Macro Factors Impacting J&J

Part 1

Macro-environmental factors influencing the external environment

In order to understand the macro environmental factors that impact on the external environment of J&J, STEEPLE framework can be used.

Social factors: The influence of social factors is not only vital for business operation of J&J, but also for marketing aspects. In this context, the key social factors that will influence J&J are:

Class distribution is vital for J&J, as the company cannot promote premium products if most of the target customers are lower class people, rather it would require concentrating on niche market segment then

The degree of health standards can also influence on J&J as people who prefer healthy lifestyle would like to choose the products of J&J

Technological factors: Technology can quickly dismantle the price structure and competitive landscape of the pharmaceutical industry. The key technological factors that can impact on J&J comprise:

Any technological improvements by competitors, such as digital applications and IoT and

How easy and rapidly the technology is diffused to other paramedical organizations in the industry, resulting to copying the technological procedures of J&J

Economic factors: The economic factors can influence on the demand, investment and business environment. The economic factors that J&J is sensitive to and impact on the external environment of the company are:

The GDP rate of the nation where J&J intending to operate for expanding the business, which will influence swiftness of the company to grow the business

The interest rate of the economy of the nation, where J&J is intending to expand the business is another important economic factor, which impact on how much people will enthusiastic to borrow and invest. High interest rate will result in better investment and would indicate more growth for J&J.

The effectiveness of financial market can also influence on how J&J can raise capital at fair rate by considering the demand and supply

High level of unemployment is another economic factor for J&J, as the higher the demand for employment, the more people will be enthusiastic to work at low salary and will enhance the profitability of the company (Lakdawalla, 2018).

Environmental factors: Throughout the past three decades, organizations like J&J and pharmaceutical industry have started to notice that the detrimental impact pharmaceutical products have on the environment. There is increasing environmental agenda and important stakeholders of J&J are presently becoming much conscious regarding the requirements for business to be much practical in this area. J&J require observing how their businesses and marketing plans associate in with the environmental concerns.

Political factors: The political factors that can influence the profitability and possibility of survival of J&J are quite diverse in nature. To appropriately assess the level of the overall systematic political threats that J&J can be exposed to, the following factors can influence on the external environment of the organization.

Level of political stability of the host country and other countries that contains business functions of J&J

The regulations that the country enforces, specifically regarding business, like agreement laws, taxation, trade barriers and employment laws among others and (Martin & et. Al., 2018)

Legal factors: J&J has various regulatory and legislative restrictions. The evolution of internet is also stretching the legislative boundaries with customers demanding more rights in healthcare. These legal factors have significant influence on performance of J&J.

Ethical factors: There are intrinsic ethical problems with the structure of pharmaceutical industry. For humanitarian reasons, pharmaceutical organizations like J&J have ethical responsible J&J to provide affordable medicines and to invest in developing new treatments. While pursuing research, J&J require complying with variety of ethical concepts, comprising safety of individuals, who are involved in the research. In recent time new ethical challenge has appeared in the pharmaceutical industry. J&J require being very transparent in the manner it undertakes genetic research, along with the implication of such researches (Valverde, 2012).

Part 2

Industry context

Competition

The pharmaceutical industry in the US is highly competitive in nature. In recent times, the competition in the pharmaceutical market has increased in both branded and generic product segments. The ‘Big Pharma’ organizations compete and most of them are making significant investments in R&D activities. In the year 2010, J&J was regarded as the market leader in the industry with about 8.52% of market share, followed by Merck with 6.11% of market share and AstraZeneca with 5.95% of market share (Market Research, 2011). For branded and patented products, the competition is mostly dependent on product innovation and R&D. Product innovation is quite expensive and comprises high level of risks and long leads time. Only 1 among 5000 chemicals discovered can truly become medicine. Furthermore, only 3 out of 10 permitted products can recover the R&D expenditures, while typically it takes about 10 to 15years and more than $1 billion to create a new successful product. Therefore, most of the competitors focus on R&D within chosen therapeutic categories and competition is concentrated on developing either breakthrough product or product which can rival the breakthrough product.

Other forces

There are other forces which shape the industry, which can be analyzed by Porter’s five forces framework.

Competitive rivalry: The demand for medicine and pharmaceutical products throughout the world is large and has obtained significant growth in the past few decades. The Chinese pharmaceutical segment has obtained the highest growth in recent times. Furthermore, key players of pharmaceutical segment arrive from the US and Europe, with respect to revenue.

Such strong revenue demonstrates the financial strength of the company and strong rivalry among organizations, as there are various players operating in this segment, which are aiming for developing new innovative products and to obtain better competitive advantage (Holland, 2017).

Threat of substitutes: Medicines and health products are fundamental requirements of people. It is impossible for people to survive without medicines as people will generally fall ill and need to cure it with medicines. Therefore, it can be stated that there are no close substitutes for products of pharmaceutical industry. However, there are substitutes for specific products provided by J&J, as there are many other companies in this industry. The threat of substitutes for specific products in this industry is always high as innovation keeps substituting old products with new products, because pharmaceutical companies spend much on R&D to develop new and improved products. Hence, although pharmaceutical industry is safe from threat of substitutes, J&J has high threat for substitute products.

Threat of new entrants: Owing to the growth and the demand of pharmaceutical industry, new entrants are keen to start business in this segment. However, the key barrier of entries comprise high expenses for developing manufacturing facilities and R&D. Furthermore, there is also challenges for new entrants to obtain licensing and other authorizations from the government due to strict guidelines and also to set up strong supply chain network in the industry. Researchers who are expert in developing innovative products can associate with venture capitalists and entre into this industry. This industry has always opportunity for innovation, which invites new entrants. Besides, low level of knowledge of customers regarding pharmaceutical products is also another advantage that motivates new entrants to enter in this industry. This low level of knowledge results in high price setting by organizations, as customers will unable to bargain on prices of medicine. Hence, it can be stated that the threat of new entrants in pharmaceutical industry is moderate.

Bargaining power of buyers: For most of the people, pharmaceutical products are completely unknown with respect to differentiation and product pricing. Irrespective of many players in the industry, the customers do not possess any control on the pricing of the products. They require purchasing the products at the price, which is set by the organizations. Although the governments have certain control on the products, owing to low level of understanding regarding the products, the bargaining power of customers in this industry is diminished (Gregory, 2018).

Bargaining power of suppliers: The power of suppliers is low as there are multiple suppliers of medicine products. There are various companies which supply drug to pharmaceutical organizations. Hence, bargaining power of supplier with respect to medicine products is low. However, with respect to equipment supplier, the suppliers are low in comparison with the medicine suppliers. The equipment in pharmaceutical industry is technical in nature and cannot be provided by any unknown supplier. Therefore, with respect to equipment supplier the bargaining power is high. Hence, it can be stated that the overall bargaining power of suppliers in the pharmaceutical industry is moderate (Kirytopoulos & et. Al., 2008).

Attractiveness of the industry

The international pharmaceutical industry was worth $934.8 billion in the year 2017 (Market Research, 2018). This industry is regarded as one of the quickest growing industry with global sales of about $982 billion in the year 2018 and is expected to reach to about $1170 billion by 2021, signifying growth of about 5.8%. About 47% of sales of this industry arrive from the US, amounting to about $464 billion in the year 2018.

This industry is dynamic, with quick growth and possibility of high revenue. Top selling medicine products have yearly sales of around billions. Still, there are various factors that impact on the attractiveness of this industry, such as:

Disease occurrence: Disease occurrence is associated with the size of population, age group of people, genetic legacy and inactive lifestyle.

Affordability: Affordability is associated with the income of people as well as the prices of the medicines.

Customer attitudes: Customer attitudes in this industry comprise readiness to utilize substitute therapies or distrust of taking medicines.

Investment: Launch of new medicines in the market necessitates significant investments in R&D and testing. Most of the new drugs never obtain authorization from FDA, leading to burning of significant amount of fund in order to obtain one profitable product (McGahan, 2004).

Technical expertise: this industry also necessitates high degree of technical expertise in order to properly assess the feasibility of possible new products.

Part 3

Resources and capabilities of the company

Resources are productive assets, comprising both tangible and intangible assets and capabilities are aspects that the organization can do. Capabilities are developed out of organizational ability for deploying resources for the anticipated end outcome. The resource and capabilities of competitive benefit is born out of having the ability or resource that has two situations which includes the difference in resources across the firms and also immobility of the resources. It had been stated by Trainer (2014) that firms which possess sustained and superior’s performance of finance are generally characterized through stronger managerial values which even define the ways business are conducted. For J&J, the sheer financial resources have an impact highly on carrying capabilities like mergers and acquisition and utilize the resources like scientific research and development to generate newer products and develop the power of brand. The larger revenues had made them to spend $7.6 billion dollars on the R&D activities to develop new products (Eells, 2015). It is analyzed by Eells (2005) that the establishment of the competitive advantage possess formulation and implementing strategy which attain the uniqueness of the portfolio of resource and capabilities of firms. It is seen that aggressive strategy of company has exploited uniqueness of the financial resources and management team. The other contributing factor which have helped in attain success is acquisition choice as it has purchased company with similar culture which assist in extending the company. The medicine acquisition has made it easy for the J&J company to target the customers (Eells, 2015). Company also has dynamic competency, which is demonstrated in the success rate of the organization with respect to acquisition along with the advantages and new abilities, which are developed, for instance cost saving, while acquiring a company. J&J’s competitive advantage has been developed through its intelligent M&A abilities of MD&D and DePuy among others. The acquisition not only helped the organization to obtain strong brand name, but also instant market access (Trainer, 2014). According to Martin & et. al.(2018), the resource-based theory of competitive advantage implies that internal resource and capabilities gives basic direction for the strategy of the firms as well as resources and capabilities are the main source of firm’s profit. The tangibility of the resources of the firms is mainly considered in the resource-based theory (Barney, Ketchen and Wright, 2011). Tangible resources are those resources which are seen, touched and quantified whereas intangible resources are difficult to feel, touch or see. Company needs to nurture and develop intangible resources to attain long term competitive advantage (Barney, Ketchen and Wright, 2011).

The innovation strategies used by the company in its products and processes have also acted as competitive advantage for the company. Company come up with innovative product and possess stronger and well-equipped R&D networks. The state of art technology, world class research facilities, huge investment capacity and performance based small team setting have also added competitive value to the company (Drugwatch.com., 2014). J&J invests huge amount in research and development and was ranked 7 in the world’s topmost companies to spend in R&D and first in its industry. The Johnson & Johnson possess highest ranked in healthcare company and is trusted by nurses, doctors and parents all around the world since a century. The company have been involved in many CSR activities such as supporting child centers, educating people and giving handful tips regarding healthy and safety living, supported International Youth foundation for HIV/AIDS prevention programs and taking care of healthy environment (Bsr.org., 2013). It can thus be stated that J&J takes benefits of sustainable competitive advantage because of corporate culture and brand reputation. The innovation is possible due to resource capabilities, business models and extensive collaboration strategies. company possess more core competencies which they have created for 120 years of operation and created values to customers through benefits and cost advantage by enhancing return rather than economies of scale. In addition to that, Johnson & Johnson company is also driven by vision and support from the effective management, diversity of employee has also acted as one of the competitive advantages for J&J. The company have supported its employees and motivated to perform various programs and activities such as affinity groups, diversity university and mentoring of the programs. Employees are motivated and encouraged by the company through means of rewards, compensation to execute their work in different roles and divisions in order to develop broadly. The company is generally found making partnership with emerging entrepreneurs and boasting corporate venture funds in the field of life science (Drugwatch.com., 2014). The company have also received different awards and recognitions for its effective practices. company possess more than 130,000 human resources who are highly satisfied with the company’s policies and organizational culture due to three key attributes which includes forward thinking business practice, smart management and also social responsibility. Company have made every possible way to motivate its employees either by expanding its military benefits in 2017. The company’s strategy to motivate its employees and maintain diverse corporate culture have also assisted to attain competitive advantage. Apart from that, company have even given its major contribution to find the solution for some of the toughest health issues such as infectious diseases and maternal/infant mortality to create healthiest future generation. It is analysed that company have taken part in coalition for epidemic preparedness innovation which focused on assisting fast track vaccine development for the pathogens prior to widespread risks (Cortez and Koons, 2015). The company is also found committing towards human right issues and have given donations to save the children who were suffering from hurricanes Harvey’s, Irma and maria. Company have also supported global moms relay to enhance awareness.

It had thus been analyzed that Johnson and Johnson have not only enhanced its performance to attain profitability and success but also have done various activities which have assisted in social, environmental and technological welfare. It is found that company have given major emphasis on innovation and research and development activities to attain success. Each of the resources and capabilities possessed by the company have acted as competitive advantage and it is very difficult for other company to compete with Johnson & Johnson. The larger financial investment of J&J company has also made it difficult for the competitors to respond to the actions. Hence, it can be stated after reviewing the resource-based theory that resources and capabilities of Johnson & Johnson company is highly stronger and contribute to positioning of sustainable competitive advantage.

Part 4

Critical reflection

Prior to this assignment, I was not good in researching and time management. However, after I build my work on Block 2 than I found that I was capable in enhancing my researching skills. Moreover, I was even weak in managing time and had faced issues while performing this work. In the initial stage, I was very slow and was not able to execute and manage this work. However, later half of the work was completed, I managed time and was able to complete my work on time. Apart from time management and researching skills, I even developed writing skills while carrying out block 2. Although, I possess good English knowledge, but I was poor in writing assignment and expressing my knowledge and ideas. However, the thorough and dedication towards this assignment task have helped me to develop and strength my writing skills. In the initial phase, I have made various grammatical and other writing mistakes, but I didn’t lose my confidence I would thus state that this task has helped me in developing my time management, writing and researching skill.

References

Barney, J., Ketchen, D. and Wright, M., 2011. The Future of Resource-Based Theory: Revitalization or Decline? Journal of Management, Vol. No. 37, No. 5, pp.1299-1315.

Kirytopoulos, K. & et. Al., 2008. Supplier selection in the pharmaceutical industry: an analytic network process approach. Benchmarking: an international journal, Vol. 15, No. 4, pp. 494-516.

Lakdawalla, D. N., 2018. Economics of the pharmaceutical industry. Journal of Economic Literature, Vol. 56, No. 2, pp. 397-449.

Martin, K. D. & et. Al., 2018. Political management, research and development, and advertising capital in the pharmaceutical industry: A good prognosis? Journal of Marketing, Vol. 82, No. 3, pp. 87-107.

Valverde, J. L., 2012. Ethical challenges in the pharmaceutical industry. Pharmaceuticals Policy and Law, Vol. 14, No. 1-2, pp. 123-127.