Johnson & Johnson Case Study Essay Example
Johnson & Johnson Case Study Essay Example

Johnson & Johnson Case Study Essay Example

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  • Pages: 16 (4156 words)
  • Published: November 27, 2017
  • Type: Case Study
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JOHNSON & JOHNSON CASE ANALYSIS

Johnson & Johnson is a multi-national company comprised of various operating companies situated all over the world, and the world’s most comprehensive and broadly based manufacturer of pharmaceuticals, medical devices and high-value diagnostic products and services for the global health care community. General Robert Wood Johnson and his two brothers started a company in 1885 that would eventually help revolutionize the surgical and medical fields with innovative products and services.The products made by the various operating companies affiliated with Johnson & Johnson are summarized as follows: Johnson & Johnson products and services 1. Consumer products These includes products designed to various markets such as oBaby Care oSkin and hair care oWound care and topical medicines oWomen's health oOver the counter medications oNutritionals oVision products oOral Health Care 2.

Medical Devices & DiagnosticsThese J products

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are included various orthopedic products, implants, artificial joints, endovascular devices, and products used in sports medicine and trauma, diabetes, heart and vascular diseases, coronary artery disease, peripheral and vascular disease, neurovascular disease, arrhythmia, self-measured blood glucose monitors, insulin delivery devices, various surgical products and devices, and in urologic surgery and plastic surgery treatment.J also provides products that are used for a variety of medical diagnostics ranging from lab equipment and blood screening products to advanced molecular diagnostic equipment.

Prescription products Various semi-autonomous J$J operating companies located in nations around the world produce or supply drugs used for the treatment of a variety of diseases affecting a wide range of human bodily systems. Organizational structure J is structured as a business that operates using an extensive web of semi-autonomous company units, i. e. the parent firm has spun off an

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acquired a number of independent subsidiary firms such as Neutrogena and a myriad of others around the world. J has gained a strong product share and financial position in various segments of the health products market by managing its operating companies as independent businesses. However, this structure has presented difficulty for vendors who prefer "one stop shopping" with J as a whole.

J executives have tried to solve this problem by organizing the operating companies into three groups: consumer products, pharmaceutical products and professional products.Additionally, in 1992 and 1995 its Customer Support Center and J Health Care Systems were introduced respectively to work with US companies specifically to market J products to large managed care health and medical care service providers.

To summarize and reiterate how J operates, the following points are relevant:

  • Each of the many J operating companies functions managerially as independent units. Therefore, each company is responsible for managing its own product lines, administrative and financial systems, and strategic marketing plans, setting their own market and operational goals and targets. For functional purpose the operational companies are organized into three groups – Consumer, Professional and Pharmaceutical.
  • Entities such as the Customer Care Center and J Health Care Systems were created to leverage the advantages from having a large number of products and product lines.

These entities have marketed both consumer goods and healthcare goods to larger buyers in these separate industry sectors. The J way of doing business through these entities may be characterized as functioning essentially as cross-functional teams within the larger J corporate structure.

Organizational culture and limitations With respect to J organizational culture and its limitations, the following points are important to understand:

  • The autonomy of the numerous J operating companies was deliberately designed to create self-sufficient and self-operating companies. •There has been very little movement of personnel or knowledge between the various operating companies.
  • There has been little or no sharing of market information between the operating companies; rather in some areas separate J operating firms functioned as competitors to each other.
  • Each of the individual companies has applied their own styles of design and operation of separate IT systems, using different data standards and different operating systems. •Because the separate J companies have operated in different nations, they have very little in common in terms of organizational design, standard operating procedures, IT systems and processes and culture and overall organizational culture amongst the various operating companies that fall under the umbrella of the parent company.

    Key strategies at Johnson & JohnsonThe following are among the most important strategies employed by J:

    • The Company started as a producer and marketer of dressings for human body wounds. The first strategy was to dominate the market in this market.
    • Gradual expansion into other product lines, predominantly medical products and services, and also eventually including a significant number of consumer health care products.
    • To accomplish its consumer product market strategy expand into a wider consumer products market J sought out and obtained through acquisition some already successful smaller niche consumer product supply firms, e. . , Neutrogena for skin and hair care products.
    • Establishment of autonomous operational companies. These companies then have been delegated the responsibility to apply their specific market segment and niche knowledge and expertise to develop their own strategic marketing plans and product line tactics and strategies and implementation

    approaches. Each firm is held responsible for setting, managing and meeting its own market and financial goals and targets. Strategy in the more recent past has been characterized as driven by a realization that the nature of the healthcare industry is changing, and in some segments changing rapidly. In an effort to contain costs, increase convenience and reduce response time, J firms have tried to insure that health care providers are guided by J strategy so that they place all their orders with a single J vendor.

  • Similarly, in the J consumer products firms, large chains such as Wal-Mart have become important customers.These customers prefer a single point of interaction with the company, which fits well with J supply strategy. However, the practice of having multiple J operating companies competing for the business of many of the same large commercial buyers and individual customer market segments has been found not to be a sound component of J's overall market strategy.
  • More recently there has been a shift in J&J strategy necessitated by the need to respond proactively to new market developments and changes.The company has responded by creating two large units – the Customer Support Center which markets products by the various operating companies to large customers such as supermarket chains (predominantly consumer products), and the Healthcare Systems division which markets the various products across operating companies to large sized buyers in the healthcare industry.
  • Organizing and executing its market distribution strategy to reduce transaction and operational costs and the firm's customer response time. The overall market strategy of he firm has been to attempt to dominate in terms of market share to the extent
  • possible all other competing firms in each of the product categories and product line segments the company offers and to do so in as many different markets in serves around the world.

  • Organizational diversification and expansion of new product lines into existing and new developing markets also characterizes J's more recent approach to remaining competitive in ever expanding and rapidly changing health care product and service markets worldwide.IT Infrastructure The structure of information technology systems at J&J closely parallels the organizational structure of the company (see Figure 1 below). Figure 1: J&J IT Infrastructure Because the various operating companies that make up the consortium all function as independent units, they have their own IT departments.
  • Since these operating companies are financially independent, each company has to make the necessary budgetary provisions for IT in their companies. Structure in the US versus EuropeThe J&J information systems management network in Europe evolved from the Jansen pharmaceuticals IT unit, which at one time was the largest and more successful of such organization Europe. Many companies in Europe were smaller with limited numbers of IT staff. This was not true in Switzerland because of that nation's large pharmaceutical industry, but it characterized most of the rest of Europe.

    The small size of many companies also meant that they had limited capacities to invest in IT infrastructure development. Further, the IT culture expanded much more slowly in Europe overall than in the U.S. where J had its base of operations. As the Silicon Valley IT culture and the World Wide Web developed and expanded and as IT technology began to emerge and improve potential IT efficiency (through constant evolution of both better

    hardware and especially software) J was better positioned to take advantage of these trends than smaller firms in Europe and elsewhere around the world.

    This rapid progress was driven by the disproportionate number of IT professionals engaged in infrastructure development in the U. S. Many companies operating within the U. S.

    lso embraced the notion that it was important to employ these professionals within their local companies. In addition, the strategy of IT development was driven by the assumption that only by employing these professionals locally would they be able to be responsive to local needs. When situated within the particular J operating companies, such provision of a greater understanding of the issues at hand in managing the transition to a digital and internet connected world was used to adapt to this new world more rapidly than other firms and parts of the world economy.Design and development of IT driven work processes increased the effectiveness and efficiency of everything from management of all components of the supply chain to market research and strategic market planning and execution.

    Efficiencies from reduced production times and costs to shorter turnaround times to consumer became part of J organization and strategy. This should not imply that the transition to the digital world and emerging IT culture was easy for J, nor that the firm took full advantage of IT development as rapidly as it could have done most optimally.However, J adapted to this new IT driven environment more rapidly and was willing to make the requisite investment in IT systems development and deployment sooner and more rapidly than many or most of its competitor firms in the health care products and services

    market. What should Ed Parrish do? First, we would advise Mr. Parrish to gather information and think about strategy and cost and benefits to the firm before forging any new IT approach.

    In doing so he should consider and analyze thoroughly the following potential advantages of centralization. Advantages of centralization . By centralizing information systems and services, the company may be able to reduce production, supply chain and managerial duplication of effort. Some IT problems are recurrent in nature, and a centralized team may be better able to handle such problems more efficiently than through a decentralized system. When information systems are centralized, it may become easier to implement security protocols across the organization.

    Some operations across the company are similar in nature. Centralization may enable the standardization of these operations.Apart from improving efficiency and making troubleshooting more easy, staff time will be enabled to perform more easily and effectively the monitoring and data collection and analysis of these data for managerial and strategic purposes. When input from multiple sources is required, a standard response approach and platform should operate more efficiently and at lower cost.

    Centralized IT services have access to more resources, including employees and financial capital. This would enable the company to employ more IT and ther specialists, and such employment will spread benefits throughout the organization rather than to one company within which these people may otherwise be attached. By avoiding duplication, improving efficiency and system and process standardization, centralization of information services has significant potential to cut costs - both for the parent company and the individual operating companies.

    Centralization of IT systems and services enables investment in and development of sophisticated ERP design

    and operating systems to integrate all or many of the various separate IT legacy systems used by the firm.Although the start up costs of ERP systems are significant, they have proven themselves to be more efficient and effective when designed, deployed and managed properly than do the approach of operating many separate legacy IT systems. As such, ERP provides an advantage over multiple decentralized systems that can reduce costs, improve planning and decision making, production, supply chain management, market monitoring, measurement and performance assessment while reducing response time tin responding to market component changes, thus providing the firm with strategic advantage over its competitors.To ensure that centralization meets these goals and is accepted within the firm's formal and informal organizational cultures, the CIO will first have to win the support of top level management, and that of the managers of the various operating companies.

    This can be achieved by a combination of:

    • Focused communication, especially the potential to cut costs.
    • Communicating the changing market scenario, especially the new requirements of customers for a single point of contact with the company.
    • Explaining the strategic benefits of centralization indicated above. Showing how pooling of the IT talent is a sound knowledge management practice, from which the company can benefit.

    This effort can be aided by reference to other firms that have been successful in employing this strategic approach to organization of IT systems and services. Mr. Parrish also will have to reassure of the directors of the diverse operating companies that such a move will not impede their ability to respond to changing local situations. This is essential as these firms are likely to feel threatened initially by any

    IT centralization plan and, consequently, resist the proposed change.Assuring these firms that responsiveness to their customers will be sustained and even improved can be aided by involving them from the outset in designing the new centralized system. Another option is to allow a number of IT professionals to stay physically within the operating companies themselves even as centralization takes place.

    Other significant measures should be considered by Mr. Parrish, including:

    • Standardizing data definitions and formats for key data elements on a world-wide basis.
    • Defining and establishing the information technology infrastructure needed to share data and information electronically. Developing and applying IT expertise as a corporate rather than a company function.
    • Improve communications facilities across the global network.
    • Determine the cost and source of financing of IT centralization in consultation with the firm's financial division and its key executives to gain their support and to avoid discovery of unanticipated costs as the project develops.
    • Contributions from the operating companies may be included in the sources of funding.
    • Develop company wide communication and training for information system professionals and others so as to enable their smooth integration. Plan for possible reductions of staff as a result of centralization and acquire support for this plan prior to introduction of the organizational IT change proposal. Future organizational and IT structure at Johnson & Johnson In these times of rapid technological change, it is difficult to make a prediction five or ten years in advance.

    The following are the variables among those that need to be considered: The future of the pharmaceutical/healthcare industry: ? Changes in the spectrum of disease ? Advent of new technology in disease management ? Newer surgical techniques

    and devices More complex and advanced diagnostic instrumentation, including the influences of nano-technology and mass spectrometry ? The development of newer economies, especially in the east; the consequent shift in market attention to these regions, and the diseases that are common here ? Differences in the way that people pay for Health Care Services ? The emergence of managed Health Care organizations and their contributions as major customers The future of information technology ? New architecture, newer platforms, more advanced hardware and more complicated but better performing software. The emergent preference for open source architecture and software. ? Greater pressures towards specialization and provision of custom made solutions. ? Newer communication technologies including wireless, high speed internet, WI Max and many others. ? The worldwide spread of the internet and the increased access of citizens and consumers to the net ? The rapid acceleration in use and demand for IT solutions and technology specifically tailored for use in the health services industry.

    The increasing importance of telemedicine. Preparing the IT architecture 1.Data standardization is of crucial importance as the company grows larger and starts working in newer markets. 2.

    A centralized division will be required to be created which looked specifically into developing customized IT solutions for newer markets and scenarios. This division is preferably centralized because of the requirement for significant investment. The current dial up connectivity patterns in Europe will have to be replaced by faster and more reliable connection networks. A separate division should be established to look into provision of integrated IT architecture to Asian and other low cost areas.

    . The emphasis on enterprise systems should be on scalability and ability to integrate

    with other systems. The concept to implement will be that of a uniform core system that can integrate well with customized local applications.

    Integrated IT will be a priority in stratgic decision-making systems, decision support systems and customer relationship software. Decentralized technologies will be more preferable for operational activities. Consideration should be given to centralizing certain aspects of the IT architecture, such as staffing, selection of software platforms and ordering of IT supplies.And attempt should be made to identify those applications which are common across the organization, and centralized support should be provided for these.

    Frequent meetings between IT heads of the various divisions and operating companies should be arranged. This will facilitate easier integration, faster troubleshooting and promote organizational culture within the IT division. Anticipated future organizational structure As a result of the various factors suggest above, we can anticipate that ten years from now, there will be opposing pressures on multinationals such as Johnson & Johnson.

    While on the one hand best practices in the healthcare industry will spread worldwide, the need will rise to provide uniform types of services in most corners of the world. On the other hand, the emergence of new markets with differences in diseases and among the service provider spectra the pressure is increased to provide different types of services to different regions of the world, e. g. , the U. S versus Africa.

    It may not be possible to ensure a uniform organizational structure throughout the company in the future.Far flung areas will require customized operations, and these can best be provided by relatively autonomously operating companies. It is reasonable to predict that core management activities, especially strategic decision making, will

    remain with the parent company, while individual operating companies will continue to proliferate and make greater demands for autonomy. This degree of differentiation might require the creation of a separate division that deals with the integration of individual companies with the whole corporate entity.Officers from these divisions can then be posted to larger market areas where they coordinate the activities of various operating companies under their jurisdiction, and report back to the top management. In this regard, while the need for more decentralized and regionally adapted service provision is inevitable, by implementing the centralized IT system change approach we recommend the firm will become more cost effective and market responsive as a result of developing and implementing an improved IT system design and processes that better support more efficient business plans and work processes throughout the organization.

    In terms of a new centralized ERP designed IT system, the firm IT system will operate in a more networked and matrix organizational manner. This could lead the entire J enterprise toward an increasingly networked and matrix method of operating. The advantages of operating as a more networked organization have been explored and articulated in the organizational studies literature over the past several decades.For example, Evans and Wurster (1997) have argued that, in the future, all knowledge-based productive relationships will be designed around fluid, team-based collaborative communities, either within organizations (deconstructed value chains), or collaborative alliances like the “amorphous and permeable corporate boundaries characteristic of companies in the Silicon Valley,” i. e. , as deconstructed supply chains.They assert that, in these relationships everyone will communicate richly with everyone else on the basis of shared standards and that, like the

    internet itself, these relationships will eliminate the need to channel information, thereby eliminating the tradeoff between information bandwidth and connectivity. “The possibility (or the threat) of random access and information symmetry,” they conclude, “will destroy all hierarchies, whether of logic or power. ” (Evans and Wurster, 1997 p. 8) Evans and Wurster make a strong case and one that some may perceive as too radical.

    Nevertheless, we ignore such visionaries at our peril. The world wide web, together with the canon that two heads are better than one, has created something immensely interesting and transformative. The genius of the world wide web, and therefore of the networked organization, is that it is (a) distributed so that anyone can contribute to it, and (b) standardized so that everyone else can comprehend the contributions.This type of change and the work performance enhancement it provides may be anticipated as a possibility and strived for as an organizational goal for J in the future as it implements its more refined centralized IT strategy and structure. Recommendations Johnson & Johnson should develop a plan and communicate its overall strategy and component parts for a globally centralized IT system and infrastructure as the central point for all IT software/hardware platform development, information gathering, data base management, analysis, security and electronic communications.

    Then the firm should communicate the advantages of the plan and strategy throughout the organization and take the time to win the support for the new approach from as many stakeholders as possible. All senior executives and managers must be made ware of and support to the extent possible the change plan and strategy and be given voice to express every concern

    they have in the beginning as soon as the plan is introduced before the process begins.This will take time but the firm needs to act decisively and press consistently to win the support needed to implement the plan successfully. This approach should enable general management and IT managers throughout J and its diverse component firms to become aware of the various business processes that their other companies will have to change. The extent and intensity of change will vary from company to company, and this fact has to be understood and accommodated by those who implement the new plan and its IT and other business processes.IT managers and staff should make informed decisions about data definitions, warehousing, and implement change simultaneous among those companies with like products or services, all of this to be in conformance with the standardized approaches defined by the change plan managers to be applied throughout the centralization process.

    In terms of the implementation process, we recommend two stages. Firstly, the new plan and strategy should be pilot tested by J in one firm within its U. S. operations.This will allow valuable learning that will improve the ability of change agents and IT managers and staff to identify problems that will inevitably occur, to better anticipate problems and find solutions and to avoid problems in the future with the new centralized system before it is developed firm-wide.

    Secondly, to develop and integrate the new approach one company at a time would drag out the change process too long, run up costs, and increases the probability that the new technology to be developed and installed will not be done so as directed by the

    firm's overall plan and strategy.Thus, after pilot testing, implementation of the plan and strategy should take place simultaneously throughout the firm and its subsidiaries. In a world of rapidly changing technology, taking too long to integrate a new IT approach and IT systems and process runs the risk that the new system will be outdated before it is fully globally deployed and operational. Lastly, in changing the IT system of J&J the firm should place the need for its development and deployment within the context of assisting in the creation of a knowledge culture throughout the organization and all of its component parts.By doing so the firm will gain advantage in communicating the emergent strategic vision and mission of the firm, demonstrating how the new IT system is an essential part of an evolutionary approach to J&J organizational change so as to enable improved adaptive responses to consumer and market demands and preferences.

    Sources and References

    1. Austin, Robert D. (1996) Measuring and Managing Performance in Organization. New York: Dorset House. Davenport, T.
    2. H. and L. Prusak. 2000) Working Knowledge: How Organizations Manage What They Know.
    3. Harvard Business School Press. Edvinsson, Leif & Malone, Michael S. (1997) Intellectual Capital: Realizing your company’s true value by finding its hidden brainpower. New York: Harper Business.
    4. Evans, P. B. and Wurster, T. S. "Strategy and the New Economics of Information," Harvard Business Review, September-October, 1997: 71-82. Laudon, K.
    5. C. and J. P. Laudon. Managing the Digital Firm. 9th ed.
    6. New Jersey: Prentice Hall, 2006. MBA-770 Online Notes
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