Johnson and Johnson - Diversification Strategy Recommendations

TO: All Johnson & Johnson Board Members

FROM: Jamila Washington, Diversification Analysis

DATE: December 23, 2011

SUBJECT: Diversification Strategy Recommendations

This memo was put into place to recognize the components of Johnson & Johnson Incorporated's diversification strategy and recommend possible suggestions for improvement. This will be applied to their daily routine and assist in the functioning and growth of the establishment and assist with its long and short term goals.

Johnson and Johnson's Diversification Strategy

Your organization is an American international pharmaceutical, medical device, and customer packaged merchandise manufacturer that was established in 1886 (Johnson & Johnson, 2011). The pledge to diversity and inclusion is intensely grounded in your values that is instilled by your Principles and is epitomized in a number of your organization's programs and activities. It is evident that your business recognizes that differences in age, race, gender, nationality, sexual orientation, physical ability, thinking style and background bring prosperity and fortune to our work environments (Johnson & Johnson, 2011). Such diversity helps your employees relate better with the health requirements of people in communities globally. Johnson & Johnson's current diversification strategy is to diversify within a single industry. this strategy aids in explaining how your company has developed from a maker of surgical dressings, previously when it was founded in 1886, to a extensive based health care business with three organizational groups; each big enough to be an industry leader on its own (Johnson & Johnson, 2011). The common justification for a diversified approach is it reduces risk; while one industry gets afflicted, another may rise. This logic has worked out for your business, where the percentage of revenue supplied by each business fluctuates from year to year. Another justification has to do with union of technology across businesses. The most primitive example of this kind of modernization was the drug-eluting stent, which resulted in an innovation for cardiovascular disease. This modernization was an outcome from a meeting in the 1990's between engineers from the devices group and scientists from the pharmacy group (Johnson & Johnson, 2011).

Expanding Beyond a Single Industry

Firms are normally recommended to diversify beyond a single industry due to the outcome and the consequences that is attached to it which is (Xiao & Greenwood, 2004) :

 Can be potentially perilous if the organization matures and goes into fall off

 May cause businesses to miss the chance