Johnson
& Johnson: Current Market Conditions
Since
1885 Johnson & Johnson has been a premier producer of pharmaceutical,
healthcare and medical products (Johnson & Johnson, 2007), but as this
company moves forward into the 21st century they are facing increasing
competition. By exploring Johnson &
Johnson’s market structure and the impact of existing and new competitors
within this market, one can better understand the current factors that affect
Johnson & Johnson. The supply and
demand of medical and pharmaceutical products is the key to understanding other
factors which companies such as Johnson and Johnson base their decisions
on. Cost structures, price elasticity of
demands, pricing, and productivity are all related to the affects of supply and
demand.
Market Structure
Market structure is defined as the
“frameworks within which firms interact economically” (Colander, 2004, p.
243). Johnson & Johnson’s framework
can be considered a national and international oligopoly. An oligopoly is “a market structure in which
there are only a few firms” and “there are often significant barriers to entry”
(Colander, p. 285). Competitors in the
pharmaceutical, healthcare and medical products industry must take into account
what each other is doing and anticipate each other’s responses; this makes them
interdependent. Even though a number of
competitors are in the same market as Johnson & Johnson, barriers to enter
and exit the market are high, making this market a ‘contestable market
model’. As an oligopoly market, with a
contestable market model, the entry and exit barriers have more influence on
the individual company’s price and output choices (Colander, p. 297). Barrier to entering the pharmaceutical,
health care and medical products industry include but aren’t limited to, start
up costs, labor and distribution considerations, and FDA or other government
regulations.
