Bayer Johnson and Johnson PG: Three international strategies
‘Friedr. Bayer et comp.’(currently ‘Bayer’) was founded on August 1st, 1863 in Barmen (Germany), by Friedrich Bayer and Johann Friedrich Weskott. They founded a company whose main purpose was manufacturing and selling synthetic dyestuffs, not widely extended at that time, with the aim of substituting the scarce and expensive natural dyes used at that time.
They grew rapidly, and a few years after their foundation, they became international (see Table 1 of the Annex). Between 1881 and 1913 new fields of business were included in the company’s fold, with the creation of the consumer healthcare division in 1898. They started to enter new markets by exporting their products –first in the United States (USA), through intermediaries- in 1865, and a few years later, they began to acquire foreign affiliated companies in different countries in Asia, in order to secure and expand Bayer’s position. Before World War I, they had subsidiaries in Russia, France, Belgium, the United Kingdom (UK) and the USA, with around 1,000 out of 10,000 employees working outside Germany.
However, during World War I, the company lost most of their foreign assets as well as some of their valuable patents, and the export markets remained largely inaccessible. The situation previous to 1914 could not be restored until the end of World War II. They entered different business since then, all related with the petrochemical and the pharmaceutical industry, and restored their research and development activities. Their rapid growth forced them to restructure their corporate organization at the beginning of the 70s. Since then, in regards to the consumer healthcare, they expanded their foreign business to the US, Europe and Japan, focusing on the settlement of research centers and also strategic alliances with cutting-edge companies in Europe, America and Asia.
As of the 70s, Bayer’s entry modes varied. They started to go abroad by exporting their products, and after a period of recession due to the two World Wars, they changed their internationalization strategy. Regarding the consumer healthcare division, both strategic alliances through joint ventures and acquisitions of consumer healthcare divisions of important foreign firms, and organic growth through the establishment of research centers in Europe, the USA and Japan, have driven Bayer’s internationalization strategy. As of 2000, the acquisition of consumer healthcare divisions from companies operating in emerging markets has been their main strategy. Recent investments in China, Russia, Eastern Europe and Central Asia are excellent examples of this (see Table 1).
According to the information on Bayer’s website (consumer healthcare division), they are centered in three core areas: portfolio execution, investment in complementary business and brands, and global leverage. Through their expertise and global assets, they try to seize opportunities in emerging countries, while deepening their position in the USA, Western Europe and Latin America. They develop specialized products for each country according to their culture and also take into account the regulation framework operating in each one. Thus, they face high pressure for reducing costs, as well as high pressure for local responsiveness, which leads them to implement a transnational strategy.
Johnson & Johnson
Johnson & Johnson was founded in New Jersey in 1886, by Robert, James and Edward Johnson, three recognized physicians that needed to improve and simplify hygiene in their practices. The success of their medical products allowed them to grow rapidly.
Over the next 40 years they expanded their product line to include consumer goods such as toothpaste, sanitary pads and baby powder. They started to export their products to Canada and the UK in 1920. In the 1930s, they expanded to Latin and South America, while entering more markets in Europe.
The following decade, they expanded their business to Africa, Latin America (Mexico, Argentina and Brazil), Asia (India) and Australia, while changing their strategy throughout Europe. In 1956, Johnson & Johnson purchased suture German factory Georg Busch and the pharmaceutical company Dr. Remy. In 1959, they acquired Cilag AG, a pharmaceutical company in Switzerland, thereby starting their pharmaceutical division. These new acquisitions allowed them to enter countries like Russia along with some Eastern European countries. In 1973, Johnson & Johnson acquired German company Carl Hahn GmbH, producer of o.b.® brand tampons, and, in 2006, they acquired the Consumer Healthcare division of Pfizer, expanding their product portfolio with world-renowned brands. Thus, their entry modes have mainly been acquisitions and exports (see Table 2).
According to their website, Johnson & Johnson has a decentralized management approach, that is to say, they are now focused on developing products in emerging countries based on local insights and patient needs, but, at the same time, they have a global mindset. They are also trying to develop new products, technologies and business models that truly connect with the way people live around the world, helping more and more people and delivering healthcare in a sustainable way. Thus, their international strategy is also transnational. They have a high pressure for global integration, which allow them to have economies of scale, but at the same time, they face pressure for local responsiveness, as customers’ needs and behaviors change from country to country.
Procter & Gamble (PG)
P&G was founded in 1837 in Cincinnati, Ohio (USA), by William Procter and James Gamble. These two businessmen started by selling soap and candles in the USA and subsequently, they managed to gain a reputation after supplying soap and candles to the Union armies.
After years of researching the soap industry and its products, they went abroad. They first established a manufacturing facility outside the USA in 1915 in Canada. Thanks to their innovation and market research, they introduced a wide range of innovative products in the following decades, including consumer healthcare products such as shampoo and toothpaste. In 1948, they first established an overseas division to manage the company’s growing international business and they founded two subsidiaries in Latin America: Mexico in 1948 and Venezuela in 1950. As of 1954, they went overseas beginning operations in continental Europe by leasing a small plant in Marseilles (France). Two years later, in 1957, P&G opened their first office in Frankfurt (Germany).
In 1973, the company began manufacturing and selling their products in Japan, through the acquisition of The Nippon Sunhome Company, and, in 1978, the company introduced Didronel, the first pharmaceutical product.
In the 80s, P&G emerged as an important player in the consumer healthcare sector with the acquisition of Nowich Eaton Pharmaceuticals, Richardson-Vicks, and Always, companies that produce over-the-counter medicines, respiratory care products and feminine products. This expansion was followed by the opening of the Health Care Research Center in Cincinnati. After this, P&G established a worldwide research and development network with research hubs in the USA, Europe, Japan and Latin America, and built a solid foundation of global brands (like Pantene, Pro-V, Ariel and Vicks).
At the end of the 80s, the company announced a joint venture to manufacture products in China and in 1992, they acquired Rakona, a Czechoslovakian company, entering eastern Europe, and sparking the opening of new businesses in other eastern European countries such as Hungary, Poland and Russia.
In 1993, P&G opened a subsidiary in Japan. Since then, the acquisition of renowned brands, settlement of subsidiaries in different countries and strategic alliances, have been their main entry modes to foreign markets. In 2011, P&G launched a consumer healthcare joint-venture with Teva Pharmaceutical Industries. This partnership is responsible for overseeing the combined non-prescription portfolios of both companies outside North America, and is headquartered in Geneva (Switzerland). Currently, they are focused on emerging markets such as Brazil, China, India, Russia, South Africa, Mexico, Nigeria and Poland. Thus, their entry modes range from exports to organic growth, strategic alliances and acquisitions (see Table 3).
Since the 90s, P&G has grown very fast and has impressively increased its exposure in different countries. This situation drove them to change their business strategy and structure, in order to reap the fruits of their internationalization process while remaining competitive. Due to their expansion to different market places with their own particularities, they now face high pressure for global integration as well as for local responsiveness, which have leads them to implement a transnational strategy
These three companies carry out a transnational strategy for their consumer healthcare divisions. Although drivers for their strategy may differ, they have things in common. The consumer healthcare industry is continuously evolving, which force these companies to optimize their production by gaining knowledge and expertise, and sharing capabilities that allow them to make use of economies of scale if they want to internationalize. At the same time, they operate in a wide range of countries with different regulatory frameworks, as well as needs and behaviors of their population. Emerging countries now have greater access to consumer healthcare products and increased health consciousness, and, in countries in Europe or North America, consumer healthcare products are broadening.
They also share the fact that they began operating in the American market and then tried to seize Europe and emerging markets while strengthening their position in the USA. Their entry modes vary among the three companies, but acquisitions have ultimately dominated.
To conclude, the standardization of their production and central control across international operations, as well as adaptation to sell customized products are determining factors that drive the international strategy of these three firms: Bayer Johnson and Johnson PG.
If you want to know more about the sector in which these companies operate, go to our post about Healthcare market in Thailand