Johnson & Johnson Pharmaceutical Company’s Analysis

Introduction

Marketing is a highly creative and individualized process, and despite the presence of sophisticated computer technologies, the concept is more of an art than science. Businesses are required to customize their marketing strategies in response to the environments and exchange processes. As a result, marketing strategies differ in roles and situation criteria. Global marketing is complex as new competition grows from various directions, including online, private label, and low-price alternatives.

Usually, the global marketing pattern is possible due to international transportation, liberalization policies adopted by states, and communication systems. Business markets are deemed efficient when the prices of goods and services attract much demand to outdo the current supply. Concerning marketing roles, this report close examines how Johnson &Johnson seizes opportunities to realize goals. The paper’s focus is to analyze the market environment for the company’s pharmaceutical products and assess how the company can differentiate itself from competitors.

Company Overview- Johnson &Johnson Pharmaceutical

J&J is a global corporation and has secured a position in the international market to overcome challenges in the changing business environments. The pharmaceutical division of J&J is a leading segment in its market sector. Precisely, Switzerland is a key location for the part, although the products serve clients worldwide. With over 125000 employees, J&J believes in collaboration, and this approach has led to several breakthroughs in the medical markets. The company holds high regard for patients, doctors, and nurses who utilize medical products. In meetings the needs of such customers, products must be of high quality and at reasonable prices. J&J vision is to continue the path set forth by the founders and commit to clients, and employees while contributing to the community.

On the New York Stock Exchange (NYSE), J&J is among the oldest bust most prestigious American corporations. Founded in 1886 by Robert, James, and Edward, the business has transformed over its history, becoming a key innovator and pioneer in the healthcare industry. J&J deals with products including Aveeno, Neutrogena, and over-the-counter drugs such as Motrin and Tylenol. Moreover, the company creates medical tools for specialties and surgeries to enhance patient care and precision in medical services. The business model was adopted for selling pharmaceutical products to healthcare professionals and healthcare facilities. Ideally, Janssen is a primary division of J&J that majorly focuses on diseases that help develop prevention and vaccination strategies.

J&J Pharmaceutical Market Sector

The market division pharmaceutical is the leading segment in J&J’s global business. The pharmaceutical research supporting market developments focus on immunology, cardiovascular, neurology, oncology, pulmonary arterial hypertension, infectious illness, and vaccines (Johnson & Johnson, 2019a, 1). Under immunology, J&J’s mission is to redefine treatments for immune diseases by availing therapies to patients. J&J has a strong history of producing novel medicines for immunological illnesses.

The entity continues to build a pipeline of innovative biologic and oral therapies in disease areas, including inflammatory bowel, psoriasis, and rheumatoid arthritis. On the other hand, in cardiovascular and metabolic diseases, the company’s focus is to improve people’s lives with cardiac problems and diabetes. Such illustrates J&J’s commitment to intervention strategies through the pharmaceutical market approach.

The pharmaceutical segment of J&J delivers transformation new medicine for unmet medical needs in the world. In 2009, the company launched about 14 products, and seven of them exceeded sales of $1 billion by 2015 (Johnson & Johnson, 2020b, para. 1). Coupled with core growth brands, the new products fueled the industry growth impacting the overall sales or earnings of J&J. The combined strength of organizations such as Janssen in the market portfolio provides the momentum to sustain a compounded growth. By 2014, the total pharmaceutical market reached $1 trillion, with almost 40% of the growth generated from specialty medicines, including respiratory, autoimmune, and anti-viral medications (Johnson & Johnson, 2020b, para. 4).

The total global branded pharmaceutical market was projected to grow at a compounded annual operation rate of about 3% from 2014 to 2019. Among the top ten international pharmaceutical firms, J&J was the fastest-growing in the US, Europe, and Japan markets in 2014, with sales projecting up to $32 billion (Dubois and Lasio, 2018, 9). The late stag products were expected to drive growth in seven years after regulatory approvals. In 2020, the net impact of business moves such as acquisitions and divestitures of medical devices globally, the net sales growth rate was low due to the pandemic effect. The US market makes the largest market segment for J&J pharmaceutical products.

Competitive Environment Which Johnson and Johnson Pharmaceutical Operates.

To expand the market segment, J&J invests intensively in research and product developments. The competitive environment for J&J is vast due to new firms releasing commodities, but the size and scale of operation are an added advantage. In terms of revenues, J&J attained about 8% of growth in four-quarter while competitors’ revenue recorded 10.4% for the same period. Net income in four quarters of 2020 was reduced by 56% (Nedelcheva, 2019, 67). In all the product lines, J&J subsidiaries compete with firms both locally and internationally.

Competition is evident in all product lines without considering the number or size of competing entities (Morton and Boller, 2017, 5). The competition ins research, developments, or improvements of existing commodities and processes is crucial (Lakshmi and Patel, 2020, 22). Developing innovative items is considered critical to the success of all business areas. The competitive nature of the market needs a substantial environment and extensive research.

PESTEL Analysis

Political Environment

In the manufacturing of medical equipment and pharmaceuticals, government involvement is a critical factor in predicting growth. J&J operates in local US markets and internationally; hence considering political elements is paramount. In the business sector, the government has influential power. In the pharmaceutical industry, the influence is primarily political, especially on drug regulation-which can affect product sales in the form of taxes or duties. Product regulations are imposed to ensure the safety of drugs in the market and recall efficacy in ingredients used. Moreover, local authorities scrutinize an observed influence in the healthcare industry, resulting in investigations that carry potential threats to the company. In allegations concerning pharmaceutical marketing approaches, the company can suffer reputation due to legal factors such as lawsuits and patent-related issues of litigations.

Economic Factors

Decision-making by J&J leadership is influenced by various economic factors, including inflation and interest rates. Information such as growth rate, economic indicators, drug manufacturers, or consumer spending habits in the US helps forecast the development trajectory of the organization. Some economic factors that J&J considers as external influences are highlighted. For a company that operates in a challenging economic environment of the pharmaceutical industry, there is induced pressure and demand to invest and expand to emerging markets. The US is a demanding market for pharmaceutical products as the sector contributes to 80% of sales globally, and that is a significant competitive advantage that J&J has to enjoy. However, stability of the economy is a critical factor since government interference, exchange rate fluctuation, labor costs, competition, and employment laws can affect the business,

Social Factors

An increase in health consciousness is the major social influence on the company. Compared to the past, consumers are health conscious nowadays and look forward to living healthier. As such, the demand for medical products increases, impacting the production level of pharmaceuticals. Furthermore, shared beliefs and attitudes of the population play a significant role in how marketers at J&J understand the clients of the pharmaceutical market. The design of products must meet the identified needs or interests in consideration of the social elements listed.

Technology Factor

Technology is disrupting various industries worldwide. For instance, transportation is one aspect that illustrates the rapid changes. The pace of innovation gives a firm little time to cope and adjust to make profits. J&J is a leading firm in medical items, its business is broadly organized into franchises. For example, Ethicon Inc is a subsidiary specializing in producing surgical tools to support the oncology market. Thus, constant improvisation in technology is paramount. Medical devices and services are widely used in cardiovascular diseases, surgeries, and orthopedics. Technology plays a crucial role in shaping products for the market, impacting product making, and influencing the value chain and cost structure. Current trending technological factors influence the pharmaceutical industry; for instance, the emergence of artificial intelligence (AI), the development of antibiotics, bioprinting, or RNA targeting.

Environmental Factors

The pharmaceutical industry has a significant risk to the environment, such that media waste or residual can cause pollution and contamination. In that way, J&J is subjected to the US and international environmental protection policies and should abide by stipulated standards for minimal impact on society. Laws governing ecology might vary from one region to another, which requires increased awareness by the entity. In the US, conditions such as Texas and Florida have different liability clauses in environmental mishaps. As such, the pharmaceutical market in these geographies would be impacted distinctly.

Legal Factors

Some legal factors that J&J leadership considers in the market relate to discrimination, consumer protection, employment laws, data protection, health, and safety. Currently, the entity was challenged by lawsuits concerning products’ health impact on consumers. Thousands of plaintiffs lamented over the company’s product safety and marketing approach while the jury orders the health corporation to pay billions in the trials. The company’s marketing tactic of large-cap is accused of fueling the opioid addiction crisis (Lentacker, 2021, p. 19). Such legal issues affect the public image and low consumer trust.

SWOT Analysis of J&J Pharmaceutical

Strengths

A major strength of J&J pharmaceutical includes research developments, higher revenues, unique products, brand equity, and stable market performance. The company spends over 20% of gross profits on research, and based on 2019 reports, J&J spent more than $11 billion in scientific work (Nedelcheva, 2019, p. 69). Research and development (R&D) are a critical component of the company; hence the high budget is a top priority. Increased revenue is experienced due to the large market served with a wide range of products. Despite serving a local US market, J&J has a global rich, and this implicates more revenues.

Weaknesses

J&J pharmaceutical weaknesses in business operation are unethical practices, uneven revenue distribution, discrimination issues, and allegations. Most pharmaceutical companies offer kickbacks to professionals to boost prescriptions. According to whistleblowers, J&J was accused of giving doctors free services to increase drug administration, and this is the unethical practice of gaining an unfair advantage. Moreover, most pharmaceutical sales are generated from immunology products, and hence much of the company’s revenue depends on a few main products which are vulnerable to expiry and competition. A lack of diversity in products is a weakness of the entity.

Opportunities

The companies’ opportunities for growth are evident through robotic surgical systems, vaccination, bio-implants, acquisitions or mergers, and telehealth. The latter covers the distribution of healthcare services over the media. As such, it allows over-distance care and consultations, and this is a potential for the company to invest in telehealth startups. Through mergers, the company will broaden its portfolio while the population increase will create demand for bio-implants. With every vaccine, J&J earns significant income; hence increase in demand for vaccination is a fortune opportunity.

Threats

The biggest threats to J&J include lawsuits, competition, and government regulations. The authority mainly regulates the pharmaceutical industry, and policies put a ceiling on how much the entity should charge for products. Competition threatens volume sales; thus, there is low income, while lawsuits affect the public image, imposing a decline in customer base.

Porter’s Five Model Analysis

Threats of New Entrants

Threats of new entrants are low due to the high cost of R&D, expenses in producing medicine, and maintaining manufacturing. In the drug manufacturer, major innovations could lead to new firms in the market with new ways of making products or addressing health issues (Newham et al., 2018, 2). Moreover, J&J has brand recognition where customer loyalty is maintained.

Bargaining Power of Supplier

The power of suppliers is low in the market because pharmaceutical companies such as J&J choose suppliers carefully due to the need for customization and standardization. Companies in the pharmaceutical market acquire raw materials from different suppliers. Powerful suppliers will use negotiation efforts to extract higher charges from the companies. The resulting impact of high suppliers’ influence is that it can lower the overall profitability.

Buyers’ Bargaining Power

Buyers, including doctors, customers, wholesalers, retailers, pharmacists, and insurance companies, have low bargaining power. Such is likely because there are few suppliers with an established brand name to retailers. J&J has established a name with stakeholders and hence can reach fair negotiations. Moreover, consumers of pharmaceutical products may demand to purchase items with the best offerings by paying minimum prices. Such puts pressure on J&J profitability in the long run since the small the market, the more influential the client base.

Threats of Substitutes

Threats of substitutes are moderate since few subs are available in the medicine world. Substitutes that consumers might consider purchasing products such as herbs which have high costs. More competition in the market present a variety of products and create more alternative for buyers. The Food and Drug Administration (FDA) demands generic drugs to be bioequivalent to the company’s name counterparts, making it easy for substitutes (Morton and Boller, 2017, 2). In case a new product meets the similar needs of clients in several ways, the industry’s profitability suffers.

Rivalry among Firms

The level of rivalry is moderate since entities are not necessarily competing with prices but stability due to government regulations imposed. In the pharmaceutical industry, most entities perform mergers and acquisitions that J&J has done to compete. J&J faces competition from Abbott Labs, Lilly Elli & CO, Novartis AG, Nivea, Colgate, and Hindustan Unilever (Kumar and Nanda, 2017, 2). In case rivalry between these firms is intense, the prices of pharmaceutical products.

Marketing Mix

The marketing mix of J&J looks at the brand product, price, place, and promotion (4Ps) and reveals the marketing strategy. The product approach in the company can be explained as a vast and elaborate portfolio focusing on pharmaceuticals. About 35% of the total revenue of the company comes from pharmaceutical items. They vary in applications-generally used in therapeutics such as contraceptives, cardiovascular, dermatology, antifungal, and anti-effective.

In its pricing strategy, the company follows a policy in the marketing mi approach. Mainly, J&J has to keep prices within the range of buyers’ prices index. Psychological pricing is employed as an effective method to keep prices in multiples of 49 or 99 (Nedelcheva, 2019, 69). Although the company is known for superior quality and excellent packaging, it ensures affordability. When prices are favorable to the customers, it means the selling of the products will increase, and hence the company will make more profit. Also, average prices tend to attract new clients to the market.

Availability of products extensively is possible due to distribution strategy or network. J&J has multiple subsidiaries operating in different locations in the US market. An organization team is appointed to look into the operations of the distribution of pharmaceutical products. The team supervises and coordinates activities to reach target buyers. A decentralized management approach is followed by the entity while engaging employees. With the growth of trends in online shopping, J&J has notably captured the opportunity to sell products through different channels and shopping sites.

The promotion strategy in J&J follows a plan to create awareness through advertisements in various media that are eye-catching. The company’s promotion efforts aim to have a 360 branding to appeal to clients in buying more commodities. Advertisement campaigns are placed through different mediums, including newspapers, magazines, and boarding.

Marketing Strategy

J&J pharmaceutical employs different marketing strategies such as product or service innovation and brand equity. The company is committed to developing procurement relationships that are based on trust (Johnson & Johnson, 2020, para.4). The company drives growth while maintaining standards through supplier innovation, quality, and reliability (Johnson & Johnson, 2020, para.4). Using emotional and mental communication, the entity develops trust while convincing clients to purchase items. J&J pharmaceutical invests in the future by tracking market developments and seeking stakeholders such as suppliers who understand emerging trends in the business.

Visual Model of a Product Life Cycle

The product life cycle takes significant formation stages, including introduction, growth, maturity, and decline. J&J’s product life cycle starts from formation and manufacturing to uses and ends life, as shown in figure 1 below (Johnson & Johnson, 2020c, para. 2). The tenant in this process is to find opportunities that would drive improvements. The company focuses on areas that have high impacts to prioritize improvements for significant effect.

A Visual Model of a Product Life Cycle by J&J 2020.
Figure 1. A Visual Model of a Product Life Cycle by J&J 2020.

Current Trends in the Pharmaceutical Sector

The pharmaceutical industry is seeing a massive revamp, and while traditionally it was slow in adopting technology, the sector is undergoing rapid changes due to the impacts of technologies. The prominent trends include artificial intelligence (A), blockchain, additive manufacturing, and other industry innovations. Increased investments, growth of technology startups, and inter-organization collaboration are spurring influence across the pharmaceutical industry. Such transformation means a significant impact on J&J in terms of market reduction and competition force (Newham et al., 2018, 2). However, welcoming these developments in the scope of practice could significantly benefit the company regarding productivity.

How J&J Pharmaceutical Can Differentiate from Competitors

Considering the changes in the pharmaceutical industry, J&J needs to adopt a strategic approach that will offset its operation from that of rivals. One way the company can do this is through a differentiation approach. Pharmaceutical firms are changing by transforming leadership in immunology, and deepening expertise in oncology and vaccinations. Similarly, J&J must lead in introducing advanced products in the market and distribute them across multiple geographies. A differentiation approach is attained when an organization provides its client with unique products or services.

The new pharmaceutical items produced by J&J have to be distinct from those of competitors, and this will be attained through strategies such as market research, funded developments, and technologies (Lakshmi and Patel 2020, 22). Examples of companies in the US that have benefited from the differentiation approach are Amazon and Walmart. The latter’s foremost trait is cost efficiency, as the company can retain the market by providing products at the lowest cost possible. Similarly, J&J can be a leader in delivering commodities at the best cost possible and availing exceptional items.

Delivering differentiated medical products will be the key to success in a competitive market. Currently, J&J adopts a competitive pricing strategy as it constantly tries to find ways of lowering costs without hurting quality and reputation (Adida, 2021, 11).

J&J seeks to expand its product portfolio across US states and outside markets. The rationale for a differentiated approach is that the process blends current marketing or pricing and product development. Through effective cost, J&J could be widely known for the best prices, and by innovating high-quality products, the company will establish itself as a quality brand in the pharmaceutical market. A differentiation strategy is the best effective plan to enter new markets, especially when considering operating beyond the US market. The ability to perform this action will be necessitated by the sprawling nature of subsidiaries, mergers, and acquisitions.

J&J has to effectively capitalize on the advantage of internal governance by freely engaging in social or environmental-oriented behaviors. Performance standards are key in driving the differentiation approach to recognize benchmarks for the environment and social risk management as the package of environmental, societal, and governance (ESG) solutions (Zhang, Loh, and Wu, 2020, 7). Observing this trend when differentiating in the market will help maintain a competitive position, deliver profitability and operate within the interest of stakeholders.

In summary, J&J is a renowned brand with subsidiaries operating in different geographies. The firm enjoys the advantage of local windows of operations and meets customers’ needs through scientific developments. To meet the aspiration of clients and meet satisfaction, the entity has used a well=organized distribution channel. However, market threats such as competition are distinguished, requiring a differentiation approach to retain customers.

Reference List

Adida, E. (2021) ‘Outcome-based pricing for new pharmaceuticals via rebates’. Management Science, 67(2), pp.892-913. Web.

Dubois, P. and Lasio, L. (2018) ‘Identifying industry margins with price constraints: structural estimation on pharmaceuticals.’ American Economic Review, 108(12), pp.1-44. Web.

Johnson & Johnson, (2020c) ‘Product Stewardship/Earthwards’. Johnson & Johnson. Web.

Johnson & Johnson, (2020d) ‘Our Strategies to Deliver Value.’ Johnson & Johnson. Web.

Johnson & Johnson. (2019a) ‘Who we are.’ Web.

Johnson & Johnson. (2020b) ‘Johnson & Johnson pharmaceutical segment to continue driving above industry growth with plans to file more than 10 new products by 2019, each with potential to exceed $1 billion in revenue’. Web.

Kumar, A. and Nanda, A. (2017) ‘Ever-greening in pharmaceuticals: strategies, consequences, and provisions for prevention in USA, EU, India and other countries.’ pp.2167-7689. Web.

Lakshmi, B. and Patel, S. (2020) ‘Digital marketing in the pharmaceutical industry–an overview and assessment.’ International Journal of Pharmaceutical Science & Innovation. 1(1). 21-25. Web.

Lentacker, A., (2021) ‘The Opioid Documents: A Report on the Politics of the Public Record’. The Social History of Alcohol and Drugs, 35(1), pp.1-29. Web.

Morton, F.S. and Boller, L.T. (2017) ‘Enabling competition in pharmaceutical markets.’ Brookings, Brookings, 2. Web.

Nedelcheva, Y. (2019) ‘Competition and competitiveness in the pharmaceutical industry’. Economics and Management.16(2), pp.66-77. Web.

Newham, M., Seldeslachts, J. and Banal-Estanol, A. (2018) ‘Common ownership and market entry: evidence from the pharmaceutical industry.’ Available at: Web.

Zhang, Q., Loh, L. and Wu, W. (2020) ‘How do environmental, social, and governance initiatives affect innovative performance for corporate sustainability?’ Sustainability, 12(8), pp.1-18.

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