The corporate strategy that Johnson& Johnson pursue is to encourage autonomy in each division and cultivate entrepreneurial culture throughout the organization. It has heavily relied on acquisitions to grow over the years to expand the company into a board range of businesses in the healthcare industry. As Johnson& Johnson has grew into a complex enterprise, granted near-total autonomy has fostered each division to develop and expand its best-seller products and to be responsible for their promised achievement. This independence attributes most to the company’s success.
It also provides the firm with the ability to respond quickly to emerging opportunities. Each division has the freedom to develop its own strategy, and to work with its own resources. However, this decentralization brings up the company’s overhead costs. Merger and acquisition has also brought up quality control problems that some of its products have been recalled. Johnson &Johnson has evolved to have top-notch products and strong skills in all three basic divisions: drugs, devices, and diagnostics, that few companies can compete for.
To increase collaboration between these divisions will attract new business opportunities, and the firm will benefit from his convergence by allowing different units work together. Weldon has pushed all of its units to work together to deal with different health problems and to work on new opportunities. As a leader, Weldon understands the importance of entrepreneurial spirit in the company. So he takes steps and cautions to foster collaboration among disparate operations.
He set up groups that draw people from different division to work together on specific health problems, and each of the groups will be reported every six months on potential strategies and projects. He is also pushing for more internal growth that to accelerate top-and bottom-line growth. Weldon encourage employees to share database across the various business units to further improve innovation. To create a sustainable competitive advantage, Johnson &Johnson has to have valuable resources.
By acquiring different segment of healthcare industry, they have the ability to develop new products that requires different segments of healthcare industry. Encouraging synergy will improve its efficiency and effectiveness in solving difficult health problem and neutralize threats, because few companies have such large resources as Johnson& Johnson does. Since few firms could actually be able to attain the idea of synergy, the resource that Johnson &Johnson has is rare. Besides that, Johnson & Johnson has to make sure their resource is difficult to imitate and difficult to substitute.
Apparently, for competitors who own as large resources as Johnson& Johnson does will be able to perform same synergy; however, if Johnson& Johnson come up with some unique idea and products on curing one of the difficult health problems and get patent on it, it will be then difficult for competitors to imitate. In order to be hard to substitute, Johnson &Johnson has to make sure their products have distinctive effectiveness that it would be hard to achieve without their products.
From balance sheet, Johnson& Johnson’s liquidity, as measured by current assets compared to current liabilities, increased over the year. We might be tempted to conclude that its balance sheet has grown “stronger” currently. But its net income per sale has dropped dramatically. This might be caused by a string of product recalls and consumers are lost confidence in their products after recalls. Quality issues have risen since converging of two divisions, which directly affect Johnson& Johnson’s reputation. Investors are starting to question Johnson &Johnson’s management.
Its financial picture looks even worsen now. Synergy to fix the manufacturing problems that had caused the recalls are taking longer than expected, and some brands might not return to shelves until 2013. Current situation that Johnson& Johnson though may not put the company in a struggle condition, Consumers are losing faith in its products. Also, recent legal losses for Johnson &Johnson related to its antipsychotic drugs and the announcement to remove out some ingredients that have been proved harmful to personal health have made its overall picture worsen.
From its 2nd quarter 2012 conference calls, they mentioned that their current main goal is to restore reliable supply and to regain trust from consumers. Consumers have lost some degree of confidence in Johnson& Johnson because of the recalls. But they have also mentioned in the conference calls that its pharmaceutical team achieved success in new products launching and their Synthes acquisition successfully closed in the 2nd quarter. Although they are still dealing with the negative impact of the
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