Johnson & Johnson Company’s Situational Analysis

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Table of Contents

Executive Summary
Trends Within The External Environment
Competitive Issues Within the Industry
The Firm’s Ability To Respond
BCG Matrix
Recommendations
References

Executive Summary

The present paper is devoted to the situational analysis of the Johnson and Johnson (JJ), a prominent international healthcare company based in the US (“Johnson & Johnson” par. 1). The analysis reveals that JJ’s strengths allow it to manage relatively well in the current economic difficulties and the situation of tough competition, but JJ is not unaffected by these primary threats to its current and near-future operation. The principal aim of the company is to keep and possibly advance its position in the market, which can be achieved through R&D investment in the most rapidly developing sectors (such as oncology).

Trends Within The External Environment

Social Trends

The significant social trends include the promotion of education, the decrease in the people’s reliance on religion, and the promotion of human rights and equality, all of which allows the population of the world to realize their healthcare needs. All these trends are an opportunity for JJ.

Technology Developments

The main trend in medical technology development is its constant improvement (“Our Health Care Products” par. 3). To stay competitive, JJ needs to invest in the R&D continuously, which can be regarded as an opportunity to discover new products.

Economic Factors

The world is still recovering from the recession, and the economic growth is minimal or nonexistent (UN 1-4). This trend is a threat to the international JJ: it appears to have resulted in a decrease of the company’s sales and income in 2015 (“Johnson & Johnson Reports” par. 1). Still, JJ is the 5th largest pharmaceutical and 6th largest biotech and consumer healthcare company in the world (“Investor Facts” 1). Its size, reputation and experience provide notable leverage in the situation of the crisis.

At the same time, the US tends to demonstrate higher economic growth rates than most countries (UN 93-95). About 50% of JJ’s operations are carried out in the US, which makes this economic trend an opportunity that JJ is already exploiting (“Investor Facts” 1; Johnson & Johnson Reports” par. 2).

Demographic Shifts

The ageing of the population of the world is the logical consequence of increased lifespan (WHO 3-4). This trend is an opportunity for JJ since the processes of comfortable ageing are concerned with healthcare products, many of which the company offers (for example, those for diabetes or vision care).

Political/Regulatory Elements

Healthcare has always been promoted at governmental and international levels (WHO 4). The existing patent policy awards the temporary exclusive right for a new drug to the company that invents it (Mankiw 243). JJ regards this trend as an opportunity and actively invests in R&D (“Our Health Care Products” par. 4).

Another political trend is the current geopolitical tensions, including terrorism, sanctions, and the refugee crisis (UN 1-2). This threat is connected to economic difficulties that have been mentioned. However, the refugee crisis could be regarded as the extra influx of customers. Still, the prices of JJ are not aimed at low-income consumers, and it may miss this opportunity.

Cultural Trends

The achievements of the modern healthcare are celebrated by the modern society (WHO 4). Taking care of one’s health for the sake of beauty and longevity is a cultural trend and an opportunity for JJ that is being used in marketing campaigns.

Competitive Issues Within the Industry

According to the Wall Street Journal, the competitors of JJ include Pfizer, GlaxoSmithKline, Abbott Laboratories, and others. It can be concluded that none of them targets the exact same segments of the industry as JJ. The competitive issues of the industry require R&D investment, the development of new drugs and products, and the highest quality standards (“Global Pharmaceutical Industry” par. 2; “Johnson & Johnson” par. 3-4). Prices are also a significant aspect, and JJ is not the cheapest brand in the list (“Our Health Care Products” par. 1-4).

The Firm’s Ability To Respond

From the information presented above it follows that the company’s strengths include its size, reputation, investment in R&D, products diversification, and rational segmentation. The weaknesses of the company include the difficulties of operating an international organization and relatively high costs. The weaknesses of the company make it susceptible to the mentioned threats, but its strengths ensure the possibility of avoiding them while exploiting most opportunities.

BCG Matrix

Fig. 1 offers a BCG matrix created with the help of Masterson and Pickton marketing text (229). The information concerning the products is taken from the official website of the company and the latest financial report.

The wound care product line is close to becoming the dog since it constitutes about 7% of the least profitable consumer sector. Immunology line is the star of the most profitable and rapidly developing sector of JJ, the pharmaceutical segment. Oncology is the problem child of the same division that is bordering on becoming the star: it is very fast developing, but it constitutes only about 17%. The Specialized Surgery Devices are becoming the cash cow: they provide about 43% of the devices division, but the growth in the line has slowed down.

Recommendations

JJ is can manage the major threats of the economic crisis and competition due to its strengths. Still, it is not unaffected by the current economic situation. It is recommended that the company works to retain its current position in the market by ensuring its competitiveness through R&D. The BCG matrix demonstrates that the Oncology segment has the potential of becoming a star. Consequently, it is recommended to focus the attention on it. Finally, it is suggested that the company pays particular attention to the US market in the short term to be able to exploit the opportunities of this market segment, but the rest of the segments should not be neglected in the long term.

References

“Global Pharmaceutical Industry.” Statista. 2016. Web.

“Investor Facts.” Johnson & Johnson. Johnson & Johnson Services, Inc, 2014. Web.

“Johnson & Johnson Reports 2015 Fourth-Quarter Results.” Johnson & Johnson. Johnson & Johnson Services, Inc, 2016. Web.

“Johnson & Johnson.” Wall Street Journal. Dow Jones & Company, Inc., 2016. Web.

Mankiw, N. Gregory. Principles Of Macroeconomics. New York: Cengage Learning, 2014. Print.

Masterson, Rosalind, and David Pickton. Marketing. London: Sage Publications, 2014. Print.

“Our Health Care Products.” Johnson & Johnson. Johnson & Johnson Services, Inc, 2016. Web.

UN. World Economic Situation and Prospects 2015. United Nations, 2015. Web.

WHO. World Report on Ageing and Health. Geneva: WHO Press, 2015. Print.

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