Johnson & Johnson has been characterized by Noelle Hamer (2004) as one of the world's largest and most diversified health care companies, a firm that has been producing and selling products focused on human health since its creation in 1887. Currently, the firm has over 200 operating companies doing business globally in three segments: consumer products, medical devices and diagnostics, and pharmaceuticals. According to the firm, the fundamental objective of its business activity is to provide scientifically sound, high quality products and services to help heal, cure disease, and improve the quality of life (Johnson & Johnson, 2004a).
Johnson & Johnson is located in New Brunswick, New Jersey and employs approximately 109,100 workers of whom 50,000 are in the United States (Johnson & Johnson, 2004b). Basic financial data on Johnson & Johnson's status are as follows:
. Worldwide sales in 2003 were $41.9 billion
. Net earnings for 2003 were $7.2 billion
. Diluted earnings per share for 2003 were $2.40
. Dividends have been issued to shareholders every
quarter since 1944 and raised each year for 42 consecutive
. Sales have increased each year for 71 consecutive years
and double digit earnings increases reported for 19
consecutive years (Johnson & Johnson, 2004b).
Johnson & Johnson is positioned within the pharmaceutical industry, itself driven by innovation and technology. As Hamer (2004) has noted, over the counter (OTC) drugs represent an important element within this industry which is also characterized by global hypercompetition. The industry in the United States is impacted by lower interest rates that translate to lower interest expenses for companies while global and domestic economic conditions directly impact upon all players in the sector. In the U.S., health care spending is expected to increase 6.8 percent annually and health care inflation appears to be on the declin...