Evaluation of Johnson and Johnson's External Environment

Abstract

One of the biggest healthcare companies is Johnson and Johnson. The company’s products can be located almost everywhere: grocery stores, retailers, and even convenience stores. Additionally, other than selling consumer products, Johnson and Johnson specializes in pharmaceuticals and medical devices/diagnostics. Although the company is popular, there is still a chance that rivals can out compete them. To help keep track of potential loss, the company must observe their strengths and weaknesses..

Relevant components and Macro-environment

As mentioned previously, Johnson and Johnson must identify their strengths and weaknesses to avoid loss of sales. For starters, the company’s external environment consists of the surrounding industry, competition, and the macro-environment; which is relevant factors that determine how a company operates. The PESTEL analysis is a tool that is used to help identify the relevant factors. The term PESTEL is an acronym. The first letter “P” stands for Political factors.

Political Factors

Johnson and Johnson is a international known company. Their biggest sales is pharmaceuticals. Drugs are a major factor in the majority of the countries the company operates in, such as the United States. Not all countries have the same political system and government. And not all countries abide by the same laws. What may be legal in France may not be legal in Japan. It is extremely important that the company pays close attention to law changes, tariffs/ trade regulations, and the stability of the government. Even the company itself acknowledged that it works closely with the government to ensure that customers have access to healthcare.

On the company website it states: “ As a global company, Johnson & Johnson works with patient groups, providers, governments, and other stakeholders worldwide to ensure patients have access to affordable, safe, quality health care. We work with health systems, so they may recognize and value medical innovation, and we support others who share our goals. We are committed to working with stakeholders, so they have a better understanding of the positions we take, why we take them and how we work to advance them.”

At the worst case scenario, an unstable government can cause war which can lead to a major loss of sales. Military interference can also be a major factor. Changes in pricing and taxes can also effect the company. Consumers will not purchase something that can be purchased else where for a cheaper price. Another factor is the cost of living. Companies need employees to help the business run smoothly and to ensure that products are being created. A slight decrease in wages and or work hours may equal to shortage of employees. Other than government factors, legal factors play a major role too. The smallest error in logo placement or ending a partnership can also effect the company.

Economic Conditions

Johnson and Johnson must evaluate if the country’s economy is strong enough to support their sales. The education level of a country plays a major role of the overall economy, it goes hand and hand with the government. If the level is low, there’s a high chance that the property level is high, and most consumers can not afford the basic necessities to survive. On the other hand, if the level is high, the situation will be the opposite. The level of skill and other informal training person retains effects educational level as well. How often the economy experiences recession is another major factor. A low unemployment rate is an indication that economy is providing enough jobs for consumers to earn pay. A high rate means that jobs are limited, consumers are losing jobs at a fast pace, and/or companies are downsizing. As mentioned before with government regulation, it is also important for the company to educate themselves on labor costs. Does it cost more to hire employees in Country A or Country B?

Sociocultural Forces

Some countries have social classes which makes an unfortunate, obvious divide between high and low class families. Not being educated on the culture and social aspect of a country can impact the company negatively. With Demographics, there are more products that are geared towards senior citizens (Baby Boomer generation) than Generation X due to the leave number of people born between 1946-1964. The large age group requires a huge demand for senior care,. such as medication to improve memory or vitamins to boost the immune system. Also, less invasive surgical techniques are being practiced to help seniors recover quicker.

Also, more people are becoming more aware of the LGBQT community and breaking gender roles in companies and on TV. Negative comments or not being educated can cause negative reviews and potential protests. Such large companies like Johnson and Johnson should continue to ensure that they are not inclusive. Their views on the community states: “We've been recognized as an industry leader by the Human Rights Campaign’s Corporate Equality Index for our policies, including transgender-inclusive health insurance coverage. These efforts help us retain and attract the best talent, and they're the right thing to do for our employees.”

Technological Factors

Staying up to date on technology greatly benefits a company. A new software can eliminate the need to double check for errors by hand or tracking a shipment faster. Also, Johnson and Johnson has researchers who constantly find new ways to improve the overall health of the world. In recent news this year, a female scientist Glenda Gray is conducting a study to find a way to prevent HIV. Finding a preventative measure can increase sales to improve those who have been affected or at risk. Additionally, another scientist is finding the cure for Hepatitis B, which can cause liver failure.

Environmental Forces

As the years progress on Earth, the climate is constantly changing. And climate change can effect the overall growth of a business. The major concern is the impact on the environment.

Forest fires of the Amazon and the melting of the glaciers are causing more organizational leaders to take a stand against the damage that’s been done to the planet. Fortunately, the company is taking steps to improve the environment. Projects to protect pandas in China, save hedgehogs in the UK, and even protecting bees have begun to start a positive change. Additionally, Johnson and Johnson was awarded the Energy Star Partner of the Year for 2019 and named on the CDP A list for taking major steps to save the climate. Besides the company taking action, they must continue to ensure that the countries they operate in has a feasible climate. Factors such as weather, recycling, regulations on air/water pollution, and waste management are deciding factors.

Legal and Regulatory Factors

Before entering a market, Johnson and Johnson should determine whether or not their product is protected from copy right issues and intellectual property rights. This is especially important considering the current lawsuit it’s facing over the use of talc being found in baby powder. Most of their legal terms is found on the company page.