THE BAD NEWS

 Sep, 29, 1982, 4 deaths reported in suburbs

Chicago , cause unknown.
 Sep, 30, 1982, 1 more death.
 Sep, 30, cause confirmed: Cyanide( 氰化物 )
poisoning Extra-Strength Tylenol Capsules.

 The product by J&J

 CEO: James Burke
Outline

The Company: J&J

The CEO: Early Life, Career in J&J
The Product: Tylenol
Action and Question
 J&J, early history
 Founded 1886, New Brunswick, New Jersey
 Founder: 3 brothers, James, Edward Mead, Robert Wood Johnson
 Products: Antiseptic surgical dressing, Band-Aids
 Major health product company
 1926, most modern textile mill
 1933, Robert II, called for a federal law increasing wages as well as
reducing working week
 1940, Credo, public and social responsibility (to customer, employees,
community and stockholder), product quality
● decentralized(resp&credit) , trust
● Tied to every perspectives of regular concerns of business
● Affiliate company
● Balance –btw (manufacturing, marketing), (financial, operating),
(consumer, product) no single product > 5% of total revenue
● Profit through just and ethical behavior
 J&J, 1976 ~ 1981
Sales and Earning ($M)

sales earning

6000 500  CEO's Vision:

450 Commitment to science and
5000
400 technology
4000
350
Broadening its base in the health-
300

3000 250
care field
200  Tylenol's victory at consumer
2000
150 product over fight with Datril.
100
1000
50

0 0
1976 1977 1978 1979 1980 1981

 1977: disposal diapers, sales > 100M

 1977: baby shampoo, best-selling
 1978: acquired kidney dialysis, $35M, heart valve lab, $26M
 1979: acquire Technicare, CAT machine and ultrasound scanner, $125M
 1981: 74/500 largest U.S. Industrials
 4 Segments: Consumer, Professional, Pharmaceutical, Industrial
 $5,400M Sales, $468M earning ~ ½ from overseas
 Blue-chip growth stock on Wall Street
Outline

The Company: J&J

The CEO: Early Life, Career in J&J
The Product: Tylenol
Action and Question
 James Burke's Early Life
MBA ProgramRevision
ability and understanding
(ethic, public relationship & Responsibility)

HBS
WW-II Double salary
MBA
Navy Sth wrong
Okinawa turn-on Advertising
No doubt Company
moral
Challenge
College of biz
corrupt 3.5Yr Family company ??
Catholic Holy Grass P&G
high J&J
Family MA sales Product
Father school Economics work
brand 3
Director
Ventur
Mother manageme es Band-Aids
1925, Feb '42 '47 '49 nt 1953
Born
Rutland
Vermont
James Burke's Career in J&J
 Director of Band-Aids, bored, Quit, political battle
 Director of New product
 Micatin, Liquiprin
 Nose Drop, cough medicine, chest rub
 The General's congratulation, mistake paid
 Acting director of advertising, merchandising of the operating
company
 Financial's trouble, mentor
 VP of product management for the operating company
 1962, President of Baby and Proprietary Product company
 The General's challenge
 1964, executive VP for consumer products
 1965, President of Domestic operating company
 Dumped 『 Baby Liquid Cream 』 a lot $ loss
 1975, The Credo Challenge
 1976, chairman and CEO
 Credo Challenge
 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.

 We are responsible to our employees, the men and

women who work with us throughout the world.

 We are responsible to the communities in which we

live and work and to the world community as well.

 Our final responsibility is to our stockholders.

 Users (1)
 ..... everything we do must be of high quality.
 .... strive to reduce our costs in order to
maintain reasonable prices.
 Customers' orders must be serviced promptly
and accurately.
 Our suppliers and distributors must have an
opportunity to make a fair profit.
 Employee (2)
 .... be considered as an individual.
 ...respect their dignity and recognize their merit.
 ...sense of security in their jobs.
 ... fair and adequate Compensation, working
conditions clean, orderly and safe.
 Feel free to make suggestions and complaints.
 Equal opportunity for employment,
development and advancement for those
qualified.
 .... provide competent management, and their
actions must be just and ethical.
 Communities (3)
 ... good citizens - support good works and
charities and bear our fair share of taxes.
 ... encourage civic improvements and better
health and education.
 We must maintain in good order the property
we are privileged to use, protecting the
environment and natural resources
 Stockholders (4)
 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.
Outline

The Company: J&J

The CEO: Early Life, Career in J&J
The Product: Tylenol
Action and Question
 Tylenol
 Developed by McNeil
 '60~'70: a prescription drug, a generic compound,
advertised through medical trade journal, doctors,
pharmacists as a gentler-to-stomach alternative to
aspirin.
 1970, Superb opportunity: lower price retail market.
 Early '70, study questioned aspirin.
 '72~'74: sales of acetaminophen in retail mkt, 5% ->
13%, J&J accounted for 90%.
 “Hospitals trust Tylenol“, most used, trusted by
doctors.
 1981: named as 1/15 top marketing success product
 Brand Market Share Market Share, 1981
Market Share, 1975
In $1.2B Retail Market
15.3% In $680M retail market 14.0%
21.0%

Anacin
11.0%
Anacin Bayer
41.0% Bayer Bufferin
12.3%
Bufferin 9.0% Tylenol
Excerdrin
Tylenol
Other
Excerdrin 10.0%

Other

12.3%

35.0%

10.6% 8.5%

Threaten from Datril/Bristol-Myers Tylenol Sales

>> price 1/3 cut 1981: > $400M
>> 11.5% <> $1 less ($20M, 1% share) 1983: e $500M
1976, J&J advertising
1976, Extra-Strength Tylenol, the most potent Advertising Expenditures, 1976~1981($000)
1976, Tylenol 18.2% share Brand
AHP
Anacin
Sterling's
Bayer Bufferin
Bristol-Myers
Excedrin
J&J
Tylenol
1979, Tylenol 25% share, ES 70% 1976 $29,889 $15,581 $14,233 $15,841 $4,204
1977 $33,981 $17,995 $12,922 $16,252 $12,721
'76~81: won 4 lawsuits 1978 $34,290 $22,510 $14,183 $16,196 $16,988
1979 $39,671 $25,072 $14,818 $15,959 $23,670
1980 $43,513 $23,519 $14,430 $17,297 $26,495
1981 $44,641 $24,650 $20,321 $19,603 $36,766
total $225,985 $129,327 $90,907 $101,148 $120,844
Outline

The Company: J&J

The CEO: Early Life, Career in J&J
The Product: Tylenol
Action and Question
 ACTION
 CEO: took charge of management at corporate level.
 FACT:
 Cyanide was the cause.
 In random capsules in the bottles of Extra-Strength
Tylenol
 Batch number MC2880 at a McNeil plant, total
93,000 bottles containing 4.7M capsules
 A small amounts of Cyanide were used in QA
testing, requested by FDA. Clarification with media.