Johnson & Johnson Firm’s Strategic Management
A look into Johnson & Johnson’s website reveals insightful information about the company’s operations, products and services, team composition, and structures. To begin with, Johnson & Johnson is a pharmaceutical company that is engaged in the manufacture, sale, research, and development of health care products. The company operates under three segments: pharmaceutical, medical devices, and consumer. The pharmaceutical segment primarily focuses on such therapeutic areas as infectious diseases and vaccines, oncology, immunology, pulmonary tension, neuroscience, metabolism, and cardiovascular. Meanwhile, the medical devices segment is mainly concerned with the provision of equipment used in the cardiovascular, orthopedic, eye health, surgery, and diabetes fields. On the other hand, the consumer segment includes such products as oral care, women’s health, baby care, would care, over-the-counter pharmaceutical, and the beauty markets.
Company’s Strategies
The website also contains elaborate strategies for growth and innovation, future investments, global diversity, citizenship, and sustainability. Its growth and innovation strategy is to take ownership and determine a supply base that offers products and services that are not only of high quality but also reliable and compliant. To this end, the company constantly encourages its suppliers to consider innovation while sourcing and to deliver new business models that add to its mutual objectives for streamlined processes and growth (Our Strategies to Deliver Value, n.d). This is an emergent strategy because the company has no choice but to embrace new technology in response to the rising needs of patients and customers.
In investing in the future, Johnson & Johnson often tracks new markets for development and seeks to partner with suppliers who share its vision of emerging trends. In addition, the company strategically forges long-term relationships with like-minded organizations that are willing to collaborate with it to bring innovation and creativity to the marketplace. Effectively, the company ensures that its procurement efforts are rooted in its Credo to obtain products and services of the highest quality at a fair cost, which brings value to it and its partners. This is a deliberate strategy because the company intentionally picks which organization to partner.
The strategy of global diversity, citizenship, and sustainability is executed by embracing its role as a leader in the industry. To maintain this, Johnson & Johnson must shape and uphold the highest corporate citizenship and sourcing standards. Among its agendas is to partner with its suppliers in fostering social and environmental improvements across its value chains. Johnson & Johnson has put measures in place to forestall and manage risks in addition to ensuring that it complies with the laid down procurement processes and policies. This is both an emergent and deliberate strategy since it serves as a compliance tool and a commitment to serve the greater good.
Five Forces Analysis
Michael Porter’s five forces have significant implications on the profitability of Johnson & Johnson within the pharmaceutical industry. These forces include the threat of new entrants, the bargaining power of suppliers, the bargaining power of buyers, the threat of substitute products, and rivalry among the existing players (Zhao et al., 2016). Johnson & Johnson can use these forces to build a solid competitive advantage as well as explore more profitable opportunities.
Threats of New Entrants
When new entrants enter the industry, they pose considerable risks to Johnson & Johnson as they come with reduced prices, provision of new proposition values to customers, and lowering the pricing strategy. The company has no choice but to confront these challenges and come up with effective response strategies that will protect its competitive advantage. Effectively, it can resort to innovating new products and services to bring new customers and retain old ones. This is in addition to investing in research and development, training its employees, and building economies of scale.
Bargaining Power of Suppliers
Suppliers who dominate the drug manufacturing industry have the power to decrease Johnson & Johnson’s profit margins by using their negotiating position to extract higher prices from the company (Barney & Hesterly, 2014). To address this, Johnson & Johnson should build an efficient chain of supply that comprises multiple players and consider experimenting with different product designs to reduce overreliance on a single supplier.
Bargaining Power of Buyers
Buyers can put much pressure on the company by insisting on getting the best products and services at minimum prices. If the customer base is small for the company, its bargaining power becomes higher by demanding offers and discounts. Thus, one of the most effective ways of dealing with this is to build a huge customer base and rapidly focus on new product innovations.
The Threat of Substitute Products and Services
Some of Johnson & Johnson’s products like baby soaps and women’s beauty products can be easily substituted at a cheaper cost. For instance, consumers can substitute the Johnson & Johnson baby soap with Dettol or Protex and get the same or better results at a lower cost. The company, hence, should be focused more on service orientation rather than the product. This will ensure that customers will get a more significant reason to go for the brand other than the product alone.
Rivalry Among Existing Competitors
Undeniably, the competition among players in the pharmaceutical industry is monumental. For instance, Johnson & Johnson was one of the first companies to produce the COVID-19 vaccine. However, today, there are more than 20 companies with vaccines. This has indeed drastically cut into Johnson & Johnson’s profit margins. Although competition is good for business as it creates opportunities for innovation, it also reduces the market share of an organization.
VRIO Framework
References
Barney, J. B., & Hesterly, W. S. (2014). Strategic management and competitive advantage (5th ed.). Pearson Education
Our Strategies to Deliver Value. (n.d). J&J.
Zhao, Z.-Y., Zuo, J., Wu, P.-H., Yan, H., & Zillante, G. (2016). Competitiveness assessment of the biomass power generation industry in China: A five forces model study. Renewable Energy, 89, 144-153.