1. What corporate strategy does Johnson & Johnson pursue?
2. What implications does Johnson & Johnson’s corporate strategy have for its organizational design?
3. What is the role of strategic leadership in a company like Johnson & Johnson?
4. Why is synergy important for Johnson & Johnson?

Johnson & Johnson had relied heavily on acquisitions to enter and expand into a wide range of health care related businesses. As it grew, J&J developed into a complex enterprise made up of over 250 different businesses, spread over 60 countries, organized into three different divisions: consumer products, pharmaceuticals, and medical devices. J&J’s success across its three divisions and many different businesses hinged on its unique structure and culture. Most of its business units were acquired because of the potential demonstrated by promising new products in their pipelines. Each of these units was therefore granted nearly total autonomy to develop and expand on their best-selling products. That independence fostered an entrepreneurial attitude that had kept J&J competitive. The relative autonomy that was accorded to the business units had also provided the firm with the ability to respond swiftly to emerging opportunities. In addition, these businesses had been allowed to develop their own resources, including their own finance and human resource departments. Although this degree of decentralization entailed relatively high overhead costs, the benefits were considered worthwhile.

However, multiple product recalls in 2009 and 2010, primarily from the McNeil Consumer Healthcare division, had forced William C. Weldon, the firm’s chief executive, to create a more centralized form of quality control: a single framework for all divisions, with accountability directly to him. This had been a difficult decision to make, but Weldon had already been thinking about taking steps to be more actively involved with J&J’s far-flung business units.

Weldon was aware that it was getting much harder for J&J to make the same kinds of acquisitions as it had in the past. The firm would have to search for other avenues for growth. Weldon believed that the best opportunities might come from increased collaboration between its different units – that the firm had the ability to develop new products by pooling resources, combining its strengths across pharmaceutical products, medical devices and diagnostics, and consumer products, thereby developing synergy through convergence. However, any push for greater collaboration or more centralized processes threatened to undermine the strong entrepreneurial spirit that the firm had encouraged in the past.

After a swarm of product recalls, manufacturing lapses, and government inquiries that tarnished the name of one of the nation’s most trusted brands, Weldon stepped down as CEO in April 2012. Would new CEO Alex Gorsky be able to change the corporate culture and address the growing list of problems? After all, while he was head of the medical devices division, Gorsky was reluctant to publicize the defects in the DePuy artificial hip product, phasing out its production rather than doing a recall. Gorsky’s personal reputation became tarnished during the 2013 trial when lawyers suggested the decision to conceal information about the hip product was made out of concern for profits rather than consumer safety. Going forward, Gorsky needed to try to maintain a balance at J&J between the controls necessary to protect the firm’s reputation and the freedom that would allow its business units to keep growing. He needed to rethink the process by which the company managed its diversified portfolio of companies in order to ensure that it could keep growing without creating issues that could pose further threats to its reputation. Would J&J be able to find avenues for growth and a more effective way of running its multiple businesses?