The brand premium Johnson & Johnson (J&J) historically earned for Tylenol and its other leading brands will undoubtedly shrink following events of the last two years. Why pay for peace of mind when the quality that created the peace of mind is now in doubt? J&J has long held a reputation as a champion of product safety that put the consumer first, even if it meant compromised profits. The company’s handling of tampering with its McNeil Tylenol brand in 1982 is a case study in crisis public relations. Yet, J&J’s recent history includes enough US Food and Drug Administration repeat visits and citations to cost J&J CEO Bill Weldon much of his 2010 bonus (if not his job this year). With product quality processes in doubt, McNeil and its parent J&J face an even graver set of concerns than those facing Toyota following…
Business Model Synergies Bring Shareholders Value
Which business development move will destroy shareholder value? • Intel acquiring a wireless computing chip company (Infineon) and a security-software maker (McAfee)? • Proctor and Gamble creating two new businesses – Tide™ Dry Cleaners and Mr. Clean™ Car Washes, adopting a franchise business model? • Starting in 2011, BestBuy offering a Best Buy branded mobile broadband service as a reseller of Clearwire’s 4G network? All three examples deal with synergies. Strong business models are jam packed with synergies and smart leaders focus growth strategies on synergistic moves. If you don’t understand the concept of synergies, here’s a simple explanation. Synergies arise when the whole of a business is worth more than the sum of the value of its parts standing independently. McDonalds grew profitably into a global giant because its different locations are highly synergistic. Expenses are leveraged across locations (marketing, construction, food-prep,…