1. johnson & johnson case (based on text)

a. write an executive summary : problem statement, alternative solutions (at least 3-4), ideal solutions, recommendations & the timeline

please go into depth for each. will definitelt like & thumbs up!

will thunbs up

GAS CASE 19 EXHIBIT 2 Balance Sheet in millions) Year Ending 2015 $ 60.210 133.411 Current Assets Total Assets Current Liabilities Total Liabilities Stockholder Equity 2016 $ 65,032 141,208 26,287 70,790 70,418 2014 556744 130,358 25.011 27,747 62.261 0.06 71,150 69.252 Source Johnson & Johnson JOHNSON & JOHNSON On January 26, 2017. Johnson & Johnson, the world's larg est health care company, bolstered its roster of treatments for rare diseases by announcing a $30 billion deal to acquire Actelion, a Swiss biotechnology form. The deal expanded its portfolio of leading medicines and promising late stage products. "We believe this transaction offers compelling value to both Johnson & Johnson and Actelion sharehold- ers" Alex Gorsky, the chairman and chief executive of J&J. stated in a new release. With 250 companies in virtually every country, J&J has under its banner the world's largest medical device bush ness, an even bigger pharmaceutical business, and a con- sumer products division with a dozen megabrands, from Neutrogena to Tylenol. Although the firm is best known for its common consumer products, its biggest recent growth has come from its vast range of pharmaceuticals. J&J has advantages from its diversified businesses such as greater financial stability, a wider range of expertise, and a customer base that spans consumers to hospitals to governments Financial stability has been J&J's calling card for decades. Its sales have risen on a regular basis, with profits showing an annualized growth rate of over 12 percent over the three years 2014-2016 (see Exhibits 1 and 2). The firm has consistently raised its dividend for well over 50 years and it remains one of only two U.S. companies with an AAA credit rating from Standard and Poor. "They're in a great position." said Kristen Stewart, an analyst at Deutsche Bank. "They have the luxury of time and the ability to look at different opportunities across different business units. That is what a diversified business platform affords them.-2 Cae prepared by Jamal ShamsiMichigan State University, with the istance of Professor Alan R. Enner Pace Unhen Material has been drawn from published suces to be used for purposes of clan dission Coop 2017 Pamal Shamic and Alan 1. Ener However, even as it has grown and become more diversi fied. J&J has struggled to extract the greatest value from its vast portfolio of diversified businesses. Much of its growth has come from acquisitions, and it has developed a culture of granting considerable autonomy to each of the firms that it has absorbed. Although this was intended to cultivate an entrepreneurial attitude among each of its units, it has prob ably prevented the firm from pursuing opportunities that would result from closer collaboration among the units Because the units fiercely guard their independence, they have rarely searched for opportunities on which they could combine their different areas of expertise. William C. Weldon, who spearheaded a period of dramatic growth at J&J, began to direct efforts at trying to get the bus ness units to work with each other on a more regular basis After Gorsky took over as CEO in 2012. he pushed harder to weave together the operations of the different units. The need for greater oversight became more urgent after the firm ran into quality issues in two of its three divisions with some consumer products being recalled. At the same time, Gorsky realized that J&J must preserve its entrepreneurial culture Cultivating Entrepreneurship Johnson & Johnson was founded in 1886 by three Johnson brothers . The company grew slowly for a generation before Robert Wood Johnson II decided relactantly to take the for ily business public. He fretted about the effects that market pressures would have on the company's practices and values which led him to write a 307 word statement of corporale principles. This spelled out that J&J's primary responsibility was to patients and physicians, followed by employees and then by communities. Shareholders were placed last on the list. This credo is inscribed in stone firm's headquarters and is routinely invoked at the comput EXHIBIT 1 Income Statement in $ millions) Year Ending 2016 2015 Total Revenue $71.890 $70,074 Gross Profit 21.685 21,536 Operating Income 20,645 17.556 Net Income 16.540 15,409 2014 $74,331 51,585 20.959 16,323 Source: John & Johnson the entrance of the C120 CASE 19 : JOHNSON & JOHNSON Chur the years, as J&J has grown by acquisitions of fiems responsible for best selling products such as Depuy ortho sarial credo. The task has become more challenging ped in some aspect of health care, it has been guided pedic joint replacements and Cyper coronary Menti J&J's credo has kept the firm focused on quality of F has developed into an astonishingly complex enter health care, even as it has expanded into several different in the disions. The most widely known of these is the nie, made up of over 250 different subsidiaries broken business segments and adopted a decentralized approach in in that makes consumer products such as Johnson & managing its different businesses. Most of its far-fung als Johnson baby care products, Band-Aid adhesive strips, and sidiaries across its three divisions were acquired because of potential demonstrated by promising new products in their Viunge drops. Its pharmaceuticals division sells several Mockbuster drugs such as anemia drug Procit and schizo pipeline. Each of these units was granted near-total auton Omy to develop and expand upon their best selling products proti drug Risperdal. Its medical devices division is in order to better serve their patients (see Exhibit 3). 5574 CHIBIT 3 Segment Information 5 Johnson is made up of over 250 different comples, many of which it has acquired over the years. These individual companies have been assigned to three different divisions Geographic Areas 25.01 SASA 6,153 Sales to Customers 2015 2016 2010 Ontario Cons- Dited States ronal $5.420 7.887 13.307 5,222 8.285 5.096 9,400 ve from 14,496 13.507 Pomaceutical od a culture e firms that cultivate an it has to 20,125 The States 18.333 13.097 31.430 17.432 14,881 32,313 13.339 donal To 33,464 ng the unit ndence they ch they could Medical Devices 12.132 12.254 15.268 United States 13,005 dodati 12.256 12,853 25.119 $71890 25,137 27.522 Total 74,331 70,074 Worldwide tot logot be bu regular basis. pushed harde rents The aler the form ons with some 2016 $ 23.971 Basin Miks 20 time, Gors rul cu Business Segments Income Before Tax 2016 2015 $ 2,441 1,787 12,827 11,734 5.578 6,826 20,845 20,347 1,043 1,151 2014 1.941 11.696 7,953 21.590 1,027 Pencil Identifiable Assets 2013 20,772 27,477 26,144 39,773 40,979 91.221 87,895 Delices ng 45 516 133,411 not allocated to segments y three vertible Yo take the lects that are Actices and rabies mentor 49987 $141,208 20.563 19.196 Wro $19.803 CASE 19 JOHNSON & JOHNSON C12 nary reativity by emland pland les de the cate on It is widely believed that this independence has fostered opportunities by drawing on the diverse skills three divisions. The firm might derive more bet an entrepreneurial attitude that has kept J&J intensely com ness units has provided the firm with the ability to respond tics since few companies matched its reach and petitive. The relative autonomy that is accorded to the bus combining its knowledge in drugs, devices, and in these basic areas. This led Weldon to KW swinly to emerging opportunities. A commitment from everyone throughout these units to the principles that had its fiercely independent units work together. In his worth been laid out in the famous credo was considered to be suf "There is a convergence that will allow us to do this haven't done before. Through pushing the various ficient to provide the necessary direction flung units of the firm to pool their resources. We J is proud of the considerable freedom that it gives to believed they could deliver real synergy. Accordingly, its different subsidiaries to develop and execute their own created a corporate office that would get beses strategies. Besides developing their strategies, these units to work together on promising new opportunities have also been allowed to work with their own resources Many of them have been able to operate their own finance recognition that there's a way to treat disease that's and human resources departments. While this degree of silos. Weldon stated, referring to collaboration between decentralization led to relatively high overhead costs, none J&J's largely independent businesses of the executives that have run J&J, Weldon included, have For the most part, however, Weldon confined his to taking steps to foster better communication and then ever thought that this was too high a price to pay. "J&Jis aohuge company, but you didn't feel like you were in a big who ! He was convinced that such a push for communication and coordination would allow the firm to develop the sy Pushing for More Collaboration that he was seeking. But any effort to get the different bu The entrepreneurial culture at Johnson & Johnson has ness units to collaborate must not quash the entrepreneur consistently developed topnotch products in each of theial spirit that has always spearheaded most of the growth areas in which it operates. It spends beavily on research and of the firm. Jerry Caccott, managing director of consulting development (see Exhibit 4), currently about 12 percent of firm Strategic Decisions Group, emphasized that cultivo its sales on about 9,000 scientists working in research labo ing those alliances would be challenging in any organis ratories around the world. The three divisions continually tion, but particularly in an organization that has been introduce promising new products, successful because of its decentralized culture." In spite of the benefits that J&J has derived from gir- These collaborative efforts did lead to the introduction ing its various enterprises considerable autonomy, however, of some highly successful new products (see Exhibit 5 there have been growing concerns that they can no lon- Even the company's fabled consumer brands have started ger be allowed to operate in near isolation. Weldon soon realized that J&J was in a strong position to exploit new EXHIBIT 5 Significant Innovations EXHIBIT 4 Research Expenditures (in $ millions) Antiseptic Surgery (1888) Three brothers start up a firm based on antiseptis designed for 2016 $9,095 modern surgical practices. 2015 Band-Alds (1921) 2014 8.494 Debuts the first commercial bandages that can be applied at 2013 home without oversight by a professional 8.183 2012 7,665 No More Tears (1954) Introduces a soap-free shampoo that is gentle enough to det 7.548 babies' hair without irritating their eyes 2010 6,864 2009 Acuvue Contact lenses (1987) 6,986 2008 Offers the first-ever disposable lenses that can be worn for up ! 7.577 2007 7,680 2006 7.125 Gets approval to launch a much needed treatment for drug 2005 resistant tuberculosis, the first new medication to fight this 6.462 9.046 2011 week and then thrown away. Sirturo (2012) disease in more than 40 years SJAJ Source: Fast Company March 2014 C130 CASE 19 - JOHNSON & JOHNSON lured Sandi Peterson from Bayer and gave her the position ca can Ao result of increased collaboration However, shortly after he settled into his job as CEO, SATS I Dd Band Aid is based on a material used w the mer products and pharmaceutical div. Gorsky began to challenge the firm's once-sacrosanct prin wound close product sold by one of J&J's hospital his view, decentralization that fostered creativity should not ciple of giving complete autonomy to its 250 odd units. In Passes And J&J has used its prescription anti- allow these different units to be completely disconnected. treatment Nizoral, to develop a dandruff shampoo. Gorksy wanted to push further than Weldon had to get the By now products that have developed in large part out of various units of the firm to work together to find synergies. o crossfernization have allowed the firm's consumer to cross-fertilize ideas, and to reap cost savings that could husiness to experience considerable internal growth be reinvested in the business, Making a Difficult Transition Pushing for Tighter Integration Johnson & Johnson sought more interaction among In order to tie the units more closely together, Gorsky with two of its divisions. Its medical devices division ran Moms with its newest artificial hip. It recalled the of group newly created gave Peterson sweeping responsibly to oversee technology device, amidst rumors that company executives may have across the entire firm, Gorsky believed that the very nature caled information out of concern for firm profits of the job required him to hire an outsider who had not had Mese problems were compounded by serious issues that much exposure to J&J's existing culture. Because decen- and with the consumer products division, which led to the tralization had allowed the business units to make all of Siggest children's drug recall of all time. their own decisions, there had been no consistency in their Quality problems had arisen before, but they were usu- different practices. Gorsky wanted to bring order to this unwieldy machine. "Sometimes a customer doesn't want to uses thar problems at subsidiary McNeil may have been deal with 250 J&J's," he said." exacerbated in 2006 when J&J decided to combine it with Peterson began feverishly working to align everything Je newly acquired consumer health care unit from Prize from HR policy to procurement processes from the 250 The firm believed that it could achieve $500 to $600 million business units, which had been making their own decisions Sanal savings by merging the two units together. After independently. She covered everything from the timing of the merger. McNeil was also transferred from the heavily financial forecasts to employee car policies, consolidat regulated pharmaceutical division to the marketing driven ing all of the firm's data, such as about all of its 120,000 scruter products division, which was not subjected to the employees to a single HR database. Peterson claimed that we level of quality control. her efforts would allow the company to save about $1 bil- Macb of the blame for such stumbles fell on Weldon, lion. She processed as much data per day as eBay, ware wto stepped down as CEO in April 2012 after presiding housing about 500 terabytes of data. According to Peterson, or one of the most tumultuous decades in the firm's hist- this represented 2.5 times as much data as resides in the ay Critics said the company's once vaunted attention to IRS data warehouse quality had slipped under his watch. Weldon, who had An even more significant effort had already been ini anted out as sales representative at the firm, was believed tiated by Paul Stoffels three years earlier when he was bhne been obsessed with meeting tough performance appointed J&J's global head of pharmaceuticals. All of the to even by cutting costs that might affect quality. units that operated within the pharmaceutical division had Erk Gordon, who teaches business at the University of also operated with complete autonomy, J&J's seven differ Michipa, elaborated on this cost-cutting philosophy: "We ent drug R&D organizations had operated in completely wil make our numbers for the analysts. period." siloed fashion. In some cases, multiple companies pursued In April 2012. J&J appointed Gorsky to lead the way the development of the same drugs and each had its own Oct of the difficulties. Gorsky had been with the firm since system for handling clinical or regulatory development bolding positions in its pharmaceutical businesses Stoffels began to merge all of the units under his purview Europe, Africa, and the Middle East before leaving into one group and organized it to target Il diseases. In the for a few years to work at Novartis. Shortly after his return process, 12 of the division's 25 facilities were shuttered and Skelle 2008, he took over its medical devices unit that nearly 200 projects were slashed. being investigated about its faulty hip replacements. This new integrated unit developed a streamlined devel kost of his extensive background with the firm, Gorsky opment process, a highly coordinated system that Stoffels calls Accererando. Under this model global teams- When Gorksy took over as CEO, it was expected that statisticians in China, data managers in India, regulatory end at the firm. But because he was a consummate assembly inc approach has cut months, and in some cases folks in Europe-work 24/7 to speed drugs to market. The ving run the two biggest of its three divisions. years, off development time. Seventeen drug approvals in med he would do it without major changes. 10 years put J&J in a league of its own. "No other company CASE 19 JOHNSON & JOHNSON C131 Negarded as the ideal person to take the job. sont out the quality problems that had recently showed more potential for growth. tical innovation consultant Stoffels has accomplished more than just reduce the As he plotted a future course for Johnson & Johnson, time needed to bring drugs to market. He has begun to look Gorsky realized that although much of the firm's success for ideas from all sources, whether it is from any of J&J's own business units or from entrepreneurs or scientists out had always resulted from the relative autonomy granted side the firm. He has set up four innovation centers in bio- to each of its businesses, he must continue to emphasize tech clusters in Cambridge, MA: Menlo Park, CA: London: ongoing collaboration among them to pursue emerging and Shanghai, where scientific entrepreneurs can interact opportunities. As recent problems had demonstrated. with J&J's own drug and technology scouts. His flexible was also critical for J&J to maintain and develop sufficient approach with these outsiders lets J&J work with them quality control across its vast business. The health cast more casually and helps build stronger relationships. Since giant must manage its diversified portfolio of companies to 2013. the firm has reviewed more than 3.400 opportunities keep growing without creating issues that could pose any through these centers, leading to 200 partnerships. further threats to its reputation. "This is a company tha was purer than Caesar's wife. this was the gold standard Is There a Cure Ahead? and all of a sudden it just seems like things are breaking Gorsky's biggest challenge came from a demand that down." said William Trombetta, a professor of pharmaceut Johnson & Johnson might be better off if it was broken ical marketing at Saint Joseph's University in Philadephia, oll into smaller companies, perhaps along the lines of its different divisions. There were growing concerns about the ENDNOTES ability of the conglomerate to provide sufficient supervi- 1. Chad Bruy Johnson & Johnson Says It Will Acquire Action New sion to all of its subsidiaries that were spread all over the York Times, January 27, 2017. p. BS. globe Gorsky dismissed the proposal, claiming that J&J 2. Erika Fry Can Big Still Be Beautiful? Fortune, Ap. 2016.14 drew substantial benefits from the diversified nature of its 1. Kate Thomas & Reed Abelion Chief to Resign One Role. Ne businesses. Given the enormous shifts in the health care York Times, February 22, 2012, p. 38. industry and the large number of government and institu- 4 Katie Thomas Next Chief Is Steeped in Sales Culture New it Times, February 24, 2012. p. B.L tional customers and partners involved, he believed that the 5. Peter Loftus & Shirley S. Wang, J&J Sales Show Health Care Reels the firm's huge scale could be a rare asset for negotiating deals. Pinch. Wall Street Journal January 21, 2009, p. BI. Gorsky did concede, however, that the firm will have 6. Avery Johnson, J&J's Consumer Play Paces Growth Wall Street to be more selective, careful and decisive about the prod. Jarol January 24, 2007, p. A. ucts that it pursues. Since he took over, J&J has begun 7. New York Times, February 24, 2012, p. 3.6 to divest some of its lower growth businesses and reduce 8. Forn August 1, 2016. p. 86, annual costs by $1 billion. The firm had just completed the 9. Thid. p. 87 sale of Cordis, which makes medical devices such as stents 10. Thid. p. 58 IL Natasha Singer Hip Implants Are Recalled by JJ Unit. New York and catheters. J&J, which helped to develop the roughly Times August 27, 2010, p. Bl