STRATEGIC MANAGEMENT

STRATEGY ANALYSIS FOR JOHNSON & JOHNSON PHARMA

PRESENTED BY:
GROUP 10
FMG 22 SECTION A
Ankit Aggarwal
Ankit Bansal
Ankit Sharma
Ankita Handa
Heena Vij

QUESTION

Select A Business Enterprise In Pharmaceutical

Sector From The Global Fortune 500 List And
Conduct Strategic Analysis For The Enterprise.
Discuss The Enterprises Model Of Growth
With Suitable Examples.

PHARMA INDUSTRY OVERVIEW

The pharma industry is affected by the dynamic shifts in the market.

New revenue models are resulting from activities such as:

parallel trade,
the generic vs. patent fight,
mergers and acquisitions (M&A),
in-licensing and out-licensing,
the choice between semi block buster and block buster.

The shift from chemical-based small molecules to biology-based large molecules like
antibodies and protein has also created new opportunities in the industry.

VIDEO - PWC RESEARCH

ABOUT JOHNSON & JOHNSON

Johnson & Johnson is the world's largest healthcare company. Founded in the United

States in1886, the company has been profitable for 75 straight years and currently
operates 250 subsidiary companies in 57 countries.

Currently ranked 41 in Fortune 500 list, up from 42 from last year.

Its products fall into three segments:

pharmaceuticals, with 39% of total sales;

medical devices and diagnostics, with 36%; and

consumer products, with 25%.

Employs 119,200 people worldwide and sells its products in 175 countries.
Has securely positioned itself to overcome the challenges by its ever-changing

business environment poses, as well as take advantage of the opportunities presented.

The Johnson and Johnson Credo is an excellent example of organizational

values that transcend boundaries and truly serve as a guide and moral
compass for members of the Johnson & Johnson family.
It clearly outlines what the companys mission, goals and objectives are.
Some of the stakeholders that The Credo talks about are:
The doctors, nurses and patients, to mothers and fathers and all others who use
their products and services
Employees, the men and women who work with them throughout the world
The communities in which they live and work and to the world community as
well
Stockholders the final responsibility as a business lies with them

STRATEGIC ANALYSIS
OF JOHNSON & JOHNSONS PHARMA DIVISION

1. PORTERS 5 FORCES
Threat of New Entrants - High Barriers to Entry:
The worlds top pharmaceutical companies have extensive
manufacturing capabilities, distribution systems, and economies of
scale that are difficult to replicate.
These top firms also have patents that protect their current
products, as well as established research pipelines that ensure the
continual development of new products.
Have strong brand names and large marketing budgets with which
to defend them.
Finally, the exceptionally high capital requirements for founding a
pharmaceutical company and the sharp retaliation that new
entrants could expect from the established competitors render the
threat of new entrants very low.

PORTERS 5 FORCES (CONT.)

The Threat of Substitutes High:
Much more problematic than that of new entrants in the pharmaceutical
segment.
Once a patent expires, generic manufacturers are quick to reverseengineer the formerly proprietary drugs and sell generic versions at a
fraction of the cost.
The Bargaining Power of Buyers- Low:

Amount of power of individual customers for J&J is small.

As J&J is so diversified, customers rely on a large number of Johnson and
Johnson products on a daily basis.
The medical and pharma segments have a lower level of competition and
therefore do not allow customers to have many options.
Hence, when it is necessary for someone to use these devices, they are
required to use one of J&Js products or one of the few competitors.

PORTERS 5 FORCES (CONT.)

The Bargaining Power of Suppliers - Medium to Low:
J&J rely on a majority of unique and small suppliers (small and large
minority owned businesses, small disadvantaged businesses, small veteranowned businesses).
Gives J&J more power to bargain with suppliers, as the proportion for
which an individual supplier is responsible is much lower than the
proportion of business that J&J provides for that business.
Industry Rivalry - High:

Level of competition in health care industry is fairly high.

Presence of several large companies having a good hold on the current
market, such as Merck, Novartis, Pfizer.
However, there are organizations which may be able to enter the industry
because of an already established business, e.g. Wal-Marts entry into
providing pharmaceuticals.

2. PEST ANALYSIS
Political Environment Changing Politics and Policies:
The politics on local, regional, national, or international scales can exert strong
forces on businesses. Since J&J operates worldwide, it must keep track of the
political developments that may affect its business. e.g. in the Czech Republic,
health care is the subject of a major political debate. Changes in the healthcare
system may affect to whom to market.

Economic Environment The Crisis:

Economic climate is important to analyze to predict when business may face
challenges, and for an opportunity for grow.
Operating in the EU and larger European community means that J&J has felt the
effects of the current economic crisis.
It has been able to plan for its impact, the effects have not been severe as
medical products remain necessities even in periods of economic downturn.

PEST ANALYSIS (CONT.)

Social Environment Aging Population and Public Health Problems:
Aging population: he influx of senior citizens will create huge demands throughout
all realms of medical care.
Surging rates of various health problems: Especially in developed societies but
spreading worldwide, from obesity and diabetes to cancer and mental disorders.
J&J finding themselves with an increasing number of people to treat and cure.

Technological Environment Promising New Fields:

Drug markets becoming saturated and blockbuster drug strategy becoming obsolete
Innovation and breakthrough medical technologies are essential for finding blue
oceans in which to compete.
J&Js strong emphasis on R&D and its leadership in the medical devices and
diagnostics segment put it in an excellent position to become a frontrunner in
promising new technological fields.

Strengths
A long, established record of good faith in
the name of the organization.
Have a good financial record and a growing
market.
Consumers are becoming more concerned
with a healthy lifestyle.
Have a wide variety of products.

Opportunities
Can restructure, for cost savings which will
be used to offset costs in pharmaceuticals.
May market towards the untapped 25-45
year old market.
May supply dietary supplements.
May utilize the internet to combine
wholesale and retail avenues for internet
customers.

Weaknesses
Expiration of patents and
overdependence on sales of patented
products.
Lack of novel pipeline products.
Little marketing towards younger
markets.

Threats
Potential reorganization of the
company- may alter culture and cause
long-time employees to find other
organizations.
Several side effects and health risks
involved with many of its medical and
pharmaceutical products.

JOHNSON & JOHNSONS GROWTH MODEL

Company has
designed a fourtier strategic
outline for
companys
growth
prospects.
Under company
philosophy, the
growth is to be
driven by:

Value through innovation

Extension of the companys global reach, with a
local focus
Thorough execution
Inspired leadership through each member of the
legacy.

FUTURE GROWTH:
A significant portion of Johnson & Johnsons growth will come from it being a
primary competitor in an industry that will thrive in years to come.

The population is aging and the healthcare market is growing.

The industry is estimated to reach $8 trillion by 2022, with cancers, diabetes

and mental disorders growing the fastest.
By 2015, there will be more individuals over the age of 65 than people younger
than age 5.

This will drive demand for healthcare businesses because older people, on average,
use seven times more healthcare products than the younger generation.

FUTURE GROWTH (CONT.)

Growth in the industry is

largely driven by new
products and
pharmaceuticals.

It has several drugs which have gained approval, or are

in late-stage development on the verge of entering
the market.
It is the current leader in FDA approvals, with a
pipeline of 17 drugs in late stage development, which
is the most in FDA review or in phase III trials.

J&J continues to invest

and support institutes
around the world to train
healthcare providers on
the effective use of its
products.

An institute was recently opened in India, which trains

approximately 1,000 physicians a year.
These global institutes extend the companys reach
and solidify positions in key markets that are
beneficial for future growth.

ACQUISITIONS
In 2012, Johnson & Johnson acquired Synthes, Inc. for $19.7 billion.
The acquisition created one of the worlds most comprehensive
orthopedic businesses, and allowed Johnson & Johnson to move
more aggressively into the market.
In May of 2012, the company acquired Guangzhou Bioseal Biotech
Co., Ltd. This represented the first medical device acquisition in
China for Johnson & Johnson, and reinforced its emphasis on the
market. The acquisition gives Johnson access to the only approved
plasma-derived sealant on the market in China.