Introduction
The increase in new entrants and competition among companies continues to be a major issue which has prompted companies to strategize and have a competitive advantage over their competitors. “A firm has a competitive advantage in the implementation of a strategy that its competitors are unable to copy or find it too costly to imitate” (Hitt, Ireland, and Robert 6). In fact, most of the multinational organizations get confident with their strategies if the strategies resulted in one or more useful competitive advantage and if the competitor’s effort to copy the strategy has ceased or failed. On the other hand, to maintain the strategies and succeed through them, organizations come up with the right strategic management process. In this case, for a firm to manage its strategy appropriately, it requires full set of commitment, realistic decisions, and actions that will make the company achieve competitiveness. Hitt, Ireland, and Robert suggest that with the right strategic ideas, global businesses has a chance to earn above-average returns because it is vivid that strategies give organization all the requirement it needs to influence its performance within the market (6).
However, before the identification of the strategies that a firm should use for competitiveness and earning average return, it is sensible for the company to consider the issue of customer segmentation and the way it is set in the market. In addition, other factors that multinational firms ought to consider before coming up with the operational strategies include the organizational corporate governance and SWOT factors as these are among the key elements that influence the operation of global firms. Therefore, for a detailed discussion, this paper focuses on analyzing both Johnson and Johnson (J & J) and Procter and Gambler (P & G) Companies with the aim of comparing the two companies based on the key factors that are considered before making the decision of implementing operational strategies. The paper will analyze the two global enterprises with the review of the customers that both companies serves, company’s structure, the company’s executive compensation, and SWOT analysis in both organizations. The reason why the analysis will be based on these factors is that this study intends at exploring the difference and similarity between two global firms regarding strategic management.
J & J Company
The J & J Company Customers and Segmentation
Apparently, for most of the multinational and local firms, the customers are the key players in the determination of the competitive advantage. Rajagopal outlines that for the companies in the global market to be successful in different ways, it is important for them to identify new ways or strategies that integrate their business models so that the companies can have the best practices within the market (151). With the review of the Johnson & Johnson Company, it is clear that the company serves a different type of customers globally. J & J Company has more than 250 businesses that are located in more than 60 countries worldwide (“J&J Company Structure” n.p.).
In fact, the company is recognized for its service to commercial customers and intermediary partners who are based in America. The intermediary partners include hospitals, health planners, medical facilities distributors, medical equipment wholesalers, and the United States government, where J&J Company products are distributed to the public hospitals by the government (“J&J Company Structure” n.p.). As J & J Company aims at enhancing customer experience through strategic management of the customer data the company is organized into different business segments that are made of the franchises and therapeutic categories.
J&J Customer Segmentation
The company has a number of customers segments, in which it aims at satisfying the different groups of customers in the U.S and across the globe. The first category of the J & J Company customer division is the consumer healthcare segment. The segment includes an abroad range of medical products that are used for baby care services, skin care, wound care, prevention products, and over-the-counter pharmaceutical products that are set to provide various healthcare treatment services (“J&J Company Structure” n.p.). The company also has medical devices customer segment, where it focuses on the people with different diseases that need professional attentions. In this case, the company sees the sick people who need the medical attention as their primary customers, especially the people who are in need of the vision care, diabetes care, infection treatment, and clients who require aesthetic care (“J&J Company Structure” n.p.).
In this segment, “J&J Company Structure” reveals that the division is comprised of the company’s medical solutions and global surgery group, for the professionals to provide care services to different people within the segment. Lastly, for customer satisfaction J & J Company has Pharmaceuticals segment, it uses its resources and medical goal to collaborate with all customers across the globe. The staff at J & J Company who are set to offer pharmaceutical services are dedicated to addressing the unmet needs of the customers who are diagnosed with several diseases. In this division, the groups of customers who are served by the company include people with the infection illnesses such as HIV/AIDS and tuberculosis. With the identification of this group with unmet healthcare need, J & J Company has developed sustainable strategies that are integrated with the healthcare services through partnership and transparency.
Form of Corporate Governance at J&J Company
Corporate governance regards to the structure and processes for the organizational control and control of the activities that are carried out within an organization (Sarbah and Wen 40). The corporate governance in organization stand for the relationship among minority shareholders, controlling shareholders, board of directors, the management, and any other shareholders who are affected by the business operations (Sarbah and Wen 40). Importantly, research indicates that good corporate governance plays a great role in enhancing the performance of the company, ensuring sustainable economic development, and determines the growth of the companies in the competitive market (Sarbah and Wen 40). With this understanding, it is important for the organizations to consider the aspect of corporate governance before the implementation of strategic plans because a good corporate governance enhances the management of the strategies in the best way possible.
J & J Company operates with functional form of structure, where the company has a corporate form of governance connecting different management personnel with its operational strategies (“Corporate Governance Materials” n.p.). The reason that makes J & J Company use this form of structure is that the functional structure is an important form of business operation, especially for companies that trade in the global market and want to enhance its success through multinational strategies. With J & J Company recognized as an organization that has complex operational strategies, J & J Company employs functional organizational structure to make sure that there are control and coordination of different functions and activities at all level of management. Within the company’s corporate governance, the boards of directors are the top management team, with Mr. Gorsky being the Chairman of the Board Committee (“Corporate Governance Materials” n.p.).
The board of directors at J & J Company oversees several business activities relating to the company, in which the directors’ carry out the responsibilities of sales, marketing, and managing some of the crucial business activities. The president of the company appoints the chairperson of the board of directors at J & J Company (“Corporate Governance Materials” n.p.). For competitive advantage and to succeed in the multinational businesses, J & J Company has a board of directors that has a better understanding of the global issues facing global companies in the healthcare industry and a board that has in-depth knowledge concerning the company’s business, history, and culture of the company.
Executive Compensation at J & J Company
In a firm, executive compensation is a broad concept that incorporates different areas of an organization. From the business management perspective, executive compensation is the package that the executive in the business receives and any other issue that relates to the payment of the executive members of the organizations (Sirkin, and Lawrence 6). In a more detailed manner, executive compensations are part of the employment agreement, in which the executives and the businesses agree on significant arrangements concerning the processing of payment arrangements.
At J & J Company, the compensation of the company CEO is raised according to the board conclusion, with the executive compensation at J & J being one of the financial goal for the enterprise (“Corporate Governance Materials” n.p.). In the year 2015, the Company agreed to increase the total compensation of the chairperson Alex Gorsky by 48 percent, as an award for the good work he is doing for the company. As one of the world leading company in the medical industry, the compensation increase is a decision that is passed by the board of directors, with the executives in the organizations being rewarded with compensation bonuses, as a way of motivating them, and aiming at retaining the best group of employees (“Corporate Governance Materials” n.p.). In fact, the board is set to review the salary of the company CEO, whereby the board will either make a decision to increase the CEO’s salary or continue working with the current payment program.
J & J Company SWOT Analysis
SWOT analysis is an acronym for strength, weaknesses, opportunities, and threats. Kurtz and Louis state that by systematically evaluating all four factors that make up the SWOT analysis concept, a firm can then come with ideas to develop the best strategies that will enhance competitive advantage and profitability (288). For a company to assess its competitive position within the market, this can be done through SWOT analysis, where the company will evaluate its strength, weaknesses, opportunities, and threat (Kurtz and Louis 228). For a SWOT analysis to show the company its intended objectives, the managers need to review the strength and weaknesses each function, such as finance, marketing, information technology, and human resource (228). On the other hand, to evaluate the firm opportunities and threats, the organizational leaders may review opportunities such as the ideas that will make the company grow, the opportunities to get different skills and experience from the workforce (229). The threats that the companies are likely to face include economic recession, change in government regulations and rules concerning the business activities.
Kurtz and Boone note that J & J Company carries different forms of evaluations that are set to cater for the Company’s SWOT analysis (228). In this essence, for the company to have the strengths that will ensure that it come up with effective strategies, J & J Company intends at coming up with financial support from the consumers buying its products. Here, the company aims at selling more products to the consumers, whereby the sales make the company sustainable financially. J & J Company also performs a SWOT analysis through its marketing programs, with the goal of creating product awareness to its customers. For instance, the company used the marketing strategy to place Tylenol Extra Capsules in the market as it was trying to introduce new products in the market (Dominguez 245). The company also financial resources from the R&D department, in which the department emphasizes on employing innovative employees at J & J Company (“Corporate Governance Materials” n.p.).
Some of the weaknesses that are influencing J & J Company performance include the issue of global business standardization, whereby cost control measures are set for multinational organizations. The increased market share that J & J Company is enjoying in the current state is an opportunity for the company to further its operations globally. Finally, the issue of competitors and leadership is a threat to the company. For instance, J & J Company has in one time find itself in a crisis that was caused by lack of leadership awareness, where the leaders did not know the impact of Tylenol Extra Capsules that lead to the death of the customers who consumed the product (Dominguez 245).
Analysis of Procter & Gambler (P&G)
P&G Customers and Segmentation
According to Bose, segmentation at Procter Gambler (P&G) assists the company to identify approaches for target customers, which is helpful the company as it allows P&G to keep its customers and capture new markets (115). Market segmentation is not only important for multinational organizations, but also an element that enables organizations to prioritize on the different segments, which gives the organizations an opportunity to focus more on the most profitable market segments (Bose 116).
P&G Company is organized into three global business unit, in which each category of business unit is divided into two segments (Logan, Repp and Venkatraman, 2). In the first category of the P&G Business unit, the two segments are Beauty and Grooming. In this segment, the company has various brands that are set for local and international market. In the beauty segment, P&G customers are based on their gender, age, and preferences. Logan, Repp and Venkatraman point out that most of the beauty products that the company supplies in the market include: cosmetics, deodorants, hair care product, skin care products, and personal cleansing products (2). Health and well-being also forms a crucial business unit at P&G Company. In this unit, the two primary segments are health care and snacks and pet care division. Most of the customers at these two segment include female and children customers, as they are the key customers buying the personal care and snacks products (Logan, Repp and Venkatraman 2).
Lastly, household care is another form of business unit at P&G Company, in which the company has fabric. In this case, the segments are home care product, baby, and family care products (Logan, Repp and Venkatraman 2). The customers that the company target in this unit includes people with family needs care needs, young children, and women who are taking care of the young kids. Recently, P&G Company has divested its business segments so that it focuses on the core business segments and continues to maintain a strong portfolio of brands (2).
Form of Corporate Governance at Procter & Gambler (P&G)
At the P&G Company, the board has clear objectives and responsibilities. As such, at P&G, the board represents and acts on behalf of all shareholders of the company. Some of the responsibilities that the boards at P&G Company boards carry out include; acting as a whole or through its committee, establishing, and helping the company to achieve its goals and objectives (P&G Corporate Governance n.p.). Another important task that the board at P&G conducts is approving and monitoring essential corporate and financial strategies of the company, with the goal of making the company operates efficiently.
The board of directors at P&G Company carries out the leadership tasks, as the members of the board represent the company leaders who are assigned to different business activities. The board of director at P&G consists of people who are professionals in the departments of business, administration, law, nursing, and education (P&G Corporate Governance n.p.). Therefore, the top management team at P&G includes the chair of the Board and Chief Executive Officer (CEO). The Chairperson of the board at P&G is appointed by the board members, in which he or she takes the responsibility of reviewing the company’s internal control, business management, and managing other company’s principal officers (P&G Corporate Governance n.p.). The type of board of directors at P&G Company is unique in terms of size, composition, and qualifications. As such, the board has about ten to fifteen board members. The composition of the board makes the company functions effectively, in which if the chairperson of the board is liberated. The board at P&G will involve at least a majority of independent members (P&G Corporate Governance Guidelines n.p.). For the employees’ board members to be qualified for the task of the board, the employees ought to have a senior management responsibility for any operating function within the organization.
Executive Compensation at P&G Company
Sirkin and Lawrence acknowledge that executive compensation executive comprises of several aspects of business operations (7). Although executive compensation is something that is practically reviewed by the board of directors, the concept is usable and essential to the management of organizations (7). In most of the multinational organizations, the board of directors passes executive compensation rules with the assistance from either internal or external consultants, human resources, or finance department (7).
Correspondingly, at P&G Company, executive compensation is something that is valued and taken seriously by the board (Corporate Governance Guidelines n.p.). The Compensation and Leadership Development Committee carry out the task of executive compensation at the P&G Company. The committee conducts an annual review of the compensation of the board members in order to make recommendations to the full board regarding the payment programs at the organization (Corporate Governance Guidelines). In addition, the company has a compensation philosophy, whereby it considers some goals before making the decision about the compensation of the company’s CEO. According to the compensation philosophy at P&G Company, the committee should compensate the executive members in relation to the work that each person is doing in terms of overseeing the management of the company operations (Corporate Governance Guidelines n.p.). The committee has also set the compensation programs that are competitive with other companies and according to the interest of the members.
P&G Company SWOT Analysis
To understand the aspect of internal and external environment and the way they influence the performance of P&G Company, in this section of this paper, the company’s strengths, weaknesses, opportunities, and threats are reviewed. As one of the global leading organization, it is apparent that P&G Company uses various aspects to review its strengths and weaknesses. The marketing strategies that P&G Company is incorporating to its operation are key strengths, as the marketing team at the company does not only focus on placing the brands on the market but also making sure that there is product promotion. Cervantes, et al. posit that brand management at P&G Company encompasses four functions: brand management (marketing), consumer and market knowledge (market research), communication, and product design (44).
Along with other aspects of brand management at the P&G Company, it is clear that the much attention given to marketing is a strength that P&G is using to outdo its competitors. Through the marketing strategies that P&G Company is utilizing, the company gets the chance to unify brand-building resources and focus on delivering better brands that are competitive (Cervantes, et al. 44). The aspect of human resources in the company is another factor that is viewed a strength for P&G Company. As such, the HR at the company guides the recruits to follow the company’s Worldwide Business Conduct Manual, which makes the employees work in an efficient manner (Cervantes et al. 28). The company also employs individuals who have already established employment with P&G Company because the employees who have already shared a connection with the company are likely to stay and become the best candidates for the enterprise (Cervantes et al. 49). Information technology also makes at P&G Company to be one of the best globally and be competitive at all levels. The company uses a competent global information system to maintain organizations and success. In fact, at P&G Company has an IT operation system such as SAP applications, where they integrate with ERP to run the global business management activities (Cervantes et al. 50).
The decline of the company sales is a weakness, which has an impact on the company’s financial capability. Cervantes et al. argue that in the 2015 financial report, P&G Company sales decreased due to the aspect of foreign exchange (46). The weakening of the developing market economies that had an adverse impact on the foreign exchange brought the financial weakness at P&G Company (46). The emerging markets are opportunities for P&G Company, as this will give the company a chance to make excessive sales and more profits. P&G Company has operated in about 80 countries, but their product has ventured to global markets, where the company is now selling its brand to more than 180 countries globally. Finally, the issue of competition has become a critical threat to P&G Company. The many competitors in the global market are a major threat, as the company is likely to lose its customers to other businesses (55). Some of the competitors for P&G Company include enterprises such as Unilever, as the two companies are eying the same market.
Conclusion
From the analysis of the two companies in terms of the customers of the company and segmentation, corporate governance, executive compensation, and review of the SWOT factors, it is apparent that one can see the difference and similarities between the two companies. The two companies have diverse customers that are targeted according to different segmentation. As such, both P&G Company and J & J Company are set to serve their customers based on their preference, taste, age, gender, and personality. However, the analysis reveals that P&G Company has identified a well-established customer segmentation with the company focusing on serving as many customers as possible. In the case of executive compensation, both P&G Company and J & J Company have programs that are set to value the significance of executive compensation with the task based on the perspective of the board of directors. The corporate governance at both companies has a chairperson who is appointed by the board of directors, with the obligation of serving each company to the interest of the stakeholders and customers. Finally, from the case of SWOT analysis, it is clear that both companies understand how the strengths, weaknesses, opportunities, and threat can influence the performance of their businesses. SWOT analysis for the two companies is based on the human resources management, financial, employees, marketing, and information system factors.
Works Cited
Bose, Tarun Kanti. “Market Segmentation and Customer Focus Strategies and Their Contribution Towards Effective Value Chain Management.” International Journal of Marketing Studies 4.3 (2012): 113-121
Cervantes Monica, Crimson Kayla, Figueroa Carina, Hess Alexander, and Martinez Emmanuel. “Procter & Gamble Company’s 2015 Strategic Audit.” Dissertation. College of Business Admin, Sacramento State. 2015.
Corporate Governance Guidelines. “The Procter & Gamble Company Board of Directors.” N.p., 2016. Web.
Corporate Governance Materials. “Johnson & Johnson.” N.p., 2016. Web.
Dominguez, Orlando J. Ems Supervisor: Principles and Practice. Burlington. Jones & Bartlett Learning, 2016. Print.
Hitt, Michael A, R D. Ireland, and Robert E. Hoskisson. Strategic Management Competitiveness and Globalization Concepts. (11th ed). Minneapolis/St. Paul, Minnesota: West Publishing Company. 2015. Print.
J&J Company Structure. “Johnson & Johnson.” N.p., 2016. Web
Kurtz, David L, and Louis E. Boone. “Contemporary Business.” Hoboken, N.J: Wiley, 2011. Print.
Logan Janel, Repp Amanda and Venkatraman Padma “Procter & Gamble NYSE: PG.” Dissertation, Washburn School of Business. Topeka, Kansas, United States.
P&G Corporate Governance. “Board Composition”. N.p., 2016. Web.
Rajagopal. “The Butterfly Effect in Competitive Markets: Driving Small Changes for Large Differences.” 2015.
Sarbah, Alfred and Wen Xiao. “Good Corporate Governance Structures: A Must for Family Businesses.” Open Journal of Business and Management 3.1 (2015): 40-57
Sirkin, Michael S, and Lawrence K. Cagney. “Executive Compensation.” New York, N.Y. (345 Park Ave., South, New York 10010: Law Journal Seminars-Press, 1996. Continually Updated Resource.