Johnson & Johnson faces several external factors that influence its international business environment. Competitively, while barriers to entry are high, the threat of substitutes in the form of generic drugs poses a major challenge once patents expire. Buyers also gain bargaining power when generics emerge. Rivalry is intense in saturated markets where J&J competes. Contextually, political debates around healthcare, economic downturns, aging populations needing more medical care, rising health issues, and promising new technological fields both impact J&J and provide opportunities.

1. EXTERNAL FACTORS INFLUENCING
JOHNSON & JOHNSON
PRESENTED BY: DEEPSHREE
SHARMA
GUIDED BY: DR. MOHD. RUMZI
TAUSIF

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. 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. COMPETITVE ENVIORNEMENT-
FIVE FORCES MODEL

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. 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. 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. 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. 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. CONTEXTUAL ENVIRONMENT –
PEST ANALYSIS

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. 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. 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. • 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. 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. THANK YOU