Johnson & Johnson was founded in 1886 and originally produced sterile surgical dressings. Since then, they have expanded into medical supplies, pharmaceuticals, and consumer products such as Band-Aids and baby powder. They are the largest healthcare company in the world with over $1 billion in revenue each year. Their headquarters is located in New Brunswick, New Jersey, and employs more than 126,000 individuals across the globe. Their competitive advantage is based on their extensive research and development, which focuses on four areas: medical devices and diagnostics; pharmaceuticals; consumer products; and emerging markets. Let’s now go over Porter’s Five Forces Model of the company.
Johnson & Johnson Competitive Rivalry:
As the largest healthcare company in the world, Johnson & Johnson faces a significant amount of competition from companies such as Pfizer and Novartis. Competitors include established pharmaceutical companies, generic drug makers, biotech firms developing treatments for cancer and rare diseases, medical-device manufacturers, and retailers that offer a full line of over-the-counter products.
Johnson & Johnson Bargaining Power of Suppliers:
The bargaining power of suppliers depends on the goods and services that Johnson & Johnson requires. If these products and services are unique, it is hard for suppliers to switch because they will lose the business from Johnson & Johnson if they do so. However, if products and services are easily interchangeable, suppliers have more bargaining power because they can be easily switched out.
Johnson & Johnson Bargaining Power of Buyers:
Johnson & Johnson has a large market share in several industries it participates in, which gives the company significant bargaining power over buyers. If consumers demand Johnson & Johnson products, suppliers also need to sell to Johnson & Johnson or risk losing their business with customers. Because of this, suppliers will offer lower prices to the company in order to gain its business.
Johnson & Johnson Threat of New Entrants:
The barriers to enter into the healthcare industry are quite high due to heavy research and development costs that need to be amortized over a large sales volume. Additionally, the healthcare industry is highly regulated, which may make it difficult for new companies to enter the market without an established presence.
Johnson & Johnson Threat of Substitutes:
Healthcare technology has rapidly evolved in recent decades with helpful tools such as wearable devices that monitor health and even artificial hearts that help individuals survive. As substitutes for Johnson & Johnson products become more advanced, it becomes easier for customers to switch to a different product if they do not see the value in those from Johnson & Johnson.
Johnson & Johnson Porter’s 5 Forces Conclusion:
As a result of competition from several large companies as well as smaller startups with new ideas and technologies, Johnson & Johnson must continue to innovate in order to maintain its market share. They face a high threat of new entrants, little bargaining power over buyers or suppliers, and constant threats from substitutes. With the right strategic decisions, Johnson & Johnson can overcome these issues for success in the future.