This project is one of three assigned reports I will complete as part of the strategic analysis of Johnson and Johnson. This firs report focuses on the strengths, weaknesses, opportunities, and threats (SWOT) and includes the following sections. First, the major concepts related to the SWOT analysis will be defined. Second, those concepts will be applied to the specific case of Johnson and Johnson. Then the evidence from Johnson and Johnson will be evaluated to identify the major problem the company is facing and propose a solution that Johnson and Johnson can adopt to restore its lost competitive advantage.
The SWOT analysis is the examination of a company’s external environment and internal organization. This section will define key concepts involved in the SWOT analysis. 2.1. External Analysis
The function of an external analysis is to identify opportunities and threats in a firm’s factors of general environment, and the industry forces. The general environment is composed of factors that can have a dramatic effect on the firms chosen strategy. Typically, a firm has little ability to predict trends and events in the general environment and even less ability to control them.
The general environment can be separated into six segments: demographic, socio-cultural, political/legal, technological, economic, and global. Within each of these segments of the external environment each business is presented with opportunities and threats. An opportunity is an external factor that a company can take advantage of to assist in accomplishing its strategic objectives. Threats are external forces that will limit or undermine a company from achieving its strategic objectives. 2.2. Internal Analysis
The purpose of the internal analysis is to identify strengths and weaknesses in a firm’s internal (or competitive) environment. The competitive environment consists of many factors that are particularly relevant to a firm’s strategy. These include competitors (existing or potential), customers, and suppliers. Potential competitors may include a supplier considering forward integration, or a firm in an entirely new industry introducing a similar product that uses more efficient technology.
Within the internal environment, a business must evaluate their strengths and weaknesses in order to maintain their current competitive advantage. Strengths are internal factors that enhance a company’s ability to achieve its strategic objectives. Weaknesses are internal factors that threaten the company’s ability to achieve the strategic objectives. Strengths and weaknesses can be either resources of a tangible or intangible nature and/or capabilities of the company.
The report will now focus on the SWOT analysis of Johnson and Johnson. It will apply the concepts of opportunities, threats, strengths and weaknesses to the particular case of this firm.
3.1. External Analysis
Johnson and Johnson is a conglomerate whose core business is the manufacturing of pharmaceuticals. Therefore it is in the pharmaceutical industry. Two of the most important opportunities in Johnson and Johnson’s industry environment are the low threat of entry and the intensity of competition among existing rivals within the industry.
The threat of new entrants refers to the possibility that the profits of established firms in the industry may be eroded by new competitors. The extent of the threat depends on existing barriers to entry and the combined reactions from existing competitors. If entry barriers are high and /or the newcomer can anticipate a sharp retaliation from established competitors, the threat of entry is low. As in the pharmaceutical industry the threat of new entrants is extremely low because of the large economies of scale and brand reputation that are required to succeed in the industry, potential competitors are less likely to attempt to enter the...