JOHNSON & JOHNSON

Johnson & Johnson - Critical Analysis of the Microeconomic and Macroeconomic Challenges

Johnson & Johnson - Critical Analysis of the Microeconomic and Macroeconomic Challenges

Introduction

One of the world's largest producers of healthcare products and drugs, Johnson & Johnson manufactures the Carefree and Stayfree feminine hygiene products in the United States and overseas. Its other consumer products include Band-Aids, Neutrogena skin care products, Reach toothbrushes, and Tylenol and Motrin pain relievers. Johnson & Johnson has operations in 60 countries and employs 115,000 people. As the company is mainly focused on other products, the size of operations in the Sanitary Paper Product Manufacturing industry is small in comparison to total company revenue (Henke, Goetzel, McHugh & Isaac, 2011). Johnson & Johnson will account for about 2.9% of industry revenue in 2012.

Johnson & Johnson has 37 manufacturing facilities in the United States that are dedicated to the development of medical instruments and supplies. The company's ability to converge medical instruments and pharmaceutical research and development has resulted in differentiating features in many of its products. Additionally, Johnson & Johnson is able to gain market share by developing new products or enhancing existing products quickly (Donelan, Buerhaus, Ulrich, Norman & Dittus, 2005). OneTouch Verio, for instance, provides greater reading accuracy for self-monitoring of blood glucose than existing products on the market and was a result of combined pharmaceutical and medical instrument R&D.

Discussion

Johnson & Johnson's efforts in medical instruments, including ceramic orthopedics and minimally invasive surgical tools, should help maintain the company's leadership in several medical device groups and support strong pricing power. The company's powerful sales force helps to make the company a partner of choice for smaller healthcare companies that are developing new products (Solomon, 2010). Further, Johnson & Johnson's hands-off style for recently acquired companies may also entice companies with innovative products to become part of this conglomerate, allowing the firm to continue its global growth.

Johnson & Johnson's US medical instrument sales are expected to grow by 4.9% in 2011 reaching about $6.8 billion (Henke, Goetzel, McHugh & Isaac, 2011; Solomon, 2010). This contributes to an average annual growth of 5.3% during the five years through 2011, driven by an improving economy and strong development in orthopedic products. The initial stages of a recovery of several MD&D markets following the recent economic downturn have spurred demand, although growth remains below previous long-term rates (Becker, Lynde & Swanson, 2008). To stimulate sales, the company has been focused on investments targeting faster growing markets, such as insulin delivery, biosurgicals and electrophysiology. This has been allowing Johnson & Johnson to gain share in the overall industry by penetrating new and growing product categories.

Strong results in the Ethicon business have led the medical devices segment. The drug-eluting stent business posted its first gain in the United States in more than two years as the market share losses to new products from top competitors have begun to subside. The company is not expected to return to strong stent growth as in the early 2000s, but Johnson & Johnson's ...