to Britain in 1924. Its public launch was in 1944 listing with the New York Stock Exchange.

Its strategic acquisition started with Neutrogena in 1994 and Depuy in 1998. During the period from 1989 to 1999, the company had 45 acquisitions to its credit. Johnson & Johnson began to help doctors and nurses to use sterile sutures, dressings and bandages in the treatment of wounds.

This fuelled further innovative ideas to be introduced from time to time ever since. (Marketing Teacher.com, n.d). Keeping its responsibility towards environment, the company formulated in its vision statement that it should use the resources that are environmental friendly. Its major products of traditional production are Band-Aids, Listerine and Baby Lotion.

As part of its healthy planet program, it sets up new long term goals every five years Their long term goals include direct purchase of low cost hydro and wind power, and acquiring on-site solar power and land fill gas. It is also maintaining the largest fleet of hybrid vehicles throughout the world (Boone and Kurtz, 2011).

The Company is still remembered for its response to people who died of cyanide poisoning of its Tylenol capsules as sabotage. The quick withdrawal of Tylenol from the market alone cost the company half a billion dollars as moving cost. Ethical practices of the company are proving to be its competitive advantage (Williams, 2011).

Strengths

• Workforce of 118,000 employees.
• Presence in 60 countries.
• More than 250 operating companies.
• The 8^th largest pharmaceutical business and the 6^th largest biotech business in the world.
• Recognized by the United Nations as the Humanitarian of the year for 2011 for the work of philanthropy touching lives of billions of people’s basic health care.
• Reported strong progress in the first of five year pledge to help save and improve lives of 120 million women and children in developing countries as part of the United Nations Millennium Development Goals.
• Increasing sales of $ 61.1 bn in 2007, $ 63.7 bn in 2008, $ 61.9 bn in 2009, $ 61.6 bn in 2010 and $ 65 bn in 2011.
• Increased dividends paid per share $ 1.620 (2007), $ 1.795 (2008), $ 1.930 (2009), $ 2.110 (2010) and $ 2.250 (2011).
• Development of new treatment for prostate cancer.
• 125 years of experience.
• A number of new innovative products to meet the unmet health care needs across the world.
• Strong product portfolios in immunology, oncology, surgical devices and emerging markets.
• Scientific innovation.
• Well positioned to grow and increase market leadership.
• Delivering sustainable growth for shareholders.
• Business restructured to manage cost structure, simplify business operations.
• Nine major approvals for new pharmaceutical products in the U.S. obtained as a result of continued research and development for the last five years incurring over $ 37 billion. The new products include STELERA and SIMPONI in immunology, PREZISTA, INTELENCE in HIV, ZYTIGA in oncology, XARELTO in cardiovascular disease segments.
• R & D efforts in the segment of Medical Devices and Diagnostics (MD & D) and consumer platforms, such as contact lenses, electrophysiology, advanced energy, biosurgicals, oral care, and skin care. These amount to $ 7.5 billion.
• New technologies for replenishment of certain segments. E.g., Fibrin Pad, canaglifozin and bapineuzumab are produced for treatment of hemostasis, diabetes, and Alzheimer’s disease respectively.
• Sizeable amount of capital reserves returned by of refund of shares and payment of retained dividends that further strengthened financial parameters.
• Pfizer Consumer Healthcare and Beijing Dabao Cosmetics Company Ltd in the Consumer business segment acquisitioned as part of company’s long term strategy. These were company’s strategic alliances to improve its market and competitive advantage. Crucell N.V. and Elan Corporation Plc were introduced in pharmaceutical business segment, pending acquisition of Synthes, Inc were applied in MD&D business.
• Ingenuity, resiliency, tenacity, integrity and compassion shown by the people of Johnson & Johnson during the period of industry and global changes.
• Growth in adjusted earnings for the 28^th consecutive year. It amounted to $ 13.9 billion, and adjusted earnings per share were $ 5.
• Worldwide sales of $ 65.0 billion reflecting an increase of 5.6 % from previous year.
• Development of “telaprevir” in partnership with Vertex Pharmaceuticals, which was approved in 2011 and set to meet the needs of treatment of hepatitis C affecting 170 million people all over the world. It is already in the market under the brand name IN CIVO in Europe.
• Making alliance with Bayer Healthcare. Due to that, drug by name XARELTO was introduced by the company in 2011. It is for the cure of complications arising out knee or hip replacement procedures. This medecine can also be administered to avoid stroke and systemic embolism in people suffering from nonvalvular atrial fibrillation.
• Broad based business and expertise. These allowed to create devices like blood glucose monitors, insulin pumps, and develop new drugs like canagliflozin.
• Nutritional products, such as SPLENDA sweeteners, brought out through Consumer Wellness and Prevention business.
• 70 % of sales. This rate is attributed to two products having No. 1 and No.2 global market share positions.
• 25 % of sales from the new products launched in the last five years.
• Maintained AAA credit rating.
• Paid increased dividend to shareholders for the 49^th consecutive year.
• Generated a free cash flow of about $ 11.4 billion.
• Exceeded Standard & Poor‘s 500 and Dow Jones Industrial Average in respect of one year shareholder return at nearly 10 percent.
• Even before the advent of the 20^th century, Johnson & Johnson became an enterprise with international presence. It is credited with customer satisfaction and robust R & D facilities.
• Large scale operations have helped the company minimize expenditure and become more competitive.
• Brand image, brand loyalty, and long standing customers are the plus points for the company.
• It commands world wide presence with as many as 250 subsidiary companies operating in about 57 companies.
• The company’s products are represented in 175 countries as in 2008, and its annual sales revenue for the year ended in 2011 is $ 65,030 millions.
• The company has been able to differentiate from its competitors.
• With vast diversification in pharmaceuticals, medical devices, and consumer packaged goods, the company enjoys the competitive advantage over the others.
• Johnson & Johnson has more than 29,925 internet domains associated with Internet and technology organizations having web presence (MBA Lectures, 2010).
• Strategic acquisitions mean that its stable financial position has enabled Johnson & Johnson to make timely acquisitions utilizing its cash reserves. Its triple –A credit rating indicates its ability to seize opportunities by remaining free from financial debt burden.
• Product diversification has enabled the company to avoid dependence on any particular market segment or product portfolio. Its long range plans of diversification are set to be completed by 2014.
• Positive revenue growth projections include that the new products launched will more than compensate its decline in revenues from prescription pharmaceutical market, and an increase of 1.8 % in 2008-14 is sure to be achieved (Marketing Teacher.com, n.d).

The above comparison has been maintained over a long period.

The company remains an investment choice for several decades (Johnson & Johnson 2011). Johnson and Johnson was the first to introduce a sterilizing technique for catgut sutures. It was the company’s first major product.

In the U.S., the company is able to keep their price increase in tune with Consumer Price Index (CPI). It is able to prevail upon the governments for differential pricing of its products so as to make its goods reach different segments of population. Thus, the company has agreement with the U.K. in respect of its product VELCADE meant for the treatment of multiple myelama.

Another agreement was made with France for RISPERDAL and CONSTA for treatment of schizophrenia. Various companies and governments have also entered into agreements with the company for various risk sharing arrangements (Marketing Teacher.com, n.d).

The company is able to offer discount for their baby care products and contact lens. Its promotional campaign “Beauty for all Ages” has been quite popular at Wallgreens.

The company is involved in helping manage many cases, such as healthy life styles. There were a lot of programs to promote a healthy living, such as the campaign for Nursing’s future, Having a Baby Changes Things and Because We Care We Act.

Its decentralized management approach gives its employees an entrepreneurial feel of the belief that they succeed to meet the customer needs and provide them with solutions (Marketing Teacher.com, n.d).

Weaknesses

• Uncertain macroeconomic conditions;
• Patent expiration in two years for two of the company’s major drugs, Risperdal and Topmax which gained $ 6 billion in sales;
• Severe economic conditions that restrict consumer spending;
• Quality issues related to over-the-counter products at McNeil Consumer Healthcare;
• Recall of the DePuy ASR Hip system.
• On April 30, 2010, Johnson & Johnson’s subsidiary company had to recall 43 kinds of OTC medicines that include Benadr, Tylenol Plus, Tylenol and Zyrtec.
• In 2010, Johnson & Johnson was sued by the U.S. government unethical distribution of drugs to dementia patients through Omnicare.
• Several of its products are outdated due to patents or copy rights expiry.
• The company incurs heavily on expenditures related to information gathering having no value added output or input.
• Due to its copyright expirations, the company is facing lot of pressure to reduce its prices.
• Company is largely dependant on revenues from Risperdal and CNS (MBA Lectures 2010).
• Its new products recently launched are subject to uncertainties of market forces and regulatory overview.
• Reliance on small molecule drugs, which are subject to competition from generics market, puts the company at a disadvantage (Marketing Teacher.com, n.d).

As on January 1, 2012, the company is facing numerous product liability cases. Damages claimed are substantial although company’s warnings and instructions were adequate enough to counter such claims.

Yet it is difficult to predict the litigation outcomes. Approximately, there are 3,800 claimants for injuries due to LEVAQUIN, 4,700 in respect of ASR™ XL Acetabular System and DePuy ASR™ Hip Resurfacing System, 860 for PINNACLE, 420 for RISPERDAL, 480 for pelvic meshes, 95 for CYPHER stent and 60 for DURAGESIC.

Johnson & Johnson’s subsidiaries are facing intellectual property lawsuits in respect of Medical Devices and Diagnostics. In 2004, Tyco Healthcare Group LP (Tyco) and the U.S. Surgical Corporation sued Ethicon Endo-Surgery, Inc for infringement of four of TYCO patents by the company’s product EES’s HRAMONIC Scalpel in the U.S. District Court of Connecticut.

Although the case was dismissed on the ground that TYCO did not own the patents, and the dismissal without prejudice also was affirmed in appeal, TYCO has filed complaint of similar infringements in the same court for monetary damages and injunctive relief in 2010. The case is expected to be heard in May 2012.

Cordis Corporation filed lawsuits in New Jersey and Delaware courts against Guidant Corporation, Abbott Laboratories, Boston Scientific Corporation, Meditronic Ave in 2006 complaining that company’s Xience V (Abbott), Promus (Boston Scientific) and Endeavor (Meditronic) infringed several of their Cordis’s Wright/Falotico patents. Courts found the claims invalid, and they were also affirmed in appeals in one of the cases for lack of written description and written enablement.

In 2007, Bruce Saffran sued for patent infringement against Johnson & Johnson and Cordis in Texas court for infringement of the US Patent No. 5,653, 760. Court found in 2011 that Cordis infringed a patent issued to Saffran who was awarded with $ 482 million. Cordis was also ordered to pay $ 111 in addition in 2011 as pre-judgment interest. Cordis appealed, and the company has not made any accrual in this regard since it believes that there is no unfavorable outcome.

In 2007, Rosche diagnostics filed lawsuit for patent infringement against Life Scan Inc. in Delaware Court for the reason that LifeScan’s blood glucose monitoring system infringed two of its patents related to the sue of microelectrode sensors. Lifescan obtained a favorable judgment. On appeal by Roche, appeal court has remanded the case for hearing on new findings.

In 2008, Cordis filed lawsuit against Guidant, Abbott, Boston Scientific andMedtronic alleging that the Xience V™ (Abbott), Promus™ (Boston Scientific) and Endeavor® (Medtronic) infringed their Wyeth (now Pfizer) Morris patents. In January 2012, court summed up in the favour the defendants for lack of enablement and failure to describe the full scope of the invention sufficiently. Cordis is likely to appeal.

Similar lawsuits were brought by Rembrandt Vision Technologies L.P. in 2009. Howmedica Osteonics Corp and Styker Ireland Ltd filed lawsuits for patent infringements in Texas and New Jersey Courts respectively in 2011. Trials are pending.

Company’s subsidiaries have instituted lawsuits in respect of pharmaceutical patent infringements starting from 2007 till date. Similarly lawsuits are also pending against the company’s subsidiaries (Johnson & Johnson 2011).

Opportunities

• Ageing of the world population contributes to more spending on health care costs.
• International presence and outward growth help the company avail of the opportunities for additional business emerging from global health care reforms.
• Cancers, mental health disorders, diabetes, heart disease, stroke, rheumatoid arthritis, and HIV present opportunities in the unmet medical needs. These give chances to control the market where the company has presence and can make investments to gain leadership.
• Health care reforms evolving around the world requiring more cost effective health care solutions by the government payers and regulators present opportunities to make investments in personalized medicine, companion diagnostics in the fields of oncology and anti-psychotics.
• There are also new opportunities through acquisitions for new technologies, such as the product REVIVE SE device which saved the life of Mrs. Wecker through full recovery from her stroke. Similarly, company’s oncologist Bill Hait was saved from the use of newly introduced blood clot retrieval and removal device.
• Fibrin pad was developed through collaboration with Israel based Omrix Pharmaceuticals Ltd in the treatment of surgical bleeding.
• Sustained regulatory environment with a view of saving lives, mitigating patients’ sufferings, and addressing unmet medical needs allows to make innovations.
• Company supports strong regulatory presence since it ensures patient safety, and fast approvals of lifesaving medicines (Johnson & Johnson 2011).
• The company’s acquisition of Pfizer will add to its growth substantially.
• Johnson & Johnson enjoys competitive edge to enhance its market capture by way of innovative products and sustained product development.
• The company has been leveraging its international presence with the strategies of joint ventures and acquisitions.
• It’s foray into diagnostics and medical devices markets helps promote the growth of its markets.
• Growth in the economy round the corner promises increased customer spending which will in turn reflect in company’s enhanced sales revenues.
• The company has the unique synergistic advantage in maximizing its revenues through acquisitions of diverse range of companies (MBA Lectures 2010)
• Cross selling opportunities abound due to its strategic acquisitions and strategic positioning. The disease life cycle presents unlimited growth opportunities in the segments of Cardiovascular, oncology, diabetes and I & I therapy.
• Market for biological products has a huge potential not only to compensate its loss of market due to patents expiry on molecules. A biological major has already joined hands with the company in 2009 to develop and commercially exploit the items, such as therapeutic proteins Procrit, Natrcor, and monoclonal antibodies, such as Remicade, Reopro, Simponi, and Stelara. These provide the company with the intellectual property rights opportunities so as to strengthen its discovery rights (Marketing Teacher.com, n.d.; Johnson & Johnson SWOT Analysis, n.d.).

Threats

• Slowdown in economic growth, fluctuations in financial markets, increased unemployment and pressure on heath care costs have a negative impact on health care spending (Johnson & Johnson 2011).
• There is regulatory high-handedness.
• Its global competitors are able to offer substitute products at lesser prices.
• Established pharmaceutical products with brand selling face major threats from generic manufacturers from local markets.
• Bio-technology may wipe out pharmaceutical technology in future.
• There exist regulatory pressures of different kinds in different countries (MBA Lectures 2010).
• There is a regulatory high-handedness.
• Its global competitors are able to offer substitute products at lesser prices.
• Established pharmaceutical products with brand selling face major threats from generic manufacturers to local markets.
• Bio-technology may wipe out pharmaceutical technology in the future.
• There exist regulatory pressures of different kinds in different countries (MBA Lectures 2010).

References

Boone, L. E. & Kurtz, D. L., (2011). Contemporary Business, USA: John Wiley & Sons.

Johnson & Johnson, (2011). Annual Report. Web.

Johnson & Johnson SWOT Analysis. Web.

MBA Lectures, (2010). SWOT Analysis of Johnson & Johnson. Web.

SWOT Analysis of Johnson & Johnson. Web.

Williams, C., (2011). Management . Ohio, USA: Cengage Learning.