Managerial Economics & Organizational Architecture 6th Edition by James Brickley , Clifford Smith ,Jerold Zimmerman

Exercise 11

Johnson Johnson ( J J) is one of the largest medical products companies in the world. In 1994, it had 33 major lines of business, with 168 operating companies in 53 countries. Decision rights in J J were quite decentralized. For instance, in 1993, the baby oil manager in Italy ran his own factory and got to decide such things as package size, pricing, and advertising. Similarly, other country managers had considerable discretionary authority for similar products sold in their countries. This type of decentralized decision making has served J J well: Its returns to shareholders have been very good. Significant changes, however, are occurring in J J's environment. In particular, trade barriers have been significantly reduced in Europe.
a. Describe the advantages of J J's decentralized decision making that have helped to explain the success of the company.
b. What organizational changes do you think J J should consider given the change in the environment Explain. Draw a new organizational chart for J J's international operations (based on your suggestions).