The current stock price of the Company
J&J’s current stock price is $ 150.44.
The financial ratios of the Company and an industry Comparison of these ratios
| Name | Company | Industry |
| P/E Ratio | 23.47 | 41.71 |
| Price to Sales | 4.79 | 83.57 |
| Price to Cash Flow | 39.63 | 53.58 |
| Price to Free Cash Flow | 40.7 | 40.56 |
| Price to Book | 6.46 | 7.88 |
| Price to Tangible Book | – | 24.13 |
The SWOT analysis of the Company
Strengths
J&J has diverse healthcare segments. As the Company’s operation involves three segments, many products are produced. This enables it to care for people efficiently. Also, the Company’s philosophy of decentralized management ensures that there are little or no internal conflicts, thus improving the Company’s efficiency.
The brand portfolio of the Company is broad. The J&J produces each of their product in large quantities. This is because they have a wide variety of brands from which they can choose, making them be highly visible in the market.
It is a trusted brand. It is irrefutable that J&J is a brand that is trusted by all medical practitioners. The Company’s increased focus on local markets has made it to be able to meet the demands of the consumers.
Its supply chain is extensive. The distribution system of the Company is robust, thus making its products to be available to medical stores, supermarkets and retail traders.
The Company has advanced its technology through mergers and acquisitions. By merging with other Companies like Neutrogena, the J&J has improved its technology.
Weaknesses
Reliance on selling drugs that have small molecules has declined its sales. In 2008 and 2012, there was a decline in the sale of drugs that have small molecules by the Company, resulting in reduced profits.
Conflicts with its partners. The Company may engage in conflicts with its partners, leading to a reduction in its operations.
Involvement in litigations. In the year 2010, the J&J was sued due to various allegations, and as a result, the brands’ image was affected.
Opportunities
Addition of biologics. The addition of biologics, such as antibodies will enable the Company to grow further.
Increase in the rate of literacy. As a result of the global increase in the literacy levels, medical practitioners may require many medicinal products, thus benefitting the Company.
Threats
Stiff competition. J&J faces stiff competition from other companies which produce substitute products.
Government regulations. Regulations set by the government prevent importation and exportation of the products of the Company, thus preventing its success.
Harmful ingredients. The use of toxic elements in producing medicinal products by the Company in the past has affected the brands’ image.
Planning and budgeting concerns of the Company
The profit budget of the Company is revised thrice in a year. The March revision consists of an update by the subsidiary’s executive committee member who presents its most recent estimate of sales and profit for the current year to the HQ executive committee. This information is based on estimates provided by the subsidiary president. The June update then follows. Finally, the November revision provides another update which is presented to the HQ of the executive committee.
Salary and bonus system of the Company.
The Johnson & Johnson salary system is unique. The HQ executive committee decides bonus and salary for each subsidiary president and the other top managers of the Company. Still, the subsidiary president has complete discretion in wage and bonus matters for all other employees. However, as there is no predetermined formula that is tied to these decisions, they are deemed lack accuracy because there is a lot of diversity and unpredictability in the healthcare industry. Additionally, the Company has set strategies that will enable it to develop strong relationships with its customers. The plans include aiming to improve its supplier base to ensure a constant supply of products to its customers, tracking the new trends in the market then seek suppliers who understand the emerging trends and creating more employment opportunities to people from diverse continents
The prospects of the Company
On Wednesday, the 15th of May 2019, the consumer products giants- J&J, revealed its plans, which aimed at boosting its growth over the next five years. This included seeking regulatory approval for its line-extensions of treatments and extensions that were then under development. The extension’s number exceeded forty. On that day, the Company’s top officials sat with industry analysts to review on other issues as well, which include pipeline and pharmaceutical development’s progress. In the meeting, the Company said it was in the process of exploring some regulatory approvals for the drugs it was working on at that time.
Part of the meeting’s objective was to dig deep on what the Company had planned on the delivering of new medicines. So far, in the year 2019, J&J’ pharmaceutical Company, Janssen had gained regulatory approvals only for two treatments. This includes the treating of resistant depression in adults using the nasal spray called Spravato, and the treatment of a spread blood cancer which can’t be surgically removed by using a drug called Balversa. Alex Gorsky, the Company’s CEO, said that a further discussion was to be held, whose focus was to be on the additional medicines which will be probably launched in the year 2023. He also added that the pharmaceutical organization of the Company had created advanced medications that will address a few of the society’s most unmet medical needs. Therefore, based on the information that the Company gave out during the meeting’s progress, it’s clear that the pharmaceutical giants are set to prosper in the near future.
However, some researches have pessimistic views about the Company’s ability to have an outstanding presence in the pharmaceutical industry for the next ten years. According to Keith Speights’ article about the prediction of the Company’s future, the chances of the Company triumphing in the ten year period are minimal. He argues that if the legislation version proposed by Sen. Sanders gets to become a law, the Company will be impacted negatively in various ways. First, the laws will lead to a significant cutting of the pharmaceutical revenues of the Company. Secondly, the Company’s business of medical devices will be severely hurt as hospitals won’t have enough cash to spend. Thirdly, the market of Company’s current top-selling drug – Remicade, will decline.
Recommendations
For J&J to effectively perform its operations, I will recommend the following.
The Company should be able to pay its obligations safely and quickly as it has a current ratio of 2.5, rather than waiting for them to pile up.
The Company should use a considerable amount of money that it has access to for other acquisitions. This is because the Company’s acid test is 1.9, which can only be as a result of a vast amount of market securities.
As the Company has a working capital that is positive rather than negative as in other Companies in the healthcare continuum, it should ensure that its short term liabilities have been paid on time.
Since J&J’s inventory turnover is 2.8, which is slightly higher compared to its competitors, it should ensure that inventory control should be correctly carried out.
The Company should ensure that it has worked towards the message it conveyed to people during its most recent press conference which is “remaining profitable”. This will, in return, make it to have a stable growth as compared to its staunch competitors.
As the J&J is a true pharmaceutical giant, which has been in existence for quite a long time, it should be able to pay interests on its outstanding debts rather than behaving like a struggling company in the industry when it comes to payment of benefits.
Conclusions
As seen in the above analysis, it looks like Johnson & Johnson is outpacing the market each day by delivering quality services to all its global customers at any time. The mission of the organization, the size and the structure prove one thing which is the superiority of the organization in the healthcare continuum. When the Johnson brothers started the Company many years ago, it was to serve as a small family business. Now, the Company has extended its roots to many continents and has impacted the lives of hundreds of millions of people. However, this advancement and success can be attributed to three core things which include its Credo, its strategic framework, and its strategic principles.
The project’s learnings
Through this analysis, I have learnt various lessons. The first lesson learnt is that effective planning is vital. Through effective planning, Johnson & Johnson has managed to reach its standards. Another lesson learnt is that it is essential for a company to have faith in its products and bring those products to the market in an aggressive manner. The last lesson learnt is that a brand image can propel a Company to higher levels just as it has done to the J&J.