Johnson & Johnson SWOT Analysis - Research Paper Example

J & J SWOT Analysis Company background Johnson & Johnson is a pharmaceutical and manufacturer of medical equipment, which is also as a US multinational company established in 1886. The company has a listing as among the Fortune 500 companies and in 2008 was among the most respected companies as per a survey by Barron’s Magazine. Founded by Edward, James, and Robert Johnson, the Company’s headquarters are in New Jersey and has operations across the world with establishments in over a hundred and seventy five countries. The company also has two hundred and fifty subsidiary companies that operate in almost fifty-seven countries worldwide. As at 2011, the sales of the worldwide subsidiaries totaled to $65 billion despite the product recalls and the legal issues that the Company has battled in recent years. Other than dealing in medical products, Johnson & Johnson Company also produces baby and beauty products whose consumption is overwhelmingly popular in many of the consumers in the world market. With this, this essay will delve into the SWOT analysis of the Johnson & Johnson Company and the ways in which the company may improve its operations in order to increase the profit generation levels. List of Johnson & Johnson products Acuvue contact lenses Corn Huskers Lotion Johnson Baby powder Aveeno Ponstan Euthymol Healthy Woman Johnson’s Baby Combatrim Ideally, the products manufactured by J & J are in three categories namely medical devices, diagnostics, and health care products with its employee base amounting to one hundred and twenty nine thousand people. As of 2012, these products brought in $67.2 in revenues, which translated to high profit margins for this pharmaceutical product manufacturer. SWOT Analysis Strengths One of the leading reputation that the Company holds is that it has attracted the admiration of many because of its involvement in the manufacture of consumer products that meet the quality standards in the globe. In 2011, the company received recognition from the UN for an award through its active participation in its campaign dubbed ‘Healthy Mother, Healthy Baby’, which influenced its brand to retain its market acceptability across the globe. The other strength that J & J Company has been that it operates in more than fifty-seven countries hence lowering their business operations risks through the widespread investing. The other strength is that J & J as a brand has been in existence for many years hence influencing its target market to have immense trust in the products manufactured by the parent company or its subsidiaries. Further, J & J has a vertically integrated supply chain in that the subsidiaries of this company have unity because they all have a common owner despite the fact that each of the supply chain members produces different products (Harrison, Lee & Neale 263). Therefore, J & J has control of its supply chain as this has helped in the improvement of coordination among the various subsidiaries spread across the globe. Moreover, J & J has diversified in the products that it manufacturers in that the Company has stable operations as this lowers the operational risk while increasing its value (Hendrikse J & Hendrikse L 41). This means that if one of the production systems brings in losses, then the other arms provide cash flow that may be applied in making investments. Therefore, this strength has helped J & J to operate in volatile markets and be profitable even when it is experiencing challenging times. Weaknesses Over the years, J & J has had to battle various challenges such as various litigations and product recalls that have made the Company to record dismal performance. Product recall In 2010, a subsidiary of J & J voluntarily recalled children’s medicine accessible over the counter totaling forty-three that appeared to have been endangering the lives of the users. McNeil Consumer Healthcare did so after conducting a routine check on its facility and ascertained that the products produced did not meet the quality and production specifications set in the USA. The product recall also affected the international shipments and this potentially harmed the brand name of the company. In case such a mishap occurs to the company in the future, there is a high likelihood that the Company would suffer losses despite its brand name that has been in existence for many years. J & J Company being a global brand also a weakness when it comes to brand reputation as some retailers might sell expired products without factoring the kind of damage that this would bring to the Company’s image Litigations Over the years, J & J has faced several court battles ranging from the use of the Red Cross symbol in some of their products as this Company was the first to register it as a trademark. Other litigations include the 2007 lawsuit between the Company and Abbott Labs over the production and distribution of Humira, which is a drug that manages arthritis. According to Holler, J & J also faced Boston Scientific in court over the patency right to Heart stent medical devices where the latter to compensate the former for infringement. Opportunities One of the opportunities that J & J have is that they have the potential of expanding their market to regions that do not have established subsidiaries for the Company. In essence, this is highly likely to increase profitability for the company and foster growth for its already well-established business structure. Further, the future for health care also presents trading and expansion opportunities for the Company as there is likely to be increased demand for health care products. Its arm that deals with beauty is also likely to experience high profits because the population is growing old and beauty products would be of more help to keep them young. The other opportunity lies in J & J looking into developing other product lines according to the needs of its target rather than focusing on continued production of medicines and pharmaceutical products. Threats For one, J & J has witnessed intense competition from rival companies and from the availability of low priced commodities that have saturated the drugs market. Some of the rivalry also comes from generic products that are the affordable substitutes to the products that J & J developing a threat to the profit generation capabilities for this pharmaceutical giant. Other than competition, the other threat for J & J is the production and distribution of counterfeit drugs that bare the Company logo as this decreases the value of the original products as intimated by Cheng (1517). The counterfeit drugs are low on quality and retail at a cheaper price as compared to the original product, which would translate to a reduction in the profit margins for the company. Other than this, the government regulations tend to be different across the various trading countries that the Company may have establishments in, which may not be a challenge as it protects the well being of the consumers. However, the cost implications attached to the implementation of government policies vary depending on the countries of operations hence increasing the operational costs for a company. Financial analysis of J & J Company Ideally, Johnson & Johnson’s sales market is in the US with at a percentage of 45 with Europe being its second largest market. The company also enjoys strong markets in Asia with 19%, which formed the basis for the proposed expansion plans for the Company. As per the data posted by Financial Analysis, the pharmaceutical arm of these companies' operations is the largest contributor to J & J revenues with a significant portion of its sales efforts having concentrations in the Asian and the European market. The return on assets for the first quarter of J & J in 2012 was the highest recorded by the company, which stood at a remarkable 26%. As compared to other companies such as Intel, J & J earns more money they actually spend meaning that the share repurchase program used by the company is an effective practice. In the 2011 financial year for J & J Company, the investments made totaled to over $1 billion that were in fixed assets making the company to have a balanced structure. The company’s share value was $20, 800 with the market price share being at $64,8 making the market evaluation to be high as compared to other companies in the same category. Recommendations J & J should expand its target market and products to include those that it has never had any investments in such as clothing and shoes. Rather than rely on revenues from medicine and other related products, J & J can also use this as a way of expanding its business presence across its trading countries. In turn, this will spread the risks on investments from one stream to include others that are likely to attract profits to the company. Lastly, J & J should also ensure that they conduct unprecedented inspections on its subsidiaries so as to be sure that their products are within the quality standards and also uphold human value. In so doing, the company will be able to continue competing with other companies in the same field to gain the target market that falls under their rivals. Works cited Cheng, M. M. (2009). Is the Drugstore Safe? Counterfeit Diabetes Products on the Shelves. Journal of Diabetes and Technology, 3(6), 1516-1520. Financial Analysis. Johnson & Johnson 2012 1Q financial analysis. May, 7. 2012. Web. 28 Nov. 2013. Harrison, Terry P., Lee, Hau L., and Neale, John J. The Practice of Supply Chain Management: Where Theory and Application Converge. New York: Springer, 2005. Print. Hendrikse, John W, and Hendrikse, Leigh. Business Governance Handbook: Principles and Practice. Cape Town: Juta Academic, 2004. Print. Hollmer, Mark. J & J victory: Appeals court tosses stent patent defeat. Fierce Medical Devices. April, 5. 2013. Web. 28 Nov. 2013. Read More