Johnson and Johnson 2012 Annual Report Download - page 10

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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 127,600 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 and
Diagnostics. The Consumer segment includes a broad range of products used in the baby care, skin care, oral care,
wound care and women’s health fields, as well as nutritional and over-the-counter pharmaceutical products and wellness
and prevention platforms. These products are marketed to the general public and sold both to retail outlets and
distributors throughout the world. The Pharmaceutical segment includes products in the following areas: anti-infective,
antipsychotic, contraceptive, gastrointestinal, hematology, immunology, infectious diseases, neurology, oncology, pain
management, thrombosis and vaccines. These products are distributed directly to retailers, wholesalers and health care
professionals for prescription use. The Medical Devices and Diagnostics segment includes a broad range of products
distributed to wholesalers, hospitals and retailers, used principally in the professional fields by physicians, nurses, hospitals
and clinics. These include products to treat cardiovascular disease; orthopaedic and neurological products; blood glucose
monitoring and insulin delivery products; general surgery, biosurgical and energy products; professional diagnostic
products; infection prevention products; and disposable contact lenses.
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 and Diagnostics 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 and in maintaining sales forces. 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 aimed at achieving sustainable growth. To accomplish this, the
Company’s management operates the business consistent with certain strategic principles that have proven successful
over time. To this end, the Company participates in growth areas in human health care and is committed to attaining
leadership positions in these growth areas through the development of high quality, innovative products and services. New
products introduced within the past five years accounted for approximately 25% of 2012 sales. In 2012, $7.7 billion, or
11.4% of sales, was invested in research and development. This investment reflects management’s commitment to the
importance of ongoing development of new and differentiated products and services to sustain long-term growth.
With more than 275 operating companies located in 60 countries, the Company views its principle of decentralized
management as an asset and fundamental to the success of a broadly based business. It also fosters an entrepreneurial
spirit, combining the extensive resources of a large organization with the ability to anticipate and react quickly to local
market changes and challenges.
2•Johnson & Johnson 2012 Annual Report