Johnson & Johnson Inc SWOT Analysis

Strengths: 

• Global coverage – Johnson & Johnson has established a global presence in the cosmetics and toiletries market, insulating it to some extent from local market difficulties.

• Strong position in major developed regions – the company has developed a particularly strong position in the large North American and Western European markets.

• Strong brands – the Johnson & Johnson portfolio contains a number of strong brands, including Neutrogena, Listerine and, notably, Johnson's Baby, which has established high levels of consumer trust in many markets.

• Dominance in baby care – Johnson & Johnson has established a geographically broad-ranging dominance in baby care, which acts as a significant obstacle to the development of rivals in the category.

• Strong scientific background – the company's breadth of operations in pharmaceuticals, OTC healthcare and medical devices/diagnostics confer significant advantages in a cosmetics and toiletries market which is increasingly influenced by scientific and medical developments, including research and development synergies.

• Decentralised operations – the company's decentralised operating structure provides it with the capacity to respond quickly and flexibly to changing local conditions.

• Experience of entering emerging markets – Johnson & Johnson has a long history of expansion into emerging markets, suggesting that it is in a good position to exploit forecast strong growth in markets such as Eastern Europe and Africa and the Middle East.

Weaknesses

• Lack of central focus – the autonomy granted to different brands and geographical divisions may lead to a loss of strategic coherence and control.

• Cosmetics and toiletries take a back seat – the secondary status of Johnson & Johnson's Consumer division, compared to the flagship pharmaceutical business, may weaken the company's position in the cosmetics and toiletries market within the short term as competitors are able to concentrate more intensely on development.

• Bias towards mature markets – while it has established global coverage, Johnson & Johnson still relies heavily on the mature developed markets of North America and Western Europe, which jointly accounted for around 60% of the company's cosmetics and toiletries sales in 2007. These are forecast to be the two most sluggish regions in cosmetics and toiletries on a global level over the 2007-2012 forecast period.

Opportunities

• Strong growth in skin care – ageing populations and a growing concern about ageing amongst younger consumers are set to drive strong growth in skin care, making it the most valuable cosmetics and toiletries sector over the forecast period. Johnson & Johnson's established strength in skin care places it in a good position to exploit such growth.

• Expansion of sun care – sun care, an increasingly important category for Johnson & Johnson, is also set to witness strong growth going forward, as rising health-consciousness underpins a greater awareness of the hazards of over-exposure to the sun's rays.

• Increasing demand for scientifically-orientated products – rising consumer awareness of health issues and medical advances are set to lead to demand for more sophisticated, scientifically-orientated products. Johnson & Johnson's broad pharmaceutical and medical background provides a strong platform from which to exploit such developments.

• Expansion in China – with existing production facilities and an established presence bolstered by the 2007 acquisition of Dabao, Johnson & Johnson is well-positioned to roll out brands in the Chinese market, which represents a considerable opportunity for cosmetics and toiletries manufacturers.

• Growth in emerging markets – ongoing urbanisation is resulting in stimuli such as rising disposable income, more public lifestyles for women and improved distribution infrastructures in emerging markets. With an established foothold in many emerging markets, Johnson & Johnson is well placed to benefit from growth in regions such as Eastern Europe and Latin America.

• Higher purchasing power per child – fewer children, more women in established careers when they become parents and increasing numbers of double-income families are raising the amount of disposable income available per child, creating opportunities for value-adding innovation in baby care, a core category for Johnson & Johnson.

• Buoyant birth rate in developing countries – higher birth rates in dynamic emerging regions give the company the opportunity to build its presence in these markets with its strong baby care offering.

Threats

• Maturity of core markets – mature conditions in core markets in North America and Western Europe are set to lead to sluggish growth and expose the company to negative factors such as increasing pricing competition, intensified by an expanding private label offer in such regions' sophisticated retail environments.

• Strong local rivals in emerging markets – the emergence of strong local competitors in key emerging regions could hinder Johnson & Johnson's expansion in these increasingly important markets.

• Increasing size of competitors – the increasing consolidation of the cosmetics and toiletries industry, particularly with regards to major players such as L'Oréal and, particularly, Procter & Gamble, puts Johnson & Johnson increasingly in danger of being out-gunned in the market.

• Aggressive pricing by major retailers – ongoing consolidation amongst retailers is being spurred by aggressive pricing strategies, which particularly target essentials such as oral hygiene products and bath and shower products.

• Falling birth rates in developed markets – the increasing number of women pursuing education and employment opportunities and delaying setting up families is leading to falling birth rates in major developed markets, resulting in a shrinking consumer base for Johnson & Johnson's core baby care products.

• Further distractions for the company – the challenge of smoothly integrating the US$16.6 billion acquisition of Pfizer Consumer Healthcare will mean that Johnson & Johnson's already limited focus on its cosmetics and toiletries interests will be further reduced in the short to medium term.

• Costs of product development increasing – Johnson & Johnson faces higher research, development and manufacturing costs associated with the development of cosmeceuticals which must satisfy regulatory requirements in individual markets.