Distribution Strategy of Johnson and Johnson -
March 27th, 2011
Johnson & Johnson is a global American pharmaceutical, medical devices and consumer packaged goods manufacturer founded in 1886. Its common stock is a component of the Dow Jones Industrial Average and the company is listed among the Fortune 500.
Johnson & Johnson consistently ranks at the top of Harris Interactive's National Corporate Reputation Survey, ranking as the world's most respected company by Barron's Magazine, and was the first corporation awarded the Benjamin Franklin Award for Public Diplomacy by the U.S. State Department for its funding of international education programs. A suit brought by the United States Department of Justice in 2010, however, alleges that the company from 1999 to 2004 illegally marketed drugs to Omnicare, a pharmacy that dispenses the drugs in nursing homes. Johnson & Johnson has responded that the payments were lawful and appropriate.
The corporation's headquarters is located in New Brunswick, New Jersey, United States. Its consumer division is located in Skillman, New Jersey. The corporation includes some 250 subsidiary companies with operations in over 57 countries. Its products are sold in over 175 countries. Johnson & Johnson had worldwide pharmaceutical sales of $24.6 billion for the full-year 2008.
Johnson & Johnson's brands include numerous household names of medications and first aid supplies. Among its well-known consumer products are the Band-Aid Brand line of bandages, Tylenol medications, Johnson's baby products, Neutrogena skin and beauty products, Clean & Clear facial wash and Acuvue contact lenses.
This measure of the market relates to the different distribution channels to market for each product. The distribution can include the following channels
Consumer Goods example:
Johnson & Johnson's new fundraiser strategy just doesn't seem appropriate to me. Earlier this week J&J announced it will launch a newpromotion this month enabling fundraising groups to sell J&J's over-the-counter medicines and products in exchange for an 8% donation to the community group sponsoring the fundraiser.
J&J is positioning this new distribution channel as a great alternative to door-to-door sales of cookies, wrapping paper or candy.
Johnson & Johnson(JNJ) is requiring all of its medical products distributors to agree to not source any JNJ products from any entity other than JNJ. It appears that the aim of this mandate is to reduce the risk of counterfeit medical products reaching end customers by forcing distributors to agree not to participate in the secondary market and to purchase only from JNJ. If a distributor involved in the sale of JNJ products fails to agree with the terms, the company's status as an authorized distributor of JNJ products will be revoked and shipments of the company's products will cease effective March 5, 2004.
While over 100 distributors have signed the agreement none of the publicly traded medical distributors (as of January 9th) are on JNJ's list of those who have agreed with the company's terms and signed its agreement. This includes Cardinal Health (Allegiance division), Henry Schein (via its Medical segment), McKesson (Medical products division), Owens & Minor, and PSS World Medical.
This decision by the company is important because of the clear mandate made in its trading partners. Goldman Sachs believes that JNJ products may account for as much as 14% of the hospital distribution market. Owens & Minor indicates that JNJ products represent approximately 16% of total company sales. The impact is likely to be somewhat less in Cardinal's Allegiance division and McKesson's medical products. However, that JNJ remains an extremely important supplier for any medical products distributor is an axiom. It is probable that distributor managements are under significant pressure to come to agreement with company demands and to remain as authorized distributors.