Johnson and Johnson: A Leader in the Healthcare Field

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Johnson & Johnson (A)
Philosophy & Culture
Case Analysis

Introduction:
Johnson & Johnson (J&J) was founded 121 years ago based on the need for sterile medical supplies to treat patient’s wounds. Post-operative mortality rates were a grim 90% and after attending a seminar on “antisepsis” Robert Wood Johnson, an apothecary, saw this as an opportunity to start a much needed company. With $100,000 in capital and the help of his brothers, James and Edward, they established Johnson & Johnson. Their prospect with J&J was “to manufacture and sell medical, pharmaceutical, surgical and antiseptic specialties and analgesic goods.”

Johnson & Johnson quickly became a leader in the healthcare field and by 1910 (when Robert died) the company had already introduced revolutionary surgical dressings, established a bacteriological laboratory and published the book “Modern Methods of Antiseptic Wound Treatment.” They were able to grow very quickly as a result of acquiring established companies and introducing new products. J&J expanded internationally starting with Canada in 1919 and then Great Britain in 1924.

By 1983, J&J was one of the world’s most successful health care companies with their product lines consisting of consumer products (baby care, surgical dressings, first aid, nonprescription drugs), professional products (surgical dressings, sutures, diagnostic products), pharmaceutical prescriptions and industrial products (nonwoven fabrics, edible sausage casings). The consumer products group brought in the largest percentage of sales (43%) while the industrial products brought in much less (4.1%). J&J’s competitors - Bristol-Meyers, Procter & Gamble and Kimberly-Clark to name a few, were unable to keep up with J&J’s continual introduction of new products which allowed J&J to be #1. In 1982, J&J’s sales totaled $5.8 billion with a net earnings after taxes of $523 million.

Johnson & Johnson valued a family-like atmosphere and this is what shaped the company’s philosophy, culture and their Credo – all of which has remained the same since the beginning. The Credo focused on the company’s responsibilities to its customers, employees, the community and its stockholders. Robert Wood Johnson, “the General,” son of the founder, is given the credit in establishing the company’s ways. He believed in decentralization (establishing small, autonomous units to focus on a given market, mission and consumer) and this lead to the development of over 150 companies worldwide. Some principal domestic companies include Johnson & Johnson Dental Products Co., McNeil Pharmaceutical, Ortho Diagnostic Systems and Technicare. This dedicated business approach allows each separate company to flourish much greater than a single company could.

Johnson & Johnson’s ability to grow in upwards of 300 companies over the next 10-15 years is achievable; however their main issue is how to effectively and efficiently manage a larger organization with the same charisma as in managing the smaller divisions. Strategic Trajectory:

For J&J the company’s Credo, or statement of beliefs defines the business and its operations. This Credo was formed in the 1940’s by the founder’s son, Robert Wood Johnson or “The General.” The Credo defines the responsibilities of J&J to the customers, employees, communities and lastly its stockholders as well as the views of public and social responsibility. The Credo is the basis for the company’s values, mission, vision and value creating strategy. The first responsibility of J&J is to its customers. These customers include doctors, nurses, patients, mothers and anyone who uses J&J products. In order to fulfill the responsibility to the customers J&J must produce high quality products and strive to reduce the cost of those products. The prices of those products can be maintained at a reasonable level if the costs are reduced or kept at a fair price where suppliers and distributors will have the...
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