Case Study Essay
On January 26, 2011, health care conglomerate Johnson & Johnson announced that earnings had declined in the fourth quarter of the previous year, and lowered its estimates for its earnings for 2010. The firm claimed that the weaker results could be attributed to the depressed economy and to a string of product recalls. Sales figures do indicate that Johnson and Johnson has clearly been hurt by 17 recalls since September 2009, covering several over-the-counter medicines, a batch of contact lenses and some hip replacements.
The most serious problems have surfaced at McNeil Consumer Healthcare, which has had to recall many of its products, including one for an estimated 136 million bottles of children’s Tylenol, …show more content…
Johnson & Johnson has been quite proud of the considerable freedom that it has given to its different business units to develop and execute their own strategies. Besides developing their strategies, these units have also been allowed to work with their own resources. Many of the businesses even have their own finance and human resources departments. While this degree of decentralization makes for relatively high overhead costs, none of the executives that have run J&J, Weldon included, has ever thought that this was too high a price to pay. “J&J is a huge company, but you didn’t feel like you were in a big company,” recalled a scientist who used to work there.4
Restructuring for Synergies
In spite of the benefits that Johnson & Johnson has derived from giving its various enterprises considerable autonomy, there have been growing concerns that they can no longer be allowed to operate in near isolation. Weldon has begun to realize that J&J is in a strong position to exploit new opportunities by drawing on the diverse skills of its various business units across the three divisions. He is well aware that his firm can benefit from the combination of its knowledge in drugs, devices, and