Industry Analysis and Resource-Based View of Johnson & Johnson

Analyse The Industry Context Of The Company, Considering Both The Competition And The Other Forces, And Discuss The Attractiveness Of The Industry.

Analyse The Resources And Capabilities Of The Company And How They Contribute To a Position Of Sustainable Competitive Advantage. 

The pharmaceutical industry has evolved as one of the most critical and controversial industry all over the world due the rise in the prices of the drugs. This industry is quintessential in the general healthcare globally and hence, will never lose its relevance. The main targets of this industry are the companies that develop drugs under brand names and have patent protection. The analysis of the external factors that affects the industry will be helpful in determining the strengths and the competencies required for improvement of the industry. The present discussion will focus on the Porter’s five-force analysis to examine the industry context of Glaxosmithkline Pharmaceutical Company.

Porter’s Five Forces is a strategy which helps to understand business environment and competitiveness in the market. It is very effective to find out the potential areas of a business which can yield to profitability while the ones which are posed with threat due to market conditions. The model is very useful to understand the forces which operate in a business environment and employ strategies to adapt to them. The model was developed by Michael Porter who evaluated the attractiveness of an industry and the chances of achieving profitability (Dobbs 2014). It has been one of the most used and highly regarded strategies which has helped businesses grow by evaluating conditions of the market. The model helps in the process of analysis of five forces which include Competitive Rivalry, Power of Buyers, Power of Suppliers, Threat of New Entry and Threat of Substitution.

The number of competing forces against which the Glaxosmithkline Pharmaceutical Company operate are less even though the companies are of large scale. The strategies which are employed by a company have lesser chances of being unnoticed which makes the competition within the market low to moderate (Barba-Sanchez, Calderón-Milán and Atienza-Sahuquillo 2018). The competition which Glaxosmithkline Pharmaceutical Company face is not always restricted to the prices at which products are sold but also the regulations and rules which are imposed by the government on health, pharmaceutical, consumer and medical products to maintain safety and standards. Glaxosmithkline Pharmaceutical Company have large market share which makes it one of the market leaders. Glaxosmithkline Pharmaceutical Company have shown growth in the years and indicate growth in the years to come which is a positive sign in the industry and competing forces will have to employ effective strategies to capture the market share as them. Glaxosmithkline Pharmaceutical Company diversifies their product range and do not solely concentrate on medicinal products which indicate that companies which pose competition to them will have to open their prospects to other businesses as well.

Competitive Rivalry

The buyers in the market include doctors, medical practitioners, retailers, pharmacists, wholesalers as well as insurance companies.  The bargaining power of the buyer in the market are quite low. The companies maintain product differentiation due to which the buyers are often caught up in fixes unable to find alternatives of a specific product. The buyers of the products are less price sensitive and it is important to maintain the quality of the products (Haleem et al. 2015). This pulls down the bargaining power of the buyers in the market as quality is a very important factor which is also regulated by the government.

The power of the suppliers in the market is also quite low. Pharmaceutical, diagnostics and medical devices require standardization. The dominant forces of the companies also needs to choose the right suppliers to ensure success in the industry. Large scale companies require several suppliers in order to cater to the demand and meet the deliveries which are crucial for the growth of the company. Suppliers are responsible to manufacture medicines and medical equipment which should meet standards. Compromising with regulations and standards may lead to grave consequences (Haleem et al. 2015). Thus, the companies maintain contractual agreements before initiating long tern collaborations. Glaxosmithkline Pharmaceutical Company has more than thousand suppliers which makes it difficult for them to dominate the prices and values of the products.

There is considerably high degree of threat of substitutes in the medical and pharmaceutical industry as the demand for the products is quite high. The substitutes for medical and health products could be medicinal herbs, plants and other ways which can be implemented to achieve cure for diseases and conditions for which medicines are purchased, primarily because the cost of medicines are higher as compared to medicinal herbs and other substitute products. Products from competitive brand names may gain popularity through substitute products as well. Pharmaceutical industry should aim at maintaining quality and standards by keeping affordable prices of the products which will attract and retain buyers in the market.

The threat of new entrants is low as there is less scopes for companies to enter the market. If a company has to influence the market, it will require great financial capability and experiences, which pharmaceutical industry possesses and adds competitive advantage to the company profile. In the health and medical products market there are high barriers, which are sometimes impossible to penetrate as new entrants. In order to pose competition to company such as Glaxosmithkline Pharmaceutical Company experience of the market plays a great role. Production of medicines is a tough process which requires intense quality checks and maintenance of standards, which companies need to abide by. Thus, the chances of entering the market is low as to create the final products, it is important to go through the difficult process and ensure quality products like the dominant forces in the market.

Power of Buyers

Johnson and Johnson is an American multinational company which specializes in the development and manufacturing of health care products. The company operates within some segments which include pharmaceutical, consumer and medical devices (Jnj.com (2020). The company was established by Robert Wood Johnson I, Edward Mead Johnson Sr and James Wood Johnson in 1886. The head quarter of the company is situated in New Brunswick, NJ.

The method of analysis of the environment in which a business is operating is known as the industry context of the company. The scanning of the environment has its main focus on the macro environment of the industry that can possible affect the productivity and other related conditions of the operations of the company. By analysing the context, the will also be able to determine the target market and the future trends that it should adopt.

The organisation of Johnson and Johnson is primarily divided into three main segments-

Consumers that will also include the skin care as well as the baby care.

Pharmaceuticals: like the anti viral drugs,

Medical devices as well as the diagnostic segments.

The resource based view of any company enables it to put in a place the resources that it has and the compatibilities it possess so that both can be put together for the more effective productivity. It is to be taken into account that the capabilities and the resources are the main sources of profitability for the company and also analyses the needs for the future resources and competencies that it will need in order to compete with the contemporary market. The Johnson and Johnson company earns its key resources of revenue from the Healthcare as well as the Medical devices. The pharma segment of the company earns 45% of the total revenue for the company, and adds upto 605 of the total value of the company. Most of the extracted revenue comes from the major two divisions under the pharma segment, which are mainly Immunology and Oncology. These two divisions create the quarter of the total segment of the revenue resources for the company.

The productive assets for any company are the tangible and intangible assets of the company. The tangible assets refer to the cash and plant of the company. The total assets of the company was 152.954 USM$ in 2018. And in 2019, it extended to 155MUS$ approximately. The intangible assets of the company are the reputation, culture or the techno logy used in it. The company had earned a good reputation in the medical device and pharma. It is a well known brand all across the world. The company had their dynamic competencies which has been demonstrated in the success rate of the company along with their new techniques in protecting the tangible assets like the cost saving exercises while they are acquiring the firm or the benefits they extrapolates by limiting the culture clashes. The company through Mergers and Acquisitions acquires the main tangible assets of the company. Another way in which the company has achieved the success in their merger and acquisition are their huge successes in the successful acquisition of the MD&D franchise and the DePuy Inc. With the purchase of the Du pey the company has not only been able to acquire a huge brand, but also got hold of the new valuable and innovative technology of the Hip Replacement. The company i this manner had been able to access the $270 billion dollar a year.

Power of Suppliers

Thus, the main resources of Johnson and Johnson are the technologies are thus advertising, reputation, and value of sales, policy choice, technology, and patents.

Advertising: the company has created a content platform and defined their baby products by the well defined audience profile as well as the expectant mothers. The projection of such delicate symbols instantly creates an affinity towards the brand. In recent times, the company has launched the for every face campaign in Indonesia to empower the teen girls. In addition to these, the company also promotes content based advertising strategies in newspaper and the social medias.

Technology: the company focuses on the ERP technology and digital technology in order to contribute more into the sustainable and growth strategy. The company has its reputation of being thirsty for innovations. The company has created the Enterprise Resource Planning in order to manage the inventory and the suppliers and audit trials. They have enhanced their supply chain policies with the collaborations with the in pharma technologists the company has also focused in the pioneering of the hi-tech new strategies and investing in increasing the supply chains. Johnson and Johnson currently make use of the Internet of Things sensors to collect data from the required data. The company also use the concept of analytics system in order to prevent the failures of the machines by predicting the real time modelling and the process range.

Reputation: the reputation of the company had been quite owing to the supplies and range of the medicines and the medical devices. However, in recent times, the company had been battling the reputation crisis because of its involvement in the opioid crisis. The brand position has also suffered a fall because of this issue and now it is in the 57^th position straight down from the 8^th position.

The brand of Johnson and Johnson is valuable as it mitigates the threat of rivalry by the effective use of the resources. The company makes use of the effective technological devices that has created an important asset for the country. The company uses the technology in gaining data. This helps the company in analysing the present and the future demands of the market. the company also gets a grope in the supply chain policies of the products by the effective use of the recent technologies. This will help the company in being aged of the competitors and the competitors. This will also enable the company in communicating well with the target market and knowing the demands. The advertising strategy of the company is also an important resource for it caters to the innovative level that the target markets seeks for. The promotions through the advertising and social media content help the company in generating the interest of the target market and reaching to a large number of audiences. The rarity factor of the company primarily includes the branding of Johnson and Johnson. The brand image of the company is comparatively high in comparison to other substitutes in the market. With their reputation and their strong customer base the company had been able to create a brand image for itself which cannot be imitated or duplicated. Moreover, the imitation of the service given by the brand is also costly which can be borne by a handful of companies. The company emphasises on their promotion of the tactic of the caring for family, which is also unique to the company and contains the originality. Few companies have a past history and business as Johnson and Johnson and hence cannot imitate their brand image. The tangible assets of the company is also build over the years and this high amount of asset cannot be mitigated by any new entrants in the industry. Patents are also important part of the resources that contributes to the growth of the company. the company’s patent system is complex. Moreover, the suppliers will not jeopardise their relation with the company, which earn them a huge profit.

There are both inward and outer environmental situations that need to be analysed by the company in order to prepare the three years development plan for the company. Johnson and Johnson imparts the costly loyalty trainings to the employees that helps the company in creating the organisational culture that builds the resource competency matrix from the Human Resource point of view. However, the company needs to focus more on its internal environment and not merely depend on the patents for they will not last long.  The continuous improvements and experiments with the technologies will help the company in creating a trustworthy and consistent image.

Conclusion

From the above discussion about the forces, that affects the macro environmental context of the company of Johnson and Johnson it is identified that the company has to mainly face the competition from other large companies from the same industry. Moreover, their strategies are quite passive so it do not get easily noticed by the consumers or other related stakeholders. However, the resource based analysis of the company shows that the resources in hand , both tangible and intangible are quite competent in order to cope up with the internal as well as the external adversaries. Thus, the company needs to focus on their strategic implementation in order to  keep their resource-competence level in track.

Reference List

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Dobbs, M., 2014. Guidelines for applying Porter's five forces framework: a set of industry analysis templates. Competitiveness Review, 24(1) pp.32-45.

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