Johnson and Johnson are a company based in the United States specializing in developing medical equipment, consumer packaged items, and pharmaceuticals. This corporation has a rich history, having its origin in 1886 when a dispensing chemist, Robert Wood Johnson, and his brothers created it (Bogdan and Dombrowski, 2019, p. 6422). Since its inception, this organization has experienced a series of strategic events that have enabled it to emerge as the world’s leading establishment in the health care industry. The consortium has developed a reputation for designing improved, mass-produced varieties of common medical and sanitary commodities (Bogdan and Dombrowski, 2019, p. 6425). This paper discusses both the internal and external landscape of Johnson and Johnson’s corporation using various frameworks such as SWOT, PESTEL, and Porter’s Industry tool. It proposes new strategies related to its marketing mix and corporate social responsibility to improve its brand differentiation.
Johnson and Johnson’s business model has several strengths emanating from its internal operations. For example, the company’s research and development (R&D) segment has enabled it to maintain peak performance in the industry. According to its financial statements, the medical consortium invested approximately 20.13% of the gross profit on drug development in 2020 (Rao, 2020, p. 564). Moreover, the pharmaceutical syndicate allocated nearly $11.35 billion for the development of R&D since it is an essential component of its internal operations in the healthcare industry (Rao, 2020, p. 570). Therefore, Johnson and Johnson’s R&D is one of the greatest strengths that enable it to outperform its competitors.
The company’s broad product offering is also regarded as its core competency. While it primarily manufactures health-related commodities, medical tools, and medicinal products, it has also invested in household brands such as Pepcid, Listerine, and Tylenol. Moreover, it also owns Janssen, a healthcare brand that makes over 380 products. As such, this extensive portfolio of unknown commodities has allowed the American corporation to maintain its peak performance.
Johnson and Johnson’s global reach and revenue have been a significant factor in its competitive environment. The consortium has established a presence in over sixty nations, and the commodities are sold in at least 140 countries (Rao, 2020, p. 565). Irrespective of the obscure operations in the healthcare industry, this corporation has deep connections to almost every individual on the planet. In 2020, the pharmaceutical brand accumulated $82.584 billion in revenue compared to its immediate competitors Pfizer and GlaxoSmithKline that made approximately $41.908 billion and $43.783 billion, respectively (Rao, 2020, p. 565). In essence, the American behemoth’s revenue and global recognition have enabled it to maintain peak performance.
Irrespective of Johnson and Johnson’s strengths, the corporation’s internal operations also have some limitations. For example, its lack of diversity in revenue accumulation has inhibited its growth. This uneven distribution of income emanates from its pharmaceutical division since 50.7% of its proceeds comes from this segment (McWilliams et al., 2018, p. 1143). As such, a significant percentage of the organization’s earnings depend on a few products which are susceptible to patent expiry and rivalry. Moreover, instances of unethical practices had tarnished its reputation when a magistrate in Oklahoma discovered the corporation at fault in distributing “dishonest, misinforming, and unsafe marketing campaigns” for opioids (Obeidat, Al-Hadidi, & Tarhini, 2017, p. 386). The advocate also stated that the initiative promoted addiction and led to an increase in overdose incidents (Obeidat, Al-Hadidi, & Tarhini, 2017, p. 386). As such, these incidents have ruined the brand’s name, thereby limiting its internal operations
Gender discrimination allegations are forces that might impact the performance of a business negatively. In Johnson and Johnson’s case, its diversity and inclusion policy supports its devotion to different people and nurturing and preserving inclusiveness (Ball et al., 2018, p. 59). However, news of the corporation’s former senior manager filing a lawsuit against Johnson and Johnson for gender discrimination is considered a weakness for the American brand (Ball et al., 2018, p. 59). Moreover, a kickback allegation incident involving a whistleblower accusing the pharmaceutical giant of providing free services to health practitioners to increase the prescription of Remicade and Simponi has surfaced (Ball et al. 2018, p. 70). Such incidents bring a negative impact to the image of the multinational company.
Johnson and Johnson also have several opportunities in its external environment. The American consortium also has several market openings available in bio-implants, the human-made body parts developed from a biosynthetic substance such as collagen and artificial tissue and skin (Mak and Pichika, 2019, p. 773). According to researchers, about 20% of the US residents would be over 65, and such technologies will be significant for the brand since the demand for bio-implants will increase (Mak and Pichika, 2019, p. 773). Therefore, this company should start investing in the above segment to improve its future performance.
Johnson and Johnson’s external environment has also posed a risk due to several threats available. For example, there is aggressive competition from other brands such as Pfizer, especially during the coronavirus pandemic, when the latter has already developed a high-efficacy vaccine for the virus (He and Harris, 2020, p. 176). Moreover, government regulations have had a negative impact on the brand by slowing down its growth. Surgery deferrals are also a threat to the operations of the American brand. Supplying medical tools is one of the company’s business units (Lexchin, 2018, p. 37). In particular, this is the only division that has exhibited a decrease in sales attributed to the rescheduling of surgical procedures due to the coronavirus pandemic. Lastly, the company has been facing various lawsuits as some instances have emerged, specifying that its talcum powder caused the complainants to develop ovarian cancer (Lakdawalla, 2018, p. 397). Therefore, Johnson and Johnson should use its core resources and capabilities to ensure that it addresses the threats in its macro-environment.
Since political forces vary in different countries, Johnson and Johnson’s operations in various markets are affected somehow. Government involvement in business is one of the significant factors determining the growth and profitability of any enterprise. Therefore, political stability is considered a facilitating driver of development for any multinational corporation. Since the American brand operates in a majority of countries, it has to consider its presence in multiple political settings of these nations. However, if there is a possibility of military conquest and other disrupting activities, the conglomerate will have to divest from such places. In essence, the level of corruption within a particular region is also essential, and Johnson and Johnson need to consider such concerns.
The economic setting is also a critical factor that the American corporation should examine to predict when it may face challenges and exploit market openings for growth. Investing in the European community suggests that Johnson and Johnson have considered the possible consequences of Brexit (Ball et al., 2018, p. 59). Aware of the predicament, the firm has drafted a plan for the impacts. The repercussions on pharmaceutical enterprises have not been intense, as medical products remain essential even in times of economic recession. Moreover, the establishment should also consider the possible effects of currency exchange. For example, a transition to the euro in Ireland has various impacts in 2000 (Bogdan and Dombrowski, 2019, p. 6422). For instance, accepting euro accelerated transactions with other countries. The American consortium also faces practical problems with accounting activities that occur with a shift in currency (Bogdan and Dombrowski, 2019, p. 6422). Therefore, maintaining such an economic situation is imperative for the success of Johnson and Johnson.
Social changes in society can either promote or undermine the operations of a business. In Johnson and Johnson’s case, the millennial generation has had a significant impact on the world since its origin. This tendency will continue as the cohort is starting to enter old age (Khazzaka, 2019, p. 1). The influx of older individuals is beginning to create enormous demands for medical care and equipment. Therefore, the American consortium can expect to see increased sales across its consumer goods, pharmaceuticals, and medical gadget and diagnostics segments (Khazzaka, 2019, p. 5). Additionally, another significant social trend that is influencing Johnson and Johnson is the occurrence of increasing rates of different health problems in some economies, such as cardiovascular and mental disorders, obesity, and cancer (Lexchin, 2018, p. 37). Although these events are a menace to humanity, medical corporations such as Johnson and Johnson continue to find themselves in a position to treat and attend to more patients. Since it massively invests in research and development, this is the opportunity for the American brand to develop new ways of managing these problems.
As numerous pharmacological industries become congested and the medicine strategy gets obsolete because of the significant transformations occurring in the segment, innovation and breakthrough healthcare technologies are vital for an environment for competition. Therefore, Johnson and Johnson has several opportunities available in predictive medicine. The latter involves forecasting diseases based on genetics and developing their remedies. Moreover, personalized medicine entails handling a patient’s health in relation to their characteristics instead of adhering to standard guidelines for care (Tulum and Lazonick, 2018, p. 281). Therefore, Johnson and Johnson is at the forefront of medical technologies due to its focus on research and development and its headship in the healthcare and diagnostics sectors (Tulum & Lazonick, 2018, p. 281). Therefore, the American company can utilize these opportunities available in its external market to cement its position in the industry.
An organization’s profitability can be negatively impacted if it does not observe legal requirements in a particular country. Therefore, if a corporation does not follow laws such as taxation, intellectual property, and trade regulations, the company is likely to realize several consequences (Pomering, 2017, p. 157). These decrees vary as per the nation in which the business operates. In Johnson and Johnson’s case, it has to abide by these principles to avoid any legal problems. The American brand has a group that proactively manages all terms and conditions from different countries and, therefore, protects them from significant fines and complications in operations.
Pharmaceutical corporations are increasingly observing various environmental laws as stipulated in multiple countries. Since this segment is among the most wasteful, companies operating in it should strive to increase efficiency. Therefore, integrating technologies through artificial intelligence will allow organizations to make more intelligent and more strategic choices that benefit Johnson and Johnson and the customers (McWilliams et al., 2018, p. 1143). Moreover, the American brand’s investment in research and development into reducing, reusing, and recycling will help alleviate the risk it poses to the environment.
Porter’s Five Forces Analysis
The industry analysis framework was designed mainly for examining the competitive environment in which a corporation operates. Developed by Michael Porter in 1979, this model has enabled managers to competitive intensity and attractiveness of a market segment (Lexchin, 2018, p. 37). It is a vital tool for gaining insight into the strengths of a firm’s current competitive position and its position in the industry. In Johnson and Johnson, the corporation operates in the pharmaceutical sector, comprising of some of the best players.
New entrants pose an insignificant threat to the operations of Johnson and Johnson. It is because the barriers to entry in this sector are the expenses in research and development required to penetrate this industry successfully. Moreover, the costs involved in the production and manufacturing of drugs and medical devices are massive, and as such, enterprising firms may not have adequate funds to establish their operations (Mak and Pichika, 2019, p. 773). Moreover, the American brand has been in the industry for a long time and has established relationships with suppliers and other parties.
Threat of Substitutes
In the pharmaceutical industry, there are few substitutes available, thereby making the threat low. For example, consumers may opt for store-brands and natural herbs as replacements to the medicines offered by Johnson and Johnson. Moreover, herbal medicines are hard to find and, in most cases, they are expensive, thereby posing a moderate threat to the operations of the American giant (Tulum & Lazonick, 2018, p. 281). However, in the beauty products segment, the multinational corporation faces more competition since other rivals have established their brand names. Irrespective of these alternatives, Johnson and Johnson still has a significant market share in the pharmaceutical sector.
Consumers do not have a significant influence over the products and services that Johnson and Johnson offers. Therefore, the buyers of the American brand’s products and services include doctors, pharmacologists, and insurance firms. They will attempt to establish reputable relationships with wholesalers and retailers since they are few vendors available to them. However, when it comes to the consumers of Johnson and Johnson, they need to be connected to a trustworthy name such as the American brand, thereby making their negotiating power to be low (Tulum & Lazonick, 2018, p. 281). Individual consumers have some bargaining power over the multinational enterprise because the switching cost is somewhat lacking.
Since Johnson and Johnson have multiple business units, it has various categories of suppliers. For example, it requires merchants for the production of medical equipment and medicines. The corporation ensures that it selects third-party vendors carefully since they need standardized and customized vendors. Moreover, the company has a contract with the suppliers to maintain a long-standing rapport. The suppliers have significant costs involved as well, and they would not opt for losing on such a reputable brand globally. Therefore, the suppliers’ influence over the American brand can be rated as low.
The rivalry in this market is intense in terms of the enterprises available in the industry. However, these firms are not competing in terms of prices since the costs of medicines are supposed to stay consistent due to some regulations enforced by the governments. Moreover, corporations in this segment often merge to obtain businesses that can improve their core resources and capabilities. They are an attempt to expand their product portfolio in the industry. Johnson and Johnson have multiple competitors depending on the business unit. For example, under its pharmaceutical division, its rivals are Pfizer, GlaxoSmithKline, Novartis, Merck, and Abbott (Rao, 2020, p. 564). Therefore, the intensity of competition in this market segment can be described as moderate.
How the Company can Differentiate Itself from the Competition
There are several strategies that Johnson and Johnson can utilize to support its differentiation strategy. For example, its product offering currently supports three significant segments that offer the customers products in three categories: pharmaceuticals, consumer goods, and medical apparatus (Rao, 2020, p. 564). For example, the application of the Boston Consulting Group (BCG) matrix can help the corporation to classify its products. For example, Johnson and Johnson’s baby and beauty products are categorized as cash cows, suggesting that they do not need heavy investment in advertising since they already occupy a substantial portion of the market share. In addition, the American brand’s health products are classified as a star, implying that they can be improved to transition to the cash cow category.
Johnson and Johnson’s current pricing strategy involves a psychological approach to win customers. However, the company can incorporate other philosophies to remain competitive and distinguish itself from the competition. For example, it can consider implementing a cost-leadership method whereby it minimizes its prices to maintain the leading position in the industry (Pomering, 2017, p. 157). This approach will also help it in lowering its operational costs. In addition, the pharmaceutical firm has already established a strong distribution network. Currently, it has approximately 30 subsidiaries with operations in nearly 60 nations (Ball et al., 2018, p. 59). Therefore, the company can invest in the online distribution of its products by utilizing various online portals and shopping sites. Lastly, marketing is an imperative factor for achieving organizational success. Johnson and Johnson have invested in advertising via multiple media outlets, thereby creating awareness and reaching distant consumers. However, it is recommended that this corporation should improve its social media strategy by engaging its customers via networking sites such as Facebook, Instagram, YouTube, and Twitter.
Corporate Social Responsibility (CSR)
Corporate social responsibility is a program that organizations invest in for three purposes. For example, companies formulate CSR strategies for environmental wellness, social development, and corporate governance. However, these approaches can also help a corporation to improve its differentiation strategy since it incorporates elements of publicity and marketing initiatives. As such, Johnson and Johnson can fine-tune its current CSR philosophies to distinguish itself from the competition. The American brand’s vision statement affirms its commitment to promote eye health and learning in the greater society (Min et al., 2017, p. 58). Therefore, the multinational conglomerate can utilize its social responsibility to improve its public image in a number of ways. For example, by selecting the appropriate cause or advocacy, Johnson and Johnson can choose health advocacy in under-developing nations to conduct a campaign to enlighten the masses of the safety measures associated with the coronavirus pandemic (He and Harris, 2020, p. 176). Additionally, this corporation can incorporate renewable energy sources to focus on as part of its CSR initiatives.
Moreover, ensuring that everyone is involved in a company’s social responsibility is essential for differentiation. Therefore, Johnson and Johnson can ensure that every stakeholder in its corporate social responsibility is engaged in its goals and objectives. Involving the staff workers and other members of the organization will be essential for improving workplace morale and adding enthusiasm as they undertake their tasks. Johnson and Johnson can also opt for using social media avenues to drive its CSR efforts. Since social marketing has become an integral component of new promotion, the American giant can utilize these strategies to improve its brand differentiation (Lexchin, 2018, p. 38). Lastly, the multinational corporation can ensure that its CSR program reflects its brand. Therefore, it should match the company’s brand messaging, suggesting that there has to be a connection to its attributes such as its vision, mission, and core values. In essence, Johnson and Johnson can improve its brand differentiation by implementing the strategies identified above.
This paper has discussed the strategic environment of the world’s leading pharmaceutical corporation, Johnson and Johnson, and proposed strategies that can be incorporated to improves the brand’s differentiation approaches. A strength, weaknesses, opportunities, threats (SWOT) tool was utilized to identify the company’s core resources and capabilities. A PESTEL model was also adopted to explore the forces influencing the corporation’s strategies in its macro-environment. Lastly, Michael Porter’s industry analysis framework was utilized to examine Johnson and Johnson’s competitive environment. Therefore, the American brand exploits the suggestions identified in the paper to improve its differentiation. The company can adjust its marketing mix to enhance its product, place, promotion, and pricing models to increase its market share. In essence, corporate social responsibility can also enable the American brand to enhance differentiation.
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