Multinational Enterprise: Jonson and Jonson

Introduction

The task of managing multinational companies presents with several challenges that are related to product standardization, foreign market, barrier to market entry, product adaption, and management of human resource. As such, multinational organizations that are successful have effective business strategies that enable them to penetrate the foreign markets and attract a considerable number of customers (Cooke et al., 2020). One of the multinational companies that become center of this essay is Jonson and Jonson (J&J). This paper finds that the success of J&J has been contributed by its core capabilities and modes of entering foreign markets. This paper, therefore, provides a history of J&J and its core capabilities. It also analyses one of the foreign countries in which the company operate and describes its current political situation. Lastly, the paper describes J&J’s strategy in the host country by describing entry modes that it adopted to successfully gain the market share.

Jonson and Jonson Profile

Founded in 1886, 130 years ago, Jonson and Johnson (J&J) is an American multinational company that produces and distributes pharmaceuticals and consumer packaged goods and medical devices. The company, which is headquartered in New Jersey, the United States, was formed as a family business, and is currently one of the leading pharmaceutical companies worldwide (James et al., 2018, p.11).  It develops research and provides pharmaceuticals for the immune diseases, neurological disorders, infectious, cancer, cardiovascular, and metabolic disease. It also provides consumer products in oral care, baby care, beauty, and wound care. Further, it produces medical devices for use in orthopedic, cardiovascular, and general surgery and vision categories. The company, which is listed in fortune 500 and currently positioned at number 37 operates in 60 countries and its products are sold in more than 175 countries to wholesalers, retailers, hospitals, and healthcare professionals.  Some of the major markets of the company include Europe, Asia pacific, Hemisphere, and Africa.  According to Edris (2019, p.230), the company made a worldwide sale of 70.1 billion in the year 2015.

The company was started by three brothers who were inspired by an antiseptic advocate Joseph Lister in 1885, and decided to set up the company in order to offer a line of ready-to-use surgical dressings. The leadership mantle of the company was first taken by Robert Wood as its president in 1887 where he sought to work on the improvement of the standards of sanitation (James et al., 2018, p.11). After one year of its formation, J&J launched its first aid kit which was meant to help railroad workers; eventually the kit became widely used to treat injuries. During the same year, Johnson baby powder was developed which was majorly used after child birth. Sanitary protection products became one of the biggest breakthroughs of Johnson & Johnson in the years 1896 and 1897. With this invention, the organization made a big leap towards improvement of women’s health.

One of the subsidiary of Johnson and John is a company known as Ethicon, which solely manufactures surgical sutures and wound closure devices. The company came into operation in 1932 in a move meant to offer alternative health solutions to its market. In 1959, J&J acquired McNeil Laboratories; these acquisitions gave J&J a competitive edge in the pharmaceutical industry, especially when it manufactured one of the best pain reliever drug known as Tylenol. In 1961, a Belgium pharmaceutical company called Janssen Pharmaceutical joined Johnson & Johnson; the company was famous in the field of pharmaceutical research and innovation, and today Janssen is one of the best in the field of HIV/AIDS, neurology and women health research. As of today, Johnson & Johnson has over 250 subsidiaries which focus on the medical services, pharmaceutical and diagnostics.

Core Resources and Capabilities

There are certain core resources and capabilities that give J&J competitive advantages over other companies that operate within the same industry. The first resource and capability is the brand. Notably, J&J has been in operation for more than 120 years, making it one of the brands that have been trusted by nurses, hospitals, as well as retailers and wholesalers (Tan et al., 2020, p.7). On a similar note, the organization has also been involved in several corporate responsibilities such as supporting international youth foundations for prevention of HIV /AIDS in Africa, India as well as educating populations about healthy living.

The second capability of J&J is innovation. By recognizing that innovation is important in pharmaceutical field and would increase their leadership position, the company has been investing highly in innovation and research. According to the study conducted by Rosa, Gugler, and Verbeke (2020, p.32), J&J is among the world’s top spenders on research and development with about 12 percent of its sales revenues invested in 10,000 scientists who work in various research laboratories around the world.  Currently, there are four J&J innovation centers in California, London, Boston, and Shanghai.

Another core capability is extensive collaboration. The organization has been exclusively involved in acquiring and forming joint opportunities purposely for growth and expansion.  According to Edris (2019, p. 233), in every single year, they get into several strategic alliances and they have acquired approximately 35 companies in order to share excellent practices, develop and acquire cooperative talent, and share the research initiatives.  For instance, in the year 2006, the organization acquired the consumer section of Pfzer Consumer Healthcare, a factor that added several diverse portfolios in nine additional categories. Additionally, the capability of J&J to work in several countries across the world has assisted it to produce broad and comprehensive healthcare services and products, making it unique in the pharmaceutical industry.

Lastly, J&J has a rich corporate culture. Motivated by its vision and support from the top management, employees’ diversity has become the most significant competitive advantage for the organization, which is supported by several activities and programs such as mentoring programs, affinity groups, and Diversity University (Rosa, Gugler, &Verbeke, 2020, p.34). Workers are exhilarated to operate in diverse roles and areas so as to develop broadly.

Host Country Analysis

One of the foreign countries that J&J operate in is Kenya. Kenya is a country in Eastern Africa with a population of 50 million, and is the 29^th populous county in the world.  Although it had been hit by a serious post-election violence in a decade ago, Kenya is known as one of the most peaceful countries in Africa (Austin and Wennmann, 2020, p.450). With the introduction of new constitution in 2010, it created a bicameral legislative house as well as constitutionally tenured judiciary and electoral body that ensures election, the cause of tension in the country is managed peacefully according to the constitution. The country has got a powerful judiciary that settles several issues, among them corporate and political issues. Currently, the country is peaceful given the fact that the ruling party and the opposition work together in order to ensure the country achieves its goals of improving the life of Kenyan people as well as individuals in the region. According to Austin and Wennmann (2020, p.450), “Kenya is the largest and the most advanced economy in East and Central Africa; with strong growth prospects supported by an emerging, urban middle class and an increasing appetite for high-value goods and services”.

There are several opportunities that the current political situations create for J&J. The first opportunity is that the county is peaceful, a factor that has created a humble and comfortable environment of doing business. Being peaceful, other neighboring countries such as Ethiopia and other African countries can trade with Kenya hence increase of sales of J&J’s products (Ichuloi, 2018, p.11). This is also supported by the fact that there is no trade barrier between Kenya and its immediate neighboring countries, hence goods move easily from country to the other which makes J&J product to reach several counties other than Kenya.

Second, the county has a strong and independent judiciary which settles cases according to not only to the Kenyan law but also as per the international laws. This provides J&J with confidence of operating in the country since it is a law-abiding country, hence processes such as acquisition and mergers, and even settling of certain disputes are done according to international laws.

Lastly, being a friend to the neighboring countries and the rest of African countries gives J&J an opportunity to learn the market trend on of the region, possible opportunities, and expand its activities in other countries. According to Ichuloi, (2018, p. 23), J&J operates in few countries in Africa; however, after analysis of the market trend while operating in Kenya, it can expand to other countries as well as venture into other product line within the pharmaceutical industry based on the needs of the people within the region.

However, the current political situation in the county is also a subject to competition. In the event that the country has the biggest and one of the most growing economies, the peaceful state has welcomed other pharmaceutical organization in the region. This is likely to create a stiff competition that has the possibility of reducing the sales of the organization.

J&J Strategy in the Host Country

One of modes of entry into the Kenyan market by J&J and is joint venture.  This is a shared ownership of two partners where one is from the home nation and the other is from the host nation. Although J&J has not worked directly with Kenyan pharmaceutical companies, it worked with other existing companies in Kenya from other countries. As stated by (Rosa, Gugler, &Verbeke (2020, p.31), for strategic importance in the current global competition, multinational companies as well as small companies highly depend on joint ventures in order to become relevant and expand in foreign markets. It is important to note that despite the age, brand, and revenues of a company; sometimes it is quite difficult to enter into some markets without employing the correct mechanism and business strategy.

In this particular case, J&J and entered in to a joint venture with mobile Unjani clinics, a South-African pharmaceutical company that has been operating in Kenya for a considerable duration, which knew the market trend and political situation not only in Kenya but in the region as a whole. As one of the mobile clinics that dominated the area, Unjani used the products of J&J that were mainly baby oils, and cancer and HIV drugs – diseases that are widespread in Africa. In the end, it marketed its products which are now sold in several countries in Africa.  Additionally, they also made a joint venture with Market Vines Solution to market and create awareness about their product through patient education and community mobilization.

Another strategy was used by J&J is exporting. This means goods produced in one country and sold in another country.  It is important to note that the company has no manufacturing site in Kenya, and Africa as a whole. Some of the manufacturing sites are in Belgium, Switzerland, and the United States. However, it exports goods direct to Kenya as well as other neighboring countries. According to the organization, it is less risky and very profitable to export already processed goods from the manufacturing country instead of developing new one in Kenya (Rosa, Gugler, &Verbeke, 2020, p.31). Additionally, in the event that firm had not strongly established its roots in Kenya, it could face seasonal domestic demand that could lead to losses. As such, management argues that before making a decision to construct a manufacturing line in a foreign country, it has to ensure that it commands a big customer base and there is no seasonal demand of their products. In other words, it must have a bigger share of the market in terms of customers and sales.

Lastly, J&J used its corporate culture to penetrate Kenyan market as fast as possible. Driven by the vision and support of the organization from the top management, worker diversity is a competitive advantage the organization supported by numerous programs, such as affinity groups, diversity university, and mentoring program. Kenya is one of the regions in Africa that is affected by youth employment, high prevalence of chronic diseases, including AIDS and Cancer. It is noted that at the time its entry, J&J participated in several activities that promote well-being of people in the county as well prevention of chronic diseases. For example, J&J has supported several programs that is going on Kenya that include Helping Babies Breathe (HBB), which trains healthcare workers in low resource setting to intervene in case a new born has asphyxia. Additionally, it supported mothers2mothers (m2m), an organization that empowered women living with HIV to be mentors and educate individuals living with HIV in communities. In that regard, other than selling their products, J&J used its corporate culture to assist several communities in the country.

There are several benefits of J&J getting into Kenyan market. The first one is ability to understand the market trend of the region so that it can expand to other regions of Africa such as West Africa. According to Ichuloi (2018, p.13), understanding the local market of the region has been quite difficult, especially to the American firms since the region is dominated by Indian pharmaceutical companies that have created several barriers to entry through production of generic drugs that can be easily afforded within the region. Therefore, by starting in Kenya, the largest and fast-growing economy in East Africa, the company will understand the market trends and local competition that will enable it expand to other similar markets.

Another benefit is growth in sales. While the company has been facing competition from various pharmaceutical companies that have been existing in the region, it has made significant progresses which have yielded it a significant portion of the market. As such, based on it reports, the organization has been making profit from its sales that have increased its revenues. A stated by Edris (2019, p.231), it is obvious that most companies will realize certain losses during their first time in a different market. However, this has not been the case for J&J while it operates in Kenya.

Lastly, other than its own benefits, several communities have also gained from its presence in Kenya. Data has it that Kenya and its neighboring countries have high prevalence of chronic diseases such as AIDS and cancer. Notably, J&J, using its corporate culture, started several programs that have seen most individuals benefit from its services and products.

The pitfall decision to get into Kenyan market was poor partnership.  Notably, the company entered into a joint venture with Market Vines Solution, one of the pharmaceutical companies that had been in Kenya for a longtime (James et al., 2018, p.11). While it was seen as one of the entry strategy of J&J, most customers did not differentiate the two. As such, after the end of the partnership, most customers still believed that Market Vines Solution was part of J&J. This made Market Vines Solution to sell many of its products in the name of J&J to some customers.

If I was given the responsibility to manage the operation of J&J, I would ensure that the firm has a manufacturing site in Africa. This decision is based on the fact that the African market, in terms of manufacturing, has not been fully utilized. For example, out 54 countries, Johnson and Johnson has offices only in three countries (James et al., 2018, p.11). This is despite the fact that Africa is among the regions with the highest prevalence of chronic diseases such as cancer and tuberculosis. Thus, the region forms one of the best markets for pharmaceutical products. In order to maximize the sales and reduce cost of production, I would suggest that the company constructs one manufacturing site to serve the whole region. Additionally, there are other potential markets that the organization should venture into, which include part of North Africa as well as West Africa. Being one of the leading pharmaceutical companies, J&J has the potential of expanding anywhere in the world as long as there is market.

Conclusion

Jonson & Jonson is one of the leading pharmaceutical companies that has appeared in fortune 500 twenty-two times. Currently holding position 37 in fortune 500, the company has expanded to foreign markets where it operates in 60 countries, and its products are being sold in more than 200 countries worldwide. It produces and distributes pharmaceuticals and consumer packaged goods and medical devices. J&J’s growth has been embedded on its core capabilities, which include its brand that has existed over 100 years, its innovative nature, collaboration with other companies and its corporate culture of supporting several programs that aim at elevating the livelihoods of individuals in the regions of operation. In its quest to grow, the company has expanded its services in several countries across the world.

One of such countries is Kenya, a country in Eastern Africa with a population of 50 million, and is the 29^th populous county in the world. The current political situation has enabled the company to increase its sales while also studying the market trend of the region in order to expand in other parts since Africa is one of the regions with high prevalence of chronic diseases, hence can form a potential market for the organization.  However, it has also faced a challenge of competition as several pharmaceutical companies get into the country due to its largest and fast growing economy in the region. In order to enter into Kenya, J&J used entry modes that include joint venture, export, and its corporate culture. Other than increasing sales and mastering the market trend of the region , it has also improved the lives of people in the region by supporting several programs that are aimed at improving the lives of people, such as individuals living with chronic disease, including cancer and HIV.