Businessmodel of Johnson & Johnson

Customer Segments

Johnson and Johnson sells its products to a range of customers across the consumer, healthcare and pharmaceutical markets. The Company’s three distinct operating segments have slightly different target markets:

• The Company’s Consumer segment markets its products to the general public and sells both to retail outlets, online retail chains, and distributors across the world;
• The Company’s Pharmaceutical segment sells its prescription medications directly to retailers, wholesalers, hospitals and health care professionals; and
• The Company’s Medical Devices segment sells its products to wholesalers, hospitals and retailers, physicians, eye care professionals, and specialist care clinics, including in the fields of orthopaedics, general surgery, cardiovascular disease, and diabetes care. Johnson and Johnson serves a global customers base. Its largest single market, however, is the US, which accounts for a little more than half of the Company’s total sales. Europe, and Asia Pacific and Africa are also significant markets for Johnson and Johnson products.

Value Propositions

Johnson and Johnson provides value to its customers in the following ways:

• Its brand reputation and industry standing, being one of the largest and most well-known companies of its kind in the world, associated with a range of high-profile and quality brands;
• The breadth of its global sales and marketing reach, with the Company operating through more than 250 companies across 60 countries, and collaborating with a network of distributors and retailers to extend its presence worldwide;
• Its commitment to innovation and development, with the Company committing substantial funds to research and development activities, with a view to providing its customers with up-to-date products and solutions; and
• The affordability of its products, which are accessible to consumers across all class and status brackets. ### Channels

Johnson and Johnson operates a website at www.jnj.com, through which it provides information to customers and investors on its various products, services and activities. While the Company does not operate its own online sales channel, its products are available through a range of online retailers and merchants. Its products are also available to consumers through physical retail outlets, drugstore chains, and pharmacies.

Johnson and Johnson makes the majority of its sales through its own in-house direct sales force, organised both by geographic region and by business segment. The Company operates offices across the Americas, Europe, Asia Pacific and Africa, through which it is able to deal directly with local customers.

Johnson and Johnson’s own direct sales teams are supported by a network of channel partners, including independent sales agents, distributors and resellers, particularly in jurisdictions where the Company itself does not maintain a significant presence.

Additionally, Johnson and Johnson offers a range of free health and wellbeing mobile applications, through which it can reinforce its brand identity among consumers.

Customer Relationships

While Johnson and Johnson does maintain an online presence, the Company does not sell products directly to customers on a self-service basis. Its products can, however, be purchased by consumers on a self-service basis through various online and physical retail chains.

When dealing with institutional and commercial customers, Johnson and Johnson aims to establish long-standing relationships. The Company’s direct sales teams consult directly with customers, establishing the individual circumstances and requirements of each customers, with a view to securing recurring business.

Johnson and Johnson provides technical support and assistance to its customers, who are able to access personalised assistance from the Company’s staff via email, over the phone, or through an online contact form.

Key Activities

Johnson and Johnson is a holding company. Through its numerous subsidiary companies it is engaged in the research and development, manufacture, marketing and sale of a range of products in the healthcare and wellbeing field.

The Company operates through three business segments: Consumer, which relates to the development and marketing of baby care, oral care, skin care, over-the-counter pharmaceutical, women’s health and wound care products; Pharmaceutical, which relates to the development and marketing of prescription medications and treatments, spanning a range of medical fields; and Medical Devices, which relates to the development and marketing of specialist medical products, targeted at the oncology, neuroscience, and cardiovascular fields, among others.

Johnson and Johnson operates research facilities across the US, Belgium, Brazil, Canada, China, France, Germany, India, Israel, Japan, the Netherlands, Singapore, Switzerland and the UK.

Key Partners

Johnson and Johnson collaborates with a broad network of partner companies panning multiple business sectors and jurisdictions. The Company’s partners include:

• Research and Development Partners, comprising academic institutions, medical research facilities and pharmaceutical operators that assist the Company in the development of new products and technologies;
• Supplier Partners, comprising a range of resource, service and consumables suppliers, that support the Company’s manufacturing and distribution operations;
• Commercialisation Partners, with the Company assisting third-party companies in the commercialisation of their products;
• Channel Partners, comprising reseller, distributors, and independent sales agents that extend the Company’s own sales and marketing reach; and
• Strategic and Alliance Partners, with which the Company shares resources and technology and embarks upon joint-venture projects. Johnson and Johnson has recently launched a partnership with Google to develop high-tech surgery solutions, with Geron to develop blood cancer treatments, and with Gigaom to develop medical uses for 3D printing technology.

Key Resources

Johnson and Johnson’s key resources are its technology and intellectual properties, its research and development facilities, its supply chain and manufacturing facilities, its logistics and distribution channels, its partnerships, and its personnel.

Johnson and Johnson and its subsidiaries own a number of patents, both on their products and manufacturing processes. Searches of records published by the US Patent and Trademark Office identified a number of patent applications filed in Johnson and Johnson’s name, including applications entitled ‘Comfortable ophthalmic device and methods of its production’, ‘Contact lenses with improved oxygen transmission’ and ‘Absorbent article with a printed design’. Patents related to the production of REMICADE, the Company’s largest product, are particularly important, the drug accounting for 9.4% of the Company’s 2015 revenue.

Cost Structure

Johnson and Johnson incurs costs in relation to the development of its products, the management of its supply chain, the operation of its manufacturing facilities, the sale and marketing of its products – including consumer-focused advertising campaigns, and the retention of its personnel.

Johnson and Johnson’s worldwide research and development costs amounted to $9.0 billion in 2015, while its worldwide advertising activities – including television, radio, print media and internet marketing – accrued $2.5 billion in costs for the year.

Johnson and Johnson also accrues substantial costs in relation to the payment of salaries and benefits to its more than 127,000 employees and the payment of rental and utility fees across its international network of offices.

Revenue Streams

Johnson and Johnson derives revenue from the manufacture and sale of various healthcare and wellbeing products across the general consumer and medical markets. This includes the sale of consumer products, the sale of prescription medicines and medications, and the sale of medical devices.

In 2015 Johnson and Johnson generated total sales revenue of $70.07 billion, down slightly on the $74.33 billion recorded in 2014. The Company’s Pharmaceutical segment is its largest revenue generator, registered $31.4 billion in sales in 2015. Johnson and Johnson’s Consumer and Medical Devices segments recorded annual sales of $13.5 billion and $25.1 billion respectively.