Factors affecting Johnson and johnson

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What are the factors that affect Johnson & Johnson?

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Factors affecting Johnson and johnson

  1. 1. EXTERNAL FACTORS INFLUENCING JOHNSON & JOHNSON PRESENTED BY: DEEPSHREE SHARMA GUIDED BY: DR. MOHD. RUMZI TAUSIF
  2. 2. I. INTRODUCTION • Johnson & Johnson is the world's largest healthcare company. Founded in the United States in 1886, the company has been profitable for 75 straight years and currently operates 250 subsidiary companies in 57 countries. • Its products fall into three segments: • pharmaceuticals, with 39% of total sales; • medical devices and diagnostics, with 36%; • consumer products, with 25%.
  3. 3. II. ANALYZING THE ENVIRONMENT • Johnson & Johnson strives to anticipate the external factors that affect its international business environment, as well as adapt to those changes, it is important that it understands the environment in which it is operating. • The two sets of external forces that face the company are: -Competitive -Contextual.
  4. 4. COMPETITVE ENVIORNEMENT- FIVE FORCES MODEL
  5. 5. THE THREAT OF NEW ENTRANTS – HIGH BARRIERS TO ENTRY • The threat of new entrants is not of particular concern to Johnson & Johnson. Barriers to entry, especially in the industries of pharmaceuticals and medical devices, are extremely high if not unsurpassable. • The world’s top pharmaceutical companies have extensive manufacturing capabilities, distribution systems, and economies of scale that have been built up over decades and would be virtually impossible for a new entrant to replicate.
  6. 6. THE THREAT OF SUBSTITUTES – THE RISE OF GENERICS • The threat of substitutes is much more problematic than that of new entrants, especially in the pharmaceutical segment. The FDA requires that generic drugs be bioequivalent to their brand name counterparts, making them serious substitutes. • Once a patent expires, generic manufacturers are quick to reverse- engineer the formerly proprietary drugs and sell generic versions at a fraction of the cost. Virtually all the top pharmaceutical companies, Johnson & Johnson included, face an influx of upcoming patent expirations.
  7. 7. EXAMPLE- RISPERDAL • significant source of profits, with sales that totaled $3.5 billion in 2005 and surged 21% percent in the first quarter of 2006, to $1.2 billion. • the patent for Risperdal expired in December of 2007 and became available in generic form in October of 2008, the company’s revenue from pharmaceutical sales stagnated. In fact, in July of 2007, Johnson & Johnson announced plans to eliminate up to 4,800 jobs, citing patent expirations as the main motivation to trim the workforce and thus save money
  8. 8. THE BARGAINING POWER OF BUYERS – INFLUENCE OF GENERICS • When drugs are patent-protected, pharmaceutical companies enjoy a monopoly where they can set prices to include high profit margins. • However, once cheaper, generic versions of the drugs become available, buyers gain more power. Patients’ switching costs, an important element in determining the bargaining power of buyers, are fairly low, and price-sensitive buyers will likely switch to generic versions once available.
  9. 9. THE DEGREE OF RIVALRY – FIERCE AND CHANGING COMPETITION • While the numerous competitors remain fairly fragmented, mergers and acquisitions have increased rivalry, as the top firms’ areas of expertise began to overlap. • Rivalry is especially intense in saturated markets, such as the pain reliever segment, in which Johnson & Johnson competes with its products Tylenol and Motrin. • While the numerous competitors remain fairly fragmented, mergers and acquisitions have increased rivalry, as the top firms’ areas of expertise began to overlap. Rivalry is especially intense in saturated markets, such as the pain reliever segment, in which Johnson & Johnson competes with its products Tylenol and Motrin.
  10. 10. CONTEXTUAL ENVIRONMENT – PEST ANALYSIS
  11. 11. POLITICAL ENVIRONMENT – CHANGING POLITICS AND POLICIES • The politics on local, regional, national, or international scales can exert strong forces on businesses. • Since Johnson & Johnson operates worldwide, it must keep track of the political developments that may affect its business • In the Czech Republic, health care is the subject of a major political debate.
  12. 12. ECONOMIC ENVIRONMENT – THE CRISIS AND THE EURO • The economic climate is also important for Johnson & Johnson to analyze in order to predict when its business may face challenges, as well as when it can seize an opportunity for growth. • Operating in the European Union and larger European community means that Johnson & Johnson has felt the effects of the current economic crisis. • Aware of the crisis, the company has been able to plan for its impact, and fortunately, the effects on Johnson & Johnson have not been severe, as medical products remain necessities even in periods of economic downturn.
  13. 13. SOCIAL ENVIRONMENT – AGING POPULATION AND PUBLIC HEALTH PROBLEMS • There are two major social changes on the horizon that will both affect Johnson & Johnson as well as provide tremendous opportunities. The first is the aging population. • The gigantic baby boomer generation, consisting of those born between 1946 and 1964, has had a huge social and economic impact on the world since its birth. • The influx of senior citizens will create huge demands throughout all realms of medical care. • To cater to the aging population, Johnson & Johnson is pioneering developments in preventative medicine as well as less invasive surgery techniques.
  14. 14. • Another major social change affecting Johnson & Johnson is the phenomenon of surging rates of various health problems, especially in developed societies but spreading worldwide, from obesity and diabetes to cancer and mental disorders. • Though highly problematic for society, companies in medicine-related industries such as Johnson & Johnson are finding themselves with an increasing number of people to treat and cure.
  15. 15. TECHNOLOGICAL ENVIRONMENT – PROMISING NEW FIELDS • Predictive medicine, which entails predicting diseases based on genetics and preventing them, and personalized medicine, which involves managing a patient’s health based on his or her individual characteristics as opposed to following the more traditional “standards of care” model, are growing fields into which Johnson & Johnson can expand. • The company’s strong emphasis on research and development and its leadership in the medical devices and diagnostics segment put it in an excellent position to become a frontrunner in making new discoveries in these promising new technological fields.
  16. 16. THANK YOU

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