Johnson & Johnson

Johnson & Johnson is the world’s most comprehensive and broadly based manufacturer

of health care products in the industry. It consists of as many as 250 different operating

companies that are spread over 60 countries. Their operating companies around are organized in

three segments: consumer health care, pharmaceutical and medical devices. Johnson & Johnson

is characterized as a divisional structure which is a self-contained organization with better

control and coordination. The divisional structure has several strengths. This structure is suited to

fast change in an unstable environment and provides high product. The most widely known that

makes consumer products is Johnson & Johnson baby care products, Band-Aid adhesive stripes,

and Visine eye drops. The acquisition of Pfizer in 2006 for $16.6 made the consumer health

division grew substantially, and also allowed the firm to add to its lineup well-known products

such as Listerine mouth wash and Benadryl allergy medicine. Share of firm’s sales has decreased

from 48% to 44% and share of firm’s operating profits has decreased from 44% to 36%, and this

was due to the 17 recalls since September 2009, covering several over-the-counter medicines, a

batch of contact lenses, and some hip replacements. One of the most serious problems surfaced

at McNeil Consumer Healthcare, 136 million bottles of children’s Tylenol, Motrin, Benadryl,

and Zyrtee were potentially contaminated with dark particles which excoriated by the Food and

Drug Administration and causing it to close down the factory. In 2011, Johnson & Johnson

intended to revamp its quality controls, creating a single framework for their divisions. There

were far more sales and profits from the pharmaceuticals and medical devices divisions. Its

medical devices division is responsible for best-selling products such as Dupuy orthopedic joint

replacements and Cyper coronary stents, while its pharmaceuticals division sells blockbuster

drugs, such as anemia drug Procit and schizophrenia drug Risperdal. These two divisions
generate operating profit margins of around 30% which double those generated by the consumer

business.

Decision making is not centralized in Johnson & Johnson Company. The decentralized

structure and the size, geographical distances, and cultural differences member companies have

in this enterprise could make it hard to lead and to maintain a cohesive, unified company attitude.

Top management does not have wide control over the operations. Also, there is a risk that people

working separately might forget the common purpose. William Weldon, the CEO of Johnson &

Johnson certainly does not want to undermine the entrepreneurial spirit that has resulted from the

autonomy that has been given to each of the businesses. He has taken to push J&J’s units to

collaborate with each other. He believes the firm can tap into many more opportunities when it

brings together the various skills that it has developed across different division. Johnson &

Johnson has been spending heavily on research and development for many years; it spends $7

billion on about 9,000 scientists working in research laboratories around the world. Scientists are

the real asset of the company. They are continuing introducing new products, currently working

on a drug to prevent strokes and one to treat prostate cancer. They are the real mind behind the

success of the brand and the products it delivers. However without collaboration and sharing of

new ideas, the company will fail to keep the leadership in the industry. Johnson & Johnson’s

CEO should start looking at the prospective of acquiring new business as outdated and in change

start strategies to create a bond between existing divisions.

Johnson & Johnson need to change their organizational structure in order to overcome

their problems. The structure that I would recommend for J&J is a global matrix structure

because a matrix structure is most often the only way global organizations can achieve the

combination of global, regional and product objectives that exist within organizations with
world-wide operations, distributed plants and supply chains. Also a matrix structure can better

help to balance the need to develop products and services. Sometimes matrix structures are used

only for a short period of time to complement culture change as J&J has done with the

human resources credo plan. Also matrix structures are suited well for cross-functional

project teams and aid in the harnessing the talents of a wider range of people across a

global business environment along with aiding communication lines. A matrix structure aids

global integration and aids local responsiveness, which is key in an ever-changing

technologically advanced environment where responsiveness is key. There are disadvantages of

matrix structure. Matrix structure can tend to increase role conflict and role ambiguity. The

potential communication issues that a matrix structure faces are caused by confusion among

workers and managers. One example is a worker who constantly reports updates to the wrong

manager and therefore receives invalid feedback. Managers themselves might not always

communicate the same tactical message to workers, thereby causing mixed responses from

workers. A synergetic effort by cross-function managers is required to avoid this kind of problem.

An even bigger issue can arise if upon failure of a project, senior management is not sure who to

hold accountable. This can be cause by ambiguous definition of roles and responsibilities, to

these must always be made very clear in a matrix structure.