Case: “Johnson & Johnson Consumer Products Brazil: Corporate Transformation (A)” We will discuss the situation facing Justino. There is not much financial information in the case. However, the implementation issues are worthy of our consideration. 1. Why is J&J Brazil in the situation they are? Some of the reasons I have observed are as follows: • Economy plays a role in the situation that they are in now. Rapidly decaying economy and constantly changing economical and regulatory landscape prepares the necessary grounds for J&J Brazil’s downfall.
For example, the fact that they were technologically ill-prepared to keep up with the new entrants’ and other competitors’ pace of technological/machine upgrades, is a great example of this. • They did not plan for the opening of the market/removal of barriers to entry. When it happened and they started losing market share, instead of focusing on quality/innovation (R&D), they became focused on cost cutting to make the monthly goals. They stopped advertising and they just started using sales promotions and price cuts. We can say that they did not have a long term plan and a contingency plan in place. Because of the stable sales and market share for years, they became too complacent and stopped innovating. They just focused on selling and that was it for them. It is extremely dangerous for any company to stop innovating, even if the market landscape and sales are stable. • They became organizationally inefficient. They did not stay true to their Credo. We see that the organizational structure change over time and operational inefficiencies started to rise.
The best example for this is the fact that the top management started to make all the decisions by late ‘90s. There is no empowerment or trust left in the company. Another good example is that the 3 smaller companies under J&J Brazil, even though they were merged under one consumer business, they kept their own sales and marketing divisions. It is almost as if this merger created a 3-headed hydra. • Organizational roles and responsibilities are not clear. Marketing seems to be running the show when it comes to sales.
Per the executive, marketing is not interested in input from sales, which tells me that there is a lack of feedback and planning happens without feedback from the field. This would blindside any company. 2. What are the priorities for Justino? What areas require immediate attention? What areas can he deal with later? • #1 priority for Justino is establishing a vision and turnaround plan (which includes a strategy based on the vision and specific action items for financial and operational house of the business). • Justino must change the organizations structure as part of his plan.
There are many operational overlaps and inefficiencies in the current structure. • Roles and responsibilities need to be clarified as part of the plan. Marketing and sales organizations need to do what they are meant to do and not play project manager or peon roles in the company. • Getting ahead of the game, namely R&D and brand positioning need to come back to the heart of the operations again. They became too risk-averse and at this point, it is costing them an arm and a leg. • Marketing practices need to change based on the decided-upon vision.
Only getting through the day is not an option for J&J Brazil at this point. They must focus on upgrading their machines as well as researching new products that have unique order winning specs. The only way he will win market share back is to differentiate its products’ from those of competitors’ and build and market them efficiently and effectively. • As Justino puts it, they need to “start talking to the consumers again”. They need to reconnect with their consumer base. 3. How should Justino communicate the vision and change agenda? • The vision and the change agenda have to be communicated company wide.
There has to be constant feedback from the ground level up. I think Justino should go down to the floor himself and show that he is not only blowing smoke but actually stands behind the vision and the plan. This is especially important, because if he wants to make this plan a success in such a short time, he will need everyone’s buy-in, and one of the things that will help him in this quest is if he can prove to his employees that this is for everyone’s benefit and that he is a part of this. He absolutely needs to stay away from the Ivory Tower approach.
Also, the frequency of the communication is extremely important. Communications and request for feedback from the upper management needs to be continuous. Under the current circumstances, there is not a moment to lose for Justino. 4. What does he need to do to ensure that the organization, key individuals and stakeholders support the change? • Like I said in my answer to the 3rd question, he needs to include them in the process. With roles and responsibilities clearly defined and proper communication and feedback channels in place, this should not be hard for Justino. He needs to get his field team to reconnect with the consumers and have them start getting feedback from consumers as well. For too long, they operated in the blind, but if they are looking for a swift turnaround, they need to understand what the consumer needs and wants. • The morale in the executive management seems to be low as well. It seems that morale and trust degraded greatly over the years, and without those as the foundation, Justino’s turnaround plan would be doomed to fail. 5. What barriers to change and turnaround is Justino likely to encounter? Resistant to change from inside is almost inescapable. It is clear that, especially marketing department got too complacent with the old ways and will not be willing to give up power. • There may be barriers from the government as well. Given the unstable nature of the market, Justino may have to work on getting the government on his side through establishing barriers that benefit J&J and keeps other players from entering or gaining market share in the market place. • Some of the restructuring may cause resistance from the employee base as well.
Because it has been a “family of companies” by cultural nature and these people have been getting constant raises every 15 days due to inflation, if the turnaround plan includes some parts where they need to make sacrifices to help the company’s bottom-line, I think this will result in some resistance from the workers. • Some of the resistance will come from share arrogance. When communicating his vision and plan, Justino needs to make it very clear that they are not the only one in the town anymore and it will take more than just selling to take the company back to its glory days.