SWOT Analysis of Johnson & Johnson Inc-Strategic Evaluation
Strategic Evaluation of Johnson & Johnson
Strengths
·
Global coverage – Johnson &
Johnson has established a global presence in the cosmetics and toiletries
market, insulating it to some extent from local market difficulties.
·
Strong position in major
developed regions – the company has developed a particularly strong position in
the large North American and Western European markets.
·
Strong brands – the Johnson
& Johnson portfolio contains a number of strong brands, including
Neutrogena, Listerine and, notably, Johnson's Baby, which has established high
levels of consumer trust in many markets.
·
Dominance in baby care –
Johnson & Johnson has established a geographically broad-ranging dominance
in baby care, which acts as a significant obstacle to the development of rivals
in the category.
·
Strong scientific background –
the company's breadth of operations in pharmaceuticals, OTC healthcare and
medical devices/diagnostics confer significant advantages in a cosmetics and
toiletries market which is increasingly influenced by scientific and medical
developments, including research and development synergies.
·
Decentralised operations – the
company's decentralised operating structure provides it with the capacity to
respond quickly and flexibly to changing local conditions.
·
Experience of entering emerging
markets – Johnson & Johnson has a long history of expansion into emerging
markets, suggesting that it is in a good position to exploit forecast strong
growth in markets such as Eastern Europe and Africa and the Middle East.
Weaknesses
·
Lack of central focus – the
autonomy granted to different brands and geographical divisions may lead to a
loss of strategic coherence and control.
·
Cosmetics and toiletries take a
back seat – the secondary status of Johnson & Johnson's Consumer division,
compared to the flagship pharmaceutical business, may weaken the company's
position in the cosmetics and toiletries market within the short term as
competitors are able to concentrate more intensely on development.
·
Bias towards mature markets –
while it has established global coverage, Johnson & Johnson still relies
heavily on the mature developed markets of North America and Western Europe,
which jointly accounted for around 60% of the company's cosmetics and
toiletries sales in 2007. These are forecast to be the two most sluggish
regions in cosmetics and toiletries on a global level over the 2007-2012 forecast
period.
Opportunities
·
Strong growth in skin care –
ageing populations and a growing concern about ageing amongst younger consumers
are set to drive strong growth in skin care, making it the most valuable
cosmetics and toiletries sector over the forecast period. Johnson &
Johnson's established strength in skin care places it in a good position to
exploit such growth.
·
Expansion of sun care – sun
care, an increasingly important category for Johnson & Johnson, is also set
to witness strong growth going forward, as rising health-consciousness
underpins a greater awareness of the hazards of over-exposure to the sun's
rays.
·
Increasing demand for
scientifically-orientated products – rising consumer awareness of health issues
and medical advances are set to lead to demand for more sophisticated,
scientifically-orientated products. Johnson & Johnson's broad
pharmaceutical and medical background provides a strong platform from which to
exploit such developments.
·
Expansion in China – with
existing production facilities and an established presence bolstered by the
2007 acquisition of Dabao, Johnson & Johnson is well-positioned to roll out
brands in the Chinese market, which represents a considerable opportunity for
cosmetics and toiletries manufacturers.
·
Growth in emerging markets –
ongoing urbanisation is resulting in stimuli such as rising disposable income,
more public lifestyles for women and improved distribution infrastructures in
emerging markets. With an established foothold in many emerging markets,
Johnson & Johnson is well placed to benefit from growth in regions such as
Eastern Europe and Latin America.
·
Higher purchasing power per
child – fewer children, more women in established careers when they become
parents and increasing numbers of double-income families are raising the amount
of disposable income available per child, creating opportunities for
value-adding innovation in baby care, a core category for Johnson &
Johnson.
·
Buoyant birth rate in
developing countries – higher birth rates in dynamic emerging regions give the
company the opportunity to build its presence in these markets with its strong
baby care offering.
Threats
·
Maturity of core markets –
mature conditions in core markets in North America and Western Europe are set
to lead to sluggish growth and expose the company to negative factors such as
increasing pricing competition, intensified by an expanding private label offer
in such regions' sophisticated retail environments.
·
Strong local rivals in emerging
markets – the emergence of strong local competitors in key emerging regions
could hinder Johnson & Johnson's expansion in these increasingly important
markets.
·
Increasing size of competitors
– the increasing consolidation of the cosmetics and toiletries industry,
particularly with regards to major players such as L'Oréal and, particularly,
Procter & Gamble, puts Johnson & Johnson increasingly in danger of
being out-gunned in the market.
·
Aggressive pricing by major
retailers – ongoing consolidation amongst retailers is being spurred by
aggressive pricing strategies, which particularly target essentials such as
oral hygiene products and bath and shower products.
·
Falling birth rates in
developed markets – the increasing number of women pursuing education and
employment opportunities and delaying setting up families is leading to falling
birth rates in major developed markets, resulting in a shrinking consumer base
for Johnson & Johnson's core baby care products.
·
Further distractions for the
company – the challenge of smoothly integrating the US$16.6 billion acquisition
of Pfizer Consumer Healthcare will mean that Johnson & Johnson's already
limited focus on its cosmetics and toiletries interests will be further reduced
in the short to medium term.
·
Costs of product development
increasing – Johnson & Johnson faces higher research, development and
manufacturing costs associated with the development of cosmeceuticals which
must satisfy regulatory requirements in individual markets.
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