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Introduction: Johnson and Johnson, commonly called J& J for short, is one of the world's well known, largest, most decentralized and most diversified health care companies. Since 1887, Johnson and Johnson has been producing, manufacturing and selling products related to human health and well-being. Today J& J has over 200 autonomous operating companies and do business globally specializing in consumer products, medical devices and diagnostics, and pharmaceuticals. Consumer products are the company's most recognizable segment, including popular brands like Tylenol, Johnson and Johnson Baby Shampoo and Band-Aid.
The medical devices and diagnostics segment manufactures products including surgical equipment and contact lenses. The largest of the three segments is pharmaceuticals. Johnson and Johnson is poised for growth on many fronts. Their short-term outlook is bright due to a lead position in the drug-coated stent market. They should also see a substantial increase in prescription drug sales from the recently enacted Medicare regulation, which will grant prescription drug coverage to more Americans. In the long run, J& J should see consistent sales growth fueled by the aging demographics in the United States.
Moreover, the medical supplies and services needed by the elderly population will increase simultaneously with the aging of the large baby boomer population. While there is no doubt that J& J is a corporation that has gone a long way and due to its reliability, culture and growth will continue to do well, analyzing the effectiveness of their current strategy is still essential. The question of whether J& J should become more centralized in order to adapt to the changing hospital industry needs to be addressed. Because of the changes in the hospital sector and because of the changes that distributors underwent in order to meet the hospital changes, J& J inevitably needs to change as well and become more centralized.
While I do not think it is possible or even necessary for J& J to become completely centralized, J& J should consider the benefits of becoming more centralized. If J& J continues to be as decentralized as they are they will have a hard time adapting to change, communicating within the organization and contact within the organization will decrease as well. In the recommendation portion of this case analysis, I will be suggesting that the best way for J& J to become more centralized yet not completely decentralized would be to rely on clusters of companies rather than on continuously spinning off and making more and more decentralized autonomous sub-companies. My "cluster" approach would bunch together companies that are similar in nature, working on similar goals, performing similar functions and have similar customer bases. General Environment and Industry Analysis: Potential Opportunities and Threats The external environment consists of opportunities and threats. J& J can greatly benefit from taking advantage of opportunities.
An opportunity that J& J can benefit from is the changes in Medicare insurance that have recently been enacted providing increased medical coverage to seniors with Medicare by covering prescription drugs. An article that I read in the Wall Street Journal stated that the new plan increases prescription drug coverage for senior citizens dramatically. This should increase the amount of prescription drug use in the U. S. Since pharmaceutical sales is J& J's largest segment, increases in prescription drug use can potentially increase sales and profits for J& J.
Another opportunity that J& J can take advantage of is catering to the healthcare needs of the baby boomers who are expected to be seniors in the near future. The population of people ages 65 and older is expected to grow by 30 % between 2004 and 2015. Currently senior citizens account for 1 / 3 of the total prescription drug. As the baby boomers age and become senior citizens J& J can increase sales by providing for their health care needs. A growth in Americans over 65 can lead to a growth in pharmaceutical sales for J& J. Furthermore the increasing average age of the American public should bring rising revenues to pharmaceutical companies in the years to come.
While there are many opportunities that J& J can take advantage of no company is invincible to potential threats. J& J is no exception. The increase in generic drugs can have an adverse impact on J& J. Drug patents on major over the counter and prescription drugs are rapidly expiring. This gives generic drug companies the opportunity to sell similar drugs that J& J has already invested many years of research and development into at a significantly lower price. Another threat that J& J needs to consider is the increasing pressure by insurance companies wanting lower drug prices.
Insurance companies are very large, powerful and influential and J& J should try to appease them as best it can. However, with the high costs involved in producing successful drugs, lowering prices of these drugs might result in faltering profits for J& J. Another threat that J& J should consider, is that while such government regulation as an increase in prescription drug coverage for the elderly is a benefit to J& J, in the long run, however, increasing government intervention and regulation can prove to be a major threat for J& J. The government may pass regulations that are not in J& J's best interests. Potential governmental pricing constraints are a threat to the profitability of the U.
S. pharmaceutical industry. Pricing limits may cut into R& D budgets, haltering growth opportunities. Internal Environment: Strengths and Weakness With regard to the internal environment, it is important to analyze J& J's strengths and weakness.
After reading J& J's website, I was overwhelmed with the strengths that J& J possess. J& J is one of the main competitors in the race to produce the best and most widely used stent. They produced Cypher, a device that is implanted in arteries to help keep arteries open and prevent them from getting clogged. J& J currently posses the largest portion of the coronary stent market with their Cypher stent. Approved in April of 2003 and launched in May, Cypher is the only drug-coated stent to be supported by numerous tests, including four large-scale clinical trials involving 1, 800 patients. In tests, Cypher proved more effective than bare metal stents at preventing re-blockage.
Another strength that J& J possesses is having high barriers to entry. Entrance into the pharmaceutical industry is difficult. Pharmaceutical companies require large fixed costs, large set up costs and large research and development costs. While this does not insure that new companies will not enter their market, it does give J& J some safety measure at being able to prevent and / or compete with new entrants.
Free research essays on topics related to: prescription drug, senior citizens, baby boomers, internal environment, pharmaceutical companies
Research essay sample on Prescription Drug Senior Citizens
