Johnson & Johnson

Marketing Assignment
Mohammad Talha Awan
TP021713

Consumer goods Pharmaceutical

Medical

2010

s
Word count: 1518 (excluding tables, acknowledgment and table of content)

Product Development Report

Table of Content: 1) Acknowledgment 2

2) Company Background ....... 3 2.1) History of the Company .. 3-4

3) The Credo .. 4 4) Market position .. 4-5 5) SWOT analysis .. 5-6 6) Market Segments .......................................... 6 7) Product and Marketing strategies ...... 7 7.1) 7.2) 7.3) 7.4) Product Description ....... 7-8 Pricing Strategy ..... 8-9 Promotion Strategy 9 Distribution Channel .. 10

8) Conclusion . 10 9) Referencing 11

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Acknowledgment: This report involves extensive research on Johnson & Johnson Company; market prices and cost of production were an assumption and based on realistic values. Sales figures were generated and taken from authorized sites, with referencing provided for each one. This report includes a detailed company background on J&J, charts and tables for references, design of the product was not copied but purely created by the individual. The total word count has been mentioned on the cover page which does not include words from tables, charts, table of content, referencing and acknowledgment. A special thanks to the lecturer Miss Shamini for explaining marketing strategies in detail with real life examples.

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Company Background: Johnson & Johnson is a multinational Company that operates in almost every country in the world. It has approximately more than 250 companies and employees over 118700 employees that are engaged in research and development and selling of health care related products. The company specializes in products helping improve human health and well-being of people. Johnson & Johnson has a more decentralized approach towards management; leading to trust its employees with day to day decision making process. Each of the operating companies runs as a separate single business and also knowing that the key to their success is by anticipating customers needs and wants and going a step further in fulfilling those needs successfully. Research and development is an important part of the J&J, with research facilities located not only USA but also Belgium, UK, Canada, China, France, Brazil, India n etc. These facilities are dedicated to creating new products, improving existing ones along with following government regulations for protection of customers. The research costs for 2008 and 2007 summed up to an amount of $7.6 and $7.7 billion which are directly recorded as expenses in the incurred year. J&J History: Johnson & Johnson was first founded in the year 1886 with a single aim of meeting peoples health care needs internationally. This was based on a revolutionary idea over 120 years ago: Hospitals used Band-Aids or dressings to treat peoples injuries, this idea was taken into mind and since then the company had worked to revolutionize the health care industry by breakthroughs and inventions which were generated by many inspired employees who were willing to make a difference in peoples lives. The company eventually expanded through takeovers, mergers and developing new companies, and currently is the worlds largest health care

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organization. The company introduced a variety of essential products like dental floss, First-Aid kits, sanitary products, baby powder and etc.

The Credo: Johnson & Johnsons main responsibility is their customer or all people that buy their products from doctors to mothers. They strive hard to satisfy their needs in terms or health care and safety and also try to cut down on their costs as much as they can to keep the prices low to be affordable. They believe that the customers should be served properly and on time and also that their suppliers or distributors are able to earn a fair profit. Johnson & Johnson believes that the main reason for their success is due to the dedication of their employees and hence they should be recognized for the achievement by providing merits, hygienic working conditions and decentralized structure for everyone to make contributions or suggestions regarding anything. Market Position: Since Johnson & Johnson was founded in 1886, it had not experienced most obstacles until 2009. The economic crisis and increased competition made the company face many challenges, including a $3 billion patent expiration. The companys sales was reported to decline for the first time in 76 years, but still due to efficient management and caring employees the company was able to pull out results beyond expectations. Overall sales for 2009 were $61.9 billion which is 2.9% less than previous year, but that was still able to cut down costs and keep sales stable. Johnson & Johnson tried strengthening the core of the business by investing another $7 billion into research and development for the year 2009 which lead to launches of new innovative
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products. Mergers and acquisitions of 8 major firms were made since 2008 including Cougar Biotechnology, Inc. for oncology and Acclarent, Inc. for minimally invasive sinus surgery. The company also continued to expand globally by increasing its operation in Brazil, India, china and other fast developing countries. (http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=JNJ)

Sources:http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=JNJ

SWOT analysis: Strength: The company is able to cut down cost and maintain sales inspite of the economic downfall. Research & development is very strong leading to formation of new innovative products to capture the market. Due to decentralized decision making process allows workers to enjoy an open environment and attract great minds to work with them. Opportunity: The recent takeover Pfizer Consumer Healthcare will act as an advantage as the company now has more resources at disposal and also encourage growth through alternate routes. Further investment in research & development will allow firm to cater new innovative products. Setting up companies in Brazil and India will allow the business to cater to new markets.
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Weakness: There is increased pressure within Pharmaceutical companies to reduce their market prices, but it is hard to manage with high research &

Threats: Within the pharmaceutical companies competition has aroused making it more challenging for J&J to maintain its market share. Innovation is the only key for the business to survive the competition and this includes extensive research.

development costs. A reduction in the market demand for key products is seen, which needs to be replaced with new innovative ones.

Market Segments: Johnson & Johnson has 3 main business segments that it caters to: Consumer goods: this includes products like baby care, skin care, wound treatment and women health care products. ( 2009 sales: $15.8 billion) Pharmaceutical: this segment deals in the area of anti-infective, orology, dermatology, pain management and etc. These products are directly distributed to retailers and wholesalers for use by public.(2009 sales: $22.5 billion) Medical: this area includes products being sold directly to hospitals or wholesalers for people in specific fields like doctors, nurses, therapists and clinics etc. (2009 sales: $23.6 billion) (http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=JNJ) Johnson & Johnson is well known for its innovative products and breakthrough in medical and consumer health care products. If we look at the overall sales of each segment it can be clearly identified that consumer goods has the lowest proportion of total sales for the company. This is mainly due to too much of competition rising in the market. In order for Johnson & Johnson to maintain its customers and increase sales they would have to come up with a new product that would approach the users in a totally different way.

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Product & Marketing strategies: Name of Product: PROPRES Capacity: 255ml (100 tissues-single ply) Use: Tissue Cloth

Johnson & Johnson

PROPRES
Instant Tissue!

PROPRE S

Description:
y

Propres is one of the unique products that has not yet been invented by any company and will cater a totally different market for Johnson & Johnson. The name Propres is Latin for clean; it is very appealing, short, easy to pronounce and gives the product a unique innovative look. The idea of this product is to grant consumers an easy access to instant tissue papers for cleaning purposes. When in time of use the consumer will just have to spray the can on any flat surface or even his/her hand for a tissue cloth to form. This
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development is not a theory but has been put into practice and tested by Paul Luckham and fashion designer Manel Torres to create a cloth or fabric out of spray and ready to use in less than a minute. This was made possible by combining cotton fibers, polymers and a solvent to form a liquid which would form an instant non-woven fabric that could be sprayed on any surface. The material can be formed of any desired thickness and also washed and worn again. Applying the same concept a tissue cloth could be created with a little more detailed research required. Johnson & Johnson spends millions each year on research for innovative products and this product development would give it a breakthrough in the consumer market. Easy to use and portable canned tissue papers would definitely catch consumers mind. One of the other plus points of the product as the research has revealed is that as it is a sterilized material coming from an aerosol can, you can simply add drugs to it to help heal wounds faster.

Pricing Strategies: Johnson & Johnson is very careful about its pricing strategy and makes sure reasonable prices are charged. During the launch of the product Penetration pricing will be used that is charging lower prices as the product is being introduced in the market and customers
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will get attracted by the new product and low prices. Once the product is well introduced into the market and consumers are made aware of it, sales will start to increase. It would be wise to maintain low price until first 6months of the launch. After they have achieved specific amount of customers the prices can be increased by using cost based pricing as the demand will be inelastic.

Output produced in a month (For the 1st year) Advertising cost (per year) Cost per unit Price Charged ( 1st year ) Distribution costs (per month) Research and development cost Profit per unit (in 1st year) Price Charged (2nd year) Profit in second year (per unit) Promotion Strategies:

3,500,000 units $4,000,000 $0.50 $1 $200,000 $3,000,000 $0.5 $1.30 $0.8

Johnson & Johnson should set up Point of Sales where they can give demonstration of the new product; this is basically during first 2 months after the launch in order to create awareness. Alongside the company should start with Informative advertising, in this all features and portability of the product will be portrayed by informing customers what is so special about the product. Once awareness is created sales will eventually start to increase by mid of the year and the advertising will shift to Persuasive in order to capture the minds of consumer, this most probably will be carried out through out the second year after launch.Public relations is also another way that Johnson & Johnson more often uses, this is by creating awareness amongst consumer that you care about them. This has always been the motto for Johnson & Johnson to produce products essential for consumers safety.

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Distribution Strategies: Johnson & Johnson has very good relationship with its retailers and makes sure that they earn a reasonable profit. All of its products are sold through wholesalers or retail outlets. It is a wise strategy as in this way it gets easier to reach the customers, there are many retailing outlets within a country and by using the Producer Wholesaler Retailer Consumer chain it is very easy to make products available to consumers. Usage of intermediates will also help the company to identify how many units are being sold. They may also place special offers on the product itself, which indirectly will help the companys sales to increase.

Conclusion: Looking at the overall product design and strategies it can be said that PROPRES is a totally unique product with a different market to cater. Johnson & Johnson can have a breakthrough and form a monopoly if appropriate strategies are implied as there are no competitors for the product and It will help them boost their consumer good sales.

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References:
J&J - SWOT analysis [Online]. Retrieved from: http://www.scribd.com/search?query=johnson+%26+johnson+SWOT [Accessed 16th December 2010]. Johnson & Johnson[Online]. Retrieved from: http://www.scribd.com/doc/39007528/JohnsonJohnson [Accessed 16th December 2010]. Annual Report 2009 [Online]. Retrieved from: http://files.shareholder.com/downloads/JNJ/1098987245x0x359541/6EAF4E16-08B2-4AD486AC-5BDB928E5320/JNJ_2009AR.PDF [Accessed 18th December 2010]. SWOT analysis [Online]. Retrieved from: http://www.businessteacher.org.uk/businessresources/swot-analysis-database/johnson-johnson-swot-analysis/ [Accessed 18th December 2010]. Market Share 2009 [Online]. Retrieved from: http://finapps.forbes.com/finapps/jsp/finance/compinfo/CIAtAGlance.jsp?tkr=JNJ [Accessed 19th December 2010]. Fabrican Spray-on Fabric [Online]. Retrieved from: http://www.fabricanltd.com/ [Accessed 19th December 2010]. Fabrican- Aerosol Technology [Online]. Retrieved from: http://www.fabricanltd.com/technology.php [Accessed 19th December 2010]. Fabrican Spray on T-shirt [Online]. Retrieved from: http://www.technovelgy.com/ct/ScienceFiction-News.asp?NewsNum=3014 [Accessed 20th December 2010].

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