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.
