Andrei Gololobov Laura McMannis Svetlana Grimes

J&J: A Brief History Founded in New Brunswick, New Jersey by James and Edward Mead Johnson in 1885 ◦ Began selling surgical dressings ◦ (1921) Band-Aid & Baby Cream Industry Strategy: Decentralization Expansion ◦ (1940s) Ortho Birth Control & Ethicon Endo Surgery ◦ (1959) Tylenol (Developed by McNeil Labs) ◦ (1970s) Consumer Goods Beyond ◦ Expanding portfolio with mergers and acquisitions

J&J’s Dilemma Diversification across three industries ◦ Pharmaceutical Preparations ◦ Medical Devices ◦ Cosmetics/Toiletries Three industries require three different strategies Must balance its industry strengths while competing against less-diversified competitors

J&J’s Dilemma Revenue of Johnson & Johnson and its competitors 2009 Company Revenue for Industries (billion $) PharmaceuticalsMedical Devices Consumer Goods OtherTotal Johnson & Johnson 22,520 23,57415,803 61,897 Pfizer 50,009 Merck & Co. 27, Abbott Laboratories 16,486 14,27930,765 Boston Scientific 8,188 Bristol Myers/Squibb 18,808 Medtronic INC. 15,817 15,817 (2010) Procter & Gamble 78, Unilever 57,074.30

Current Industry Conditions Pharmaceutical Preparations ◦ Large, powerful sector ($145.4 billion in 2008) ◦ Dominated by well-established firms ◦ Frequent mergers and acquisitions ◦ Safety regulations and patent concerns ◦ Bulk revenue generated by Blockbuster Drugs ◦ Remained resilient in wake of the recession ◦ Moderate commercialization

Current Industry Conditions Medical Devices ◦ Diverse range of products ◦ Technology driven ◦ Incremental innovation ◦ Powerful source of future growth potential ◦ Frequent mergers and acquisitions ◦ Business to business transactions ◦ Low commercialization

Current Industry Conditions Cosmetics/Toiletries ◦ Sensitive to economic fluctuations ◦ Brand image is very important ◦ Safety and ethical concerns from consumers ◦ Sensitive to recessions ◦ Looking for ways to the life of a brand  Rebranding  Globalization ◦ Heavy commercialization

Assessment of present strategy By Accounting criteria: Z-score From 8.37 in 2005 to 4.90 in 2009 Total Trading Cycle 195 days in days in days in 2009 By Financial criteria: Total shareholder return is 11.3 while competitors like Merck only 1/3 of it

Marketing, Management & HR Global expansion (BRIC countries) Bigger spending on this function than on R&D Trends in healthcare New launches of innovative products M&A Restructuring Taking care of business and its people

SWOT Strengths: Diversity, Total revenue growth, Sales and Marketing capabilities, Robust financial capabilities Weaknesses: High reliance on small molecule drugs, Small input from in-house R&D Opportunities: Leverage therapeutic coverage of Medical devices and Health care divisions, Broaden position in Biologics, Concerta and Invega Threats: Failure of launch portfolio to deliver

Core Capabilities Reputation by Quality Best in Class Talented People Innovative Products Robust Pipelines Global Presence

Competitive Strength & Managing for Sustainable Growth Endurance and consistency in management approaches Four strategic principles: 1) Being broadly based in human health; 2) Operating in a decentralized manner; 3) Managing for the long term; 4) Staying focused on people and values.

Zeroing in on tactics Pharmaceuticals division: i. Redesigning priorities to support core products ii. Redeploying major resources to maximize opportunities with new products and solutions iii. Investing in prioritized internal and external development opportunities to ensure a strong product succession pipeline iv. Exploring new business models while continuing investments in emerging markets with growth potential

Planning for Action Harvesting industrial/consumer division revenue and create new products and markets Investing in biomedicals Cross-selling strategies Facilitate access to health care; Help in improving long term sustainability of health care system

Driving Forces for Change Pharmaceuticals ◦ Innovation ◦ Technological Advancements ◦ Globalization Medical Devices ◦ Innovation & Technological Advancements together Cosmetics/Toiletries ◦ Consumer wants ◦ Innovation ◦ Globalization

Competitive Forces Most Prevalent Pharmaceuticals ◦ Intensity of Competitor Rivalry ◦ Threat of Substitutes ◦ Customer Bargaining Power Medical Devices ◦ Threat of Substitutes ◦ Intensity of Competitor Rivalry Cosmetics/Toiletries ◦ Bargaining Power of Customers ◦ Intensity of Competitor Rivalry

Strength of Company within Industry Pharmaceuticals ◦ JNJ ranked 7 th ◦ Could slip out of top 10 due to recalls ◦ Abbott Laboratories ranked 10 th Medical Devices ◦ JNJ ranked 1st ◦ Acquisitions Cosmetics/Toiletries ◦ JNJ 1 st in skincare ◦ Repositioned selling strategy

Keys to Success REMAIN DIVERSIFIED Pharmaceuticals ◦ Innovate New Products ◦ Focus on Longevity ◦ Eliminate Recalls Medical Devices ◦ Maintain Market Share ◦ Technological Advancements Cosmetics/Toiletries ◦ Keep Doing What you Know ◦ Meet Consumer Demands

Overall Stands its own in regards to the industries it competes in. Overcome the lack of proper internal controls in certain divisions. Strategic framework to achieve greatness, but it must execute it more efficiently and effectively. Don’t stray from roots