Johnson and Johnson 2014 Annual Report Download - page 12

Management’s Discussion and Analysis of
Results of Operations and Financial Condition
Organization and Business Segments
Description of the Company and Business Segments
Johnson & Johnson and its subsidiaries (the Company) have approximately 126,500 employees worldwide engaged in the
research and development, manufacture and sale of a broad range of products in the health care field. The Company
conducts business in virtually all countries of the world with the primary focus on products related to human health and
well-being.
The Company is organized into three business segments: Consumer, Pharmaceutical and Medical Devices (previously
referred to as Medical Devices and Diagnostics). The Consumer segment includes a broad range of products used in the
baby care, oral care, skin care, over-the-counter pharmaceutical, women’s health and wound care markets. These
products are marketed to the general public and sold both to retail outlets and distributors throughout the world. The
Pharmaceutical segment is focused on five therapeutic areas, including immunology, infectious diseases, neuroscience,
oncology, and cardiovascular and metabolic diseases. Products in this segment are distributed directly to retailers,
wholesalers, hospitals and health care professionals for prescription use. The Medical Devices segment includes a broad
range of products used in the orthopaedic, surgical care, specialty surgery, cardiovascular care, diagnostics, diabetes
care, and vision care markets, which are distributed to wholesalers, hospitals and retailers, and used principally in the
professional fields by physicians, nurses, hospitals, and clinics.
The Company’s structure is based upon the principle of decentralized management. The Executive Committee of
Johnson & Johnson is the principal management group responsible for the strategic operations and allocation of the
resources of the Company. This Committee oversees and coordinates the activities of the Consumer, Pharmaceutical and
Medical Devices business segments.
In all of its product lines, the Company competes with companies both locally and globally, throughout the world.
Competition exists in all product lines without regard to the number and size of the competing companies involved.
Competition in research, involving the development and the improvement of new and existing products and processes, is
particularly significant. The development of new and innovative products is important to the Company’s success in all
areas of its business. This also includes protecting the Company’s portfolio of intellectual property. The competitive
environment requires substantial investments in continuing research. In addition, the development and maintenance of
customer demand for the Company’s consumer products involves significant expenditures for advertising and promotion.
Management’s Objectives
The Company manages within a strategic framework with Our Credo as the foundation. The Company believes that our
strategic operating principles: being broadly based in human health care, managing the business for the long term, a
decentralized management approach and commitment to our people and values are required to successfully meet the
demands of the rapidly evolving markets in which we compete. To this end, management is focused on our growth drivers:
creating value through innovation, expanding our global reach with a local focus, excellence in execution and leading with
purpose.
The Company engages in areas of human health care where there is an opportunity to make a meaningful difference, and
is committed to creating value by developing broadly accessible, high quality, innovative products and services. New
products introduced within the past five years accounted for approximately 25% of 2014 sales. In 2014, $8.5 billion, or
11.4% of sales, was invested in research and development, reflecting management’s commitment to delivering new and
differentiated products and services to meet evolving health care needs and sustain the Company’s long-term growth.
Our diverse businesses with more than 265 operating companies located in 60 countries are the key drivers of the
Company’s success. Maintaining the Company’s decentralized management approach, while at the same time leveraging
the extensive resources of the enterprise, uniquely positions the Company to innovate, execute and reach markets globally,
while focusing on the needs and challenges of the local markets.
2•Johnson & Johnson 2014 Annual Report