Case Study 2
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Table of Contents 1.0 Introduction .......................................................................................................................... 3 2.0 Product line- J&J Baby care (Johnson‟s Baby) ................................................................... 4 3.0 Analysing structural features of the Industry- Five force analysis of J&J ........................... 4 4.0 Target Market segment ........................................................................................................ 8 5.0 J&J‟s ways to provide competitive advantage ..................................................................... 8 5.1 Competitive Advantage ................................................................................................. 11 5.2 Core Competency underpinning this product line ......................................................... 13 6.0 Organisational structure ..................................................................................................... 14 7.0 Success of „Johnson‟s Baby‟ ............................................................................................. 15 8.0 Conclusion and recommendations ..................................................................................... 16 Reference ................................................................................................................................. 17
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1.0 Introduction The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand is often mistaken to be devices, and pharmaceutical Products. The company‟s stocks have been listed in the NYSE in 1944 and with years of excellence, Johnson & Johnson became a member of Fortune 100 list of companies (Johnson & Johnson, 2013). The company houses more than 127100 employees in more than 265 companies all around the world with operating units in 60 countries. The company‟s research facilities are found to be situated in countries such as Germany, Israel, India, the UK and France. The value of sales of the company is found to be around 70 billion in 2016 and is predicted to reach 75 billion in 2018 (Thomson One, 2016). Product mix
Consumer products Baby care
Skin care
Oral care
Medical devices Devices to treat cardiovascular diseases, blood glucose monitoring devices, professional diagnostic products, orthopaedic and neurological products, general surgery, bio-surgical devices, infection prevention products and energy products
Pharmaceuticals Anti-infective, gastrointestinal, contraceptive antipsychotic, Hematology, infectious diseases, immunology, neurology, pain management, vaccines, oncology, Thrombosis
Wound care
Women's health care
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Nutritional products
Source: Adopted from Forbes (2016)
2.0 Product line- J&J Baby care (Johnson’s Baby) The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand is often mistaken to be revenue over the years.
5,000 4,500 4,000 3,500
OTC
3,000
Skin care Baby care
2,500
Women's health 2,000
Oral care
1,500
Wound care
1,000 500 0 2012
2013
2014
2015
Source: Adopted from Johnson & Johnson (2016a)
3.0 Analysing structural features of the Industry- Five force analysis of J&J „The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and 4 © 2017-2018 All Rights Reserved, No part of this document should be modified/used without prior consent Tutors India™ Your trusted mentor since 2001 I www.tutorindia.com UK: The Portergate, Ecclesall Road, Sheffield, S11 8NX I UK # +44-1143520021, Info@tutorsindia.com
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technology. However, the name of the brand is often mistaken to be on the five-force model, J&J‟s baby care product line is assessed and is as follows:
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Figure 1: Porter’s five force model Potential entrants
Threat of new entrants
Suppliers
Bargaining power of suppliers
Industry competitors
Bargaining power of buyers
Buyers
Threat of substitute products or services
Substitutes
Source: Adopted from Porter (1980) Force 1: Rivalry with industry competitors The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand is often mistaken to be strategy J&J tries to establish to distinguish itself from market competition is their purview to shift to organic products which the millennial mothers normally prefer these days. Force 2: Availability of Substitutes Customers always try to perceive product alternatives or substitutes for a best quality The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand is often mistaken to be other competitors sell products with customised names for specific nations. Hence the rating for availability of substitutes is high. 6 Š 2017-2018 All Rights Reserved, No part of this document should be modified/used without prior consent Tutors India™ Your trusted mentor since 2001 I www.tutorindia.com UK: The Portergate, Ecclesall Road, Sheffield, S11 8NX I UK # +44-1143520021, Info@tutorsindia.com
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Force 3: Bargaining Power of Suppliers Suppliers are also the power factors influencing profitability in an organisation. The size of the company is enormous which leads J&J to influence the interests of its suppliers. J&J The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand is often mistaken to be Force 4: Bargaining Power of Buyers One another important force as mentioned by Porter is the „Buyer‟s bargaining power‟ which has strong influence over a company‟s profits. There are number of baby care products which are found to be alternatives of J&J‟s products. However, the brand name and quality have lead the company to maintain its status which is evident from „Johnson‟s Baby‟ winning the number one baby care brand award in Brands Annuals 2016 wherein the award is acquired for the fourth consecutive year (Business Cafe, 2016). Hence, the rating for bargaining power of buyers is moderately low since customer preferences may also get affected based on low price substitute products. Force 5: Threat of Entry The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand is often mistaken to be industry, J&J and other competitors have already benchmarked their existence. Hence, new entrants will ultimately face difficulties achieving market share and the rating for new entrant threat is low. Based on the ratings, the radar chart is drawn with rating „high‟ designated as 5, moderately high as „4‟, medium as „3‟, „moderately low‟ as „2‟ and „low‟ designated as 1.
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Figure 2: Radar chart for J&J baby care products based on five force analyses Rivalry with industry competitors 5 4 3 Threat of Entry
2
Availability of Substitutes
1
Rating (1-5)
0
Bargaining Power of Buyers
Bargaining Power of Suppliers
Source: Author, 2016
4.0 Target Market segment For any product to achieve market segment, companies should identify the target The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand is often mistaken to be the STM factors (Segment, Target group and Positioning) for “Johnson‟s baby” are as follows: Segment Target group Positioning
Baby care segment Mothers of children (Women within the age 20-54) Quality products at right price for mothers
Targeting strategies were very unique in the „Johnson‟s baby‟ range of products. For example, JOHNSON‟S® baby shampoo is marketed to its target consumers as the product is gentle and does not create tears in children (Johnson & Johnson, 2016e). Mothers may tend to The Economist is a leading news magazine in the world which does not necessarily adhere 8 © 2017-2018 All Rights Reserved, No part of this document should be modified/used without prior consent Tutors India™ Your trusted mentor since 2001 I www.tutorindia.com UK: The Portergate, Ecclesall Road, Sheffield, S11 8NX I UK # +44-1143520021, Info@tutorsindia.com
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only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand is often mistaken to be 5.0 J&J‟s ways to provide competitive advantage Figure 3: Value chain analysis model
Primary activities
Inbound logistics
Production and operations
Outbound logistics
Marketing and sales
Service
Human resources
Technology Secondary activities Procurement
Research and Development
Source: Adopted from Porter (1980) Porter (1980) devised the value chain analysis concept which is used to analyse whether J&J‟s resources and capabilities provide competitive advantage.
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Table 1: Value Chain analysis of J&J S. No 1
Activity Primary activity
Sub-activity Inbound logistics
Production and operations
Outbound logistics
Marketing and sales
2
Secondary activity
Human resources
Description - Strong procurement practices with efficient collaboration of suppliers and J&J - More than 10 thousand suppliers all over the world - Procurement Sustainability Initiative (PSI) was developed which acts as a purchase decision making framework and guide to suppliers - Best suppliers are recognised (Johnson & Johnson, 2016c) - High standards of production -Employee safety maintained (Johnson & Johnson, 2016h) - Greenhouse gas emission in third party supplier products is also monitored to promote sustainable production (Genco, 2016) - Transport and energy costs are reduced through Project COLD, a measure to reduce power consumption through cold storage (Genco, 2016) - Ethical marketing using educational videos, brochures, and Direct to customer advertisements (Johnson & Johnson, 2016c) - Employee relations are managed by adhering to the International Labour The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand 10
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Technology
Procurement
Research and Development
is often mistaken to be work, supporting their opinions, and elimination of discrimination support gaining competitive advantage (Johnson & Johnson, 2016c) - J&J have made alliances with research institutions and life science organisations to explore global innovations (Johnson & Johnson, 2016f). - The team of technical experts and scientists utilise modern technologies to add value to the supply chain of the company (Johnson & Johnson, 2014) J&J has its own procurement organisation which enables creation of supplier network and management of procurement with ease (Johnson & Johnson, 2016d). - J&J spends considerable amount for R&D activities to value certain processes in the production line. - The expenses reached 9046 million US dollars in 2015 (Statista, 2016)
Source: Author, 2016 5.1 Competitive Advantage The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand is often mistaken to be a) Brand name J&J is one among the most perceived brands in the world and even has a 120 year old history. Its baby care product line, „Johnson's® Baby‟ is proven to be the most trusted brand
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by mothers all over the world. The products are gentle to skin which is based on rigorous R&D activities over the years (Johnson & Johnson, 2016b). b) Products The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand is often mistaken to be
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c) Endless Innovations The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand is often mistaken to be market for organics is growing in the target group (mothers) (Financial Times, 2016). 5.2 Core Competency underpinning this product line The core competency of the Johnson‟s Baby product line lies in three of the following factors: a) Intellectual Property (Uniqueness): Johnson‟s Baby products are very gentle to baby skin and have been developed using their own „No more tears‟ formula. The formula has been tested for safety using several tests such as Ingredient and formulation, and ocular irritation assessment, and is hypoallergenic (Johnson & Johnson, 2016e). b) Product quality: Johnson‟s Baby products are known for its product quality. The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand is often mistaken to be, 2015). c) Variety: Johnson‟s Baby has become a brand name with complete baby care product solution. From oil to shampoo, soaps to diapers the Johnson‟s Baby has a rich product portfolio. The wide portfolio is the result of years of understanding what keeps baby skin healthy (Johnson & Johnson, 2016b).
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6.0 Organisational structure The organisational structure of J&J is based on its credo which is as follows:
Source: Adopted from Johnson & Johnson (2016g) With the company‟s credo based on taking responsibilities to manage its stakeholder‟s better, J&J adopts a decentralised management structure wherein the organisation‟s first level is the Board (CEO and the Directors). However, the board monitors the Chief Financial Officer (The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and 14 © 2017-2018 All Rights Reserved, No part of this document should be modified/used without prior consent Tutors India™ Your trusted mentor since 2001 I www.tutorindia.com UK: The Portergate, Ecclesall Road, Sheffield, S11 8NX I UK # +44-1143520021, Info@tutorsindia.com
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technology. However, the name of the brand is often mistaken to be departments shall take care of the next level operations within each unit (The Official Board, 2016). In this manner, J&J dedicates its decentralised management to serve its customers and other stakeholders better.
7.0 Success of ‘Johnson’s Baby’ A positioning map is designed for the baby care product line to examine the position of J&J and its success in the baby product market. Figure 4: Positioning map of baby care product line HIGH PRICE
LOW QUALITY
HIGH QUALITY
LOW PRICE
Source: Author, 2016
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The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand is often mistaken to be 8.0 Conclusion and recommendations J&J is a successful company with its products diverse in segments such as consumer products, pharmaceuticals and medical devices. Apart from other product lines, the baby care product line named „Johnson‟s Baby‟ holds a good brand name within the mothers of children. The company has strategically aligned its resources to comply with the needs of its stakeholders wherein the organisational structure itself adheres to the company‟s credo values The Economist is a leading news magazine in the world which does not necessarily adhere only to economic affairs as its name suggests. The Economist is a pioneer in delivering news from all over the world covering the aspects of business, finance, science and technology. However, the name of the brand is often mistaken to be. Product differentiation should be even more unique to increase sales.
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Reference Business Cafe (2016) Johnson’s Baby Wins No. 1 Baby Care Brand in Brands Annuals 2016 for the Fourth Consecutive Year. [Online] Available at: http://businesscafe.lk/business-news/lifestyle-fashion/item/2980-johnson-sbaby-wins-no-1-baby-care-brand-in-brands-annuals-2016-for-the-fourth-consecutive-year [Accessed : 15 November 2016]. Financial Times (2016) J&J to relaunch baby brand as millennials go organic. [Online] Available at: https://www.ft.com/content/035c1068-0630-11e6-96e5-f85cb08b0730 [Accessed : 15 November 2016]. Forbes (2016) #32 Johnson & Johnson. [Online] Available at: http://www.forbes.com/companies/johnson-johnson/ [Accessed : 15 November 2016]. Genco (2016) Johnson & Johnson Faces Supply Chain Sustainability Challenges. [Online] Available at: http://www.genco.com/Logistics-Articles/article.php?aid=638981 [Accessed : 10 November 2016]. Johnson & Johnson (2013) Johnson & Johnson Fact Sheet. [Online] Available at: https://www.jnj.com/sites/default/files/pdf/JohnsonJohnson_Factsheet_May%202013.pdf [Accessed : 10 November 2016]. Johnson & Johnson (2014) Johnson & Johnson Innovation – JJDC, Inc. [Online] Available at: https://www.jnjinnovation.com/jjdc [Accessed : 10 November 2016]. Johnson & Johnson (2016a) Annual Meeting Materials. [Online] Available at: http://www.investor.jnj.com/gov/annualmeetingmaterials.cfm [Accessed : 16 November 2016]. Johnson & Johnson (2016b) Consumer. [Online] Available at: https://www.jnjindia.com/business/consumer [Accessed : 15 November 2016]. Johnson & Johnson (2016c) Employee & Labor Relations Practices. [Online] Available at: http://www.jnj.com/caring/citizenship-sustainability/strategicframework/Employee-and-Labor-Relations-Practices [Accessed : 10 November 2016]. Johnson & Johnson (2016d) How We Are Organized. [Online] Available at: http://www.jnj.com/sites/default/files/pdf/how-we-are-organized.pdf [Accessed : 16 November 2016].
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Johnson & Johnson (2016e) JOHNSON’S® baby shampoo. [Online] Available at: https://www.johnsonsbaby.in/shampoo/johnsons-baby-shampoo [Accessed : 15 November 2016]. Johnson & Johnson (2016f) Johnson & Johnson Innovation Catalyzes New and Exciting Science and Technology in Pharmaceutical, Medical Device, Diagnostic and Consumer Healthcare Spaces. [Online] Available at: https://www.jnj.com/media-center/press-releases/johnson-johnson-innovationcatalyzes-new-and-exciting-science-and-technology-in-pharmaceutical-medical-devicediagnostic-and-consumer-healthcare-spaces [Accessed : 16 November 2016]. Johnson & Johnson (2016g) Our Credo. [Online] Available at: https://www.jnj.com/about-jnj/jnj-credo [Accessed : 15 November 2016]. Johnson & Johnson (2016h) Standards for responsible External manufacturing. [Online] Available at: https://www.jnj.com/sites/default/files/pdf/standards-for-responsible-externalmanufacturing.pdf [Accessed : 10 November 2016]. Mother and Baby (2015) The 2015 Mother & Baby Award Winners. [Online] Available at: http://www.aww.com.au/mother-and-baby/expert-advice-for-mums/best-babyproducts-2015-mother-and-baby-award-winners-24213 [Accessed : 16 November 2015]. Porter, M. E. (1980) Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press. Statista (2016) Johnson & Johnson’s expenditure on research and development from 2005 to 2015 (in million U.S. dollars). [Online] Available at: https://www.statista.com/statistics/266407/research-and-developmentexpenditure-of-johnson-und-johnson-since-2006/ [Accessed : 15 November 2016]. The Official Board (2016) Johnson & Johnson. [Online] Available at: http://www.theofficialboard.com/org-chart/johnson-johnson [Accessed November 15 2016]. Thomson One (2016) Trusted Financial Content for Superior Decision Making. [Online] Available at: https://www.thomsonone.com/DirectoryServices/2006-0401/Web.Public/Login.aspx?brandname=www.thomsonone.com&version=3.7.9.18833&proto col=0 [Accessed : 15 November 2016]. Wood, L. (2015) Global Baby Hygiene Products Market 2015-2019 with Johnson & Johnson, Kimberly-Clark, Procter & Gamble (P&G) & Unicharm Dominating. [Online] 18 © 2017-2018 All Rights Reserved, No part of this document should be modified/used without prior consent Tutors India™ Your trusted mentor since 2001 I www.tutorindia.com UK: The Portergate, Ecclesall Road, Sheffield, S11 8NX I UK # +44-1143520021, Info@tutorsindia.com
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Available at: http://www.prnewswire.com/news-releases/global-baby-hygiene-productsmarket-2015-2019-with-johnson--johnson-kimberly-clark-procter--gamble-pg--unicharmdominating-300068526.html [Accessed : 10 November 2016].
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