Johnson & Johnson pursues a business-level strategy that is 75% differentiation and 25% cost leadership. At the corporate level, its strategy focuses on vertical integration, product differentiation, and operational economies of scope across its consumer products, pharmaceutical, and medical devices segments. The presentation recommends Johnson & Johnson further integrate forward, continue ebola treatment research, and create a rewards program to mitigate threats from rivals.

1. JOHNSON & JOHNSON:
STRATEGIC ANALYSIS
Presented by:
Thea Lindquist, Delaney
Begin, Kylie Hoffman,
Miguel Perez, & Kelly
Young

2. OBJECTIVES
Analyze the external opportunities and threats of Johnson & Johnson.
Analyze the internal strengths and weaknesses of J & J.
Identify the Business- Level Strategy.
Identify the Corporate- Level Strategy.
Make recommendations for Johnson & Johnson’s future.

3. BACKGROUND
Johnson has been operating since 1886,
and currently operates in 60 countries
and employs 128,700 people worldwide.
They have an increasing industry
growth, with increasing annual sales
growth from 65 billion dollars in 2011
to 78.1 billion dollars in 2013..
They distribute consumer products,
prescription products, and medical
devices and diagnostics.

4. INTRODUCTION
This analysis focuses in on their
consumer product segment.
Their consumer products consist of
baby care, hair and skin care, wound
care and topicals, oral care, over-
the-counter medications,
nutritionals, and vision care.
Their name brand products that they
own and distribute are comprised of
popular brands, such as, Listerine,
Neutrogena, Tylenol, Splenda, Band-
Aid, Aveeno, Sudafed, Acuvue, and
many more.

5. EXTERNAL ANALYSIS
Johnson & Johnson
Threat of Substitutes
Medium/High
-Threat of generic prescription drug substitutes
-FDA requirements
-Consumer preference for generic drugs
-Big box retail stores (Target and Wal-Mart)
Threat of Rivalry
Medium
-Many competitors (Unilever, Pfizer Inc., Novartis,
-Industry leader in pharmaceuticals and health
products
- increasing annual sales growth from 65 billion dollars
in 2011 to 78.1 billion dollars in 2013.
Threat of Suppliers
Low
-Strong & stable relationship with suppliers
-Access to raw materials
-Supplier diversity program
-Technology patented to stimulate innovation
- Suppliers unlikely to forward integration
Threat of Buyers
Low
-Products are patent protected
-Advantage in cost & prices
-Customers are fragmented
-Technology patented to stimulate innovation
-80% of distribution to buyers dependent on
distributors and contractors.
-Diversified company
Threat of Entry
Low Threat
-Economies of scale- 275 companies in 60 countries
-Technology patented to stimulate innovation
-Product differentiation
-Brand loyalty and brand recognition with customers
- Government policies

6. EXTERNAL ANALYSIS:
PORTERS FIVE FORCES
Threat of Entry is low:
Economies of scale
275 companies located in 60 countries around the world,
along with 71.3 billion dollars in sales in 2013.
Cost advantages independent of scale
Patent technology
Differentiation
Brand identification and brand loyalty
Government policies
Anti-trust & competition laws, Environmental laws &
regulations

7. EXTERNAL ANALYSIS:
PORTERS FIVE FORCES
Threat of Suppliers is low:
Unlikely suppliers integrate forward
Firm has purchased $1.88 billion dollars from suppliers
Differentiated product
Access to raw materials
Firm is significant to suppliers
Supplier Diversity Program

8. EXTERNAL ANALYSIS:
PORTERS FIVE FORCES
Threat of Buyers is low:
Buyers for focal firms output
Many companies rely on J&J
Differentiated Product
Products are patent protected
Product is significant to buyer
80% of distribution to buyers dependent on distributors and
contractors.

9. EXTERNAL ANALYSIS:
PORTERS FIVE FORCES
Threat of Rivalry is medium:
Large number of competitors
Unilever, Abbott Laboratories, Pfizer
Increasing growth
Annual sales growth
Fastest growing pharmaceuticals company

10. EXTERNAL ANALYSIS:
PORTERS FIVE FORCES
Threat of Substitutes
is medium to high:
Pharmaceuticals
Generic prescription drugs
Store brand drugs

11. EXTERNAL ANALYSIS:
COMPLEMENTORS
Consumer Products:
Luvs and Pampers compared to
J&J diaper rash cream
Toothbrush and mouthwash
brands compared to J&J’s
Listerine

12. EXTERNAL ANALYSIS:
GENERAL SEGMENTS
 Demographic trends
 Baby boomer generation
 Political/legal conditions
 FDA regulations
 Cultural trends
 All-natural products
 Technological changes
 IBOT license
 Specific International Event
 Ebola/Virus outbreak

13. EXTERNAL ANALYSIS:
MATURE INDUSTRY STRUCTURE
Industry characteristics:
Technology stands exist
FDA regulations
Increasing international competition
Outsourcing to small low-cost producers overseas
Industry exit is beginning
Healthcare reform
Antibiotic research and development

14. INTERNAL ANALYSIS
Resources
of Johnson
& Johnson
Reputation
Economies
of Scale
Policy
choices
TechnologyPatents
Human
Resources
Advertising
Strategies
 Is it Valuable?
 Is it Rare?
 Is it costly to
Imitate?
 Is it supported
by the
Organization?

15. INTERNAL ANALYSIS: RESOURCES
Reputation and Brand
Loyalty
Valuable because it
mitigates threat of Rivalry &
Substitutes
Costly to imitate and rare
because of unique historical
conditions
Sustainable Competitive
Advantage
Resource V R I O
Reputatio
n
& Brand
Loyalty

16. INTERNAL ANALYSIS: RESOURCES
Marketing & Advertising
Strategies
Mitigates threat of Substitutes
Exploits brand loyalty and
reputation
Emphasizes “Caring” for families
Rare & Costly to imitate because
few companies have been in
business for as long as they have
Resource V R I O
Marketing
&
Advertisin
g

17. INTERNAL ANALYSIS: RESOURCES
Economies of Scale
Reduces threat of new entrants
Exploits opportunity of increased
profits for the firm
A new entrant would have to
invest heavily to reduce their cost
to compete with same low-cost
position as Johnson & Johnson
Costly to imitate because of
social complexity and patents
Resource V R I O
Economi
es of
Scale

18. INTERNAL ANALYSIS: RESOURCES
Learning Curve Economies
Mitigates threat of suppliers
Exploits the opportunity of
maintaining customer loyalty
Rare and costly to imitate
because of unique historical
conditions
Allows them to move down the
learning curve successfully
Suppliers wouldn’t jeopardize
sales with Johnson & Johnson
Resource V R I O
Learning
Curve
Economi
es

19. INTERNAL ANALYSIS: RESOURCES
Human Resources & Policy
Choices
Mitigate threat of rivalry and
substitutes
Rare because of constant
innovation and first-mover
pioneers
Costly to imitate because of
employee loyalty and training
Resources V R I O
Human
Resources
& Policies

20. INTERNAL ANALYSIS: RESOURCES
Technology & Patents
 Important resources that help
with other resources in
maintaining a sustainable
competitive advantage
But, they are not rare or costly to
imitate
Patents only last a certain
amount of years before other
companies can begin to make
generic products that imitate
Johnson & Johnson
Technology is valuable, but not
rare or costly to imitate
Resource
s
V R I O
Technolo
gy &
Patents

21. BUSINESS LEVEL STRATEGY
75% Differentiation
Strategy
25% Cost Leadership
Strategy

22. BUSINESS LEVEL STRATEGY
Differentiation
Advertising
Brand Loyalty
Product Mix
Human Resources
Cost Leadership
Economies of Scale
Learning
Economies of scale
Policy Choices

23. BUSINESS LEVEL STRATEGY
Economic value achieved through advertising
Consumer marketing strategies. “Johnson & Johnson: More than a
century of caring”.
 Emphasize highest care and quality products.

24. BUSINESS LEVEL STRATEGY
Customer brand loyalty
Brand recognition. “To build
long-term equity of their
brand by building sustainable
customer loyalty and building
shareholder value over time”.
Product mix vital for to
compete with rivals.

25. BUSINESS LEVEL STRATEGY
Consumer Products
Baby care
Hair and skin care
Wound care
Oral care
Over-the-counter
medications
Nutritionals
Vision care
Name Brand
Listerine
Neutrogena
Tylenol
Splenda
Band-Aid
Aveeno
Sudafed

26. BUSINESS LEVEL STRATEGY:
POLICY CHOICES
Sourcing raw
materials
Team up w/
suppliers
Toxicology
assessment
Clinical
evaluation
In-use
testing
Continual
evaluation

27. CORPORATE LEVEL STRATEGY
Consumer Products Pharmaceuticals Medical Devices

28. CORPORATE LEVEL STRATEGY
Vertical Integration
Vertical Integration
• Vertical Integration
• Product Differentiation
• Operational Scope of
Economies

29. VERTICAL INTEGRATION: VALUE
CHAIN
Market &
advertise
Distribute
final
product
Package &
label
Manufactu
re &
develop
ingredient
s
Raw
materials
from
suppliers
Research &
develop
Forward vertically Integrated
Reduced transaction cost
Quality and consistency control
Good reputation and trustworthy
reputation

30. PRODUCT DIFFERENTIATION
 Related Corporate Diversification
Related-Constrained: less than 70% of firm revenues comes from a
single business, and different businesses share numerous links and
common attributes.
 The three markets share similar inputs, production technologies,
distribution channels and similar customers.
Innovation
Continuous innovation with technologies in all aspects of product
manufacturing
Hiring successful managers that committed to producing these results

31. OPERATIONAL ECONOMIES OF
SCOPE: ACTIVITY SHARING
Common Quality
Control System
• FDA Regulations
• Research and
Development
Common Advertising
Efforts
• Shared Consumer
• Related to Health
Field Field
Common Distribution
Channels
• Retailers
• Hospitals

32. OPERATIONAL ECONOMIES OF
SCOPE: CORE COMPETENCIES
Managerial
& Technical
Know-How
Identify
Develop
Acquire
Market Products
Consumer
Goods
Pharmaceuticals
Medical Devices

33. Strategies Threats
Mitigated
RECOMMENDATIONS:
FORWARD INTEGRATE FURTHER
 Open Kiosks
 Distribute
Vending
Machines
 Decrease
Rivalry
 Increase
Barriers To
Entry

34. RECOMMENDATIONS:
CONTINUE EBOLA TREATMENT RESEARCH
Bacteria
Killing
Hand
Sanitizer
Strategies Threats
Mitigated
 Decrease
Rivalry
 First Movers

35. RECOMMENDATIONS:
CREATE REWARD OR INCENTIVES PROGRAM
Strategies Threats
Mitigated
 Rewards Card
 Scans At
Multiple
Retailers
 Redeemable
Coupons And
Discounts
 Decrease
Rivalry