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University of Nebraska - Lincoln
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Honors Theses, University of Nebraska-Lincoln Honors Program
5-2023
Johnson & Johnson Strategic Audit

Hannah Headley
Lucy Peterkin
University of Nebraska-Lincoln
Ryan Nyffeler
Joshua Wiemers
Bailey Birkholtz
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Headley, Hannah; Peterkin, Lucy; Nyffeler, Ryan; Wiemers, Joshua; and Birkholtz, Bailey, "Johnson &
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JOHNSON & JOHNSON STRATEGIC AUDIT
An Undergraduate Honors Thesis

Submitted in Partial fulfillment of
University Honors Program Requirements
University of Nebraska-Lincoln
by
Bailey Birkholtz, BSBA, Actuarial Science
Hannah Headley, BSBA, Supply Chain Management
Ryan Nyffeler, BSBA, Finance, Economics
Lucy Peterkin, BSBA, Business and Law
Joshua Wiemers, BSBA, Accounting
College of Business
May 2023
Faculty Mentor:
Dr. Tammy Beck, PhD, Management
J&J Strategic Audit 2
Abstract
Johnson & Johnson (J&J) is a healthcare company that generates economic value from its three
core business segments: Consumer Health, Pharmaceuticals, and Medical Devices. Recent
innovations include new pharmaceutical products, remote clinical trials, automated patient
recruitment, improved scientific and digital literacy amongst employees, and innovative digitized
models for supply chain planning. J&J has a competitive edge in R&D efficiency, with a 4.35
return on research capital ratio. Sociocultural, technological, and economic factors will play a
large role in changing the pharmaceutical industry environment, and J&J is well positioned to
benefit from sources of growth such as the increase in aging populations, technological
innovation, and expansion of health care coverage.
J&J's broad differentiation strategy is evident in every aspect of the company's strategic decision-
making. J&J benefits from numerous unique competencies and constantly adapts to the industry
environment through strategic maneuvers such as acquisitions and R&D expenditures. The
company's corporate-level strategy utilizes large-scale integration to work efficiently across the
healthcare industry and harness an aggressive acquisition strategy. J&J also employs a thoughtful
corporate governance system with a 14-member Board of Directors and specialized executive
team to support its broad differentiation strategy.
This strategic audit was conducted using industry analysis reports, J&J statements, financial
statements, news reports, and other company reports, covering topics such as business-level
strategy, merger and acquisition history, corporate governance, organizational structure, and
future investment in renewable energy.
Key Words: Johnson & Johnson, Pharmaceutical Industry, Strategic Management, Strategic
Audit, Case Study

TABLE OF CONTENTS
STRATEGIC LEADERSHIP 5
History 5
Business Model 5
Johnson and Johnson Management Team 6
Credo Statement 7
Goals 8
EXTERNAL ENVIRONMENT ANALYSIS 9
PESTEL Analysis 9
Profit Potential 10
Porter’s Five Forces Analysis 10
INTERNAL ANALYSIS 12
Firm’s View of Environment 12
Customers & Appeal 12
Resources & Capabilities 13
VRIO Framework 13
Core Competencies & Competitive Advantage 14
Value Chain 14
SWOT Analysis 15
PERFORMANCE ANALYSIS 15
Performance Expectations 15
Key Performance Indicators and Metrics 16
Financial Competitive Advantages 17
Executive Compensation 18
COMPETITIVE DYNAMICS 19
Degree of Concentration 20
Pfizer Inc. 20
Strategic Actions and Responses 21
EXECUTIVE SUMMARY 23
BUSINESS-LEVEL STRATEGY 24
Differentiation 24
Cost-Leadership 24
Business Scope 24
Business Strategy 25
Strategy Analysis 25
CORPORATE-LEVEL STRATEGY 25
Vertical Value Chain 25
Product Diversification 26
MERGER AND ACQUISITION STRATEGIES 27
Evaluating the Success of J&J’s Acquisition Strategy 29
M&A Strategy Moving Forward 30
CORPORATE GOVERNANCE 30
Board Compensation System 30
Board Composition and Structure 30
Committee Structure 31
Code of Ethical Conduct 32
Largest Stockholders 32
Recent Voting Issues 33
ORGANIZATIONAL STRUCTURE AND CONTROLS 33
Executive Team Overview 33
Structural Fit 34
Board of Directors Committee Structure 34
Control Systems 35
STRATEGIC DECISION: RENEWABLE ENERGY 36
Overview 36
Analysis 36
Appendix 37
Exhibit 1 37
Exhibit 2 40
References 41
STRATEGIC LEADERSHIP
History
Johnson & Johnson was founded by the three Johnson brothers in 1886. Grounded in an
extensive history of medical service experiences and harrowing encounters with American Civil
War medicine, the brothers entered into a partnership to capitalize on Joseph Lister’s new
antiseptic methods (Johnson & Johnson, n.d.). Throughout their extensive history, Johnson &
Johnson has been able to innovate within the medical industry, from creating some of the first
first-aid kits to sanitary surgical tools. Johnson & Johnson’s first foray into pharmaceuticals
began in 1959 with the acquisition of McNeil Laboratories, a company that produces household
essentials like Tylenol (Pharmaphorum, 2021). Johnson & Johnson has been plagued by a string
of controversies, most recently their 6.8 billion dollar settlement over the drug Risperdal. Despite
these costly challenges, J&J has continued to expand and provide consumers with new
innovation derived from both internal technological advancement and critical acquisitions.
Amongst these acquisitions are companies like Janssen Pharmaceutica and Pfizer Consumer
Healthcare (Pharmaphorum, 2021). Through these historical strengths Johnson & Johnson has
thrived to become a premier health product provider.
Business Model
Johnson & Johnson’s principal business model is oriented toward creating and developing
various healthcare products. Their original credo and mission statement, formed over 70 years
ago, puts patients, doctors, nurses, and mothers as their first responsibility and emphasizes
providing value at a low cost (Our Credo, n.d.). The company’s operating model emphasizes
continual investment in innovation and in personale. J&J’s multifaceted investment includes
multiple business lines and several influencing acquisitions. Through time, Johnson and Johnson
has become known as a “Family of Companies”, as it builds its extensive portfolio of unique and
diverse brands.
Johnson and Johnson derives its revenue from three core business segments: Consumer Health,
Pharmaceuticals, and Medical Devices. Out of these business segments, Johnson and Johnson
makes the majority of its revenue from its pharmaceuticals division. In 2021, pharmaceuticals
generated $52.08 billion (55.53% of revenue), medical devices generated $27.06 billion (28.85%
of revenue), and consumer health products generated $14.64 billion (15.61% of revenue)
(Johnson & Johnson Form 10-K, 2022, p. 22).
Its most lucrative and profitable division, pharmaceuticals, is further divided into 6 business
lines: Immunology, Infectious Diseases, Neuroscience, Oncology, Cardiovascular and
Metabolism, and Pulmonary Hypertension. Key pharmaceutical products such as REMICADE
and SIMPONI are concentrated in inflammation reduction and arthritis treatment. Outside of its
concentration, its most notable pharmaceutical product and development is the Janssen Covid-19
Vaccine. All of these products have had a profound impact on the lives and well-being of
consumers across the world, especially throughout the recent COVID-19 pandemic. In the
consideration these products have provided immense value and good health so that communities
may thrive, Johnson and Johnson’s business model aligns with its mission statement.
Johnson and Johnson Management Team
(Ozaist, 2022)
CEO: Joaquin Duato

Joaquin Duato became the eighth CEO in Johnson & Johnson history in January 2022 following
previous CEO Michael Sneed’s retirement. Duato has worked at Johnson & Johnson for 33 years
in multiple countries (Ozaist, 2022). He began his career at J&J in Spain and has since worked in
almost every division at the company, including the Global Supply Chain, Technology, and
Health and Wellness teams. Duato has also assisted with strategy development for the Consumer
Health and Pharmaceuticals teams. Duato’s time serving as the interim Chief Information Officer
positions him to provide unique insight into the importance of intelligent automation and data
science within the healthcare field in the coming years. Technological innovation is critical to
Duato’s vision for the company: he is striving to increase the company’s competency as a “tech
bilingual” workforce which is able to read and utilize scientific data in order to make informed
business decisions (Ozaist, 2022).
New Appointments:
Following his promotion to CEO, Duato made the following appointments in January 2022:
Vanessa Broadhurst was appointed Executive Vice President, Global

Corporate Affairs. Vanessa Broadhurst has previously worked in
commercialization and launch strategies for Janssen, a pharmaceutical
subsidiary of J&J. Her work was focused in Pharmaceuticals operations
and Research and Development. Broadhurst joined Johnson and Johnson
in 2005 (Vanessa Broadhurst, 2022 )
(Vanessa Broadhurst, 2022)
Dr. Bill Hait, who is the former Global Head of Johnson & Johnson External Innovation,
was appointed Executive Vice President, Chief External Innovation, Medical Safety, and
Global Public Health Officer. Prior to his appointment, Dr. Hait worked to
build the Research and Development pipeline. Under his leadership, J&J
launched more than 20 new products and line extensions (Johnson &
Johnson, 2022). Before joining the company in 2007, Bill was the Rutgers
Cancer Institute of New Jersey Director. He was a Professor of Medicine
and Pharmacology as well as an Associate Dean at The Robert Wood
Johnson Medical School from 1993-2007.
(Johnson and Johnson, 2022)
Dr. Mathai Mammen, Global Head of R&D at the Janssen Pharmaceutical Companies of
Johnson & Johnson, was appointed Executive Vice President, Pharmaceuticals, R&D in January,
but he has recently left the company as of August 8, 2022. Johnson & Johnson is currently in the
process of replacing him (Johnson & Johnson, 2022).
Mr. James (Jim) Swanson, Chief Information Officer, was appointed

Executive Vice President, Chief Information Officer. (Johnson & Johnson,
2022). Swanson has previous experience at Bayer Crop Science serving as
the “Head of Digital Transformation.” His experience suits him well to
support Duato’s technologically innovative vision. (James Swanson, 2022).
(James Swanson, 2022).
Many senior leaders that served under CEO Michael Sneed remain, including:
Dr. Peter Fasolo, Executive Vice President, Chief Human Resources Officer; Ms. Ashley
McEvoy, Executive Vice President, Worldwide Chairman, Med Tech; Mr. Thibaut Mongon,
Executive Vice President, Worldwide Chairman, Consumer Health; Ms. Jennifer Taubert,
Executive Vice President, Worldwide Chairman, Pharmaceuticals; Mr. Michael Ullmann,
Executive Vice President, General Counsel; Ms. Kathy Wengel, Executive Vice President, Chief
Global Supply Chain Officer; and Mr. Joseph Wolk, Executive Vice President, Chief Financial
Officer (Johnson-Johnson, 2022).
Credo Statement
Johnson & Johnson has implemented a Credo statement that clarifies the firm’s goals and
emphasizes its values of transparency and accountability. The statement is structured in a way
that demonstrates the priority level to whom they owe responsibility. The Credo begins with
“We believe our first responsibility is to the patients, doctors and nurses, to mothers and fathers
and all others who use our products and services,” (Our Credo, n.d.). The rest of this opening
statement details their motivation to deliver high quality at reasonable prices while fulfilling
consumer time expectations. They follow this by adding “We are responsible to our employees
who work with us throughout the world,” (Our Credo, n.d.). After consumers, Johnson and
Johnson clarifies that their employees are their next top priority and expands upon their
commitment to an inclusive and diverse environment where employees feel free to use their
voice. In the next section, they add “We are responsible to the communities in which we live and
work and to the world community as well,” signifying that they ultimately strive to be an ally to
their communities and look out for citizens that don’t have direct ties to their company (Our
Credo, n.d.). Their final statement concludes with, “Our final responsibility is to our
stockholders,” addressing their motive to continually grow and develop to remain a strong
competitor in the industry (Our Credo, n.d.). Overall, Johnson and Johnson’s Credo statement is
able to thoroughly identify their diverse responsibilities and offer explanations as to how they
fulfill them.
Goals
In the 2021 Shareholder’s Report, the former CEO of Johnson & Johnson, Alex Gorsky,
identified four strategic goal areas for the future:
First, J&J is prioritizing innovation. In 2021, the company devoted $14.7 billion to research and
development, a 21% increase from 2020 (Johnson & Johnson, 2022, p. 2). They are also
investing in data science and digital business enablement to prepare them for the remote future.
Next, Gorsky mentioned the importance of making public health a priority. Johnson & Johnson
seeks to address systemic inequities in healthcare through donations, scholarships, mentoring
programs, and new partnerships. J&J is leading the way in addressing public health challenges.
Third, J&J is embracing a new era of collaboration and partnership. Gorsky wants to further
global supply chain value by creating a strong web of investment relationships. By collaborating
with governments, regulators, and private companies, J&J hopes to lead through the complexity
of the future.
Finally, the company is continuing to focus on its essential purposes and on building up
company-wide resilience in the face of global challenges. COVID-19 demonstrated the
importance of giving employees a purpose and a meaningful mission for what they are doing.
J&J leadership wants to ensure that employees and citizens never forget this purpose and remain
resilient through the challenges ahead.
Each of these goals identified is a long-term, neverending goal. While Gorsky identified them in
the 2021 report, they are sure to be present and continually evaluated for many years.
EXTERNAL ENVIRONMENT ANALYSIS

PESTEL Analysis
Within the next five years, the pharmaceutical industry will likely be influenced the most by
sociocultural and technological factors. A significant sociocultural factor that will soon be
making a large impact on the pharmaceutical industry is the continuous aging of the population.
In thirty years, the number of citizens aged sixty and older is expected to double, and by 2030 it
is estimated that one in six people will be aged sixty or older (Pharmaceuticals Global Market
Report 2022, 2022). This rising demographic will therefore increase patient pools for a variety of
chronic diseases typically seen in older generations. These larger patient pools will drive the
demand for pharmaceuticals needed to treat these chronic diseases and pose an opportunity to the
industry overall. However, this growth will be obstructed by a shortage of experienced workers
with skill sets specialized in the advancement of these specific pharmaceuticals
(Pharmaceuticals Global Market Report 2022, 2022). Mercer, a consulting firm, predicts
substantial shortages of healthcare workers in the coming decade, as extreme as 400,000 home
health aides and 29,400 nurse practitioners (Pharmaceuticals Global Market Report 2022, 2022).
While these constraints are a threat to the industry, they will also offer individual health care
workers an opportunity for a more competitive salary.
A significant technological factor that will impact the future of the pharmaceutical industry is the
accelerated process of vaccination development and distribution (2022 Global Life…Science,
2022, p. 36). In the past, the vaccination timeline from initial creation to the first formal
distribution would span a decade. Now, with the urgency and severity of COVID-19, an
accelerated process was essential in the preservation of the global population. The time it took
after the development of the Pfizer-BioNTech COVID-19 vaccine to obtain Emergency Use
Authorization was only ten months (2022 Global Life…Science, 2022, p. 36). Therefore, the
COVID-19 pandemic caused a shift in expectations in the industry, and future processes will be
streamlined to match this revolutionary efficiency. This offers an opportunity for the industry to
continue to improve these processes and others so that both essential and nonessential health
products can reach the public at a faster rate.
The rise of private health insurance coverage is an economic factor that will also have an impact
on the profit potential of the pharmaceutical industry in the years to come. As this coverage
expands, industry products, specifically brand name products, will become more affordable for
the average consumer, (Khaustovich, 2022, p. 9). There has also been an increase in federal
funding for Medicare and Medicaid over the last decade. This funding increase will lead to
products becoming more affordable for consumers with prescription drug coverage
(Khaustovich, 2022, p. 19). This is a great opportunity for the industry to allow their products to
reach more potential customers and expand the market. Overall, in the coming years, there are
many opportunities for the pharmaceutical industry to expand and grow its profits.
(Khaustovich, 2022, p. 15)
Profit Potential
By 2027, the profit potential of the pharmaceutical industry is estimated to grow at an annual rate
of 2.6% to reach $258.1 billion within five years (Khaustovich, 2022, p. 13). Based on the
factors listed previously that present the industry with a variety of growth opportunities, this does
not come as a surprise. With the shift of age demographics, improvement of development
processes, and expansion of private health coverage, the pharmaceutical has a diverse portfolio
of sources to grow from.
Porter’s Five Forces Analysis

Each of the five forces will impact the pharmaceutical industry's profit potential. The first and
most influential factor is the intensity of competition within the industry. While concentration in
the industry is low, numerous firms have been around for an extensive period and are well
known across the globe (Khaustovich, 2022, p. 27). This sense of brand awareness offers an
advantage to firms that have built a dependable reputation for themselves. Because there is a
large amount of funds needed to cover all of the costs of operating a pharmaceutical firm, high
profit margins are needed to be successful and remain a strong competitor. Companies are
continuously merging or acquiring one another, and this also makes for higher competition
within the industry. It is also essential for these firms to follow technological trends and
advancements so that they do not fall behind their competitors. Innovation is essential in the
pharmaceutical industry and can be the ultimate factor that decides a firm’s survivability.
Overall, the intensity of competition in this industry is high and many factors need to be taken
into consideration for a firm to gain and maintain market share.
The next external force is the threat of new entrants into the industry. Due to the extensive
barriers established to entering the pharmaceutical industry, this threat is minimal. One of the
largest barriers is the large amount of funds needed to cover research and development costs.
According to the IBIS World Report for Brand Name Pharmaceutical Manufacturing,
“Pharmaceutical manufacturers invest a higher percentage of their revenue in R&D than
companies in most other industries,” (Khaustovich, 2022, p. 33). This creates a challenge for
potential new entrants to match this amount of funding and become a strong competitor in the
industry. Government regulation policies also offer another barrier to entry, as it takes sufficient
time and resources to develop a new product and obtain approval for it. Because of these high-
cost barriers to entry, the threat of new entrants in the pharmaceutical industry is low.
The extent of the threat of substitutes in the pharmaceutical industry varies depending on where a
product stands within its patent period. Obviously, if a drug is still within its patent period, there
is little to no opportunity for substitutes to come about and threaten the original patent. However,
once this period has passed, other competitors within the industry have the freedom to create
their own substitutes and can offer new options to the market. Another factor to consider is the
difference in generic substitution regulations across states. No matter the state, if a prescriber
clarifies “brand only” on a prescription, the threat of substitutes is automatically eliminated
(Khaustovich, 2022, p. 25). However, the procedures for prescriptions without the specific brand
demand are what offer generic substitute opportunities. Some states require that if “brand only”
is not specified, generic substitutes must be used instead. Alternatively, other states may permit
but not mandate the use of generic substitutes if “brand only” is not specified (Khaustovich,
2022, p. 25). Overall, the threat of substitutes is low, but does fluctuate across states. The only
significant substitutes for the pharmaceutical industry come from within the industry itself since
there are little to no outside products that can fulfill the same purposes as pharmaceutical drugs.
The power of suppliers is also low since the manufacturing of almost all pharmaceutical products
is done in-house. The essential resources that are outsourced are the raw chemicals needed as
well as the machinery and equipment needed for manufacturing and distribution (Khaustovich,
2022, p. 5). However, these suppliers depend on the pharmaceutical industry for their business
just as much as competitors in the industry depend on their suppliers for these resources.
Therefore, they have no motive to leverage bargaining power or influence market prices. In
general, the power of suppliers has a very low ability to influence the profit potential of the
pharmaceutical industry.
The power of buyers in the pharmaceutical industry is medium due to the variety of competitors
and different purchasing opportunities. The buyers of pharmaceutical products with the most
influence is by far pharmacies and hospitals (Khaustovich, 2022, p. 5). Once a patent expires,
generic substitute production begins, and pricing becomes more competitive. When it comes to
buying brand name products specifically, buyers hold next to no power since the firm with the
brand name is the only source. However, modern-day technology and annual public reports offer
buyers the opportunity to conduct their own research and become more powerful in their
bargaining abilities. The individual consumer has no buying power, so they depend on their
pharmaceutical distributor to bargain and make supply chain decisions in their favor. As the
industry expands and information becomes easier to obtain, buyers gain bargaining power and
can influence the pharmaceutical market.
In using Porter’s Five Forces Analysis, it is easy to forget about other external factors that do not
fit into any of the five primary categories. For example, government regulations and policies are
continuously evolving and play a major role in the manufacturing and distribution of
pharmaceutical products. However, since these factors do not fit into one of the five force
categories, they can often be overlooked. Another weakness of this analysis is its lack of
quantitative data to add support to claims. This also limits the ability to compare competitors to
one another and identify their strengths and weaknesses. This analysis also ignores the impact of
other industries a firm is involved in if it is involved in more than one. Generally, this model
assumes that all the firms in a given industry are only involved in that specific industry.
Therefore, all these limitations must also be considered when making recommendations.
Although a recommendation based on Porter’s Five Forces Analysis could seem ideal and
reasonable, one of these factors that do not fit into one of the five categories could play a role
that makes this recommendation less suitable and ultimately not beneficial.
INTERNAL ANALYSIS
Firm’s View of Environment

Following Johnson & Johnson’s successful response to the COVID pandemic, there is a general
sense of optimism within the company. In the 2021 annual report, Executive Chairman Alex
Gorsky states that the “hope” of recent years will “propel us onward in creating a better
tomorrow” (Johnson & Johnson, 2021). General industry trends towards growth and innovation
opportunities favor J&J’s long-term prospects. In particular, J&J is a leading contender in
medical digitization and data science (Johnson & Johnson, 2021). A reduction in vaccine &
pharmaceutical approval delays also benefits J&J as an innovation leader.
Customers & Appeal

The customers of J&J’s pharmaceutical division encompass a large proportion of the population
due to the universality of medical care. The customers most likely to use J&J’s services are the
young (through parents) and the elderly (HealthAffiars, 2014). The easiest way to market to
customers is by having a monopoly on the treatment. This is common in the first years of a
product line, as the patent protects against outsiders gaining market share. Once the patent
expires, 90% of all sales go to generic pharmaceutical producers (FDA, 2021). J&J maintains its
10% share through brand name recognition. Acetaminophen and triple antibiotic ointment are
commonly referred to as the Tylenol and Neosporin brands respectfully, even when the product
is generic. Marketing for longstanding products normally revolves around maintaining brand
name recognition and diversification of marketing strategies across global geographic areas
(Johnson & Johnson, 2021).
Resources & Capabilities

Tangible resources serve an important role in providing facilities for intangible assets and the
utilization of technological capabilities. The most important tangible assets are J&J’s many
laboratories, pharmaceutical production facilities, and administrative centers (Johnson &
Johnson, 2021). Laboratories provide resources to conduct R&D essential to innovation.
Production facilities deliver physical products that consumers can buy. Administrative centers
are a nexus of institutional knowledge housing legal, regulatory, data analytics, and marketing
experience.
Intangible assets include patents, trademarks, and pre-established customer relationships. These
make up most of J&J’s balance sheet assets, at a combined value of 46.4 billion (Johnson &
Johnson, 2022, p. 41). The pharmaceutical segment accounts for 10.6 billion alone. This resource
is essential to J&J’s strategic outlook. It is the legal protections and brand recognition these
assets represent that maintains J&J’s market share. This is supplemented by goodwill gained
from previous acquisitions, bringing new resources to J&J.
Behind these assets also lies an intangible capability to innovate. As of their 2021 annual report,
J&J has 16 new drugs in various stages of regulatory approval. This has been a historically
crucial capability for J&J, and was proven to still be world-class during the COVID pandemic
(Johnson & Johnson, 2022, p. 26). This capability allows J&J to orchestrate its laboratory and
intangible assets to generate new product lines. The main components of this capability are
access to global talent, a long-standing company culture of innovation, and a high reputation
with regulatory agencies.
VRIO Framework
Resource/Capability Valuable? Rare? Imitative? Capturable?
Facilities Yes, allows Moderate, many can Moderate, J&J’s Yes, J&J has a
exploitation of produce tangible assets can century of
economic value. pharmaceuticals but be copied, but at experience bringing
few have world-class extreme cost, products from R&D
R&D facilities. particularly for to production to
R&D market.
Patents, TM, & Yes, protects Yes, provides legal No, it is impossible Yes, J&J has the
Customer Contracts against the threat protections that are for a competitor to production facilities
of competition. ‘absolute’. gain a patent or TM and marketing arm
we maintain once needed to keep
we have obtained it. selling these
products.
Innovation Yes, driver of Yes, few firms can call Moderate, while Yes, J&J has proven
economic value upon similar pools of others may be able that organization
and protects talent and acquired to build similar exists to consistently
against the threat experience. capabilities, it takes invent new products.
of obsolescence. time, focus, and
cost.
Core Competencies & Competitive Advantage

Taken together, the three resources noted above build J&J’s core competency: first adoption of
new medical technology. More than just innovation, J&J can take raw innovation and orchestrate
its first mover advantage into an actionable product release plan. J&J’s facility and intangible
resources reinforce innovation by giving it tangible financial value. The required activities to
leverage this competency are well used at J&J, particularly the process of applying for regulatory
approval, and the production and distribution to customers of pharmaceuticals. Successful
pharmaceutical launches that result in a competitive advantage are then reinvested into the
resources and capabilities. Successful pharmaceutical launches result in useful patents,
trademarks, and contracts (isolating mechanisms), and the financial resources acquired can
expand R&D facilities and staff. New knowledge and expertise acquired in inventing the current
product are retained to increase the capability to invent new cures. In this way, the advantage is
maintained long-term.
J&J understands the value of this competency/advantage and harnesses it through their continued
investment in R&D. In fact, it seems J&J is leaning into this more and more, with $14.7 billion
in R&D expenses. As mentioned before, this is an increase of 21% over 2020, itself an all-time
record. Former CEO Alex Gorsky has called innovation prioritization “the foundation of growth
for our company” and Joaquin Duato is likely to continue pursuing this goal (Johnson &
Johnson, 2022, p. 2). J&J has made a substantial investment in R&D each year since 1886, and
the company will continue to leverage this advantage.
Value Chain
J&J’s pharmaceutical value chain starts with research and development of new drug
compositions and cures. R&D is supported through human resources, as J&J recruits the highest
talent available. In its annual report, J&J states that “its employees must be equipped with the
right knowledge and skills and be provided with opportunities to grow and develop in their
careers” (J&J, 2021). Once a product has been invented, it will undergo a series of regulatory
tests.
With approval for the new drug the primary activities begin. A wholesaler, pharmacy, or hospital
places an order with J&J for a specified amount of product (Khaustovich, 2022, p. 5). Supply
chain staff plan distribution and source ingredients, or continue established procedures if order is
recurring. J&J produces its pharmaceuticals in its own facilities (Khaustovich, 2022, p. 5). New
orders are sought through regional advertising. Quality control teams are active in ensuring
pharmaceuticals are pure, and other supporting activities undertake the business functions normal
to a public company.
SWOT Analysis
Strengths Weaknesses
● Patent Exclusivity ● Susceptibility to Litigation
● Brand Name Recognition ● Potential for Data Breach
● Innovation
Opportunities Threats
● Aging Population ● Healthcare Worker Shortage
● Reduced Vaccine Approval Time ● Intense Competition
● Increasing Privatization of Health
Insurance
While there are too many interactions between SWOT items to present a useful SWOT matrix
chart, we can still examine the most important insights from the matrix analysis:
● J&J’s strength in patent protection will minimize the threat of competitors competing
with its newest products through isolating mechanisms.
● The strength in brand name recognition allows us to be offensive within the industry shift
towards private health insurance, reducing the cost of brand name pharmaceuticals.
● J&J’s strength in innovation allows us to be offensive within the industry shift toward
reduced approval time to reduce the wait between R&D and return on investment.
● J&J’s weakness in susceptibility to litigation may hamper its ability to capitalize on
reduced approval time by allowing defective products into the market. J&J has been sued
before, notably in a 2021 supreme court case (pharmaphorum, 2021; Forbes, 2021)
● J&J’s weakness in potential data breaches requires J&J to be defensive against
competitors breaching its R&D before patent creation, particularly from global
competitors.
PERFORMANCE ANALYSIS
Performance Expectations
Although J&J’s financial performance has not strayed far from its expectations, revenues and
earnings have failed to meet original projections. Previous guidance forecasted the company to
earn approximately $95.8 billion, which has now been forecasted down to $94.3 billion.
Although this is not a significant miss, it has affected J&J’s bottom line for shareholders. At the
outset, earnings per share was expected to be anywhere from $10.15 to $10.35, but as of July
2022, J&J adjusted its FY 2022 expected earnings per share down to $10 to $10.10 a share
(Woelfel, 2022).
As J&J has a rich and long history of stable income streams, the predictability of its business is
generally high, compared to most businesses within the economy. However, outside
macroeconomic forces are often unpredictable, majorly outside of the business’s control, and can
have a material impact on the company. Rather than attributing the recent misses to internal
shortcomings, the company cites the recent strengthening of the dollar as the main contributor to
its expectation adjustments.
As J&J has a worldwide presence, it has a
large exposure to currency risk and the
macroeconomic forces that disrupt the
balance of exchange rates. To illustrate its
worldwide prominence, in FY 2021, J&J’s
non-domestic sales made up 49.7%, or just
under half of total revenue. More
specifically, European-based sales make up
18.4% of the company's total sales
(Johnson & Johnson Form 10-K, 2022,
p.22). With the Euro falling equal to the
U.S. dollar for the first time in twenty
years, this revenue concentration within
(Johnson & Johnson
Europe has decreased the top line of the 2nd Quarter 2022
business (Johnson & Johnson 2nd Quarter
2022 Results, 2022, p.25). Even though Results, 2022, p.25)
this risk could have been further hedged
with currency swaps, this is a Black-Swan-
like event that is difficult to predict and
prepare for.
Key Performance Indicators and Metrics

Rather than having a standard set of performance metrics across the business, J&J understands
that flexibility is necessary to adapt to the needs of each business partnership and program. For
each program, J&J collects all relevant data, analyzes it, and works with that program’s
respective team to identify the most meaningful metrics (Johnson & Johnson, n.d.). To ensure
they are meaningful, all these metrics are specifically chosen to advance the four main goals of
J&J’s “Health for Humanity'' campaign - champion global health equity, empower employees,
advance environmental health, and lead with accountability and innovation. The key
performance indicators outlined in its Health for Humanity 2025 Goals focus on the direct
impact on consumer health while maintaining a

holistic perspective that serves the surrounding
communities and business stakeholders (Johnson
& Johnson, n.d.).
To champion global health equity, J&J has been
orienting its KPIs to enhance global access plans,
access to HIV treatment, access to tuberculosis
treatment, developing tuberculosis treatment, and
access to schizophrenia treatment. To measure the
advancement of its global access plans, J&J looks
at the % of its assets with global access plans and
aims to reach 100% by 2025. Regarding its
medical treatment goals, J&J looks to the number
of countries it has long-acting injectable access
solutions for HIV, the number of cumulative
patients receiving access to tuberculosis treatment, the number of tuberculosis drugs/regimens
developed, and number of clinical studies performed on schizophrenia drugs. Additional KPIs
that champion global healthy equity measure the support for frontline health workers, the global
surgeries for obstetric fistula, enhance viral vaccine preparedness and monitoring, and research
for the best-practice healthcare for women.
Beyond championing health equity, J&J evaluates performance by how it empowers its
employees, advances environmental health, and innovates. To empower its employees, J&J is
increasing the % of diverse professionals in management positions, the % of managers achieving
a healthy workforce score, and the number of girls participating in STEM activities. To advance
environmental health, J&J is boosting the % of renewable electricity in its portfolio and scopes 1
to 3 carbon emissions. To lead in innovation, J&J is integrating suppliers into their ESG
obligations, increasing spending on small and diverse suppliers, and adding to the number of
supplier partnerships.
Financial Competitive Advantages

In the pharmaceutical industry, the key financial ratios factor in research and development costs,
in addition to a company’s ability to handle debt obligations and overall profitability. It is
important to compare how quickly a company is able to realize a return on its research as
pharmaceutical companies require a large amount of capital expenditures. Most commonly, the
return on research capital ratio is used to determine the efficiency of translating R&D costs into
revenues and profit (Maverick, 2021). In FY 2021, J&J spent $14.7 billion on R&D and obtained
$63.9 billion in gross profit, achieving a 4.35 return on research capital ratio. Falling behind J&J,
Pfizer spent $13.8 billion on R&D and obtained $50.5 billion in gross profit, only achieving a
3.66 return on research capital ratio (Pfizer Inc., 2022). At least within the category of research
efficiency, J&J beats out its main competitor.
For profitability ratios, operating margins and net margins generally provide a measure of how
the company manages its business and costs. For 2021, J&J had an operating profit margin of
25.2% and a net margin of 22.3%, while Pfizer had an operating profit margin of 30.4% and a
net margin of 28.9%. Although the two businesses are alike in more ways than not, the primary
reason Pfizer has been able to obtain a higher operating margin is due to J&J’s high marketing
expenses within their consumer health division as they advertise products such as Neutrogena,
Tylenol, and Aveeno.
On the topic of debt and the ability to pay off its liabilities, J&J not only dominates the medical
and pharmaceutical industries, but it has a competitive advantage over the entire U.S. economy.
There are only two AAA-rated bonds issued by any credit agency, and J&J happens to be one of
them (The Wall Street Insider, 2022). This allows J&J to finance new ventures far more cheaply
than any other company in the world. To illustrate this, there is little difference between J&J’s
and Pfizer’s capitalization structure, yet there is a drastic difference in their interest coverage
ratios. J&J’s debt to capitalization ratio is 0.28 while Pfizer maintains a debt to capitalization
ratio of 0.32. However, the EBIT/Interest Expense ratio, which measures the company’s
operating income against its interest obligations, makes it clear that J&J has a financial
competitive advantage. With an annual EBIT of $23.6 billion and an interest expense of $183
million, J&J can cover its interest obligations 130 times over. On the other side of the spectrum,
Pfizer can only cover its interest 17 times over.
Executive Compensation
In January and February of each year, the compensation committee assesses the performance of
executive officers, paying them out through a base salary, annual incentive, and long-term
incentive. The first component of their compensation, salaries, is never guaranteed and is not
automatic. To determine the salary rate for executives, the committee considers market data,
responsibilities, and experience when the yearly rate decision is being made. The second
component of their compensation, the annual incentive, is paid based on the specific
performance of the previous year. For 2021, annual incentives were 70% based on financial
goals and 30% on strategic goals. The three financial goals executives had to pursue was
operational sales growth, free cash flow, and adjusted operational EPS growth, while strategic
goals were proprietary. Overall, the executive team overachieved their benchmarks, receiving a
130.0% payout factor on their base annual incentive for 2021. The third and last component of
executive compensation, long-term incentives, is paid out in equity. These long-term incentives
are given in a mix of performance share units (60%), options (30%), and restricted share units
10%). J&J pays out each component as the performance share unit payouts are determined by
earnings per share figures and relative shareholder return, the option payouts are determined by
share price appreciation, and restricted stock payouts are determined by the share price. Overall,
the size of the long-term incentive packages are awarded as a % of salary and performance
(Johnson & Johnson DEF-14A, 2022). Below are the executive payouts for FY 2021:
Name and FY 2021 Salary Earned Annual Incentive Long-Term Total Direct
Title Incentive Compensation
A. Gorsky $1,650,000 $3,750,000 $16,900,000 $22,300,000

Chairman/CEO
J. Wolk $938,077 $1,540,000 $6,140,000 $8,618,077

EVP, CFO
P. Stoffels $1,222,500 $1,990,000 $0 $3,212,500

CSO
J. Duato $1,030,000 $1,670,000 $7,730,000 $10,430,000

VC of Executive
Committee
J. Taubert $938,077 $1,340,000 $6,200,000 $8,478,077

EVP, Worldwide
Chair
Pharmaceuticals
(Johnson & Johnson DEF-14A, 2022)
J&J has an extensive committee for executive compensation, which has structured a detailed
compensation system. Although some components of executive compensation are proprietary
and not fully disclosed, it is evident that little is left to guesswork. Financial benchmarks are set,
executives are motivated for both short-term and long-term success, and everyone is rightfully
paid under the consideration that J&J ranks 89th percentile for net income among peer groups.
COMPETITIVE DYNAMICS
Degree of Concentration
When evaluating the competitors in the Brand-Name
Pharmaceutical industry of Johnson & Johnson, five
competitors occupy 62.1% of the space (Abbvie -
18.0%, Bristol-Myers Squibb - 14.2%, Johnson &
Johnson - 11.3%, Merck & Co - 9.3%, Amgen -
9.2%). The industry as a whole is low to moderately
concentrated, with the four largest players accounting
for 34.2% of total revenue for 2022. For two decades,
concentration in the industry has remained the same,
resulting in high competition between the major firms.
Before the COVID-19 pandemic, mergers and
acquisitions increased within the market, but the
number declined after March 2020. Yet, because cash
reserves among companies are growing, mergers and
acquisitions are likely to pick up again, and the
industry concentration is expected to rise even further
in the next five years (Khaustovich, 2022, p. 27).
Pfizer Inc.
Johnson & Johnson competes with firms in many different industries. In the brand-name
pharmaceutical space, its biggest competitor is Pfizer Inc. While Pfizer is a “research-based,
global biopharmaceutical company,” and Johnson & Johnson has products across spaces in
addition to biopharmaceuticals, they still directly compete (Pfizer Inc., 2022, p. 1). Most
recently, the two companies competed in the production of a vaccine for COVID-19, yet, both
companies have previously been leading manufacturers of vaccines. Still, the pandemic brought
to light the high level of competition between Pfizer Inc. and Johnson & Johnson, as they
competed in the same product market, and among the same geographic markets, fighting to
expand across the world as quickly as possible. Not only does Johnson & Johnson directly
compete with Pfizer Inc. in vaccinations, but they also compete in oncology, immunology,
cardiovascular, and metabolism pharmaceutical products (Pfizer Inc., 2022, p. 4) (Johnson &
Johnson, 2022, p. 1).
Regarding resources, Johnson & Johnson and Pfizer have similarities and differences. To start,
both companies hold many patents on products, including their uses, ingredients, and
manufacturing processes. They are also committed to trademarking their products, ensuring
customers recognize the brand name. However, while Johnson & Johnson boasts 141,700
employees, Pfizer holds about 79,000, placing J&J higher in terms of human capital resources
(Pfizer Inc., 2022, p. 12) (Johnson & Johnson, 2022, p. 1). Still, Pfizer devoted $10.5 billion to
research and development in 2021, about 13% of revenues, and J&J devoted $11.9 billion, which
was 21% of pharmaceutical revenues (Pfizer Inc., 2022, p. 4) (Johnson & Johnson, 2022, p. 29).
Their capital resources devoted towards research result in increased competition among the
companies, in a battle to publish their research and put new products into the market as quickly
as possible.
Strategic Actions and Responses

Increased focus on mergers and acquisitions as the COVID-19 pandemic slows
With the merger of Allergan and Abbvie in May of 2020, brand-name pharmaceutical companies
continue to take advantage of mergers and acquisitions in order to capitalize on market share
(Khaustovich, 2022, p. 36). Merck had two acquisitions in 2021, one for $1.85 billion and
another for $11.5 billion (Adams, 2021). They are also rumored to be negotiating a $37 billion
deal with Seagan, the biggest acquisition since Allergan and Abbvie’s $60 billion deal (Peebles
& Langreth, 2022). Pfizer also negotiated two large deals in 2021, one for $6.7 billion and
another for $2.26 billion (Adams, 2021). Johnson & Johnson also participated in this growth
with the acquisition of Momenta Pharmaceuticals Inc for $6.5 billion in October of 2020.
However, they did not have any acquisitions in 2021, and there do not appear to be any on the
horizon (Johnson & Johnson, 2020).
For some companies, these mergers and acquisitions have been beneficial, but for others, they
have not. For example, Abbvie’s merger resulted in a 5% growth in market share, which is
continually growing (Khaustovich, 2022, p. 37). On the other hand, Merck, Pfizer, and Johnson
& Johnson have not witnessed any market share growth due to their most recent acquisitions,
with some even seeing a slight decrease. Specifically, Johnson & Johnson reported a negative
0.6% sales growth as a result of their 2020 acquisition (Johnson & Johnson, 2022, p. 15). Still,
with the need for innovation in the market, mergers and acquisitions are still likely to ramp up in
the coming years, as long as government regulations allow them.
Increased investments in data science, digital business, and innovation
As COVID-19 demonstrated, the pharmaceutical industry relies on medical technology
advancements in order to develop new products and address customer needs (Khaustovich, 2022,
p. 15). From advances in chemical reactor design, to the FDA’s Process Analytical Technology,
to e-prescribing and other Single-Use Technology, the increased focus on technology is a result
of the increased need to innovate faster and sustain market share growth (Khaustovich, 2022, p.
49). Johnson & Johnson is specifically innovating in “remote clinical trials, automated patient
recruitment, and innovative digitized models for end-to-end supply chain planning” as they have
a strategic goal to focus on innovation in 2022 (Johnson & Johnson, 2022, p. 2).
One area that requires significant innovation investments is oncology drugs. Large
pharmaceutical manufacturers have seemed to step out of the space, with emerging companies
taking over. Specifically, 68% of all oncology products are produced by smaller companies, with
the larger firms only holding a 23% market share in the space in 2021 (Khaustovich, 2022, p.
17). So, while there are increased investments in this space, larger firms are choosing to devote
their resources and market share elsewhere, as costs are too high to justify the investments.
While overall investments are growing, the rate of development has slowed recently, due to the
increasing costs of research and development. Companies are adapting their methods of
innovation in order to combat these costs, by partnering with universities and small companies
with advanced knowledge of processes in order to help with the foundational research.
Additionally, with increased government regulations, patent protection losses, and generic
product competition, overall industry growth is slowing as companies look to alter their methods
(Khaustovich, 2022, p. 15).
As a whole, no companies seem to be gaining market share as a result of increased investments
in the digital space, instead making adaptations to their current methods in hopes of making a
long-term impact. With the current focus on consumer wants, companies are responding by
looking to provide data-driven, innovative solutions for products and technologies that disrupt
the entire field, and produce sustainable growth and competitive advantage.
EXECUTIVE SUMMARY
The pulse of Johnson & Johnson’s broad differentiation strategy can be felt in every aspect of the
Company’s strategic decision-making. The firm benefits from its numerous unique competencies
and continues to expand into new growth markets each year. J&J’s business scope is all-
encompassing: if it is a part of the healthcare sector, it is a part of Johnson & Johnson. In order to
maintain this positioning, Johnson & Johnson is constantly adapting to the industry environment.
Strategic maneuvers like acquisitions, R&D expenditures, and the unprecedented spin-off of the
consumer health segment into its own company are just a few examples of how J&J works to
stay true to one of its most critical core competencies: innovation.
J&J enables its core competencies using its vertical value chain corporate-level strategy. Large
scale integration has enabled J&J to work efficiently in unique niches across the healthcare
industry while simultaneously stacking their resources and capabilities. As a result of this large
scale and broad scope, J&J has been well situated to harness an aggressive acquisition strategy.
Over the past five years, J&J has completed almost 40 acquisitions. Many of these acquisitions
are in the Company’s Medtech sector, indicating an increased focus on innovative surgical
technologies moving forward, especially in the surgery and orthopedics sectors.
J&J employs a thoughtful corporate governance system in order to support ethical and orderly
operations. Johnson & Johnson’s system of corporate governance utilizes a 14-member Board of
Directors structure where board members serve on standing committees, such as Regulatory
Compliance & Sustainability and Science & Technology. Internally, J&J utilizes an executive
team structure with 10 executive vice presidents and one CEO. This large executive team
supports Johnson & Johnson’s broad differentiation strategy; each specialized executive brings
critical expertise to the team.
This strategic audit was conducted using industry analysis reports, Johnson & Johnson
statements, financial statements, news reports, and other company reports. The audit includes an
overview of the company’s business-level strategy, corporate-level strategy, merger and
acquisition history and future outlook, corporate governance, organizational structure and
controls, and consideration of future investment in renewable energy.
BUSINESS-LEVEL STRATEGY
Differentiation
Johnson and Johnson has a long history of pursuing a differentiation strategy. J&J provides
higher value to consumers by producing brand new pharmaceutical products ahead of the
creation of generic versions (Johnson & Johnson Strategy Highlights, 2019). This is how most
Johnson and Johnson pharmaceutical products start their life and is when the differentiation
position is easiest and most profitable. As various isolating measures (such as patents) allow for
easy differentiation to expire, the company prepares for the next stage of the product's life as new
competitors enter the market. The factors that create higher value for customers in this late stage
are the company’s brand name assurance of quality and the ease and familiarity of relationships
for large customers working with J&J.
Cost-Leadership
Johnson and Johnson typically does not pursue a cost-leadership position in the market, but does
pursue several tactics that are typical of low-cost strategies. This is due to the relatively low
value difference between name brand and generic suppliers after the expiration of the patent
period. Examples of post-patent cost leadership include efforts to decrease the cost of input
factors, leverage economies of scale more efficiently, and exploit the built-up manufacturing and
procurement experience on the learning curve. Isolating measures such as patents allow Johnson
and Johnson to plan and prepare these measures before prospective cost-leaders get into the
market, preserving Johnson and Johnson’s position. This strategy is further articulated in a
Johnson & Johnson’s news release:
As part of its attention to cost management, the company plans to accelerate steps to
standardize and streamline certain aspects of its enterprise-wide functions such as
human resources, finance and information technology to support growth across the
business, while also leveraging its scale more effectively in areas such as procurement to
benefit its operating companies. (Johnson & Johnson Cost Structure, 2007).
Business Scope
Johnson and Johnson has a broad approach to the market. This is evidenced by its diverse
offerings across and within each of its three segments: Consumer Health, Pharmaceutical, and
Medical Devices. While these are all related segments, there is considerable breadth between
them. Within the pharmaceutical segment, the product offerings cover a broad area, with drugs
related to diseases, mental issues, and everyday uses (Johnson & Johnson Prescription Drugs,
2020). Internally, Johnson and Johnson explains its evolving differentiation in communication to
shareholders:
Janssen has an evolving and differentiated R&D strategy that embraces both disease
areas and biological pathways, as well as new technologies such as cell and gene
therapy and broad-based application of data science. Together with strong partnerships,
this strategy will help Janssen discover, develop and deliver the next wave of
transformational medicines (Johnson & Johnson Strategy Highlights, 2019).
Business Strategy
Johnson & Johnson pursues a broad differentiation strategy. This strategy begins with the
development of new cures and treatments to provide for unfulfilled needs. As put by former vice
chairman Sheri McCoy: “Our people focus every day on addressing the world’s major unmet
medical needs with superior science” (Johnson & Johnson Strategy Highlights, 2011). To ensure
that Johnson & Johnson continues to develop superior solutions, the firm must first invest
heavily in establishing core competencies in innovation and R&D. Isolating mechanisms like
protection of intellectual property via patents allow Johnson & Johnson to profit heavily from
new products, which are then used to recuperate R&D costs and pay for the next innovative
product. The company also uses the profits from this period to prepare its value chain to compete
with generic sellers post-patent period. The modest profits from the differentiation position in the
late stages of the product's life provide a return for shareholders.
Strategy Analysis
Johnson & Johnson maximizes its profits from its core competency in innovation by maximizing
the value of isolating mechanisms. This preserves a sense of dynamism within the company, and
allows them to adapt quickly to current events. J&J’s agile innovation is perhaps best evidenced
by its successful development of a COVID-19 vaccine, one of only three major US firms to do
so. Johnson & Johnson’s constant process of innovation is essential for revenue generation, as
cost-leader generic pharmaceutical producers will take the majority of the market share after the
end of the patent period. Extensive R&D creates a large upfront cost for new products that must
be recuperated over time, which could be jeopardized if demand is lower than expected. Overall,
however, the scale of Johnson and Johnson’s operations and the longstanding ability to find
viable new pharmaceutical products mitigate these disadvantages and establish its place as a
leader in the medical market.
CORPORATE-LEVEL STRATEGY
Vertical Value Chain
Over the past three decades, Johnson & Johnson has transformed its supply chain from a
decentralized and disconnected collection of suppliers to a far more comprehensive and
integrated operation that better supports its ability to serve customers (Johnson & Johnson,
2017). Because of the scale of the company, Johnson & Johnson has been able to create
significant value in its supply chain by connecting its broad portfolio across several global
regions. Although the transformation has been a long effort, the business’s vertically integrated
business model has been greatly accelerated in the advent of the COVID-19 crisis, as the quick
delivery of pharmaceutical products, such as the Janssen vaccine, was imperative for securing
global health and wellness (Johnson & Johnson, 2020).
Raw Materials, Components, and Intermediate Goods

Across all of Johnson & Johnson’s business divisions, the company spends approximately $35
billion annually on its rapidly growing supplier base of over 50,000 suppliers. Its most dominant
division, pharmaceuticals, makes up for the highest percentage of this expenditure at 37%, but
the company shows no favor towards any division, committing to the same responsibly-sourced
supply chain strategy across all of its businesses (Johnson & Johnson, 2021). To follow its
community-oriented Credo, Johnson & Johnson has thoroughly worked towards developing a
diverse and inclusive supplier network that spans across the globe (Johnson & Johnson, n.d.). As
the events of COVID-19 had a far more negative impact on smaller businesses, Johnson &
Johnson set a goal to spend $4.5 billion on a wide collection of small suppliers as part of its
Health for Humanity 2025 campaign. Beating that goal by a wide margin, Johnson & Johnson
spent $5.2 billion with small suppliers in 2021 alone, paving the way for an intensely resilient
and robust supply chain (Johnson & Johnson, 2022).
Final Assembly Manufacturing

Johnson and Johnson adopts a dual-manufacturing strategy, both partnering with third-party
manufacturers and leveraging its global manufacturing footprint of 85 manufacturing facilities
distributed fairly equally among the United States, Europe, Latin America, Africa, Asia, and the
Pacific. Out of the 26 manufacturing facilities in the United States, five are used for
manufacturing products within its pharmaceuticals division (Johnson & Johnson, 2022). This
dual approach has allowed the business to remain agile in its distribution through crises, but also
capitalize on its economies of scale through the direct ownership of its plants.
Marketing and Sales and After-Sale Sales Service

With an annual marketing, selling, and administrative spend of $24.7 million as of FY 2021,
Johnson & Johnson promotes over 150 of its brands in a variety of ways, whether it be through
magazines, commercials, direct sales to healthcare providers, or other methods. However, due to
the nature of the pharmaceutical business, Johnson & Johnson must adhere to more strict
marketing regulations than they would with their consumer health business. Pharmaceutical
marketing and sales interactions with healthcare providers (HCP) are governed by external and
internal guidelines. Through structured employee training, Johnson & Johnson ensures its HCP
sales representatives are well-qualified, have special knowledge of the pharmaceutical they are
selling, and ethically serve in the interest of end-users. To further support ethical selling,
resources are spent on proper HCP education on the company’s products. Third parties are often
involved in the pharmaceutical sales process, whom Johnson & Johnson must enforce consistent
due diligence on as well (Johnson & Johnson, 2021).
Because of the size and average lifetime of 21 years for Johnson & Johnson’s customers, the
high lifetime customer value incentivizes the company to maintain strong relationships after the
sale. Relationships may even require after-sales service on a contractual basis. Outside of service
towards sales relationships, Johnson & Johnson heavily prides itself on its direct-to-consumer
customer service and the thousands of service representatives that answer customer calls each
day. In one of their most prominent customer service stories, a representative solved a
pharmaceutical logistics disaster by coordinating the distribution of skin medication to victims of
2016 China Floods, saving tens of thousands of lives from disease (Johnson & Johnson, 2017).
Product Diversification
Within the pharmaceutical division alone, Johnson & Johnson operates in 6 areas - immunology,
infectious diseases, neuroscience, oncology, cardiovascular and metabolism, and pulmonary
hypertension. In FY 2021, Immunology products made up 32.2% of pharmaceutical sales,
Oncology made up 27.9%, Neuroscience made up 13.5%, Infectious Diseases made up 11.3%,
Cardiovascular and Metabolism made up 8.5%, and Pulmonary Hypertension made up 6.6%.
Although the company’s key pharmaceutical products are concentrated in the therapeutic area of
immunology, Johnson & Johnson produces and markets over 52 drugs across all of its 6 areas
(Johnson & Johnson Manufactured/Marketed Prescription Drugs). From anticoagulants and
epilepsy treatments to pain relievers and ADHD treatments, Johnson & Johnson's
pharmaceuticals serve a wide swath of ailments. This level of diversification demonstrates
related-constrained diversification, with less than 70% of revenues from a single business
activity, but the production of pharmaceuticals utilizes similar resources and competencies. The
related-constrained diversification strategy is also applied to Johnson & Johnson as a whole, with
55.53% of revenue in pharmaceuticals, 28.85% in medical devices, and 15.61% in consumer
health products (Johnson & Johnson Form 10-K, 2022, p. 22). As the consumer health business
separates, this will likely change. Still, while the company’s resources and competencies are less
linked than in the pharmaceutical division alone, they still demonstrate a reliance on each other
to operate. Overall, through product diversification, the company is able to target several
customer markets, expand its sales by fulfilling multiple needs, and better improve global health.
MERGER AND ACQUISITION STRATEGIES

Johnson & Johnson has pursued an active merger and acquisition strategy for the past five years:
the firm completed almost 40 acquisitions from 2016-2021(Kansteiner, 2022). The company
utilizes acquisitions as a means of product development and expansion within sectors of interest,
such as the Pharmaceutical and Medtech sectors (2016 Annual Report, Johnson & Johnson to
Acquire…, 2022). Over the past five years, J&J has focused on both larger “mega deals” and
smaller “tuck-in” acquisitions. Some notable examples of acquisitions in the past five years
include:
Notable Mergers and Acquisitions 2016-2022

Year Company Reason Change in Acquired Change in J&J’s Stock
Acquired Firm’s Stock Price Price due to
Acquisition
2016 Vogue Vogue International is a Privately Held (N/A) This acquisition was
International natural hair care company neutral to accretive to
focused on providing salon- stock earnings in the
inspired products. This first year. In June of
acquisition removed a 2016 when the deal
competitor while was finalized, the
simultaneously Company stock price
strengthening J&J’s global was on a continuous
presence in the haircare rise sitting at $114.76
industry (J&J 2016 Annual per share (CNBC,
Report, 2016). 2022).
.
2016 Neuwave Neuwave Medical is a Privately Held (N/A) This acquisition was
Medical Inc Medtech device company neutral to stock
that manufactures soft tissue earnings. In April of

microwave ablation systems. 2016 when the deal
This acquisition allowed J&J was finalized, the
to fill a gap in its Medtech Company stock price
sector and enter a new was on a continuous
market (J&J 2016 Annual rise sitting at $110.18
Report, 2016). per share (CNBC,
2022).
2017 Abbott J&J acquired this firm to Wholly- This acquisition was
Medical broaden its ability to meet owned subsidiary of neutral to accretive to
Optics vision care needs by adding Abbott Laboratories stock earnings and
products related to cataract (N/A) may have contributed
surgery, laser refractive to the increasing stock
surgery, and eye health. This price in February 2017
acquisition came from the when the deal was
subsidiary’s parent Abbott officially completed.
Laboratories which is one of In 2017, the net
J&J’s biggest competitors in impact of acquisitions
the medtech sector (J&J and divestitures on
2017 Annual Report, 2017). global sales growth
. was positive at 3.6%
(J&J 2017 Annual
Report, 2017).
2017 Actelion Ltd J&J utilized this acquisition Shareholders received In a joint report from
by Janssen to expand its $280 per share as well Acetelion and J&J
offerings in the cardiac as one share of R&D executives, this
sector and to complement its stock per Actelion share acquisition was
existing cardiac offerings in (Johnson & Johnson anticipated to
therapeutic areas. Acetelion 2017 Annual Report, accelerate J&J’s top-
was a competitor with 2017) line growth by 1% and
Janssen’s portfolio to provide an
previously, so this immediate accretive of
acquisition furthered J&J’s .35-.40 cents in the
reach into the sector and first year (Johnson &
eliminated competition Johnson 2017 Annual
(Johnson & Johnson 2017 Report, 2017).
Annual Report, 2017).
2019 Auris Health JNJ’s Ethicon Inc acquired Privately-held (N/A) This acquisition was
Auris Health, a Medtech neutral to stock price.
company that uses Robotics In February 2019,
to diagnose and treat lung when Auris health was
issues. J&J utilized this firm being acquired, J&J
to amplify its focus on stock sat at $136.60
digital surgery and lung per share and was
cancer intervention and to increasing steadily
develop its offerings in the (CNBC, 2022).
medical robotics industry
(Johnson & Johnson 2019

Annual Report, 2019).
2022 OrthoSpin J&J’s DePuy Synthes Privately-Held This acquisition was

Ltd. acquired OrthSpin, a first- (N/A) neutral to accretive to
of-its-kind orthopedics stock price. In
automated strut system. December 2021, J&J’s
Acquiring this technological stock price notably
innovation allows J&J to increased in the wake
supply the Medtech system of this acquisition’s
with the strut treatment part announcement to a
rather than seeking outside height of $172.31
suppliers (Depuy Synth, (CNBC, 2022).
2022).
2022 Abiomed Johnson and Johnson Following the The deal is projected
acquired Abiomed in order announcement of J&J’s to be completed in the
to increase its involvement acquisition, Abiomed’s first quarter of 2023.
in the high-growth stock jumped from Financing this
cardiovascular Medtech $252 to as high as expensive acquisition
sector. Abiomed has been $381.99 a share. is expected to be
responsible for critical Abiomed shareholders dilutive or neutral to
innovations like the Impella were given an upfront earnings per share in
heart pump. Prior to its payment of $380.00 per the first year following
acquisition, Abiomed was an share as well as a non- the deal, but, by 2024,
existing competitor in the tradeable contingent the acquisition is
industry. Abiomed value right to $35 per projected to be
encompasses a diversity of share, providing certain accretive at $0.05 a
heart failure and recovery commercial and clinical share and increasing
products and has an 18 year milestones are achieved from there (Halley,
record of profitable growth (“Johnson & Johnson to 2022).
in the industry (“Johnson & Acquire…”, 2022).
Johnson to Acquire…”,
2022).
.
Evaluating the Success of J&J’s Acquisition Strategy

Johnson and Johnson’s merger and acquisition strategy has been highly successful. The firm has
not completed any mergers, but it has filled gaps in its existing pharmaceutical and Medtech
offerings and incorporated innovative new technologies via acquisitions. These deals have
generally had a neutral to accretive long-term impact on stock price. Through acquisitions, the
company is successfully leveraging its wealth of resources from its three segments to invest, in
future pharmaceutical and Medtech innovation. As arguably the most diverse companies in
healthcare, it is unsurprising that these acquisitions span such a diversity of industries: from
orthopedic surgery, to cardiovascular pumps, to eye health, to shampoo. Even as Johnson and
Johnson plans its future split from its consumer health segment, the firm remains a giant with
resources that far outpace other Medtech industry competitors. In 2021, J&J had $32 billion in
cash and marketable securities: 3 times the 10.2 billion held by Abbott Medical and 11 times the
$2.9 billion held by Medtronic (Reuter, 2022, “Abbott Laboratories”…, 2022).
M&A Strategy Moving Forward

In his first earnings call this past January, new CEO Joaquin Duato called for an “aggressive”
Mergers and Acquisitions strategy for Johnson & Johnson moving forward. Duato’s announced
strategy is generally reflective of aggressive M&A strategies being pursued by other
pharmaceutical and Medtech competitors, such as Abbott Laboratories and Medtronic (Reuter,
2022). The company already follows an intensive strategy in M&A, but Duato detailed in the
call his plan to focus more acutely on smaller “tuck-in” acquisitions moving forward. Smaller
acquisitions are well suited for J&J’s 2022 vision because they are easier to integrate and well-
situated to fill small gaps in J&J’s Medtech offerings. J&J can both broaden its position to
include more technologies and deepen its expertise in specific areas of focus, for example, within
J&J’s most lucrative medical device segments, such as surgery and orthopedics (Reuter, 2022).
CORPORATE GOVERNANCE
Board Compensation System
Johnson & Johnson revised its compensation system for board members in 2022 after an annual
review. Changes were made based on an analysis of competitive position, demonstrating that
compensation was below the peer-group median for 2021 (Johnson & Johnson Proxy Statement,
p. 51, 2022). Each director is paid equal cash compensation of $125,000. The lead director
receives an additional $50,000. The Audit committee chair receives an additional $30,000, and
other committee chairs receive $20,000. Additionally, each director receives $185,000 worth of
deferred share units. They also have the opportunity to have up to $20,000 per year in matched
charitable contributions. Board members are reimbursed for transportation, hotel, and food
related to attending Board and Committee meetings, but they are not paid direct compensation
(Johnson & Johnson Proxy Statement, p. 53, 2022).
Board Composition and Structure

The Johnson & Johnson Board of Directors has 14 members, 12 of which are independent. The
two non-independent members include the current and former CEO of the company, Joaquin
Duato, and Alex Gorsky. Presently, there is no CEO duality, as Joaquin Duato took over as CEO
on January 3, 2022. Before his start, Gorsky had CEO duality as the board's executive chairman.
Gorsky does plan on standing for reelection in 2023, so there is a chance that CEO duality
returns (Johnson & Johnson Proxy Statement, p. 22, 2022). The Board of Directors has a lead
director, Anne Mulcahy, who is not an officer of the company.
Current board members are all above the age of 56, yet have served on the board for a range of
less than one to thirteen years. Half of the director nominees are from diverse backgrounds, with
five women, two African-Americans, and one Hispanic/Latino member.
Committee Structure
The Board of Directors has six standing committees, and in 2022, one special committee. The
committees include audit, compensation & benefits, finance, nominating & corporate
governance, regulatory compliance & sustainability, and science & technology. The special
committee was for consumer health, intended to oversee the potential separation of the
company's Consumer Health business. Each committee consists of a chair and one to six other
members. The composition of each committee is shown in the table below, along with the
qualifications of the board members.
Name Audit Comp & Fina Nom & Reg & Sci & Cons
Ben Corp Comp Tech Health
Darius Adamczyk X
Mary C Berckle Ph.D. X C
D. Scott Davis C X X X
Ian E. L. Davis X X
Jennifer A Doudna, X X
Ph.D.
Joaquin Duato
Alex Gorsky C
Marillyn A. Hewson C X
Hubert Joly X X X
Mark. B McClellan X X
Anne M. Mulcahy X C X
A. Eugene Washington X X
M.D
Mark. A. Weinberger X C
Nadja Y. West M.D X X
Code of Ethical Conduct

Johnson and Johnson has a Code of Business Conduct, effective in March of 2020. The code has
five main sections. First, the introduction section contains information on what the code is, why
and how to use it, and the responsibilities of employees and managers. Then, the code dives into
how Johnson & Johnson conducts its business, including employee duties, certain laws, foreign
payments, human rights, political activity, purchasing and procurement, and environmental
issues. Next, fair treatment of employees is discussed. Topics range from what and why, to
workforce engagement, non-discrimination, work environments, and the use of social media.
After this section, the code discusses financial integrity and protecting assets, honing in on the
accuracy of records, use of assets, intellectual property, trade secrets, and compliance with laws.
Finally, the last section highlights the importance of conflicts of interest, when they occur, how
items of value play in, personal investments, family members, and outside board memberships
(Johnson & Johnson Code of Business Conduct, p. 4, 2020). As a whole, Johnson & Johnson’s
Code of Business Conduct provides a foundation for the company’s values and following ethical
guidelines and procedures.
Largest Stockholders
As of the release of the 2022 Proxy Statements, there were three owners of Johnson & Johnson
stock that owned greater than 5%. These included The Vanguard Group, which owns 8.92%,
BlackRock, Inc., which owns 7.6%, and State Street Corporation, which owns 5.51% (Johnson &
Johnson Proxy Statement, p. 50, 2022). These owners are known as beneficial owners and
receive fees each year. On the other hand, regarding employee ownership, directors, the CEO,
the CFO, and the three most highly paid executive officers own 9,078,713 shares combined,
which equals less than 1% of shares outstanding (Johnson & Johnson Proxy Statement, p. 49,
2022). The CEO is required to own 12 times the amount of stock in relation to base salary, and
other executive officers are required to own six times (Johnson & Johnson Proxy Statement, p.
86, 2022). This amount was doubled in December 2020 to follow the requests of shareholders.
As far as employee ownership, the company provides long-term incentives in the form of shares
for its 25,000 employees. In March 2022, there were 197,579,124 shares available for
employees, representing about 5% of shares outstanding (Johnson & Johnson Proxy Statement p.
111, 2022). So, employees own a relatively high number of stock, yet, no individual or small
group of employees owns a large amount.
Recent Voting Issues

In the 2022 Proxy Statement, there were four issues put for a vote by the company, and ten
requested by shareholders. Items one and two are presented for a vote each year relating to
governance, and deal with the election of directors, and an advisory vote to approve named
executive officer compensation. The board recommends 14 directors for a vote each year, with
the majority remaining the same, but with two changes. Joaquin Duato’s entrance as CEO placed
him on the board in January of 2022, but he will not have the chance to be chairman of the board
like the previous CEO, Alex Gorsky, until 2023.
The third issue was for approval of the company’s 2022 long-term incentive plan, because it
expires after ten years, and was last voted on in 2012. The proxy statement details the changes to
the incentive plan, none of which are greatly changed from the 2012 plan. Without its approval,
no shares can be issued to employees, so it is a crucial issue. Next, the fourth issue was ratifying
an independent registered public accounting firm. This issue is not required for a shareholder
vote, but the board felt it necessary to share with shareholders. The ratification is necessary
yearly, as the public accounting firm is reevaluated annually. Issues five through fourteen have
been presented by shareholders, and the Johnson & Johnson Board of Directors recommended
voting against each. Issues include topics on the following: federal securities laws, diversity and
racial justice, access to COVID-19 vaccines, reporting on public health costs, baby powder,
charitable donations, lobbying activities, and incentive compensation metrics (Johnson &
Johnson Proxy Statement, p. 124-161, 2022). The statement extensively details why the board
recommends voting against each of these issues.
ORGANIZATIONAL STRUCTURE AND CONTROLS

Executive Team Overview
Johnson and Johnson utilizes a functional structure with ten executive vice presidents that all fall
under the Chief Executive Officer. While the executive team includes eleven members, the
overall leadership team of Johnson and Johnson contains fourteen, with three additional leaders
so that each of the thirteen categorical areas of the company has representation in the leadership
team (Johnson & Johnson Org Chart, n.d.). The number of members on each of the thirteen
categorical teams varies across the company. The thirteen categorical teams are Active
Pharmaceutical Ingredients (API) & Biologics, Chemicals, Construction, Capital and Facilities
Services, Consulting, Temp Labor and Professional Services, External Manufacturing, Fleet,
Travel and Meeting Services, Information Technology, Logistics, Marketing Services, Media
and Advertising, Metals and Plastics, Packaging, R&D and Contract Research Organizations
(CRO). A diagram of the leadership team can be found below, while diagrams of categorical
teams with more than one member can be found in Exhibit 1 of the
Appendix.
Structural Fit
This structure in the firm is appropriate for pursuing its broad differentiation strategy. By
leveraging their diverse leadership team with a variety of backgrounds, they can maintain their
competitive position and continue to lead innovation in the pharmaceutical industry. On a
broader corporate-level scope, their team structure with specialized knowledge ensures all areas
of their value chain are consistently analyzed and upgraded to ensure maximum efficiency.
Johnson and Johnson’s functional structure is an essential asset in pursuing their strategies and
continuing to be a leader in the pharmaceutical industry.
Board of Directors Committee Structure

Johnson and Johnson's Board of Directors follows a similar functional structure to the company.
The Executive Chairman, Alex Gorsky, assumes a principal role similar to Joaquin Duato,
Johnson and Johnson's CEO. Below him falls a lead director and twelve other directors of the
board, each with their unique backgrounds and expertise (Johnson & Johnson Proxy Statement,
p. 12, 2022).
The six previously mentioned committees and a special committee reflect the thirteen primary
focus areas. A chart of these committees and the board members involved can be found in
Exhibit 2 of the Appendix. Each committee has a chairman, similar to the vice presidents, who
comprise the executive team and oversee their specialized team. While these committees
typically include one to six board members in addition to a chair, the company's category teams
have anywhere from no additional members to thirteen other members under an executive leader.
The incorporation of specialized teams with individual purposes and goals is consistent across
Johnson & Johnson's leadership team and the Board of Directors.
Control Systems
Johnson & Johnson has specific control systems to regulate many company areas, including
reporting procedures and election and compensation guidelines. Item 9A of their 2021 Annual
Report includes the different control systems they have in place to ensure disclosure of all
essential matters in their reports (Johnson & Johnson Annual Report, p. 109, 2021). There have
been no changes in the company’s internal control over financial reporting within the last year,
as all reporting practices have been satisfactory (Johnson & Johnson Annual Report, p. 109,
2021).
Item 1 of the 2022 Proxy Statement outlines the election process of members of the Board of
Directors. Specific nomination processes exist to achieve their goal of “retaining Directors who
have deep institutional knowledge of Johnson & Johnson and the evolving healthcare
environment and electing new Directors with diverse backgrounds and skills” (Johnson &
Johnson Proxy Statement, p. 12, 2022). There are strict criteria to regulate eligibility to run for a
Director position and a list of preferred characteristics that help structure the appointment of new
Directors (Johnson & Johnson Proxy Statement, p. 13, 2022). Board evaluations occur at the end
of each year, in which the Executive Chairman and Lead Director meet with each Director
individually so that they can collect and offer individualized feedback (Johnson & Johnson
Proxy Statement, p. 13, 2022). Each committee also holds an Executive Session in which
members complete a questionnaire to facilitate the evaluation of individual and committee
performance.
Item 2 of the 2022 Proxy Statement outlines Executive Officer compensation and its processes.
By recommendation of the Board of Directors, shareholders vote for approval of the executive
officers’ compensation as well as the executive compensation philosophy, policies, and
procedures (Johnson & Johnson Proxy Statement, p. 54, 2022). The Proxy Statement includes a
Compensation Discussion and Analysis created by the Compensation and Benefits Committee of
the Board of Directors. In addition to financial and strategic goals, this section contains an
outline of the goal-setting process to create goals that are used to “develop the estimates that we
provide to the investment community, are aligned with our long-term strategic plan and promote
long-term, sustainable value creation,” (Johnson & Johnson Proxy Statement, p. 64, 2022).
Similarly, a PSU (Performance Share Unit) goal-setting process is in place with similar purposes
(Johnson & Johnson Proxy Statement, p. 67, 2022).
Johnson and Johnson has effectively implemented control systems across the company to
regulate everything from compensation adjustments to goal setting. These structured procedures
are essential for such a large firm to maintain standards through leadership turnover and other
relevant external influences. Detailed guidelines allow Johnson & Johnson to maintain
transparency with shareholders and continue to develop and meet its internal goals.
STRATEGIC DECISION: RENEWABLE ENERGY

Overview
With ever-increasing consumer expectations in regard to environmental sustainability, many
companies are introducing strategic initiatives to showcase their efforts in this space. Johnson &
Johnson is no different. As a leading healthcare company, they announced in November of 2021
their “Health for Humanity 2025 Goals.” One of these goals included sourcing 100% of
electricity needs at facilities worldwide from renewable sources by 2025.
The company’s first step towards this goal was signing a power purchase agreement to bring the
United States and Canada towards 100% renewable energy use by 2023 (Goad, 2021). The
energy will be sourced from a new solar field in Southern Texas that saves emissions equal to
18,000 cars per year. Also, in July, Johnson & Johnson signed wind and solar agreements to
ensure 100% renewable energy use in Europe by 2023 (Goad, 2021). The company owns 50 on-
site renewable energy systems in 17 countries with these new agreements. As of the 2021 Health
for Humanity Goals report released in June 2022, 52% of Johnson & Johnson’s operations are
utilizing renewable electricity, with 67% in North America, and 79% in Europe (Health for
Humanity 2025 Goals, p. 62, 2022).
From 2005 to 2021, the company has spent $470 million on completed projects, and allocates up
to $40 million per year in capital relief for research and development facilities that show CO2
savings and a financial return of at least 15% (Health for Humanity 2025 Goals, p. 62, 2022).
Johnson & Johnson’s overall emissions goal is in line with the Race to Zero campaign by the
United Nations Climate Change organization Race to Zero campaign, which aims to keep global
warming to 1.5 degrees Celsius (Johnson & Johnson, 2021).
Analysis
Presently, the U.S Health Care sector generates 8.5% of toxic air emissions (Senay, 2022). The
World Health Organization states that climate change is humanity's biggest health threat (World
Health Organization, 2021). In addition to these facts, consumers are paying increasing attention
to companies that are dedicated to solving this problem, and as climate change ramps up, costs
will rise, even more than the $800 billion already generated in healthcare (Batra, 2022). Thus,
Johnson & Johnson’s strategic decision to invest heavily in this space is smart from a cost,
consumer, and environmental perspective. But, the real question is, is the company doing enough
to solve this problem?
For one, in June of 2022, President Joe Biden introduced a pledge to reduce greenhouse gas
emissions by 50% by 2030. 61 organizations signed this pledge, some of which included Pfizer
and AstraZeneca (The White House, 2022). Johnson & Johnson did not sign this pledge, with its
goal to reach zero net carbon emissions by 2045 (Health for Humanity 2025 Goals, p. 61, 2022).
In the pharmaceutical industry, its ESG ranking was 118 out of 971, performing slightly better
than Pfizer (Sustainanalytics, 2022).
Solely analyzing Johnson & Johnson’s strategic initiative made in 2021 to source 100% from
renewable energy sources, this was a smart move for the company to make, and we fully support
it. They are ahead of companies like Pfizer, who committed to the 2030 timeline and is currently
only at 6% use (Pfizer Inc., 2022). This showcases Johnson & Johnson’s willingness to place
time and capital into utilizing renewable energy. Yet, based on the analysis of the industry as a
whole, Johnson & Johnson is not fully committed to things like reducing its production of
greenhouse gasses or improving its ESG ranking. If the company wants to become more of a
leader in environmental sustainability, it should invest more into reaching industry goals on
carbon emissions and climate change. Should Johnson & Johnson choose to invest in these goals,
many consumers, ourselves included, would support their strategic environmental initiatives
more fully.
Appendix
Exhibit 1
Diagram 1A: Team of Ashley McEvoy, Executive Vice President & Worldwide Chairman,
Medical Devices
Diagram 1B: Team of Elizabeth Forminard, Executive Vice President, General Counsel
Diagram 1C: Team of Jennifer Taubert, Executive Vice President & Worldwide Chairman,
Pharmaceuticals
Diagram 1D: Team of Joseph J. Wolk, Executive Vice President & Chief Financial Officer
Diagram 1E: Team of Kathy Wengel, Executive Vice President & Chief Global Supply Chain
Officer
Diagram 1F: Team of Najat Khan, Chief Data Science Officer & Global Head, Janssen R&D
Diagram 1G: Team of Vanessa Broadhurst, Executive Vice President, Global Corporate Affairs
Diagram 1H: Team of William N. Hait, Executive Vice President, Chief External Innovation and
Medical Safety Officer; Interim Head, Janssen R&D
Exhibit 2
Committees of the Board of Directors
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University of Nebraska - Lincoln

DigitalCommons@University of Nebraska - Lincoln

Honors Theses, University of Nebraska-Lincoln Honors Program

Johnson & Johnson Strategic Audit

Follow this and additional works at: https://digitalcommons.unl.edu/honorstheses

An Undergraduate Honors Thesis

innovation, and expansion of health care coverage.

team to support its broad differentiation strategy.

future investment in renewable energy.

Audit, Case Study

Johnson and Johnson Management Team

CEO: Joaquin Duato

Vanessa Broadhurst was appointed Executive Vice President, Global

Mr. James (Jim) Swanson, Chief Information Officer, was appointed

(James Swanson, 2022).

EXTERNAL ENVIRONMENT ANALYSIS

(Khaustovich, 2022, p. 15)

Porter’s Five Forces Analysis

Firm’s View of Environment

Customers & Appeal

Resources & Capabilities

Core Competencies & Competitive Advantage

Key Performance Indicators and Metrics

impact on consumer health while maintaining a

Financial Competitive Advantages

A. Gorsky $1,650,000 $3,750,000 $16,900,000 $22,300,000

J. Wolk $938,077 $1,540,000 $6,140,000 $8,618,077

P. Stoffels $1,222,500 $1,990,000 $0 $3,212,500

J. Duato $1,030,000 $1,670,000 $7,730,000 $10,430,000

J. Taubert $938,077 $1,340,000 $6,200,000 $8,478,077

Strategic Actions and Responses

Raw Materials, Components, and Intermediate Goods

Final Assembly Manufacturing

Marketing and Sales and After-Sale Sales Service

MERGER AND ACQUISITION STRATEGIES

Notable Mergers and Acquisitions 2016-2022

that manufactures soft tissue earnings. In April of

(Johnson & Johnson 2019

2022 OrthoSpin J&J’s DePuy Synthes Privately-Held This acquisition was

Evaluating the Success of J&J’s Acquisition Strategy

M&A Strategy Moving Forward

Board Composition and Structure

director, Anne Mulcahy, who is not an officer of the company.

Mary C Berckle Ph.D. X C

Nadja Y. West M.D X X

Code of Ethical Conduct

Recent Voting Issues

ORGANIZATIONAL STRUCTURE AND CONTROLS

Board of Directors Committee Structure

STRATEGIC DECISION: RENEWABLE ENERGY

Khaustovich, V. (2022). Brand Name Pharmaceutical Manufacturing in the US (IBISWorld

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