Case Study: Analyzing Firm Costs

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Johnson and Johnson: A Case StudyFounded in 1886, the publicly listed firm of Johnson and Johnson is a manufacturing company with its headquarters in New Jersey. The firm was established out of an inspiration to facilitate sanitation in the medical field. Initially starting with the production of surgical dressings. In the present day, the firm is primarily involved in the production of both equipment and chemicals used in the field of pharmaceuticals and other consumer products such as skin and hair care products. As of 2017, their best-selling product was Remicade, a popular prescription drug for the treatment of Crohn’s disease and Arthritis. Reportedly, the company grossed an approximate six billion dollars from this product alone in 2017.
From the figures mentioned above, it is apparent that the demand for the firm’s products is high and the same can be said of the said demand’s elasticity. Ideally, the market in which this firm operates is rife with other manufacturers. This is due to numerous factors, including the essential nature of their commodities and the production costs in competing markets such as China. Due to this, consumers have a wide variety to choose from and buy this firm’s products more out of preference than compulsion. Some of this firm’s competitors include other big names in the pharmaceutical industry such as GlaxoSmithKline and Novartis.
Vide the financial reports posted, this firm incurs various fixed and variable costs in operations.

The firm’s main fixed costs are the cost of research and development, expected of such a science-based institution. The cost of this fixed cost is an estimated at ten billion for the year ended in 2017. Some of the firm’s other fixed costs include their various insurance charges, its wage bill and taxes. On the other hand, some of its variable costs include; administrative costs and the cost of selling their products, i.e. marketing and transportation.as at 2017, these costs were reported to be twenty-one billion dollars (Swanson, 12)
It is noteworthy that a firm of this magnitude ought to have a proper fiscal plan. This may include possible avenues for expansion and ideas for future investments. As CEO, one may aim at alternative markets, such as Africa where the mainstream competition is yet to venture. Also, outsourcing of production can play a significant role in cutting down costs, and this is in light of the typical demands of the local labour force and punitive tax implications that may accrue against the products.

Works Cited
Swanson, Ana. “Big pharmaceutical companies are spending far more on marketing than research.” The Washington Post. 12 (2015).