August 8, 2014
Johnson & Johnson
From Mumbai to Minneapolis, from Warsaw to Miami, Johnson & Johnson (J&J) is impacting the quality of life of people at a global scale. Alex Gorsky, CEO of Johnson & Johnson Corporation is leading the charge for an army of products and autonomous companies under the J&J umbrella. The company has experienced many changes from 2007, when the strategic focus was to find growth in areas outside of pharmaceuticals due to projected growth risks, to a renewed focus on growth in the same market. The growth is now being realized as a result of the efforts of J&J leadership to find synergy between the company’s major divisions and the 200 plus firms that make up the whole. Real synergy within a corporation is always a challenge, but it is especially challenging at J&J since most of the 200 plus companies operate autonomously. This autonomy is one of the corporation’s main strengths and a reason its products remain successful. “The relative autonomy that is accorded to the business units provides the firm with the ability to respond swiftly to emerging opportunities.” (Goodwin, p.383). The leadership of J&J has recognized that the leaders and managers of each of the business unit knows the product and the consumer needs better than anyone else. This decentralized organizational structure prevents bureaucracy and red tape from slowing innovation and response to time-sensitive opportunities. This approach comes at significant costs and is certainly viewed as a weakness by some shareholders and market analysts. Many of the cost saving opportunities available to a global organization are from centralization of administrative and support services. There is likely to be much redundancy among the many units which will constantly conflict with traditional corporate actions driven by profit responsibility. J&J intentionally absorbs this risk through justification of how much more quickly the individual business units can respond to market and consumer demands, thereby generating revenues in a more timely fashion. In 2007, CEO William C. Weldon recognized the need to identify opportunities within the company to cooperate and find new ways to partner between business units to generate further innovation and new products. The challenge was to not diminish the autonomy of each unit, but to find a way to engage the units in a cooperative environment to build synergy. Weldon established this direction as a result of pressure to mitigate risks of a slowing pharmaceutical market, mostly due to a large number of expiring patents and aggressive competition from other drug companies. Weldon’s groundwork is now the foundation for the continued growth and success for the company. According to current CEO Gorsky, within the medical device and diagnostic segment, J&J is now “leading the industry with the largest most comprehensive business in the U.S., Europe and Japan” (Earnings Call Transcript, 2014, para. 33). While new innovations and cross-business unit cooperation is now a proven asset for J&J, the product-based departmentalization philosophy still holds strong. The divisional structure within J&J has also complimented the corporation’s approach to globalization. Business units are agile enough to adapt to regional and local cultures in order to bring products into the lives of consumers. This allows J&J to demonstrate a high regard for the diversity of values that are important to people in different cultures. According to Gorsky, the company is strengthening its position to be able to grow with the emerging markets around the globe. China and Africa are primed for growth in the middle-class markets, the largest consumer group for J&J products. “Health care spending always increases as a nation becomes more affluent.” (Yates, 2014, para. 7). Africa has one of the fastest growing middle-class segments in the world. It is also a continent with tremendous healthcare needs. And recent U.S....
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