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Neutrogena Operations and Supply Chain

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By the 1 940’s, Natone began manufacturing and distributing cosmet ics for the retail market. Stolaroff switched from the cosmetic market to the skincare market a fter distributing a pH balanced soap from a Belgian chemist, Dr. Edmond Frost. This soap was c alled Neutrogena and due to its ability to clean the skin and maintain the normal pH of the skin in less than eleven seconds Neutrogena was a success when distributed in United States. The so ap became the company’s image.

In 1 962, Natone changed its name to Neutrogena and beca me a trusted brand.

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In 1 973 Neutrogena emerged into the haircare industry. Today, Neutrogena c arries products for cleansing, acne, moisturizing, antiaging, body & bath, cosmetics, sun protectio , hair, and men. Neutrogena markets its products as the leading brand in the soap/ beauty industry as “#1 Dermatologists Recommended. ” Neutrogena’s products are distributed in ove r seventy countries. In 1 973, Neutrogena was listed as a publicly traded company on NASDAQ, (N GNA) 2 with a market value of $ 1.

2M. By 1994, Neutrogena became part of Johnson & Johnson corporations for $9. 2M.

Neutrogena has been owned by J since 1 994, and it s stock price iS $101. 53 (2/3/15). Product Description Neutrogena sells 37 products that range from facial cleansers, to cosmetics. In this roject, we will focus on Neutrogena’s acne skincare line which includes facial cleansers, facial scrubs, treatments, moisturizers, and serums for acne. Neutrogena creates va lue by extensively researching and developing high quality products with the help of dermatolog ists. This is reinforced by the product package, which has the title “#1 Dermatologist Reco mmended”.

The quality and trust suggested by this statement, combined with the low cost of t heir products creates value for their customers. Company Strategy Vision : Neutrogena’s vision is that through their partnership, called Choose Skin He alth with the American Society of Dermatologic Surgery, they are able “to fight skin cancer and save lives through education, early detection, and the empowerment to follow sun safe behaviors. ” 3 Neutrogena decided to expand its market to skin care rather than just honing in on makeup products.

Mission : Neutrogena’s mission is to become a leading skincare brand worldwide that delights dermatologists and consumers with a collection of unique products that clean , protect and correct skin. Goals : Neutrogena’s goal is to add emotional values through their campaign ads “to help share their brand identity and tell differentiation from other skin care brands. Neutrogena 4 incorporates “philanthropy into marketing campaigns, linking their products t o highimpact social projects around the world,” in order to increase their efforts in corporat e social responsibility. Values : The production development of each their products is linked to their key val ue: ‘to create pure natural skincare with real results. ” 6 Competitive Priority : Neutrogena’s competitive priority is to produce their products at a low cost in order to make it affordable to everyone, which is why it is readily available i n most convenience stores or drugstores that carry skincare products such as CVS, W lgreens, Walmart, Shaws, and RiteAid. Core Competencies Neutrogena’s core competencies are its research and development, productio n, marketing and promotion, and distribution.

Their competitive advantage is that their products are endorsed by dermatologists and that consumers trust and recognize them as the leadin g brand in the soap/ beauty industry. Neutrogena also has partnered with the American Society Of Dermatology. This endorsement gives Neutrogena a competitive advantage over competitor s because their products are supported by the doctors that take care of acne patients. 7 Strategic Framework In a market characteristic of monopolistic competition, Neutrogena must diffe rentiate its product in order to maintain its market segment.

Neutrogena uses Michael P orters strategy in order to differentiate itself from competitors. In popular convenience stores, such as CVS or Walgreens where Neutrogena primarily markets its products, customers are f aced with many alternative brands such as Dove, Olay, Clearasil, Clean and Clear, Aveeno, or A cneFree. In order to be successful, Neutrogena must Offer a product that from a consumer’s pe rspective is significantly different from those of its competitors. Product differentiation is essential. Low Cost: Neutrogena uses low cost as a means to attract young teenagers to buy their products.

According to Statistic Brain, the average annual income of teenagers from age s 12 1 7 range from $3000 $5000 dollars. When about 85% of teenager suffer from acne, Neutrogena uses 8 9 low cost to attract teenagers who cannot afford to buy expensive acne facial p roducts, such as its competitor Proactiv. Market Segmentation Strategy: Neutrogena focuses on customers who are young women that want clinically proven beautiful skin at a low cost. In order to accomplish this, Neutrogena first “advertises in medical journals, sends direct mail to doctors, attends medical c onferences, and performs research at its own Skincare Institute. Neutrogena then uses beautiful, talented 10 women as spokesmodels in their commercials. 11 Product Differentiation: Neutrogena differentiates its product through their relationship with dermatologists, and markets their products as “#1 Dermatologists Recommen ded. ” This creates value and trust with their consumers. Without this differentiation in such a sat urated market, customers would buy solely on the basis of price, driving prices down and red cing profit margins. Operations Strategy Aligned with the Product Neutrogena aligns their operations in order to become the “#1 Dermatologist Recommended. The research and development department produces a prod uct that dermatologists are able to endorse. Neutrogena’s production needed to creat e an image that had a clinical look to it, which is why their first product had a “straight edge, transpa rency, and orange tint. ” (Product Differentiation) Neutrogena’s market targeted young women, s o they used young female celebrities to advertise their products. (Market Segmentation) Neutrog ena used ssetbased positioning by distributing their soaps to luxury hotels and spas. B y doing this, it encourages those customers to buy their products in the future.

Also, Neutro gena sells their products in almost all convenience stores and local drug stores for low costs. Neutrogena’s OilFree Acne Wash sells for $6. 19 at CVS. (Low Cost) 12 Competitors Two of Neutrogena’s greatest competitors for the acne skin care market are C learasil and Proactive. Clearasil: (Owned by Reckitt Benckiser) Clearasil’s products are very similar to Neutrogena’s because they are both us ed to fight against acne. Like Neutrogena, Clearasil also follows Porte’s strategy and focuses on product differentiation.

Their products are more focused on customers with moderate to severe acne, containing higher dosage of benzoyl peroxide (10%). For example, Clearasil ha s products that “rapidly’ clear acne in hours depending on what the customer is lookin g for. Proactiv: (Owned by GuthyRenker) Proactiv is a 3step process used to treat acne. Proactiv exhibits characteristics of both Porter’s strategy and Treacy and Wiersema’s strategy. They focus on product differenti ation because their product is a product bundle that includes a skin smoothing exfoliating, p re targeting treatment, and complexion perfecting hydrater.

Also Proactiv uses the value a dded service by sending the customer the new supply of goods after 90 days without the cust omer having to tangibly do anything. Proactiv is trusted by millions of women, men and teens and recognized 13 with 28 awards and honors from the beauty and health industry’ . Proactiv uses Treacy and 14 Wiersema’s strategy of customer intimacy to build trust and long term relatio nships. When ordering Proactiv, they include free gifts, free shipping for the initial order, an d 60Money Back Guarantee. Doing so creates trust between Proactiv and its customers.

Su pply Chain Neutrogena’s products that are sold in local drugstores use a BuildtoStock (BT S) supply chain. Customers have no choice in product modification. The products Neutr ogena provides in the local drugstores are not modified to any specific individual customer. The stages that Neutrogena processes its products is 1) raw materials, 2) component manufa cturer, 3) product manufacturer, 4) distributor, 5) retailer, 6) customer. Neutrogena provides its goods in high volumes supplying the convenience stores in order to fill the shelves.

Howeve r, Neutrogena also expands its market by creating a personalized acne solution for individuals cal led skiniD. In this case, Neutrogena uses a Buildtoorder (BTO) supply chain, where customers h ave some choice of modification. It is meant to specifically meet the needs of individual custom ers. With (BTO), the raw materials are there, but the product is not produced until after the cu stomer order is received. The customer must take a skin iD evaluation, which then Neutrogen a’s dermatologists create a personalized regimen for the customer, in which they order online. Key Components

Neutrogena’s products vary but all their products are noncomedogenic. In Ne utrogena’s acne line, he key components found in each of the products are salicylic acid, benzoyl p eroxide, MicroClear Technology, and microfine beads. Salicylic acid is a monohydroxyb enzoic acid that can be topically applied and is a key ingredient used to help reduce redn ess and swelling and unclog pores to fix and prevent damaged skin. It doesn’t kill bacteria which is why it must be used continuously. Its effects stop when use IS discontinued, which IS how por es clog up again and acne reoccurs.

Benzoyl peroxide is an ntimicrobial agent” that kills acne causing 15 bacteria, treats inflamed breakouts and helps prevent future acne . This key ingredient in Neutrogena’s acne products is what results in longlasting effects to help keep the skin clear of blemishes. From Neutrogena’s R department, they were able to develop a specific 16 “technology”‘ called MicroCIear. It is “clinically shown to boost delivery of acne medicine to clear congested pores and speed treatment deep to the source. ” 17 Su pply Chain Aligned with Operations Strategy Neutrogena uses Porters strategy in order to differentiate their products fro m other competitors.

However, Neutrogena has a “slow, more expensive manufacturi ng process. ” When Neutrogena uses Porter’s strategy, it was to reinforce that their brand was me dically proven by dermatologists. Therefore, ” Neutrogena said no to the deodorants and skin softeners that many customers desire in their soap. It gave up the largevolume potential of selling through supermarkets and using price promotions. It sacrificed manufacturing efficien cies to achieve the soap’s desired attributes. In its original positioning Neutrogena made a whole raft of tradeoffs like those, tradeoffs that protected the company from imitators. This makes difficult for other brands to imitate the “premium” image Neutrogena has. This is why it is nece ssary for Neutrogena to go through the stages in Neutrogena’s (BTS) supply chain: raw materials, component manufacturer, product manufacturer, distributor, retailer, and cu stomer. Outsourced Activities Current Johnson and Johnson, the parent company of Neutrogena, has ” more than 275 operating companies in more than 60 countries employing approximately 128,700 peop le” and is headquartered in New Brunswick, New Jersey. Johnson and Johnson is a glob al firm and performs many operations outside of the United States.

Johnson and Johnson outsources both upstream and downstream portions of its supply chain, as well as internal pro cesses. Due to 18 their size, global presence, and number of employees, in 2005 realized tha t their ability to handle their telecommunications network across countries for their nearly 13 0,000 employees had reached a critical point. As stated by Peter Tarhani, manager of J&J’s globa I networking, “Throughout our organization, we had a number of different telecom payme nt and management processes for handling and paying a large number of diverse invoices.

We wer ent managing it properly. ” (Tarhani 1). As an answer to their problems, in 2006, after an inter nal audit to determine issues with their network, decided to outsource their telecom e xpense management (TEM) to the Avotis Corporation, allowing J&J to focus further on their core competencies. After two years under the Avotis Coporation’s guidance, yiel ded 6% savings on their 535 million telecommunications budget. Furthermore, beginning in 201 3, Johnson and Johnson began the process of a ccepting bids to outsource an endtoend rehaul of its IT and software products.

Subseq uently, the contract will also cover the management ofthese resources. Several companies such a s HCL, Infosys, 18M, and Cognizant Technology Solutions have placed bids. Johnson and Johnson also outsources portions of its downstream supply chai n. Johnson and Johnson does not own a retail outlet, or have the distribution network to expose consumers to their products. Thus, they outsource the sale of their consumer products, s uch as their Neutrogena line, to small drugstores such as CVS, or Walgreens, or larger sup erstores like Target or Walmart whose core competencies involve distribution and retailing . 9 Suggested: Johnson and Johnson could outsource their marketing and customer support epartments. This would allow Johnson and Johnson to refocus resources on their corecom petencies. Johnson and Johnson could focus further and research and development to drive inno vation and improve the quality of their products. Outsourcing these aspects of their business wou ld save Johnson and Johnson money. Outsourcing customer support would also allow 24 hour sup port.

Cite this Neutrogena Operations and Supply Chain

Neutrogena Operations and Supply Chain. (2017, Jul 20). Retrieved from https://graduateway.com/neutrogena-operations-and-supply-chain-42586/

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