First Draft J&J1

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Graduation Project

Johnson&johnson

DR/ Mohamed Elkaloubi

Presented by

Dalia Hani

Mohamed Ramzy

Abdelrahman soliman

Sherif Mostafa

Mahmoud


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The company

Introduction:

Caring for the world, one person at a time... inspires and unites the people ofJohnson & Johnson. We embrace research and science - bringing innovative ideas,

products and services to advance the health and well-being of people. Employees of the

Johnson & Johnson Family of Companies work with partners in health care to touch the

lives of over a billion people every day, throughout the world.

Our Family of Companies comprises:

The worlds sixth-largest consumer health company

The worlds largest and most diverse medical devices and diagnostics company

The worlds sixth-largest biologics company

And the worlds sixth-largest pharmaceuticals company

We have more than 275 operating companies in more than 60 countries employing

approximately 128,700 people. Our worldwide headquarters is in New Brunswick, New Jersey,

USA.


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Business highlight 2013


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Johnson & Johnson delivered strong results in 2013 led by the outstanding performance in

our Pharmaceutical business, the re-launch and strength of key brands in our U.S. over-the-

counter (OTC) and other Consumer businesses and continued progress in integrating

Synthes, Inc. into our Medical Devices and Diagnostics (MD&D) segment. Results also

included advances in our longer-term growth drivers including bringing innovative solutions

to the global health care market, executing with excellence, and leading with purpose to

advance health and well-being for patients and consumers around the world.

PHARMACEUTICAL

With $28.1 billion in worldwide sales in 2013, we are the seventh-largest pharmaceuticals

business* in the world and the sixth-largest biotech business*. Were the fastest-growing top

10 Pharmaceutical Company in the United States, Europe and Japan and recorded 15

consecutive quarters of operational sales growth in this segment.

Primary contributors to exceptional operational sales growth of 12 percent included

REMICADE (infliximab) and SIMPONI (golimumab), biologics approved for the treatment

of a number of immune-mediated inflammatory diseases; STELARA (ustekinumab), a

biologic approved for the treatment of moderate to severe plaque psoriasis and active

psoriatic arthritis; INVEGA SUSTENNA/XEPLION (paliperidone palmitate), a once-

monthly, long-acting, injectable atypical antipsychotic for the treatment of schizophrenia in

adults; PREZISTA (darunavir), a treatment for HIV; VELCADE (bortezomib), a treatment

for multiple myeloma; and sales of new products.

The strong sales results of new products included ZYTIGA (abiraterone acetate), an oral,once-daily medication for use in combination with prednisone for the treatment of

metastatic, castration-resistant prostate cancer; XARELTO (rivaroxaban), an oral

anticoagulant; the combined sales of COMPLERA/EVIPLERA (emtricitabine

/rilpivirine/tenofovir disoproxil fumarate) and EDURANT (rilpivirine) for the treatment of

HIV; and INVOKANA (canagliflozin) for the treatment of adults with Type 2 diabetes.

Sales results were negatively impacted by generic competition for ACIPHEX/ PARIET

(rabeprazole), a proton pump inhibitor for gastrointestinal disorders and CONCERTA

(methylphenidate HCI) for the treatment of attention deficit hyperactivity disorder.

During 2013, the company received several regulatory approvals including: U.S. Food and

Drug Administration (FDA) approval of OLYSIO (simeprevir), an NS3/4A protease

inhibitor, for the treatment of chronic hepatitis C infection as part of an antiviral treatment

regimen in combination with pegylated interferon and ribavirin in genotype 1 infected adults

with compensated liver disease, including cirrhosis; FDA approval of IMBRUVICA

(ibrutinib) capsules for the treatment of patients with mantle cell lymphoma who have


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received at least one prior therapy; FDA and European Commission (EC) approval of

INVOKANA (canagliflozin), an oral, once-daily, selective sodium glucose co-transporter 2

inhibitor, for the treatment of adults with Type 2 diabetes; FDA approval for the use of

STELARA (ustekinumab) alone or in combination with methotrexate for the treatment of

adult patients with active psoriatic arthritis; EC approval of STELARA (ustekinumab),

alone or in combination with methotrexate for active psoriatic arthritis in adults when the

response to previous non-biological disease-modifying anti-rheumatic drug therapy has

been inadequate; EC approval of an expanded indication for SIMPONI (golimumab) for

the treatment of moderately to severely active ulcerative colitis in adult patients who have

had an inadequate response to conventional therapy including corticosteroids and 6-

mercaptopurine or azathioprine, or who are intolerant to or have medical contraindications

for such therapies; FDA approval of SIMPONI (golimumab) for the treatment of

moderately to severely active ulcerative col+itis in adult patients who have demonstrated

corticosteroid dependence or who have had an inadequate response to or failed to tolerate

oral aminosalicylates, oral corticosteroids, azathioprine, or 6-mercaptopurine; and FDAapproval of SIMPONI ARIA (golimumab) for infusion for the treatment of adults with

moderately to severely active rheumatoid arthritis in combination with methotrexate. The EC

also approved the use of VELCADE (bortezomib) as induction therapy in combination with

dexamethasone or thalidomide and dexamethasone and applies to adult patients with

previously-untreated multiple myeloma who are eligible for high-dose chemotherapy with

hematological stem cell transplantation.

A Marketing Authorization Application was submitted to the European Medicines Agency

(EMA) for ibrutinib for the treatment of adult patients with relapsed or refractory chronic

lymphocytic leukemia/small lymphocytic lymphoma or relapsed or refractory mantle celllymphoma. Also filed with the EMA, was a once-daily single tablet fixed-dose antiretroviral

combination product containing darunavir, a protease inhibitor developed by Janssen-Cilag

International NV and marketed as PREZISTA, with cobicistat, a pharmacokinetic boosting

agent, developed by Gilead Sciences, Inc. for use in combination with other HIV medicines.

Looking to the future, we are pleased with our focused, deep and productive pharmaceutical

pipeline, and expect the growth of our recently launched products to continue. Furthermore,

we will continue investing in R&D thats focused on key unmet needs for patients. As we

announced in May at the Pharmaceutical Business Review, we plan to file more than ten

new molecular entities (NMEs) for approval between 2013 and 2017, and more than 25

additional line extensions of our in-market products.

MEDICAL DEVICES AND DIAGNOSTICS

With $28.5 billion in worldwide Medical Devices and Diagnostics (MD&D) sales for 2013,

our MD&D segment is the largest medical devices and diagnostics business in the world.


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Operational sales growth of 6.1 percent included the impact of the acquisition of Synthes,

net of the divestiture of the DePuy Trauma business. Excluding this impact, MD&D

operational sales growth was 0.1 percent.

Primary contributors to operational growth were sales from the acquisition of Synthes and

DePuy Synthes Joint Reconstruction products in the Orthopaedics business, Biosense

Websters electrophysiology products in the Cardiovascular Care business, the Vision Care

business, as well as biosurgicals and international sales of energy products in the Specialty

Surgery business.

Our MD&D business is anchored by 11 billion-dollar-plus-platforms including vision care,

trauma, sutures, endoscopy, and electrophysiology. The FDA approved EVARREST

Fibrin Sealant Patch, a novel product that rapidly and reliably aids in stopping bleeding

during surgery. In orthopaedics, the ATTUNE Knee System, developed with innovative

proprietary technology, is off to a great start with over 23,000 implants worldwide. TheENSEAL G2 Articulating Tissue Sealer, the worlds first articulating advanced bipolar

product, is making it easier for surgeons around the world to access difficult-to-reach parts

of the anatomy. Finally, our THERMOCOOL SMARTTOUCH Catheter enhances the

safety and efficacy of an ablation procedure by measuring the force of the catheters tip

inside the heart. These are just a few of the innovations that continue to strengthen our

worldwide leadership position in medical devices and diagnostics, where 85 percent of our

key platforms hold the number one or number two position in the market.

Integrating Synthes has been our priority and weve made good progress. DePuy Synthes

Companies is the worlds largest and most comprehensive orthopaedics company within a$44 billion market with strong fundamentals, and is primed to offer new, value-added

solutions that will help transform health care delivery.

In January 2014, we announced receipt of a binding offer from The Carlyle Group to acquire

the Ortho-Clinical Diagnostics business for approximately $4 billion. We are in an

acceptance period that will end on March 31, 2014 and expect the transaction will close

toward the middle of this year.

CONSUMER

With $14.7 billion in worldwide sales in 2013, our Consumer segment is the sixth-largest

health care consumer business in the world and achieved operational sales growth of 2.8

percent. Our near-term priority is to deliver a reliable supply of OTC products to the U.S.

marketplace. Last year, we met our objective of returning approximately 75 percent of our

planned portfolio to store shelves. We are investing in cross-channel marketing across TV,

print and social media to support their re-launch.


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Positive contributors to operational results were U.S. sales of TYLENOL and MOTRIN

analgesics; upper respiratory OTC products; international sales of baby care products;

sales of NEUTROGENA and AVEENO skin care products; and international sales of

LISTERINE oral care products.

In 2013, we took steps to strengthen our focus, divesting in certain areas such as our North

American womens sanitary protection business, and acquiring Shanghai Elsker Mother &

Baby Co., Ltd, a well-regarded baby care company in China known for its position in the

naturals segment.

We also continue to expand globally with the launch of LISTERINE ADVANCED

DEFENCE Gum Treatment in the United Kingdom and Ireland and our new

JOHNSONS Baby TRIPLE BABY PROTECTION product line, which well be taking into

global markets this year.

Current Performance 2014


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Analysis of the current Performance

MEDICAL DEVICES & DIAGNOSTICS

J&J Market Share in Spinal & Orthopedic devices: In July 2012, J&Jcompleted acquisition of Synthes a in cash and stock deal, which has furtherexpanded its orthopedics franchise (DePuy) and mark the largest deal forJ&J. Synthes is a global manufacturer of orthopedic spine and trauma

products. Synthes' product portfolio consists of five primary product groupsin trauma, spine, knee, bio-materials and power tools. After the deal, DePuyhas become a global leader in the spinal & orthopedic devices market. Weexpect Synthes to strengthen J&J's market position significantly. If this leadsto market share within the segment increasing to 20%, it can lead to a

potential upside of more than 5% to our price estimate.

BUSINESS SUMMARY

Johnson & Johnson (NYSE:JNJ) is an American multinational pharmaceutical,medical devices and consumer packaged goods manufacturer founded in 1886. Thecompany (also called "J&J") and its subsidiaries are engaged in the research anddevelopment, manufacture and sale of a range of products in the health care field.It has more than 250 operating companies conducting business worldwide.

J&J is an industry bellwether and therefore its shares generally reflect the overallperformance in healthcare products at any given point in time. It also reflectsinvestor appeal for defensive securities, as during periods of economic or marketuncertainty investors have generally sought haven in J&J shares as its earnings areless cyclical.

Some of its iconic brands include Band-Aid, Listerine, Neutrogena, Tylenol,Zyrtec, Remicade, Rieperdal and Topamax among many others. The company hassold ortho-clinical diagnostics to Carlyle group.

SOURCES OF VALUE

Medical devices & diagnostics business is the most valuable segment for J&J,constituting roughly 60% of its value.

SYNTHES ACQUISITION TO HELP BOOST GROWTH
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J&J acquired Synthes in 2012 for $21.3 billion. Synthes is a global manufacturer ofmedical devices for orthopedics market including trauma and spine. The combinedDePuy/Synthes orthopedic division has the broadest orthopedic portfolio globally.The company has a strong market position which can be attributed to its diversified

product offerings, established brand, R&D focus, and strong sales and marketingcapabilities.

EBITDA MARGINS REBOUNDING

Medical devices & diagnostics EBITDA Margin was 45% in 2007, whichincreased to around 53% in 2010 due to gain from net litigation settlements,favorable product mix, manufacturing efficiencies and cost containment initiativesrelated to selling, marketing and administrative expenses. The figure, however,dropped to 44% in 2011 mainly due to product liability, litigation expenses and

recall of DePuy Hip. By 2013, margins rebounded 56.5% primarily due to higherprofits from Synthes' sales, lower litigation expenses and product liability.

KEY TRENDS

PHARMACEUTICAL BUSINESS BECOMING INCREASINGLY IMPORTANT

The results from the last couple of years suggest that J&J has made some greatstrides in the pharmaceutical sector. The company, traditionally known for medicaldevices and diagnostics, is now becoming more centered around pharmaceutical

business. The segment is witnessing strong growth driven by increasing sales ofRemicade, Olysio and Zytiga. Recently, J&J announced the acquisition of biotechfirm Alios BioPharma to leverage its potent drug pipeline catering to treatment ofviral diseases. Also, given the recent Ebola outbreak in West Africa, the companyhas accelerated the development of vaccine which may be available for humantrials by early 2015.

LICENSING AND CO-DEVELOPMENT ARRANGEMENTS

J&J has licensing/co-development/marketing agreements with Bayer for Xarelto(Rivaroxaban), Elan for Bapineuzumab, Vertex for Telaprevir, and MillenniumPharmaceuticals for Velcade. J&J has also acquired Cougar Biotech and Crucell to

build out its oncology and vaccines businesses.


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LOSS OF PATENTS IMPACTING SALES

Over the last few years, several of J&J's drugs including Levaquin, Concerta,Invega & Aciphex lost their patent protection. Over the next few years, about 6major drugs are expected to lose their patent and J&J will need to develop new

drugs to offset these losses.

GROWING THREAT OF GENERIC PRODUCTS

The fast growing pharma market in emerging economies or referred to as the'Pharmerging' economies have the capability and technical prowess to manufacturegeneric versions of blockbuster drugs. These generic drugs are often sold at pricesthat substantially cheaper then their branded counterparts, thereby severelyaffecting big pharma's ability to generate profits in the long run.

GLOBALIZATION OF HEALTHCARE REFORMS

Governments around the world are trying to rein in fiscal spending in order tomanage their budget deficits Since healthcare costs are one of the biggestcomponents of any national budget, increased healthcare legislation and reformsaround the world will hurt revenues for the entire pharmaceutical sector.


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Vision

To maximize the power of Diversity & Inclusion to drive superior business

results and sustainable competitive advantage in a dynamic global marketplace.

Mission

At Johnson & Johnson there is no mission statement that hangs on the wall.

Instead, for more than 60 years, a simple, one-page document Our Credo has

guided our actions in fulfilling our responsibilities to our customers, our

employees, the community and our stockholders. Our worldwide Family of

Companies shares this value system in 36 languages spreading across Africa,

Asia/Pacific, Eastern Europe, Europe, Latin America, Middle East and North

America.

We believe our first responsibility is to the doctors, nurses and patients,

to mothers and fathers and all others who use our products and

services. In meeting their needs everything we do must be of high quality.

We must constantly strive to reduce our costs in order to maintain

reasonable prices. Customers orders must be serviced promptly andaccurately. Our suppliers and distributors must have an opportunity to make

a fair profit.

We are responsible to our employees, the men and women who work with

us throughout the world. Everyone must be considered as an individual. We

must respect their dignity and recognize their merit. They must have a sense

of security in their jobs. Compensation must be fair and adequate, and

working conditions clean, orderly and safe. We must be mindful of ways to

help our employees fulfill their family responsibilities. Employees must feelfree to make suggestions and complaints. There must be equal opportunity

for employment, development and advancement for those qualified. We

must provide competent management, and their actions must be just and

ethical.


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We are responsible to the communitiesin which we live and work and to

the world community as well. We must be good citizens support good

works and charities and bear our fair share of taxes. We must encourage

civic improvements and better health and education. We must maintain in

good order the property we are privileged to use, protecting the environmentand natural resources.

Our final responsibility is to our stockholders. Business must make a

sound profit. We must experiment with new ideas. Research must be carried

on, innovative programs developed and mistakes paid for. New equipment

must be purchased, new facilities provided and new products launched.

Reserves must be created to provide for adverse times. When we operate

according to these principles, the stockholders should realize a fair return.

BusinessenvironmentinEgypt

Egypt, the cradle of the human civilization has a strategic location in thecenter of the Middle East, the northern gate to Africa and has the manmadeSuez Canal connecting the Mediterranean Sea , the Red Sea and the Indian

Ocean, thus an important gateway on the trade route between Europe, theNear East and the Far East.

coastline of 2450 KM along the Mediterranean Sea and the Red Sea.

The Nile river, the longest river in the world: the fabled waterway bisectsEgypt and creates a rich, wide delta on the northern coast of the country, anda long its banks the population exploits the fertile land of the Nile Valley.

A mild warm and dry climate through-out the year with winter sunny days.

The currency is the Egyptian Pound (the actual rate to the U.S.$ is 5.68

The official language is Arabic, in the big cities people understand English. Through the countrys strong cultural influence on the region, the colloquial

Egyptian Arabic Aamiya has become familiar throughout most Arabiccountries.

Nearly 71% of Egyptians know how to read and write, the Capital Cairo LeCarrefour de lOrient has many French, English, German, Italian, Spanishand Greek schools.


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All Foreign Embassies are located in Cairo and the nearby Giza.

The prevailing religion is Islam and between 10 to 15% are Copts (ChristianOrthodox)

A population nearing the 82 million with a high rate growth of 1.8% is byitself a considerable market.

The existing economy is divided between the Public sector and the Privatesector and the Government is encouraging the Private sector to

expand and take a bigger share in the economy.

The new PPP (Public Private Partnership) program has started to beimplemented to encourage the private sector.

With GDP growth remaining strong the government is pushing ahead withthe reform program it began 2004. Reducing the budget deficit remains akey goal, although heavy government spending designed to counteract theeffects of the global recession has resulted in targets being pushed back.

Meanwhile the introduction of a value-added tax should help combat ashortfall in revenues.

AstrongBankingsector:

There are local banks, Joint Venture Banks and Foreign Banks in Egypt.

Many International banks operate in Egypt such as HSBC, Citibank,Barclays bank and Credit Agricole. Several European and Swiss banks haverepresentation offices.

Well established local banks such as the National Bank of Egypt, BanqueMisr and the Commercial International Bank proved relatively resistant tothe global downturn.

Micro finance management: Services are increasing for small business andlow-income individuals.

To avert the global crunch the banks encouraged lending in tight times.


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Anestablishedinsurancesector:

Tailoring offerings to a growing middle class that is growing more receptiveto insurance products will ensure continued take-up of products provided

they address specific market needs, such as the Bancassurance. Regulators merge to create the Egyptian Financial Service Authority.

Many insurance companies operate in the market such as: Misr Insurance,National Insurance Company, Suez Canal Insurance, Mohandes, Delta, AIG,Export Guarantee, Allianz Non-life, BUPA Egypt, Saudi Egyptian InsuranceHouse.

Minimum capital requirement to establish a new insurance company is: LE60 Million, but the adequate level of capitalization is still a subject ofdebate.

Areliableinfrastructure:

Three cellular telephone networks operate in Egypt: Mobinil, Vodaphoneand Etisalat. They cover most of the country. A big network of railways 5,063kmcover and connect all cities ofEgypt, except the Sinai peninsula: it carries passengers and goods. Most big cities have airports and Cairo has several daily flights to mostof European, North American, the Middle east, African and Asian big citiesthrough its renewed airport. Alexandria has an international Airport, also

Luxor, Sharm El Sheikh and Hurghada. Several sea ports are handling the exported and imported goods, as anexample Alexandria, Damietta and Port Said on the Mediterranean sea (5),Suez, Safaga and Quoseir on the Red Sea (3). A big network of highways and roads 64,000km being actually upgraded iscovering all of Egypt and connecting all the countrys regions.

Investment zones: 5Industrial zones in new cities: 15

Total industrial zones: 47


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Abigmarketaccessthroughmembershipsin

internationalregionaleconomicbodies: Attractive economic relations with the Middle Eastern countries: Egypt is a main

member in the Arab League and its economic union with privileged customtreatments with member countries. GAFTA (great arab free trade area )

Attractive economic relations with the African countries: Egypt is a mainmember in the C.O.M.E.S.A. (common market of eastern and southernAfrica )with privileged custom treatments with member countries.

Egypt-EU Association Agreement

European Free Association (Switzerland-Norway-Liechtenstein)

Egypt-Turkey Free Trade Agreement

QIZ(qualifying industrial zone)

Agadir Agreement


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Porters five forces for competitor analysis

Porters 5 forces model is help to evaluate the business plans of a company.

Followings are Porters five forces model:

Porters Five Forces

PORTERs

5

Threat

of new

entrants

Degree

of

Rivalr

Threat

of

substitutes

Bargaining

power of

su liers

Bargaining

power of

bu ers


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1)Threats of New Entrance:

The market is full of competitors. It is very difficult to enter in market for a

new company. On the other hand, entry of new company makes the path

very tough for existing companies. So, the existing companies treat the new

entrance as threats for their company. Porter (2010) mentioned that when a

new company tries to enter in the market, sometimes it reduces the price of

their product to attract the customer or may give some other benefits.

Especially, a new company identifies and concentrates on the weaknesses of

existing companies. It helps the company to meet customer requirement and

get developed slowly. The new company tends to maintain the availability tobeat the existing one.

2)Threats of substitute products:

Reinhardt and Stavins (2010) commented that substitute product sometimes

creates loss for the company. There have ample substitute of almost all

products. So, whenever a company have problem with supply or availability

of their product, another companies takes place. People ask for quality and it

should be convenient to buy. They might buy substitute product if they could

not find the product what they used to buy. Bingham and Eisenhardt (2011)

opined that the various promotional activities make confuse the customer

about substitute. For example: Coke and Pepsi. Both use tap water to

produce same category products but they promote in different ways. So

people might get confuse as it is almost same.

3)Customers bargaining power:

Sometimes a situation might come that there is a single buyer and market is

full of suppliers. In that situation the customers bargaining power impacts on

the industry in terms of price and all. Buyers have the option to choose the

best one. So, companies have to reduce their prices of the product to get the

customer. Otherwise other competitor will have the customer (Analoui and

Karami 2009).


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4)Suppliers Bargaining Power:

Every industry needs various components, raw materials, human resource

etc to produce final goods. It brings a relationship between the supplier and

buyer. If there is scarcity of supplier than the bargaining power of supplier

take decision over buyer. Supplier may change the price of inputs to get

intention of buyers. If it happens then the suppliers decisions takes place

instead of buyers decision (Brusoni and Prencipe 2009).

5)Competitive Rivalry within companies:

The rivalry of existing competitors indicates about new product launce,

advertisement campaign, discounts, the price deduction etc. To some extent

rivalry can creates profit but in high rivalry situation it minimizes the profit of

the company. If a company having low market share in that situation rivalry

can be effective for the company. The company is considered to be closely

controlled if rivalry of a company is low rather than other companies. This

discipline may result from the companies history of competition.

Implementation of Porters 5 forces model in Johnston and Johnston

Company:

Analoui and Karami (2009) have mentioned that the threat of new competitors

affects all existing competitors. For example, a new company Mini Baby has come

with variety of baby care products. It having good quality product to compete

Johnston and Johnston Company. This company will try to concentrate on the

weakness of the Johnston and Johnston Company as it is the main competitor for

Mini Baby. Johnston and Johnston Company is a global brand because of which

the market fluctuates. The Mini Baby having no trouble of that as it is a new

company. Secondly, it has to be maintaining the quality and availability of products.

Johnston and Johnston Company has lacking behind in terms of availability of skin

care products. The marketing strategy of that category product is not properly

implemented to attract customer. On the other hand, Bingham and Eisenhardt

(2011) opined that scarcity of these products makes customer to choose substitute


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products. Another problem is that the availability of these items is not like the

customer expectation. In that situation there is good chance for mini baby to grab

the market.

Once it grip in the market it can produce other products with good quality whichcan be compete with Johnston and Johnston Company. By evaluating the market

share and market growth through BCG Matrix this can be understood that Johnston

and Johnston Company has lacking behind in terms of skin care products. So a new

company like Mini Baby has a very good chance to expand the market Brusoni and

Prencipe (2009).

On the other hand, Goksoy and Ozsoy (2010) illustrated that medicine producing

industry is more of capital intensive industry. It is a form of barriers to a newcompany. There need to be invest a big amount of capital to produce final outcome.

Mini Baby has not that influence in medical or diagnosis products like Johnston

and Johnston Companybut it has the potentiality to fulfill customer requirement.

The product has to be promoted in such a way that people will choose instead of

Johnston and Johnston Company products.

In terms of buyers perspective, buyers have the power to make decisions (Brusoni

and Prencipe 2009). There have lots of companies who manufacture drugs and

other medical products, so the buyer has lots of option to choose. It creates

competition among companies. In that situation Mini Baby can prepare their

marketing strategy keeping in mind the customers bargaining power. On the other

hand, Goksoy and Ozsoy (2010) commented that in that category product the

supplier has no influence over buyer as the number of buyer is less than number of

supplier. Being as a new company in the market Mini Baby has to maintain brand

loyalty. Because the existing company is having brand loyalty (Dobson 2009).


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Corporate Governance

Our Board of Directors is a diverse group of individuals who are elected by ourshareholders each year. We currently have 12 Board members, 11 of whom are

independent under the rules of the New York Stock Exchange. Alex Gorsky,current Chief Executive Officer (CEO) of Johnson & Johnson, also serves as theChairman of the Board of Directors. Our independent Directors determined that foreffective Board governance, it was appropriate to have an independent LeadDirector and have selected Anne M. Mulcahy to serve as the designated LeadDirector for 2013.

Our Board holds the ultimate authority of our Company, except to the extent thatour shareholders are granted certain powers under the Companys Certificate ofIncorporation and By-Laws. Qualifications for the Board of Directors and standardsof independence are laid out in our Principles of Corporate Governance andadditional guidelines are outlined in our Code of Business Conduct & Ethics for

Members of the Board of Directors and Executive Officers. We believe goodcorporate governance results from sound processes that ensure our directors arewell supported by accurate and timely information, sufficient time and resources,and unrestricted access to management. Additionally, we believe the business

judgment of the Board must be exercised independently and in the long-terminterests of our shareholders. The Board of Directors:

Appoints senior management of the Company, who are responsible forconducting business and operations;

Provides oversight of management and offers strategic direction to theCompany; and

Forms standing Board Committees to assist in fulfilling its obligations.

The Board of Directors has six standing committees

Audit Committee:

composed of non-employee Directors, determined to be "independent" under thelisting standards of the New York Stock Exchange:

Assists the Board in oversight of the Company's accounting and financial reportingprocess and practices.

Appoints the independent public auditor and reviews its performance. Oversees the Company's Internal Audit department and reviews its annual plan. Monitors adequacy of internal accounting procedures and controls. Assists the Board in oversight of the Company's financial reporting compliance and

disclosure procedures.
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Compensation & Benefits Committee:


Establishes the Company's executive compensation philosophy and principles, reviews

and recommends for approval by the Board the compensation for the Chief ExecutiveOfficer and non-employee directors, and approves the compensation for theCompany's other executive officers.

Reviews the philosophy and policies of the non-Board Management CompensationCommittee with respect to management compensation, perquisites and othercompensation policies for non-executive employees.

Oversees the management of the various retirement, pension, long-term incentive,savings, and health and welfare plans that cover the Company's employees.

Finance Committee:

composed of the Chairman and Lead Director of the Board, exercises the authorityof the Board during the intervals between Board meetings.

Nominating & Corporate Governance Committee:


Oversees corporate governance matters. Reviews possible candidates for Board membership and recommends nominees for

election.

Oversees the process for performance evaluations of the Board and its committees. Reviews the Company's executive succession plans and executive resources.

Regulatory, Compliance & Government Affairs Committee:


Oversees the Company's non-financial compliance programs and systems withrespect to legal and regulatory requirements.

Oversees compliance with any ongoing Corporate Integrity Agreements or any similarundertakings by the Company with a government agency.

Reviews the organization, implementation and effectiveness of the Company's health

care compliance & ethics and quality & compliance programs. Oversees the Company's Policy on Business Conduct and Code of Business Conduct &

Ethics for Members of the Board of Directors and Executive Officers. Reviews the Company's governmental affairs policies and priorities and other public

policy issues facing the Company.

Reviews the policies, practices and priorities for the Company's political expenditureand lobbying activities.

Science, Technology & Sustainability Committee:
http://www.investor.jnj.com/documentdisplay.cfm?DocumentID=1264http://www.investor.jnj.com/documentdisplay.cfm?DocumentID=1264http://www.investor.jnj.com/documentdisplay.cfm?DocumentID=1265http://www.investor.jnj.com/documentdisplay.cfm?DocumentID=1265http://www.investor.jnj.com/documentdisplay.cfm?DocumentID=10722http://www.investor.jnj.com/documentdisplay.cfm?DocumentID=10722http://www.investor.jnj.com/documentdisplay.cfm?DocumentID=8880http://www.investor.jnj.com/documentdisplay.cfm?DocumentID=8880http://www.investor.jnj.com/documentdisplay.cfm?DocumentID=8880http://www.investor.jnj.com/documentdisplay.cfm?DocumentID=10722http://www.investor.jnj.com/documentdisplay.cfm?DocumentID=1265http://www.investor.jnj.com/documentdisplay.cfm?DocumentID=1264


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composed of non-employee Directors, determined to be "independent" under thelisting standards of the New York Stock Exchange.

Monitors and reviews the overall strategy, direction and effectiveness of theCompany's research and development.

Serves as a resource and provides input, as needed, regarding the scientific andtechnological aspects of product safety matters.

Reviews the Company's policies, programs and practices on environment, health,safety and sustainability.

Assists the Board in identifying and comprehending significant emerging science andtechnology policy and public health issues and trends that may impact the Company'soverall business strategy.

Assists the Board in its oversight of the Company's major acquisitions and businessdevelopment activities as they relate to the acquisition or development of newscience or technology.

Corporate Culture

What Sets Us ApartMeet our people and youll get a real sense of how our culture enables dynamic and

impactful careers. We share a kind of DNA where were each

Committed to Caring

Responsible to our communities

Ready to apply our knowledge and know-how

Unique in our background and experiences

The drivers of our own success

Passionate about doing whats right

If you share these qualities, chances are youve got that same J&J DNA. And when

you join our team, were prepared to help you

Be seen for the value you bring

Drive your careers forward

Be part of something bigger

People Aligned By ValuesWe each bring a unique set of experiences from dozens of cultural backgrounds.Our

shared values unify our direction and decisions, helping us touch the lives of more

than a billion people every day.

We collaborate in teams and continuously share and refine critical skills and

methods. We value the unique perspective and approach that each person brings.
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We foster an environment that celebrates and leveragesdiversity. We welcome

everyone to be authentic about who they are and the perspective they offer. We

ensure that every member of the team has a chance to make their mark and drive

theircareer growth.

Marketing

Marketing Mix

Over the years Johnson & Johnson has grown substantially in part due to strategic

acquisitions ranging from large ones such as Neutrogena in 1994 and DePuy in 1998, tomany smaller ones. From 1989 to 1999, the company made 45 such acquisitions of

companies and product lines. Today the firm can boast of revenues exceeding $61,897

million during the financial year (FY) ended December 2009.

Product

Johnson and Johnson products are basically in three main categories: Pharmaceuticals,

Medical Devices & Diagnostics, and Consumer Health care.

The following are examples of the Johnson & Johnson product inventory: Feminine hygiene,

Denture care, Contraceptives, Immunology, First aid, Family planning, Oncology,

Nutritionals, Diabetes care, Neurology, Vision care, Allergy cold and flu treatment, Womens

Health, Medical devices and diagnostics.

Price

In the United States, Johnson and Johnson strives to keep their net price increases for health

care products within the Consumer Price Index (CPI).

Johnson and Johnson works with governments to develop differential pricing approaches to

help more people access their medical products. Johnson & Johnson companies have

agreements with the United Kingdom for VELCADE (bortezomib), a treatment for multiple

myeloma, and with France for RISPERDAL CONSTA (risperidone long-acting injection)

a medication for the symptoms of schizophrenia. Companies and government agencies are also

entering other types of risk-sharing agreements in order to help people gain access to new

therapies sooner.
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The following are examples of Johnson and Johnson consumer product prices: Bengay Pain

Relief $12.99, (at Amazon), Listerine Oral Care $7.49 (Next Tag), Splenda Sweetener $7

(Drusstore.com).Tylenol Rapid Release $12.95 ( Allegro Medical.com ).

Place

These are some companies that sell Johnson and Johnson products wholesale: Over the

Counter Wholesale.com, WUZ Group, ShopatHome.com

Johnson and Johnson products can be found at the following retail outlets: Target, Walgreens,

WalMart, Vons and Eversave, to name but a few.

Promotion

Johnson and Johnson offers special discount coupons on products such as baby care, and

contact lens.

Johnson and Johnson has run a Beauty for All Ages rebate promotion on Coupons.com and

some of the campaign products are available at Walgreens and may also include buy one get

one half off discount as well.

Johnson & Johnson is involved with many causes and advertising campaigns that encourage

healthy lifestyles. Key initiatives include: The Campaign for Nursings Future, Having a Baby

Changes Things, and Because We Care We Act (China).

Process

Johnson and Johnson employs what they call a decentralized management approach.

Employees are encouraged to be entrepreneurial with the understanding that they will

benefit from focusing on customer needs and providing solutions.

Johnson and Johnson seeks to turn insights into innovative new products and sometimes whole

new businesses. Their goal is to capitalize on scientific breakthroughs, marketing insights and

manufacturing expertise easily across the full range their businesses. With more than 250

operating companies have a local window into emerging customer needs, scientific

developments, and technologies throughout the world.

The Executive Committee of Johnson & Johnson is the principal management group

responsible for the operations and allocation of the resources of the Company. This Committee

oversees and coordinates the activities of the Consumer, Pharmaceuticals and Medical Devices

and Diagnostics business segments. Each subsidiary within the business segments is, with

some exceptions, managed by citizens of the country where it is located.


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Physical Evidence

The Johnson & Johnson Headquarters is located at One Johnson & Johnson Plaza, New

Brunswick, New Jersey.

The Johnson& Johnson Consumer Division is located at 199 Grandview Road, Skillman New

Jersey.

The Ortho-Biotech Division is located at 700 Route 202 Raritan, New Jersey.

The Lifescan Division is located at 1000 Gibralta Drive, Milpitas, California.

The VistaKon Division is located at 7500 Centurion Pkwy, Jacksonville, Florida.

The Endo Surgery Division is located at 4545 Creek Road Cincinnati, Ohio.

The Independence Technology Division is located at 40 technology Drive, Warren New

Jersey.

Company Subsidiaries, Codman and Shurlett as well as De Puy Acromed are located at 325

Paramount Drive Raynham Massachusetts.

The Johnson and Johnson logo is based on the signature of James Wood Johnson, one of the

two brothers originally who founded the company.

Johnson & Johnson maintains a presence online via a number of websites

http://www.jnj.com/connect/others/sitemap/ which provide information on company values,

and management approach.

Another Johnson and Johnson website http://www.jnj.com , provides detailed information on

various consumer products such as Listerine or Tylenol.

People

William C Weldon is Chairman & Chief Executive Officer of Johnson & Johnson.

Dominic J. Caruso is the Chief Financial Officer and Vice President of Finance.

Johnson and Johnson has a Global Diversity and Inclusion program with a goal of achieving a

skilled, high performance workforce that is reflective of the diverse global marketplace

(workforce).

Johnson & Johnson was ranked #2 among Diversity Inc. Magazines Top 50 Companies for

Diversity.

The company has ranked high Working Mother Magazines Top One Hundred Companies for

Working Mothers

or 24 years.


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Market Presence

As the world has changed, so has the geographical distribution of our business, employees,products and sales. In 2012, 56 percent of the revenues of Johnson & Johnson come fromoutside the U.S., compared to about 40 percent a decade ago.

The BRIC markets (Brazil, Russia, India and China) comprise nearly 10 percent of our totalrevenues for 2012. The broader emerging markets represent more than 20 percent of oursales, reflecting double-digit growth in 2012 on an operational basis, inclusive of Synthes.

The broad base of product offerings and global critical mass of Johnson & Johnsonpositions us well with customers and governments, and gives us a unique ability to meet theneeds of the emerging markets. As we have established and expanded our presence inglobal markets, we have leveraged our global portfolio and selectively acquired products

tailored to meet the needs of specific populations. For example, in 2012 we acquiredSpectrum Vision, LLC, a full-service distributor of contact lenses serving Russia withfacilities in the Ukraine and Kazakhstan.

Our regional companies have optimized their infrastructure and are continuing to invest tosupport dozens of institutes around the world designed to train health care providers on theeffective use of our products. For instance, our So Paulo Institute in Brazil trains nearly3,000 health care providers annually.

An example of our commitment to offer localized health care solutions is evident in India,where we have opened a DePuy Institute. Approximately 1,000 physicians a year aretrained there in the latest orthopaedics techniques and technologies to help ensure that

patients can get the quality care they need.

Model of Emerging Market Strategy

The work we are doing in China illustrates how we are building our business in importantemerging markets. There are 1.4 billion people in China, the majority of whom are coveredby some form of health insurance. Increases in health care expenditures are estimated torun at a 20-plus percent annual growth rate through 2016. As Chinas national economygrows, and more people enter the middle class, there is a rising demand for a broader arrayof health care solutions.

Johnson & Johnson has had businesses in China for 27 years, employing close to 9,000people. Our China business generated nearly $2.5 billion in sales last year driven by adiverse and expanding portfolio of brands that Johnson & Johnson is known for globally, aswell as those we have acquired to meet specific local needs and demand.

We have eight major manufacturing facilities in China. Our Xian plant is equipped withworld-class capabilities and produces over 240 million packaging units of high-qualitypharmaceutical products that supply 26 countries with benchmark cost- efficiency. Our


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sutures plant in Shanghai provides raw materials and semi-finished silk to the U.S., Europeand South America, where we then complete production.

We have a major new Innovation Center in Suzhou that supplies medical device anddiagnostics products specifically for the emerging consumer markets in China and India.These products are targeted at specific disease states that are more prevalent in the region,

and they include simplified or smaller devices that are better suited for use outside themajor cities and top-tier hospitals, as well as multi-use or even disposable products that aremore economical. We already have a number of these products on the market, includingstaplers, sutures, a blood glucose meter and an artificial knee. Yet there is much more to bedone as we seek to bring the promise of good health to as many people as possible.

Our portfolio of offerings in China is diverse and expanding, and it includes iconic brandsfrom our JOHNSONS Baby and NEUTROGENA franchises. Important pharmaceuticalproducts such as REMICADE (infliximab) and INVEGA SUSTENNA (paliperidonepalmitate) have strongly grown in the market. RESOLOR (prucalopride) and EDURANT(rilpivirine) were approved there in late December. Meanwhile, SIMPONI (golimumab) and

STELARA (ustekinumab) are under review by the Chinese Ministry of Health.We are also conducting research and development into new medicines that will addressspecific needs in China and across Asia. In May 2012, we acquired Guangzhou BiosealBiotech, which has the only approved porcine plasma-derived fibrin sealant on the market inChina. This acquisition will expand our biosurgery business there.

We know the model in China works, and we are applying it in other countries as well.


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BCG Matrix:

Here BCG Matrix will be evaluated in terms of Johnston and Johnston Company.

MacMillan and Venkataraman (2009) opined that this will help the company to

identify and understand the mistakes done at the time of strategic planning. Thisanalysis is based on the product life cycle of Johnston and Johnston Company.

All baby care products of Johnston and Johnston Company are growing

worldwide with high market share and high growth. The company is

generating cash because of its massive investment on baby care products.

On the other hand, Robinson and Pearce (2010), demonstrate that Women

Health Care product of Johnston and Johnston Company takes place as in

Cash cow. It has the large market share in this sector. Investing lower

amount in this sector, the company can make more cash which can be again

invest in other sector of the company. It will be beneficial for the company to

Stars

All kind of baby products:

Baby Oils

Baby Shampoos

Question Marks

Medical & Diagnostics

Contact Lenses

Cash cows

Women Health care Products

Tampons / Sanitary Napkins

Dogs

Skincare Products


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improve that sector which is lacking behind. In terms of Johnston and

Johnston Company this cash could be invested in Medical & Diagnostics

sector. Unlike the other sector Medical & Diagnostics sector is not growing so

much. There is an opportunity to make Medical & Diagnostics sector to

generate more case, strategic planning should be needed. Tarplett et.al.

(2009) opined that all skin care products are mentioned as dog because they

are unable to generate cash due to low market share and low growth. Here,

the company invests a lower amount in this sector. For this company, the

skin care products either have to be minimized or invest more in that sector.

Johnston and Johnston Company have very much influence in international

market, so there is a possibility of growth in this sector in future, agreed by

Zott and Amit (2008).


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Balance Sheet

Assets Liabilities and Owners Equity2011 2012 2013 2011 2012 2013

Current assets Current liabilities

Cash 35,253,783 49,531,712 58,962,772 Account

Payable

46,462,123 68,295,011 112,499,508

Inventory 15,711,586 17,526,836 29,532,547

Account

Receivables

47,536,606 64,777,950 76,747,990

Total Current

Assets

98,501,975 131,836,498 165,243,309 Total

Current

Liabilities

46,462,123 68,295,011 112,499,508

Fixed Assets 6,419,028 8,521,178 11,528,991 Long

Termliabilities

4,054,394 4,316,065 5,467,835

Total Assets 104,921,003 140,357,676 176,772,300

Total

Liabilities

50,516,517 72,611,076 117,967,343

Equity 54,404,486 67,746,600 58,804,957

Total

liabilities

and

Equity 104,921,003 140,357,676 176,772,30


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Income Statement

2011 2012 2013

Sales 141,269,528 192,259,443 194,566,628

Cost of goods sold (80,798,862) (99,304,061) (108,071,416)

Gross Profit 60,470,666 92,955,382 86,495,212

Marketing

expenses

(38,018,964) (52,704,602) (57,596,926)

Administrative

expenses

(8,335,397) (10,994,265) (6,502,626)

Other operating

revenues

2,268,250 1,085,679 1,231,957

Other operating

expenses

(3,684,881) (5,941,931) (5,114,269)

Operating

loss/profit

12,699,674 24,400,263 18,513,348

Investment profit 449,930 1,207,800 1,167,865

EBIT 13,149,604 25,608,063 19,681,213

Taxes (3,011,334) (5,982,189) (1,622,856)

Net income 10,138,270 19,625,874 18,058,357


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2011 2012 2013 Comments

Liquidity Ratio

Current ratio 2.12 1.93 1.47

Quick ratio 1.78 1.67 1.2

Activity RatioInventory

Turnover

5.1 5.66 3.66

Total Asset

Turnover

1.34 1.36 1.1

Average

collection

Period

122.8 122.9 55.4

Average

Paymentperiod

209.8 251.1 379.9

Debt Ratio

Debt ratio 0.48 0.51 0.66

Profitability Ratio

Return on

Assets ROA

9% 14% 10%

Return on

Equity

18% 28% 30%

Net profit

margin

9.3% 13.3% 10%


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Human Resources

Benefits

Johnson & Johnson offers a comprehensive and competitive benefits program toattract and retain talented employees. In the U.S., the Choices Benefits Program isdesigned to meet the needs of employees and their families by providing a widerange of health, survivor, disability and retirement options. Choices Benefits areprovided annually to active salaried and non-union hourly employees, as well asregular and casual part-time employees who are scheduled to work 19 or morehours per week. The Choices Benefits Program lets employees create a personalizedbenefit package for themselves and their eligible dependents. Benefits include:

Medical

Dental

Vision Tobacco Cessation

HealthAccount (Flexible Spending Account) CareAccount (Flexible Spending Account)

Life Insurance Accident Insurance Disability Coverage

Long-Term Care Insurance Group Legal Insurance

Auto and Home Insurance Commuter Benefits Program

The Company provides a basic level of life insurance and business travel accidentcoverage for eligible employees at no cost. In addition to Choices benefits, theCompany provides a noncontributory pension plan and offers employees theopportunity to participate in a savings plan with a company match. Employees mayalso be eligible for retiree medical coverage and company-provided retiree term lifeinsurance. Plan provisions may differ for certain part-time employees and bycountry. Benefits are provided to union employees through collective bargainingagreements. Additional information is available in Note 10 and Note 11 of our 2012Annual Report and in the economic performance section of this report.

As the largest health care company in the world, enhancing the health and wellness

of our employees is a logical extension of our corporate mission. It is our belief thatpromoting employee health and wellness makes good business sense because itincreases productivity and engagement, while decreasing health care costs andproviding personal benefits to our workforce. Our Healthy People program providesEmployee Assistance, as well as Occupational Health and Wellness and Health

Promotion services, all of which have expanded globally since 2005. Additionally,we now offer a full suite of online resources through HEALTH MEDIA and a uniqueapproach to increasing physical and emotional capacity through the HUMAN


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PERFORMANCE INSTITUTE and Our Energy in Performance for Life programs. Seeour 2012 Executive Summary Report feature story for more information.

Johnson & Johnson provides a range of benefits to employees impacted byreorganizations. The benefits can include severance payments and access tooutplacement support, as well as Employee Assistance programs. The benefits

employees receive

will depend on a number of factors, including local practices, size and scale of therestructuring, etc., and if the employees are represented by a third party withwhom we would negotiate such benefits.

Hiring Practices

In a global, decentralized business, hiring locally helps us best meet customerneeds. Our operating companies hire from the communities in which we dobusiness and follow all applicable labor laws and requirements. In most cases, theJohnson & Johnson Family of Companies does not offer visas or work permits.Candidates must be authorized to work in the country to which they are applying.Applicants must be fluent in the language of the country where a job is based.

Each subsidiary within our business segments is, with some exceptions, managedby citizens of the country where it is located. Among our Executive Committee,based at our headquarters in New Brunswick, New Jersey, two-thirds of membersare from the U.S.

Employee & Labor Relations PracticesOur employees are our most valuable asset.

We are committed to respecting human rights as embodied in the UniversalDeclaration of Human Rights and its two corresponding covenants, TheInternational Covenant on Civil and Political Rights and The International Covenanton Economic, Social, and Cultural Rights. In addition to the universal statements ofhuman rights noted above, we follow the principles in the International LaborOrganizations Declaration on Fundamental Principles and Rights at Work, includingnondiscrimination, freedom of association and collective bargaining, and freedom

from forced and child labor.Global Labor and Employment Guidelines

In keeping with these and other internationally recognized expectations forbusiness ethics, product quality, labor and employment, health, safety and theenvironment, and to ensure that Johnson & Johnson and each of its subsidiariesthroughout the world follow consistent labor and employment policies, ourGlobal
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Labor and Employment Guidelines clearly set forth our expectations. TheseGuidelines require, first, that our policies and actions are in full compliance with thelaws and regulations of the respective countries in which we operate. In addition:

We communicate regularly with our employees and, whenever possible, partnerwith them to achieve desirable competitive outcomes

We require our operating companies to respect each employees right to decide ifthey wish to join or not join associations and/or labor unions, and to respect theability to make an informed decision, free of coercion

We operate so that support of, or opposition to, associations, does not impact anemployees employment or an individuals application for employment

Employees have the right to organize, join associations and bargain collectively, ifthey so choose. The company and its operating companies are required to bargainin good faith with these associations

It is not permitted to accept or condone any aspect of forced labor

The Company and its subsidiaries may not discriminate against any employeebased on their ideological views, race, color, religion, gender, sexual orientation,national origin, age, disability, or any other status protected by law

While the Company may counsel, and if necessary, discipline employees inconnection with unacceptable behavior, physical punishment is not permitted

Employees choose to work for us at their own discretion. It is not permitted to forcethem to remain in our employ

We support, adhere to and must strictly enforce child labor laws

Johnson & Johnson has additional guidelines that work to assure our employees aretreated fairly and equally. These include:

Equal Employment Opportunity Policy;

Policy on the Employment of Young Persons;

Guide for Resolving Employee Disagreements; and

Harassment Policy

Several global functions support and share responsibility for various aspects oflabor practices. These include Global Diversity & Inclusion, which reports to theChairman and Board of Directors through its Vice President and Chief DiversityOfficer, and to Human Resources, whose Vice President is a Corporate Officer and amember of the Executive Committee. Human Resources responsibilities includeGlobal Talent Management, Global Benefits, Health Resources and WorldwideCompensation Resources. The Supply Chain Vice President of Human Resources for
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Johnson & Johnson is responsible for the oversight and/or implementation of thelabor relations policy. Employee representatives are included in formalizing laborrelations policy in certain regions of the world, such as Asia Pacific.

Johnson & Johnson completes labor and employee relations assessments and auditsthrough local Human Resources and our Global Employee & Labor Relations

Function. Currently, three regional leaders are assigned to variouscountries/regions throughout the world. These leaders interact with employees,trade unions and other employee representatives (works councils), and governmentofficials. They have broad oversight and responsibility for monitoring complianceand maintaining relationships with labor unions and works councils.

Grievance Resolution

Johnson & Johnson maintains a variety of mechanisms for collecting and addressingemployee grievances and complaints to ensure that workers can raise concerns

confidentially. These mechanisms include an employee hotline through whichemployees can confidentially and anonymously raise their questions and concerns.The Company also has an Open Door policy; employees are encouraged to air theirgrievances to any manager, regardless of level, within the Company, and thosegrievances will be addressed.

Additionally, anyone can report allegations through other methods within theoperating companies or to Internal Audit, the Law Department, Global Security orHuman Resources. Hotline access is communicated broadly, and visibility of thisaccess and Hotline functionality are in-scope for financial audits. Regional Labor andEmployee Relations staffs independently investigate noncompliance in employeerelations matters, and verified non-compliant situations are addressed at the

respective business unit. Of the approximately 690 employee relations hotlinematters received in 2013, all were addressed. Of these, approximately 90 percentwere closed, along with approximately 130 matters pending from 2012. Althoughadditional grievance data is not tracked at the enterprise level, a global system togather this enterprise data is under development and being implemented in 2014.

In addition, the Common Ground program in the U.S. is a three-step process (OpenDoor, Facilitation and Mediation) through which employees are afforded the abilityto have their grievances and complaints confidentially aired and addressed. Theprogram has been recognized both internally and externally as a leading resource inencouraging employees to raise and resolve disputes. The Company also maintains

a non-retaliation policy

Collective Bargaining

Employee representation structures vary throughout the world, and Johnson &Johnson is assessing the status of sites with employee representation by region.The regions are North America, Latin America, Asia-Pacific and Europe/MiddleEast/Africa (EMEA). In the EMEA region, up to 100 percent of Company sites have


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the ability to establish an employee representation structure or framework. Whereemployees choose to establish these structures, management provides support.However, employees at some of the Companys sites have chosen not to establishthese employee representation structures. In the Latin American region,

approximately 55 percent of employees have employee representation structures inplace. In the North American region, less than 10 percent of employees haveemployee representation structures in place. We do not currently have informationfor the Asia-Pacific region.

Working conditions at Johnson & Johnson operating companies have beencollectively bargained in many different ways throughout the world. Subjectscovered by collective bargaining agreements with trade unions over the past yearinclude, but are not limited to: wages, hours of work, terms and conditions ofemployment, work rules, health and safety, grievance processes, organizationstructures, holidays, vacation, training, active and retired employee benefits, drug

testing, seniority, travel expenses, leaves of absence, shift premium pay, overtimepay, overtime administration, bonuses, rest periods, job bidding procedures,severance pay, equal employment opportunity, union dues payments, trade unionrepresentation, restructurings/reorganizations, layoffs and recalls. We estimate thatgreater than 95 percent of employees of Johnson & Johnson companies covered bycollective agreements have working conditions included in their agreements.

Minimum Notice Periods

Johnson & Johnson is a highly decentralized corporation comprised of many distinct

and relatively autonomous operating units around the world. We do not have aformal enterprise-wide policy mandating a minimum notice period regarding

significant operational changes. However, local operating unit leaders endeavor tocommunicate significant plans of operational changes to employees and theirrepresentatives, where they are present, in a timely and practical manner inadvance of actions being taken. Feedback and suggestions from employees andtheir representatives, where they are present, are always taken into considerationbefore any final decisions are made. In regions/countries where involvement ofemployees representatives in decision-making processes is legally required, wehave established rigorous formal consultation processes to ensure compliance.

Where minimum notice periods for layoffs are required by local law or incorporatedinto collective bargaining agreements, the operating units are always in compliance.For example, in the U.S., where a minimum of 150 employees or one-third of a

units workforce is scheduled for layoff, the WARN Act requires that the affectedemployees, their representatives (where present) and local government officials beprovided 60 daysnotice. If employees are negatively impacted by any changes, wehave measures in place to help and support them appropriately. Where there is nolegal minimum notice period, Johnson & Johnson companies attempt to providenotice at the earliest possible time, often ranging from 30 days to 180 days.


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Talent Attraction, Management & Retention

Skill and Talent Management and Training

In the Johnson & Johnson Family of Companies, every leader believes that our

people are a competitive advantage and, therefore, every leader takes fullownership for talent management. Human resource leaders and business leaders

jointly own talent management on behalf of the enterprise. Our leaders areaccountable for attracting and recruiting talent, managing performance anddevelopment, building a pipeline of global and diverse leaders, and creating anenvironment that embraces diversity and inclusion.

Our employees are active participants in their development. Employees are giventhe opportunity to develop and grow, and have access to the tools and resourcesneeded to do so. More importantly, they are empowered to navigate their owncareer development and to be accountable for knowing what is expected from themin terms of performance and development. This talent philosophy ensures a robust

and diverse pipeline of global leaders, high performing and highly engagedemployees and culture, and continued business continuity and growth.

Development is an interconnected series of experiences that strengthen ourworkforce and advance our organization. We provide enterprise-wide training thatis business-aligned and accessible to all employees within Johnson & Johnsoncompanies globally. The training encompasses a vast array of topics, fromleadership development and management education to training in disciplines suchas finance, marketing, business practices and compliance requirements. We offer

on-the-job training, plus extensive, globally accessible training and development atthe individual, team and organizational levels. These are available online to all full-

and part-time employees globally and include independent study courses, web-based courses, interviewing simulations, assessments, intensive workshops andaction planning courses. Temporary workers do not participate in Johnson &Johnson learning or leadership development offerings.

In 2012, the curriculum was streamlined and reorganized, with over 400 coursesoffered. Training is provided, tracked and documented by the operating companies.Training programs are accessible in every region and, in some cases, in severallanguages. These programs are open to all employees and are designed to addressthe different stages of their growth. Programs are part of an integrated globalcurriculum that establishes a global standard of leadership development experienceavailable throughout each employees career.

Training is provided, tracked and documented by the operating companies.Employees receive an average of eight hours or more of training per year, althoughmany receive much more. Senior management, high potential employees (belowvice president) and other critical positions receive six to seven days of educationper year; middle management and front line management receive four to five daysof education a year; and vice presidents and above receive eight to 19 days ofeducation per year. Because training records are maintained at a local or


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operational level, we are not able to provide a detailed report on this information ona global level for all employees.

Transition assistance programs offered to support employees who are retiring orwho have been terminated from employment comply with regulatory or collectivebargaining agreement requirements, with many locations providing more than what

is required. Offerings may include pre-retirement planning for those contemplatingretirement, retraining for those who will continue working, severance pay, jobplacement services and assistance (e.g. training, counseling) for those transitioningto a non-working life.

Talent Attraction and Retention

The opportunities for development and career advancement are strong componentsof Global Talent Management. Our recruiting organization continues to implementrecruiting models in countries around the worldnow in all countries in which weoperate except two, which are coming on line this yearto focus on universityrecruiting, invest in social media and implement U.S. diversity recruiting strategy.The Global Job Posting program promotes our commitment to the advancement anddevelopment of our employees, and helps to create a strong foundation for ongoingdevelopment discussions between employees and managers.

The Total Rewards program is another important part of Global Talent Managementand includes compensation, benefits and health resources services across theJohnson & Johnson Family of Companies. To ensure positive employee experiences,we offer competitive compensation programs as well as costeffective and country-focused services related to health and wellness, pension, disability and leave ofabsence. These offerings meet the needs of our diverse workforces and align withOur Credo values.

The Johnson & Johnson Family of Companies provides a portfolio of leadershipdevelopment offerings that include training and leadership development programs.The learning strategy provides opportunities in foundational, advanced andcontinuing development for the individual contributor, first line leader, leader ofleader and business unit leader. Core Training is available to support transitionsinto new roles, advanced development within roles, and development of skills tomeet current and future business and leadership capabilities through six-monthdevelopment programs, instructor-led courses, eLearning and online resources. Inaddition to these open enrollment programs, functional leadership teams designand provide for development at significant levels, from entry level to seniorleadership.

Multiple Pathways for Career Advancement

The diversity of businesses among our family of companies offers employees abroad range of career path options. Employees can advance within their functionaldiscipline, or progress along a path that provides experience across a range offunctions. Based on performance, business needs and personal interest, employeescan cross job functions, operating companies, business segments and geographicboundaries as they advance within our companies.


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Optimizing Work, Family & Personal Life

Our comprehensive programs and services for employees reflect a holistic view ofwork, family and personal life to help support individual effectiveness at work andat home. Specific programs, including those for flexible work arrangements,education, adoption, child care and elder care may vary around the world based on

local circumstances and business needs. In all cases, however, they reflect ourfundamental goal of helping employees live well, work well and be well.

Examples of programs that may be offered within our companies include:

Employee Assistance and Work/Life Resource & Referral Services to help employeesaddress personal issues and achieve a balance between their work and personallives;

Proactive Health Assessments & Health Counseling to help employees assess theirrisk for certain health problems through counseling with a registered nurse;

Workplace Health Programs to help ensure the health and safety of employeesthrough on-site, online, self-paced and group programs; and

Wellness and Fitness Services to address employees health and wellness needs;some companies offer on-site fitness centers, personal training and exerciseclasses.

Workforce Statistics

Johnson & Johnson companies have approximately 128,700 employees working inmore than 275 operating companies located in 60 countries. Previously, due to the

complex nature of the Companys various employee databases and payroll systems,and differences in how employees are compensated in different countries, theCompany was not able to calculate the total workforce breakdown by employeesand supervised workers, employment contract, employment type and region, norwere we able to report on turnover on a enterprise-wide basis. A new employeedata management system now allows us to capture and report some of thisinformation. The table below shows our workforce by region.


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Information regarding employment type, turnover and diversity indicators isavailable for our North America region: 98 percent of our workforce is made up offull-time employees; 2 percent is considered to be part time. In 2012, our total

turnover rate was just under 11 percent; the voluntary turnover rate was 7.5percent. Options are being explored that would enable this data to be provided in areliable manner on a global scale.

At year-end 2012, key workforce statistics for our Board of Directors were asfollows: three women (23 percent female), ten men; ethnic minorities equaled four(31 percent).


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Operation and logistics

Supply Chain Management

Taking responsibility for the environmental and social impacts of our productsbegins with product design and development, and then extends to the sourcing,manufacturing and delivery of our products to our customers. For many years, wehave been implementing and improving environmental and social measures in ourown organization. As a natural progression, we are focusing on promotingsustainability throughout the supply chain.By doing so, we can improve our ownperformance, as well as influence the performance of our supply chain partners. Wegive preference to purchasing products or services that demonstrate the followingattributes:

Use of renewable resources

Use of sustainable practices

Energy efficiency

Packaging efficiency

Transport efficiency

Made from recycled materials and/or can be recycled or reused at end of life

Products that do not contain or use in their production materials listed on theJohnson & Johnson Watch List (a compilation of lists of banned and/or restricted

materials, according to country and regional legislation).

With annual spending of approximately $30 billion, we are able to leverage ourpurchasing power to set sustainability expectations beyond our own operations. OurProcurement Sustainability Initiative, developed in 2008, aligns our procurementprocesses with our sustainability efforts and provides guidance for Johnson &

Johnson operating company managers who purchase goods or services.

We set a Healthy Future 2015goal for all strategic suppliers to publicly report ontwo or more sustainability goals in one of the following goal categories: energyreduction, waste reduction, water use reduction, workforce injury/illness reduction,workforce wellness, and community and human rights investment. At the end of2012, 41 percent of our strategic suppliers had met this goal. Of the suppliers thathave publicly reported goals, the percentage reporting in each of the goal areas isshown in the table below. We are particularly gratified that our efforts have helpeda few suppliers to report sustainability goals publicly for the first time. Ourchallenge going forward will be to continue with our assessments and partnershipsto assist all remaining strategic suppliers in meeting this goal. Companies requiresignificant internal review and support before many of them can share thisinformation publicly, although many have programs and goals in place.


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Additionally, as a participant in the Carbon Disclosure Projects (CDP) Supply Chainprogram, we encourage suppliers to measure their energy use and greenhouse gasemissions, and to develop and publicly report on their emissions. In 2012, 139 ofthe 156 suppliers we approached have chosen to participate in the program. We

also work with our peer companies in the Pharmaceutical Supply Chain Initiative, aneffort to drive consistent expectations and supply chain improvements throughcollaboration.

Procurement Practices

Our Procurement Sustainability Initiative (PSI) provides a foundation to guide ourprocurement professionals in their purchasing decisions and gives them aframework to provide guidance to influence our suppliers. Through PSI, weevaluate several non-financial performance factors when contracting with suppliers,seeking to partner with those that are aligned with our Citizenship & Sustainabilitycommitments. Across the 14 broad categories of goods and services we purchase,we look for suppliers that are transparent about their sustainability programs, canassure us that they are sustainably producing the goods and/or services we arebuying, and can verify the legal and regulatory compliance of their supply chain.We developed a tool, known as the Sustainability Toolkit for Suppliers, to assist oursuppliers in understanding our sustainability commitments and to improve theirsustainability processes.


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In 2013, using a standardized enterprise segmentation and alignment process,Johnson & Johnson identified approximately 120 suppliers considered to beSegment 1, representing approximately $8 billion in spend, and approximately 220

considered to be Segment 2. Supplier management processes applied vary bySegment, with more targeted management effort directed at the Segment 1suppliers, followed by the Segment 2 suppliers.

Supplier Standards

Our commitment to human rights extends to our business partners around the

world. OurResponsibility Standards for Suppliers outline compliance expectationsfor suppliers and external manufacturers. Our external manufacturing partners aresubject to assessments that may include an on-site audit or periodic inspectionsand must maintain records to demonstrate conformance to our supplierstandards.Going forward, we will continue to monitor these suppliers to verify that

they conform to our human rights standards, with a strong focus placed on about20 percent of the total that are located in high-risk countries. All external

manufacturing, active pharmaceutical ingredient supplier, re-packer andsterilizer site locations (numbering approximately 900) have been confirmed, andapproximately 130 were identified as being located in high-risk countries, includingAlgeria, Brazil, China, India, Indonesia, Kenya, Mexico, Nigeria, Pakistan, Panama,Paraguay, Romania, Russian Federation, Thailand, Ukraine and Vietnam. Of those,88 percent have been confirmed to conform to the human rights provisions of ourstandards, and none were identified as non-conformant.

In 2012, we began implementing ourResponsibility Standards for Suppliers.Implementation across our supply chain will take time, due to the sheer number of

suppliers. These standards, which previously applied only to our externalmanufacturing partners, have been extended to all of our suppliers, totaling tens ofthousands. The standards were revised to be more inclusive, including somerevisions on human rights, such as the requirement to implement policies and/orprocedures to evaluate the risk of human trafficking. The revised standards areavailable on our responsibility websiteathttp://www.jnj.com/responsibility/ESG/social/Supply_Chain/Standards.

Related to human rights, these standards state that external manufacturers must:

Not use forced, bonded, indentured or involuntary prison labor

Not discriminate against or harass an individual on the basis of race, color, religion,gender, pregnancy, HIV status, sexual orientation, national origin, age, disability,veterans status, marital status, or political affiliation

Not treat or threaten to treat an individual harshly or inhumanely. Harsh orinhumane treatment includes sexual harassment or abuse, corporal punishment,coercion or verbal abuse
http://www.jnj.com/sites/default/files/pdf/Responsibility-Standards-for-Suppliers.pdfhttp://www.jnj.com/sites/default/files/pdf/Responsibility-Standards-for-Suppliers.pdfhttp://www.jnj.com/responsibility/ESG/social/Supply_Chain/Standardshttp://www.jnj.com/responsibility/ESG/social/Supply_Chain/Standardshttp://www.jnj.com/sites/default/files/pdf/Responsibility-Standards-for-Suppliers.pdfhttp://www.jnj.com/sites/default/files/pdf/Responsibility-Standards-for-Suppliers.pdf


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Avoid unsafe working conditions by providing sufficient rest periods during theworkday and honor agreed upon days off from work and maximum working hours

Pay wages for all hours worked and clearly communicate the wages that employeesare to be paid to them in advance of commencing work and communicate to allemployees if overtime is required and the wages to be paid for such overtime

Comply with the Johnson & Johnson Policy on the Employment of Young Personsand not employ anyone under the age of 16 and not employ anyone under the ageof 18 to perform hazardous work

Respect workers rights to make informed decisions free of coercion, threat ofreprisal or unlawful interference regarding their desire to join or not joinorganizations

Respect workers' rights to bargain collectively without unlawful interference

External manufacturers for Johnson & Johnson operating companies enter into an

enforceable written agreement to comply with these standards. Externalmanufacturers are also subject to periodic inspections and must maintain records todemonstrate conformance to these standards.

Our Healthy Future 2015 goal requires that all suppliers in high-risk countriesconfirm awareness of and conformance with the human rights provisions of ourResponsibility Standards for Suppliers. For the purpose of identifying high-riskcountries, we have used regulatory requirements within the country pertaining toproduct safety, application of good manufacturing practices and qualitymanagement systems, protection of intellectual property, the enforcement ofregulations and the ranking of the country in the Corruption Perception Index

produced by Transparency International and the Johnson & Johnson ExportCompliance Policy. In 2012, tools to evaluate and verify if a supplier conformed tothe human rights provisions of our policies and standards we

Documents

First Draft J&J1