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Johnson & Johnson has the right formula for growth in China

2015-01-16 10:25 China Daily Web Editor: Qin Dexing

J&J aims to rely on innovation to make sustained gains in the Chinese market

Unlike most of its peers, Johnson & Johnson believes that it has the right formula for growth in China, notwithstanding the unique macroeconomic challenges particular to the region, including the country's sluggish economic growth.

No one knows this better than Jesse Wu, the chairman of Johnson & Johnson China. As the first local chairman of the US-based diversified healthcare giant, Wu has the formidable task of shepherding the company onto the path of sustainable development and achieving business expansion in China, amid complex challenges.

Wu admits that it is indeed a formidable challenge. "The Chinese economy has undergone enormous changes over the past two decades, and the fast-changing market as well as rapid shifts in consumer behavior are closely linked to the macroeconomic developments," he said.

The key to the Chinese market lies in building close connections with consumers and in constant innovation, says Wu, who has been working and living on the Chinese mainland for over two decades and has witnessed the rapid changes.

J&J is a household name in China because of the popularity of its baby care products like tear-free baby shampoo and other common household items like Band-Aids.

"During the past few years, J&J has focused on these aspects and strived to bring more innovative products to the market by listening to customers and by frequently upgrading technology. It is important that we understand the changes by reaching out and bringing in consumers as it gives a clear perspective of the diverse needs of various customers," he said.

To illustrate his point, Wu cites the examples of young mothers in China who have become very discerning and intelligent when choosing baby products. That marks a major departure from the trends seen during their mothers' generation decades ago, when babies were bathed with just a bar of soap.

"On the other hand, today, young mothers have a range of products and brands to choose from."

Even after two decades, Wu believes that his decision to join J&J China in 1994 was the best career decision he has made. "The China experience had a profound impact on my business outlook and in career development," he said.

"The experience of working in a rapid growth market provided me with the optimism that 'everything is possible.' I have matured and developed a more comprehensive perspective on leadership," he said.

The 129 year-old US-based J&J was among the first set of multinational companies that entered China. It has since played a critical role in educating Chinese consumers and influencing their behaviors in the market. In the early 1990s, J&J launched its advanced professional baby care concept in China.

Its baby touch program claimed to have benefited over 10 million babies and their parents and helped establish strong physical and mental bonds.

Wu says that many parents now buy products made from natural ingredients for their children. To meet these needs, J&J has launched a range of natural baby products, and even acquired a brand dedicated to natural ingredients-based products in early 2013.

The challenge is even greater for companies like J&J, key players in the baby products segment, as today's educated parents want to be fully aware of what goes into the making of the products used by their children.

Wu said J&J has launched a website named "Ingredient Transparency" that helps consumers understand the various ingredients used in their products, and why some others are not used at all.

But Wu's challenge does not end with just baby care products. The diversified J&J has businesses spanning sectors like consumer and personal care, pharmaceuticals as well as medical devices and diagnostics.

Its healthcare products have already made a big impact by improving the health and life quality of Chinese families.

Wu says that China is now an integral part of J&J's global growth and a key contributor to its overall revenue. J&J reported sales of $18.5 billion for the third quarter of 2014, a 5.1 percent growth over the same period in 2013.

Net earnings for the third quarter of 2014 were $4.75 billion, a 26 percent growth over the same period in 2013. "The real task is how to achieve sustainable development in China," he said.

According to a survey by Ipsos, a market research service provider, with the greatly expanded purchasing power in November thanks to the Singles Day shopping spree, China's urban residents' concepts on consumption and patterns of consumption have changed significantly.

The key takeaway from the survey was the fact that companies need to focus more on psychological needs and that consumer experiences will play a much bigger role in determining purchases.

Compared to a decade ago, consumers not only pay attention to products, but also care about the environment, atmosphere, mood and other comprehensive experiences while shopping, it said.

With the wider penetration of social media, consumers also have several diversified options in choosing products and service, which provide both opportunities and challenges for companies.

Wu says he is aware of the challenge. "My trump card is obviously innovation. The market is changing and also the environment. A deep understanding of the market and an enhanced focus on innovation will provide the right impetus for sustainable development in the future."

With this in mind, Wu said that J&J has already been strengthening its internal and external research and development activities and hiked its investment on innovation in China.

The latest and the most significant move was the opening of J&J's Asia Pacific Innovation Center in Shanghai last October.

The center, with satellites in Singapore, Japan and Australia, focuses on accelerating early-stage innovation worldwide and forming collaborations between entrepreneurs and J& J's global business areas of pharmaceuticals, medical devices and diagnostics and consumer healthcare products.

Wu Dong, head of the J&J Asia Pacific Innovation Center, said: "There is an explosion of growth in the Asia-Pacific region, and China in particular, shows significant medical needs."

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