strategic-management

206 TOMLIN, MILHAUSER, GIERKE, LEFEBVRE, AND MARTINEZ
Consumer Products
The Consumer segment includes a broad range of products used in the baby care, skin
care, oral care, wound care, and women’s health-care fields, as well as nutritional and
over-the-counter pharmaceutical products. Segment sales in 2008 were $16.0 billion, an
increase of 10.8 percent over 2007, with 8.3 percent of this change due to operational
growth and the remaining 2.5 percent due to positive currency fluctuations. The segment’s
operating profit increased 17.4 percent from 2007 to $2,674 million in 2008. As
a percent to sales, 2008 operating profit increased to 16.7 percent. Cost synergies and
lower integration costs in 2008 related to the acquisition of the Consumer Healthcare
business of Pfizer Inc., and other cost containment initiatives contributed to the
increased operating profit. 3
Pharmaceuticals
The Pharmaceutical segment includes products in the following therapeutic areas: antiinfective,
antipsychotic, cardiovascular, contraceptive, dermatology, gastrointestinal, hematology,
immunology, neurology, oncology, pain management, urology, and virology. These
products are distributed directly to retailers, wholesalers, and health-care professionals for
prescription use. Segment sales in 2008 were $24.9 billion, a decrease of 1.2 percent over
2007, with an operational decline of 3.1 percent and 1.9 percent increase due to the positive
impact of currency fluctuations. Segment sales were $14.9 billion, a decrease of 4.9 percent.
International Pharmaceutical segment sales were $9.7 billion, an increase of 5.1 percent,
which included 0.1 percent of operational growth and 5.0 percent related to the positive
impact of currency fluctuations. The Pharmaceutical segment operating profit increased
16.3 percent from 2007, and operating profit increased 31.0 percent to a total of $7,605
million in 2008. 4
Medical Devices and Diagnostics
The Medical Devices and Diagnostics segment includes a broad range of products used principally
in the professional fields by physicians, nurses, therapists, hospitals, diagnostic laboratories,
and clinics. These products include Cordis’s circulatory disease management
products; DePuy’s orthopedic joint reconstruction, spinal care, and sports medicine products;
Ethicon’s surgical care and women’s health products; Ethicon Endo-Surgery’s minimally
invasive surgical products; LifeScan’s blood glucose monitoring and insulin delivery products;
Ortho-Clinical Diagnostics’ professional diagnostic products; and Vistakon’s disposable
contact lenses. The segment achieved sales of $23.1 billion in 2008, representing an
increase of 6.4 percent over the prior year, with operational growth of 3.5 percent and 2.9
percent, respectively, due to a positive impact from currency fluctuations. U.S. sales were
$10.5 billion, an increase of 1.0 percent. International sales were $12.6 billion, an increase of
11.3 percent, with 5.8 percent from operations and a positive currency impact of 5.5 percent.
Operating profit in the segment increased 49.1 percent from 2007 to a total of $7,223 million
in 2008. As a percent to sales, 2008 operating profit increased to 31.2 percent. The improved
operating profit was the result of the $429 million gain from net litigation settlements, favorable
product mix, manufacturing efficiencies, and lower research and development charges
of $174 million in 2008 versus $807 million in 2007. 5
Competitors
Exhibit 5 provides a list of companies that J&J considers to be major competitors.
Abbott Laboratories
Abbott Laboratories is engaged in the discovery, development, manufacture, and sale of a
variety of health-care products through four business segments: Pharmaceutical Products,
Diagnostic Products, Nutritional Products, and Vascular Products. The company’s primary
products are prescription pharmaceuticals, nutritional products, vascular products, and
diagnostic testing products. In addition, the company has a 50.0 percent-owned joint
venture, TAP Pharmaceutical Products Inc., with Takeda Pharmaceutical Company Ltd. of
Japan, through which the company develops, markets, and sells pharmaceutical products
such as Lupron, Lupron Depot, and Prevacid (lansoprazole) within the Untied States,