Name : DEEBAN A/L MANIERAJOO

Id No. / Matrix : M181111029

Date :24/10/2019
Subject : GMGT5163 Competitive Strategic Management
Lecturer : IR Emran Ismail
Mark (%) : /100*10%
Assessment : Midterm Examination

Instruction:

This Midterm Examination contains 5 questions. You are required to study the case
study attached in UROX (Case Study – Johnson & Johnson). Questions given are based
on the case study. Answer all questions given. You may answer in this answer sheet.
Once you have completed, please upload it to Urox via the Upload box prepared.

Questions:

1. Brief the background of the case. (20 marks)

Johnson & Johnson has been a part of the lives of people for 128 years and for about 70 years a
valuable part of their savings. Founded in 1886, in 1944 we listed our stock for public investors on the
New York Stock Exchange.They have built the world's most comprehensive healthcare business base, p
roducing about 70 percent of our sales from global leadership positions No. 1 or No. 2 in our respective
markets. Their consistent performance has allowed them to offer an impressive track record of growth
that few businesses, if any, can claim: 30 consecutive years of adjusted earnings growth; and 52
consecutive years of dividend growth.

Most of the company's revenue in 2013 was $71.3 billion from healthcare, including skin care products
organic goods, over the counter and prescription pharmaceuticals, medical devices, and diagnostic
tools. Practically every home, hospital, operating room and doctor's office in 188 countries worldwide
sees Johnson & Johnson goods. Many deaths have been recorded in the city of Chicago- all related to
J&J's drug Tylenol use. Apparently, after buying them from different stores, someone had tampered
with the bottles, adding the poisonous potassium cyanide to the drug capsules and returning the
bottles back to the store. Seven deaths from different parts of the city have been registered. While J&J
was not involved in the tampering, their brand name was at the verge of change, more so as Tylenol
was a pioneer in the pain-killer industry. This accident had all the ingredients from J&J's label to make a
catastrophe.
2. What Corporate Strategy does Johnson & Johnson pursue? (20 Marks)

Johnson & Johnson is following two corporate strategies, Growth Strategy and Global Strategy.
Via creativity, research and development and the latest technology, the business often comes up with
new product according to the requirements of the consumer. Because of its global presence, it must
follow a global strategy to handle the business in the country of operations in accordance with its
geographic location.

The corporate strategy of Johnson & Johnson is:

 Diversified commercial enterprise units or divisions which are inter related such diversification
is associated diversification.
 J&J's strategy for diversification is less risky because it is vertical diversification.
 It gains from synergies, economies of scale, price leadership.
 This technique makes it easier to create inventions in a unique way.
 Flexibility in the divestment of units.
 Better opportunities for new product innovations.
 It is possible to manage and reimburse economic and financial risks as it is the associated
diversification.
 Operations for sales and marketing are managed smoothly.
 Gender equality is one of J&J's key diversification principles.
 Competition management and participation in decision-making among all units with employee
relationship.
 The technologies and new products bring about rapid change in the healthcare sector.
 In this approach, the threat of one unit with another unit can be compensated.
 The sale / demand / development of a commodity may be increased by one unit / division as
it’s linked diversification.

3. Discuss whether Johnson & Johnson has been successful in all of their acquisitions.
(20 Marks)
Johnson and Johnson's long-term goals are as follows:
 Hold sales turnover and introduce new products to increase market share
 Increase their global presence and offer new formulations that are tested and presented with
the least side effects are useful and appropriate for human consumption.
 Through their global presence and involvement in research and development programs to
support medicines of the third generation.
 Ensure the well-being of human life by continuously improving the existing product line and
adding new and appropriate formulations
 Sponsoring some brainstorming sessions and medical conferences and debating drugs of the
new generation.
 To foster human well-being, we have to focus on international partnerships and new
acquisitions.

To sum up, Johnson and Johnson will focus on creating value for human life by investing in research
and development, encouraging and endorsing activities aimed at improving and addressing the quality
of life for human beings. We must also engage in preventive care and support events and activities that
add value to mankind. The explanation for the above goals is as follows:
 We need to build an appeal for the new generation in need of preventive care.
 Their funding of health events and programs that support and encourage social welfare. This
will add to their romantic image in a positive way. It is going to increase their popularity and
scope worldwide.
 The above will boost their revenue turnover and market share and strengthen their bottom lin
e.
 We will be seen as a compassionate company that above productivity respects human life.
 It will add to its brand value and enhance its reputation as a trusted brand.
4. Discuss entrepreneurship in Johnson and Johnson. (20 Marks)

Johnson & Johnson established the initial process of a functional type of structure. Johnson & Johnson
developed a divisional organization structure for better control and alignment with the globalization of
the industry and participation in complex product production. We also divided the company narrowly
into three categories: consumer, medical and diagonal products, and eventually pharmaceutical
companies. Johnson & Johnson consists of 180 independent business divisions, including McNeil
Consumer Products; Ortho Pharmaceuticals and J & J Consumer Product, the organization that
provides Johnson's Baby Shampoo and Band Aids, each division is chartered separately and all
operations will be managed by Johnson & Johnson Family Headquarters.

 This decentralized organizational structure allows the growth and development of employees.
It also helps to bring together various products and technologies to fulfill customer
requirements of technology. A successful plan will also be built in each division as an input on
consumer and business issues. Johnson & Johnson companies around the world are typically
managed by local people because they are able to understand the needs of those markets and
use themselves in those markets.
 Contrast between Globalization and Locus Focus: As described in the definition above,
Johnson & Johnson's strategy maintained that its organizational structure was to hire local
people as they knew the local need and demand better than anyone else.
 Consistent ethical behavior across all its many autonomous operating companies: as Johnson
and Johnson's CEO states, teamwork is often the drawback of decentralization and creativity.
• Johnson and Johnson are trying to bring people together across the various groups,
sometimes there is plenty to do in their own community, and now we are challenging them to
cross borders and work together. The ability to work across boundaries also brings true
innovation, and will require some serious breakthroughs. The real challenge was to maintain
the ethical practices consistently across to get people out of the area they work in and work
across the community.

5. What did Weldon do to improve collaboration amongst business units in Johnson & Johnson?
(20 Marks)

The decentralized business structure of the company is one in which the executives of the company place
important decision-making authority in the hands of the front line and local managers, rather than
reserving all critical decisions at the top. Decentralized business structures have pros and cons in relation to
more centralized operations and each company must decide which approach works best. In a hierarchical
company structure, the company usually has a headquarters where key executives work and make most of
the company's important decisions. Such decisions are then passed on to local managers and enforced as
directed. Decentralized systems still have top management oversight, but frontline and regional
administrators have much more flexibility and authority to make decisions that benefit their local markets,
consumers and other stakeholders.

A major advantage of the decentralized system is that local leaders have a greater capacity to adapt quickly
to developments in the local market. If consumers want something, and they have to wait for the area
leaders to connect with centralized leaders, delays may result, which may alienate top customers.
Decentralization can improve morale across the organization because managers and executives at all levels
feel that they have a strong commitment to the success or failure of the company.

Johnson & Johnson CEO William Weldon points out that the main drawback of his company, which
operates with a very hierarchical approach, is that he and other top managers must relinquish control and
place great trust in the hands of other leaders. Another common drawback associated with decentralization
is that decision-making is more widespread. This ensures that more people are involved, and decisions are
not concentrated with your strongest leaders. Possible inconsistency across the product is another
problem.
Weldon also noted that the open nature of his organization has a strong impact on his ability to do business
internationally. They rely on local workers in foreign markets to make important strategic and business
decisions. Website 12 Manage states three basic types of decentralization — deconcentration, delegation
and devolution. Deconcentration is seen as the worst method of decentralization, since decision-making
often includes higher ranking regional managers and senior managers. Delegation is more extensive as the
authority is transferred to the front line level. Devolution is the most drastic because local level and frontline
stores make the most critical decisions of independence. Weldon says that he thinks that where
decentralization helps in creativity, it encourages different people with different abilities, different ideas, to
put together different products and technology to address the unmet needs of patients and consumers. For
example, we had a meeting where we brought together our MD&D engineers and scientists from our
pharmaceutical companies. They came up with putting a drug on a cardio-vascular disease stent, which was
a major breakthrough. In reality, it put together the skills and knowledge of two separate sets of people. We
are now working on a brand that we have just introduced in Europe and will soon be launching here, which
has done the same thing. It has put together the expertise of the technicians and the abilities of the scientists
to create a patch that will provide drugs for post-operative use, so that patients do not have to bring PCA
pumps and everything else with them all the time. They're just touching it, it's about the size of a credit card,
you hit it, and you get a dose of narcotics. It has a battery that ensures that it is delivered correctly, the right
quantity, the right time and the right frequency. You look at the integration of these skills, technology and
goods, and then people and I think it gives us a distinct competitive advantage. If you're quick on to the
future, I think you're going to see a lot of personalized medicine. We're going to look at biomarkers, genomics
and genetics. They will be able to identify who will respond to a drug, who will not respond, who will have a
side effect, who will not have a side effect. It draws on the experience of our diagnostics team and our
pharmaceutical group and brings them together to determine the patient who will respond to these drugs.

I feel that decentralization and the fact that there is wide range of companies actually encourages
entrepreneurship and inspires those who work in similar areas.

1.The Fit Test: How well does the strategy fit the company's situation? To qualify as a winner,
a strategy has to be well matched to industry and competitive conditions, a company's best
market opportunities, and other pertinent aspects of the business environment in which the
company operates. No strategy can work weli unless it exhibits good external fit and is in
sync with prevailing market conditions. At the same time, a winning strategy must be tailored
to the companyt resources and competitive capabilities and be supported by a
complementary set of functional activities

2. The Competitive Advantage Test: Can the strategy help the company achieve a sus-
tainable competitive advantage? Strategies that fail to achieve a durable competitive
advantage over rivals are unlikely to produce superior performance for more than a brief
period of time. Winning strategies enable a company to achieve a competitive advantage over
key rivals that is long-lasting. The bigger and more durable the competitive advantage, the
more powerful it is.

3. The Performance Test: Is the strategy producing good company performance? The mark of
a winning strategy is strong company performance. Two kinds of performance indicators tell
the most about the caliber of a company's strategy: (1) competitive strength and market
standing and (2) profitability and financial strength. Above-average financial performance or
gains in market share, competitive position, or profitability are signs of a winning strategy.