Research and Analysis of Business Problems - Assignment Example

A case study on Johnson & Johnson Table of contents A case study on Johnson & Johnson Table of contents 2 Executive summary 3 Sense 5 Solve 13 Build 14 Achieve 14 Executive summary The main of this project was to evaluate the performance of Johnson and Johnson and to determine the main problems which they are facing are. For this a thorough analysis of the company was done, their goal and mission statement was evaluated and then their actual performance was compared against it. The existing gaps helped us to determine where the problem lies. Then by using different cause-effect analysis tools the root cause was determined. A list of fissile solution was made and then by conducting cost-benefit analysis the best solution was selected. An effective plan was made to implement the solution and it was also determined that how and when the solution should be evaluated. Position Johnson & Johnson is a well known name for the world. The company has been part of people’s life for more than 120 years as it is considered as “the world’s premier consumer health company; largest and most diverse medical devices and diagnostics company of the world; the fourth-largest biologics company and seventh-largest pharmaceuticals company (Johnson & Johnson-a, “Our Company”). The company do not follows a list of written mission statements; rather it has a single page of “Credo” in which they clearly mentioned their primary responsibility toward the doctors, nurses, mothers, fathers and all who uses the company’s products and services. It is also mentioned in credo that company has a responsibility to maintain high quality and reasonable prices for which they have to keep a constant check on the cost incurred while production and distribution practices. The company declared that it has a responsibility to dispatch customers order at proper time and in an accurate quantity. They expressed their responsibility toward suppliers and distributer to give them a fair opportunity for profit making. While expressing the company’s responsibility toward its employees, it has been stated that they should get fair and reasonable compensation, the company should identify their merits and provide them an opportunity to grow further, and they should receive a proper working condition, job security along with a freedom to express them. The company clarified its responsibility toward the society and promised to actively participate in social development and educational practices. They also emphasized on following fair practices for protection of environment and natural resources. Shareholders are of prime importance for any business, and the company expressed that they will make sound profit for their investors. To retain the core competency, Johnson & Johnson will be taking research and innovation on a broader scale and by maintaining a conservative approach they will retain certain portion of the profit in form of reserves so that in the harsh time, the company does not has to compromise with any of their priorities (Johnson & Johnson-b, “Our Credo”). To fulfill all these goals company has taken many steps and with the passage of time sustainable growth became an important part of the company’s mission statement. At present the company is paying emphasis on protecting the environment and they called it “Our Healthy Planet 2010”. The main objectives under this goal are discussed below: Energy Use—Carbon Dioxide Reduction, Water Use, Paper and Packaging, Waste Reduction, Product Stewardship, Environmental Literacy, Transparency, Biodiversity, Compliance, External Manufacturing (Johnson & Johnson-c. “Our Healthy Planet 2010 Goals”). Thus the company’s credo and its goals help one to understand what the company promises to its stakeholders and on comparing the real performance of the company, existing gap can be determined. Sense From many years Johnson and Johnson has been considered among the most successful companies of the world (Interactive, 2005). In the financial year 2008, the company managed to retain a healthy growth in their financial performance in spite of the economical slowdown and it net sale rose of $63.7 billion which was 4.25 percent higher as compared to last year. (Source: Johnson & Johnson-d, p. 1) The company offers numbers of products and services to its consumers, hence it has a wide range of product portfolio which can be segregated as follows: (Source: Johnson & Johnson-d, p. 21) After considering the segmentation, it can be said that the pharmaceutical sector contributed the most to the net revenue of Johnson & Johnson, but in the financial year 2008, performance of pharmaceutical sector was not up to the mark, its sale dropped by 1.2 percent as compared to the previous year. So there must be certain reasons behind such drop in the pharmacy sale. In the past many such cases have emerged which hampered company’s reputation. For example in 1982 Tylenol medication, a product of Johnson and Johnson that was contributing round 15 percent of the net profit faced great problem when 7 people died by consuming drug containing cyanide. The news spread and created a state of panic everywhere and as a result the company faced market value loss of $1 billion. But the same case happened in the year 1986 and again the reputation of the company was badly hampered. Just to hide the company’s fault, they stopped the production of Tylenol for some time and introduced a new packaging for their products to protect them. By using its public relation management, the company soon reestablished its public image. This was not the end of negligence as many such cases are still taking place and they reveals the problem in quality standard of the company (Greyser, p.1-3). The company has a habit of hiding many important information regarding side effects which can develop due to use of any specific product, like Tylenol which contain high dose of Acetaminophen or presence of 1,4 dioxane in the baby products. Such practices indicated a problem in company’s corporate social responsibility (CSR). Everyone is aware of weak economic state of drug industry, and the threat which this industry is face by long term troubles like high competition in the generic drug sector, narrow pipelines and tough regulatory environment followed in many developed as well as developing countries. Hence undertaking all these factors, Johnson and Johnson has announced a major job cut between 3615and 4820 which was almost 4 percent of their current global workforce (120,500 person) in August 2009. The company had also declared the fact that they are going to shut down more than one production facility. The company’s head of investor relationship announced that it was a cost cutting strategy adopted by the management for the pharmaceutical sector. So it can be concluded the company’s pharmaceutical business is not performing well due to excessive diversification and heavy investment in the research department (21percent of the net revenue). Uncover Among all the major problem which Johnson and Johnson is facing at present, its quality problem is the most vital one because it directly affecters company’s reputation, its market share and its total revenue. The problem in company’s quality standards can be well understood if one considers the Tylenol’s wrong labeling or presence of 1,4 dioxane in few baby products. In the year 2006 a report was published which revalued many hidden facts regarding therapeutic ratio of many drugs and their harmful impacts. According to William M. Lee (MD of the University of Texas Southwestern Medical Center) Johnson and Johnson has recommended maximum of 8 piles of within the normal doses Tylenol as normal doses which accounts to 4,000 mg of acetaminophen, but such high doses can be fetal if consumed for 4 to 5 days. In November 2006 a paper published on Hepatology disclosed that all those patients with lever problem are more susceptible to face fetal condition on intake of high doses of acetaminophen. The company knew this fact from long back, but just to attain high market share over aspirin, they marketed their product vigorously and suppressed all safety matters (Gardner, “Tylenol Toxicity Terror”). Again in February 2008 the company announced recalling patches of fentany because a cut was detected in the company’s reservoir which may lead certain side effects in people who take it. The Food and Drug Administration gave a warning in December regarding Duragesic and its equivalent and Fentanyl is present in the patches of Duragesic . Fentanyl is mostly a cancer related drug, but due to its intake 120 people died in 2005. Though the company paid millions of dollars as compensation, but still the problem of poor quality standards existed (Ifindtrends, “Johnson & Johnson Pain Patch Recall - J&J sais Leak Can Cause Accidental Overdose”). As declared by Johnson and Johnson, market is expanding in BRIC countries at a faster rate and the company is market leader in the baby care products which is around 69 percent. (Source: Chao & Wang, “China Investigates Baby Products”) Chinese health authorities investigated that certain baby care products produced by Johnson and Johnson contain carcinogenic (cancer causing) chemicals. After this information was made public, Shanghai-based Nonggongshan Supermarkets Corporation stopped sale of Johnson and Johnson’s products (shampoo, soap and lotions) in more than 3500 outlets. American nonprofit health and environmental groups reported that Johnson and Johnson’s products contain formaldehyde and 1,4 dioxane in small concentration in baby care products. The report criticized the manufacturing process and quality standards of the company and also the company’s practice of not disclosing full description on the label. The company gave an explanation that these two products are present in trace levels and these developed within the process of manufacturing. These compounds are responsible for making the products gentle and free from bacteria. The company also said that as per U.S. Food and Drug Administration and few other government agencies trace level of these products are not harmful, but on the other side Lisa Archer from the Breast Cancer Fund warned that these two chemicals can lead to cancer even if they are in trace amount and it is the company’s responsibility to amend their production and come out with baby products which are free from these chemicals (Chao & Wang, “China Investigates Baby Products”). Another cancer drug of the company called Intelence was launched in January 2009 is facing great quality problem. When the drug was used in combination with therapy for HIV treatment, it results into serious skin rashes. In Canada and Europe the doctors are asked to stop prescribing this drug. Recently many patents have suffered with deadly skin rashes and one patient died. Undertaking all these cases, the US Food and Drug Administration (FDA) has asked the company to take serious action. The company has also received a violation letter from US authority for making fake advertisement of Ertaczo, a cream used against fungal infection (ringworm, athlete’s foot and jock itch). On clinical trials it was found company’s assurance for 100 remedy from fungal infection was not true. The advertisement doesn’t provide any information regarding safety measures and precaution (Zacks Investment Research, “Twin FDA problem for Johnson and Johnson”). There are few of the examples which assist one to understand the existing quality standards problem in Johnson and Johnson. To understand the root cause behind the quality problem, cause and effect analysis technique was adopted, a brainstorm section was done and on the basis of the data collected, fishbone analysis was carried out. Fishbone diagram This diagram helps us to identify what are the main causes behind poor quality standards of company’s products and high degree of variation in the quality. 1. It can be concluded that it main cause in lenient approach of management for retaining high quality standards. So if this problem has to be solved, the management has to come out with better quality standards. It has been found that to capture market, many of the important information are not displaced on the labels, and hence the degree of transparency is quite low. So to bring any major change, management has to change their attitude and has to genuinely follow Corporate Social Responsibility (CSR). 2. As per the information revealed by Johnson and Johnson (J&J), their Human Resource Management (HRM) practices are quite high and their employees are highly satisfied. But for any company its work force should be its strategic partners . These are the one who actual perform the task at root level, hence they can understand the root cause of deviation in quality of output. So management should give them an opportunity to come up and actively participate in problem solving processes. 3. The company’s quality management procedure is not as per the mark, hence they should update it and should incorporate Total Quality Management (TQM). 4. With passage of time, governments are making their quality standards more stringent, so as per the change in legal standards company should update it policies. 5. The company can shift from post-active measure toward pro-active measures, they should go on checking the quality of their product on regular basis, or company can outsource this task to prevent high cost of production. Solve Undertaking the resent market condition and company’s present state all the possible measures discussed above were evaluated. It was found that that it is not possible for the company to outsource the quality check task and neither can too much investment should be done because it will disturb the financial structure of the company. So the best way to solve the problem in incorporation of TQM. For introduction of TQM, certain changes have to be introduced in throughout the organizational structure. Before undertaking TQM in J&J, a thorough analysis of the whole process has to be carried out and a change management plan should be introduced. This will not only assist the management to carry out the whole process smoothly, it will also help the employees to take up change and to adjust comfortably. Build Before finalizing the plan of implementation of new changes in the organization, it is important that cost benefit analysis has to be conducted. Cost benefit analysis will help the management to determine the feasibility of the new project which will be introduced to bring the required change. Considering the historical data one can find out the annual revenue loss due to poor quality. Cases of low quality standards effects market reputation badly and it takes many years to regain consumer’s band loyalty. TQM is more like a system of performing things in a more organized way, it requires more effort from the human side and the high degree of their investment. If not only assist the company to enhance and retain quality, it will also help management to gain a strong brand image and to expand their market share. So while considering the benefits, long-term benefit has to be considered in term to increased revenue, new market acquisition, better brand image, goodwill, customer satisfaction and loyalty, better support from government, and higher employees’ satisfaction. So it is clearly visible the project of implementation of TQM highly profitable in long-term prospective. TQM will help the company to perform the social responsibility in much better way and to follow business ethics. Achieve The management will formulate a change management board who will analyze the existing problem in manufacturing and quality standards of company. Then the employees will be asked to participate in change management procedure. They have better understanding of the procedures and in practice they will be the one who will actually use TQM tools. After thorough analysis and understanding all the major decision has to be documented and throughout the process it will act as a mile stone. Before incorporating any major change, proper training programs should be arranged so that employees can learn what TQM stands for how to imply TQM tools. As stated by Milakovich in 1990, “TQM is a total organizational approach for meeting customer needs and expectations that involves all managers and employees in using quantitative methods to improve continuously the organization’s processes, products and services.” (Psychogios & Priporas, p.2). The employees should be made aware of tools of TQM which are- Continuous Improvement Employee empowerment and quality circles Benchmarking Just In Time Other TQM Tools like Six Sigma, Pareto Charts, cause effect diagrams and other statistic software. Ones the employees get proper training on implementation and utilization of TQM concept, this concept should be introduced in different department step by step. Care should be taken to identify any deviation in the process and it should be removed. Periodic evaluation is quite necessary for which different reports should be examined minutely. For evaluation, the management can undertake financial report to determine percentage increase in sale and reduction in operating expenses. Other miscellaneous expanses like depreciation, cost of repair & waste should be monitored; reduction in production cycle time and lesser deviation in quality standers are the indicators that TQM is functioning effectively. Reports from marketing and Human Resource department should also be evaluated. Reference Chao & Wang. China Investigates Baby Products. March 19, 2009. The Wall Street Journal. November 11, 2009. . Gardner, F. Tylenol Toxicity Terror. June 10/11, 2006. Pot Shots. 2009. November 11, 2009. . Greyser, A. S. Johnson & Johnson: The Tylenol Tragedy. Oct 12, 1982. Harvard Business School. Ifindtrends. Johnson & Johnson Pain Patch Recall - J&J sais Leak Can Cause Accidental Overdose. February 13, 2008. November 11, 2009. . Johnson & Johnson-a. Our Company . No date. November 10, 2009. . Johnson & Johnson-b. Our Credo. No date. November 10, 2009. . Johnson & Johnson-c. Our Healthy Planet 2010 Goals. 2009. November 11, 2009. . Psychogios, G. A. & Priporas, V. Understanding Total Quality Management in Context: Qualitative Research on Managers’ Awareness of TQM Aspects in the Greek Service Industry. March 2007. The Qualitative Report Volume 12 Number1. November 11, 2009. . Zacks Investment Research. Twin FDA problem for Johnson and Johnson. August 27, 2009. November 11, 2009. . Read More