Company Portfolio
MEMORANDUM
Date: October 3, 2020
To: The Board of Directors
From: Management Consultant
Subject: Inability to Fully Utilize the Company’s Portfolio
In the past few years, Johnson & Johnson has been experiencing an increase in profits. For example, between 2015 and 2016, the company recorded an increase from $70,074 to $71,890. Additionally, J&J has improved on its dividends for the past 50 years, ranking the company among companies with an AAA credit rating. However, the company struggles to extract the most considerable value for its comprehensive portfolio. J&J has not been able to pursue opportunities to create a much closer contribution to the units they sell.
The purpose of this memo is to address the inability to obtain the most value out of J&J’s portfolio. The memo includes an overview of the problem, after which the underlying issue is analyzed. The memo then outlines possible solutions that will improve J&J’s ability to extract more from its vast portfolio. Lastly, it concludes with recommendations that the company’s management can employ to solve the problem at hand.
Issues/Problems
The major reason for the company’s inability to extract maximum benefits from its portfolio is derived from its acquisitions. The company’s growth has been obtained from its vast range of investments in recent years. The process has created a culture where the firms that have been absorbed retain their autonomy of operation. The main aim of this approach is to develop an entrepreneurial outcome. However, the consequences of the process are harmful as it has prevented the company from accessing opportunities across its subsidiaries. The company is not able to draft effective collaborations among these different sections to fully utilize its portfolio of businesses.
In the past, the growth of the company has been due to the acquisition of other firms. However, J&J has now ventured into a more challenging business. With nearly 250 subsidiaries, the company’s mode of operation is becoming more complex. All the subsidiaries are further broken into three sections. This continued expansion and autonomy dilute some aspects of management and the organizational culture, curtailing the company’s ability to spearhead growth and venture into more product lines.
Analysis of Issues/Problems
Autonomy plays a major role in a company’s growth and strengthens the entrepreneurial attitude. When a company has the independence to perform its operations, they are better placed to respond to the available opportunities. However, isolation brings about challenges into the growth process, necessitating the need for business partnerships. When divisions partner, they can share business operations (Sarala et al., 316). Also, they will improve their likelihood of survival in the future—the absence of collaboration results in a decrease in the diversification of operations.
Johnson & Johnson cannot take advantage of the existing portfolio due to a variation in its line of production. Collaborations with the subsidiaries limit the company’s capabilities to venture into more than a single product line. Their focus is mainly on the product of the subsidiary company. In the long run, the company loses its market share and cannot gain a competitive advantage. There is diversification without a plan. That makes the company unable to handle the diverse portfolio of activities and products.
Proposed Solutions
Specialization is the right solution for the company to consider. Specializing in a single product at a time means they will gain competence in the market. They need to ensure that their products are of high standards and meet the utility of the consumer. A diverse portfolio means that they are risk-averse and can easily manoeuvre in the market (Angwin et al. 2389). They should not leave their portfolio behind even with continued collaborations among the company’s subsidiaries. The main focus should be on what already exists in the portfolio.
Another solution will be to push for much tighter integration with the subsidiaries. The focus of the integration will be to tie together the company’s units with that of the subsidiaries. The integration would even include the management of the company (Canterino et al. 166). After the collaboration, the entire company should be under a single direction. This approach will assist in the creation and implementation of policies across the organization. There will be very minimal variations in the units streamlining operations.
Conclusion and Recommendation
Johnson & Johnson has been experiencing growing sales in recent years, posting an annualized growth rate in its profits. This increase has been due to the effective management of dividends and acquisitions. However, recently the company has been facing challenges in getting the most out of its portfolio. The challenge arises from the partnerships made with subsidiary companies. Collaboration denies them the opportunity to exercise their areas of expertise fully. Thus, there is a need for a solution to tackle the issue at hand.
The company can consider an integration after the collaboration. The integration involves having single management for both divisions. The strategy will allow the company to bring its units together and ease up management processes. Equally, the units can consider focusing on a single product line after the collaboration to gain a competitive advantage. In the long run, the company will be risk-averse and will gain more from its portfolio.
Work Cited
Angwin Duncan, Mellahi Kamel, Gomes Emanuel, & Peter Emmanuel. How Communication Approaches Impact Mergers and Acquisitions Outcomes. International Journal of Human Resource Management, 27(20), 2016, 2370-2397.
Canterino Filomena, Shani Abraham, Coghlan David, & Brunelli Massimo. Collaborative Management Research as a Modality of Action Research: Learning from a Merge-Based Study. Journal of Applied Behavioral Science, 52(2), 2016, 157-189.
Sarala Riikka, Vaara Eero, & Junni Paulina. Beyond Merge Syndrome and Culture Differences: New Avenues for Research on the “Human Side” of Global Mergers and Acquisitions (M&As). Journal of World Business, 54(4), 2019, 307-321.
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Question 
Case Study Memo- Johnson & Johnson
DIRECTIONS FOR WRITING A CASE STUDY MEMO
Company Portfolio
You will provide an introduction paragraph, which does not contain an introduction header, to briefly talks about each company and state the general purpose of the memo. The memo do not read like a book report about the case. You identify and write descriptively a key issue(s)/problem(s), analyze the issues/problem, provide 2-3 proposed solutions, and choose one of the proposed solutions as a recommendation.You look at a specific issue or two issues interconnected in the case, and you don’t take a broad approach that defines little to nothing about what you think. Be precise and add direction for the problem/issue identification so the reader (executive) can make a decision from your memo.
The first header after the introduction paragraph will address what you see as a problem(s) and/or issue(s). Write two-three paragraphs about this header content, using 6-7 lines per paragraph, not exceeding eight lines. I count lines per paragraph and deduct a point or two for excessive paragraph length, and the point deduction counts for each paragraph in the memo. The “look” of any written document affects the read, so polish the look of your memos. This section will contain 2-3 paragraphs.
The second header section will provide an analysis of the issue/problem, composed of 2-4 paragraphs with a general length of between 6-7 lines, which applies to all paragraphs, with a max paragraph length of eight lines. In this section you analyze the problems/issues, looking at influences on the company, departments, unit, and possibly teams. As a researcher, which includes your work at a manager/consultant in business, you connect the influences to the problem/issue to help the reader understand the dynamics of an organizational situation that need improving or changed to improve unit cost. Use the Complicated and Complex Slide Diagram to help you see the observable and hidden action.
The third header will provide 2-3 proposed solutions made up of the same number of paragraphs, using 6-7 lines, with a max of eight lines. You write a paragraph for each solution, not one paragraph for all two or three solutions for the issue(s)/problem(s) the team will address and/or design to meet what is/are identified as issue(s)/problem(s). In each paragraph you paint a picture of what the proposed solution will entail at a high feature component, which I will address how it will affect the company. Features represent the proposed actions that the company will take to solve the problem. In the first line, per the memo example, describe the title of the proposed solution that can take on project work as the next step.
For the Conclusion and Recommendation header, you will provide a conclusion paragraph that summarizes the main ideas in the memo so an executive can easily understand the key issues and solution. The last sentence of the summary, no more than two lines, will identify the title of each proposed solution. You end with a recommendation paragraph at the bottom of the second page. The conclusion paragraph provides a high-level summary of the key items discussed in the memo, not to exceed eight lines. A recommendation paragraph selects one of the 2-3 proposed solutions to address your analysis and chosen direction, and you explain the benefits of using this recommendation to generate positive results, which I will explain.
You don’t introduce new information in the conclusion and recommendation. If you introduce new information in either paragraph, points will be deducted.
Use these headers below as the outline for the memo, which I described above. See a business memo example in the Content section of Beachboard.
Opening paragraph describes the basic situation, and the last sentence describes what the reader will read in the memo, stating the memo will include a recommendation in the Conclusion and Recommendation header. NB: You state the recommendation in the first sentence in the recommendation paragraph and explain your reason along with implementation. Use these headers below for the memo after your introduction paragraph
Paragraph Order:
- Issues/Problems
- Analysis of Issues/Problems
- Proposed Solutions
- Conclusion and Recommendation