Johnson & Johnson Corporation an international leader in the manufacture of health care products. The company is divided in three major business segments namely consumer products, pharmaceuticals, medical equipment, and diagnostics. Therefore, being one of the biggest companies in the health care market, it has annual sales of over $ 50 billion (Johnson & Johnson Services, 2012). This has been attributed to the strategies adopted by the management. The following paper aims at presenting the strategic audit of the company through an analysis of its numerous strategies.
Corporate-level strategic selection
Johnson & Johnson has a moderate to high level of diversification, since the entire business segments share technological, product, and distribution links (Henry, 2008). Its financial performance shows an above average revenue figures. Medical equipment and diagnostics business segment is the biggest designer and manufacturer of health care diagnostic and treatment devices, recording annual sales of $24 billion in 2010 (Johnson & Johnson Services, 2012). This segment is the main contributor annual revenues of about 40%.
Pharmaceuticals segment is the second main contributor with about 40% in annual revenues and 22 billion USD in annual sales (Johnson & Johnson Services, 2012). It manufactures and distributes prescription medications to wholesalers, retailers, and medical professionals. The third main contributor is the consumer segment that has about 24% annual revenue and annual sales of about 14 billion USD (Johnson & Johnson Services, 2012). The business unit entails diverse health care products sold directly to the public. The link between the three segments makes it easier to design, manufacture, and distribute all the products.
Business strategies exploiting core competencies
- Generic strategies
The Johnson & Johnson corporate strategy is to progress global health through research and development for ignored illnesses and inexpensive access to health care products (Johnson & Johnson Services, 2012). There seems to be an integrated framework between its cost leadership and differentiation. In its business strategies, it aims at pioneering new business simulations that will enhance affordability of their medicines especially in third world countries. Through cost leadership, the management has set a goal to provide economical access to tuberculosis and HIV therapies in the developing countries (Johnson & Johnson Services, 2012). To achieve this, they set some targets, like ensuring ninety less-developed nations have HIV therapies enumerated and accessible at special pricing. In addition, the company has set its prices in a manner that balances competitive dynamics and patient access enabling it accomplish its commitment, sustain its innovative edge, and guarantee reasonable returns for shareholders (Henry, 2008).
Research and development on neglected diseases is one of the differentiation strategies Johnson & Johnson has applied in gaining competitive advantage. As other health care manufacturers concentrate on developing the popular diseases, the company aims at creating research partnerships to enhance treatments and medicines for neglected illnesses in the world (Johnson & Johnson Services, 2012).
- Competitive strategies
The health care business is fairly competitive, but Johnson & Johnson has sustained competitive advantages. With three business segments that have significant market shares, there is no threat of new entries, especially in pharmaceuticals and medical devices and diagnostics (John & Harrison, 2009). Moreover, it has adopted defensive strategic responses such as the acquisition of Synthes, a world leader in developing and manufacturing of implants used in mending bone fractures. It was integrated in its DePuy business, thus increasing competitive advantage and profitability. In addition, Johnson & Johnson has the bargaining control of suppliers due to its business diversity; it depends on big and small suppliers for supplies. This allows it to have the bargaining influence because to most the company means more to the suppliers than they mean to it (John, & Harrison). Most consumers rely on their product on a daily basis, and competitors find it hard to compete on the same level. Even in the medical devices and pharmaceuticals markets, consumers opt for their products, since their products are much more diverse and popular than most competitor products (John & Harrison, 2009).
Strategic action (s)
Recently, Johnson & Johnson acquired Crucell N.V., thus eliminating a competitor and building chief leadership position in vaccines (Johnson & Johnson Services, 2012).
Johnson & Johnson ensured that of all the new pharmaceutical products launched in the U.S. market between 2009 and 2011, it remained supreme in that field. Additionally, they ensured that global distribution agreements with Merck & Co. were amended accordingly strategically setting its largest-selling product on course. INCIVO® now selling as INCIVEK by Johnson and Johnson's strategic partner, Vertex Pharmaceuticals Inc. received approval in Europe (Johnson & Johnson Services, 2012).
In securing the environment, it has committed to reducing water and waste disposal by 10%, a 20% reduction in CO2 emissions in fleet and factory operations, and increase clean and renewable technology energy by 50 megawatts (Johnson & Johnson Services, 2012). Additionally, it has adopted the ten-stage agenda for improved energy efficiency backed up by a 40 million USD yearly fund in support of gas emission decrease projects.
The company has a strong commitment to invest in product launches and pipeline compounds with strong command seen in 2011 with the launch of novel molecular entity approvals like ZYTIGA in oncology, EDURANT (rilpivirine) in HIV and XARELTO (rivaroxaban) for cardiovascular disease (Johnson & Johnson Services, 2012).
In conclusion, John & Johnson remains a market leader in the health care market. This leadership has been attributed to the adoption and implementation of its corporate, business, competitive, operational, and functional strategies. With continued growth and adoption of new strategies, Johnsons & Johnsons Corporation is bound to gain and maintain market leadership in the future.
Henry, A. (2008). Understanding strategic management. New York, NY: Oxford University Press.
John, C.H & Harrison, J.S. (2009). Foundations in strategic management. Belmont, CA: Cengage Learning.
Johnson & Johnson Services, Inc. (2012). 2011 Annual Report. Retrieved from http://www.investor.jnj.com/2011annualreport/index.html