Week 9, September 26
Codman & Shurtleff is a subsidiary of Johnson & Johnson which supplied hospitals and surgeons worldwide with over 2,700 products for surgery. Codman is now facing a profit shortfall of two million. A series of actions was decided in order to recover the shortfall, while the decisions made were somehow not aligned with J&J’s group philosophy. Codman managers decided to cut budgets of R&D expenditure which might have negative effects on the long term performance of the firm. The management of Codman ought to choose a better way that has a positive effect on operations in the long run and use a formal process, “stage gate”, in new product development.
Table of Contents
Executive Summary 2 1. Introduction 4
2. Conclusion 4
3. Recommendations 5
4.1. Analyze annual planning and control process
4.1.1. Short-term & long-term planning and control 6 4.1.2. Corporate-level & subsidiaries-level planning and control 6,7 4.2. Evaluating the planning and control system
4.2.1 Strength 7,8
4.3. Innovation (Product Development) 8,9,10
5 References 11 6.Appendices 12
Codman & Shurtleff, Inc. was established by Thomas Codman in 1838 to design and fashion surgical equipments. After the acquisition of the company by Johnson & Johnson in 1964, Codman & Shurtleff operated as one of J&J's autonomous subsidiaries. It grew stably and successfully through decades. The case started by focusing on the tentative actions, the management team at Codman must take into considerations of a revision to their budget targets due to a projected two-million dollar shortfall in planned profits. We will assist the management at Codman to solve the two-million dollar shortfall via analyzing annual planning and controlling system, evaluating the planning and control system executed at J&J and impacting on innovation by J&J management planning and control system.
At Codman, the planning and control system should focus on resolving the profit shortfall by taking a series of actions that have long-term effects on operation. The problems faced by the Codman managers may be as a result of a changing the entire J&J’s corporate planning and control. Management may want to consider look for ways to make sure projects are completed not beyond the anticipated time instead of looking for ways to cut expenditures in the Research & Development. This will insure a continuous system is in place to explore methods to manufacture technological superior products with less costs.
1. Continue using the J&J’s 5 and 10 year planning and control system and align the Codman’s strategy with J&J’s strategy
2. Focus on resolving the profit shortfall by focusing on actions that have a long-term effect on operations rather than short term performance
3. Introduce the “stage gate” product development process
4.1 Analyze annual planning and control processes:
Codman prepares its plan and strategy consistent with J& J’s, as they believe the key elements in success is due to three basic tenets “a basic belief in decentralized management , a sense of responsibility, a desire to manage for long term” as David Clare does. 4.1.1 short-term & long-term planning and control
Codman & Shurtleff is carrying out the financial plan in terms of two different time span. The short-term plans are included a budget for upcoming year, and second-year forecast. The long-term plans contain annual...