2. Answer the following questions.

1. What are the two main types of companies? Describe them.

2. What do the names of companies around the world reflect?

3. How would you define a franchise?

4. What fees does a franchisee have to pay to a franchisor?

5. What help and advice can a franchisee get from a franchisor?

6. What are the advantages and disadvantages of a franchise?

3. In pairs decide if the points below refer to a) franchisees or b) franchisors.

1. They can easily get advice on how to deal with specific problems.

2. They do not have to borrow large amounts of capital to expand.

3. They must respect certain rules.

4. They have to buy supplies from particular sources.

5. They are responsible for national advertising.

6. They can only sell certain products.

7. They have to seek approval before selling the business.

8. They provide regular reports on the level of sales.

9. They can develop their business without having to deal with the problems of recruiting and managing personnel.

Text 3. JOHNSON & JOHNSON

1. Before you read discuss the following questions.

1. Have you ever used Johnson & Johnson’s products? How do you like them?

2. Why is the company considered to be a leader in the world market?

Johnson & Johnson is a major provider of health products and services. It operates in a range of markets including baby care, first aid, prescription drugs, hospital products, skin care and feminine hygiene. It is therefore a very broadly-based business, which makes it distinctive in the markets in which it operates. In 2002 the company came top in Business Week magazine’s ranking of America’s best-performing large companies; in the same year it was also ranked as Fortune magazine’s 7^th Most Admired Company in the world.

The company is truly global player. The company’s strategy has been to pursue rapid expansion in its key markets (both through internal growth and acquisitions) as well as pursuing continuous innovation in everything it does.

The company’s decentralized structure ensures it maintains a small-company environment and culture within the framework of a larger organization. Keeping individual businesses small help to encourage innovation and allows each section to adapt and respond more easily to market changes. Decisions can be made more quickly within each business unit whilst the company headquarters provide guidance and services in a number of critical areas such as human resources, finance, advertising, law and quality management.

Origin and Expansion

Johnson & Johnson was established in 1886 in New Brunswick, New Jersey, when its founders created the first ever ready-made, ready-to-use surgical dressings. At the time there was little awareness of the dangers of infection if wounds were left open; the mortality rates following operations were as high as 90% in some hospitals. Building on the work of the English surgeon Sir Joseph Lister, Robert Wood Johnson saw the importance of dressing wounds effectively and of using antiseptic. Along with his brothers, James Wood Johnson and Edward Mead Johnson, Robert Wood developed a new type of surgical dressing that was sterile, wrapped and sealed in individual packages and suitable for instant use without the risk of contamination. This contributed to a significant improvement in health care for patients.

The company’s international expansion started in1919 with Johnson & Johnson Canada. Since then companies have been established in Latin America, Europe, Africa and Australia, although the headquarters are still situated in New Jersey. Some of Johnson & Johnson’s most famous products include:

• Johnson’s Baby Powder – introduced in 1893.

• Band-Aid adhesive bandages – introduced in 1921.

• Tylenol (America’s bestselling over-the-counter painkiller) launched in 1960 as a consumer product

• Acuvue contact lenses

• Neutrogena

The company was family owned until 1944 when it was floated on the New York Stock Exchange. Dividends have been issued to shareholders every quarter since 1944 and have increased each year for 40 consecutive years, which naturally makes the company popular with investors. Sales have increased each year for impressive 69 consecutive years.

Our Credo

At the very heart of Johnson & Johnson’s success is its underlying mission, which it calls “Our Credo”. This mission statement is shared by all of its businesses and has been translated into 36 languages. It acts as a common bond between the various business units and the values outlined in it ensure a coherent approach. The Credo also acts as a yardstick against which all decisions can be judged. If managers are uncertain about the wisdom of a particular course of action they can judge it against the letter and the spirit of the Credo.

The Credo was written by Robert Wood Johnson, who guided the company from a small family-owned business to a worldwide enterprise. Wood had what now seems a very modern view of a corporation’s responsibilities, believing that these went far beyond the manufacturing

and marketing of products. As early as 1935, in a pamphlet called Try Reality, Wood urged other managers to embrace what he called ‘a new industrial philosophy’ which stressed the corporation’s responsibility to customers, employees, the community and shareholders.

Eight years later, in1943, Johnson wrote and first published the Johnson & Johnson Credo, a one-page document outlining these responsibilities in greater detail. He urged his management to use the principles of the Credo in determining all that they did. The idea of putting customers first, and shareholders last was a very different and refreshing approach to the management of a business. However, although he believed a firm’s social responsibilities were extremely important Johnson also argued that by putting the customer first the business would itself benefit (and so it has!)

The power of the Credo was particularly evident during the Tylenol crisis of 1982 when the company’s product was adulterated with cyanide. With Johnson & Johnson’s reputation at stake, company managers and employees made numerous decisions that were driven by the values evident in the Credo. Company employees now participate in a periodic survey and evaluation of just how well the company performs its responsibilities according to the Credo. These assessments are then fed back to the senior management, and, where necessary, action is taken. Over time some elements of the Credo have been updated (for example, new areas recognizing the environment and the balance between work and family have been added), but the underlying spirit of the document remains the same as when it was first written.

The Credo has therefore provided a string basis on which the culture of the business has been based for over 60 years. It still dominates the thinking and actions of those within the organization and makes Johnson & Johnson a very socially aware business. For those doing business with the company there is the sense that this is an organization one can trust and which does genuinely believe in the importance of different stakeholder groups. This has no doubt contributed to the company’s sustained success.

The company’s commitment to social responsibility is also demonstrated by a number of key community initiatives that are outlined in its Contributions Annual Report (visit www.jnj.com). In all areas of its giving Johnson & Johnson emphasizes projects that assist mothers and children, although these are balanced with other contributions in the fields of health, family, education, employment, the environment, culture and the arts. In 2000 the company made over $210m in cash and product contributions.

Johnson & Johnson is a medical products company which has succeeded by pursuing an aggressive approach to expansion both internally and externally. It has built up a presence in an unusually broad range of markets and has relentlessly promoted innovation within the firm and its product range. This innovation ensures it continues to meet customers’ needs effectively. The business is made up of many different operating companies that have the independence to react quickly to the particular demands of their own markets. Working for such firms means there is a small firm environment where you feel you can make a difference; at the same time the resources of a large company are available to support you and offer opportunities for promotion and development. The culture of the firm is very distinctive and highly stakeholder-focused; the managers firmly believe that social responsibility leads to greater profitability in the long term. Its belief in its responsibilities to society was tested most publicly with the Tylenol crisis, when the company proved itself as an organization that was willing to sacrifice short-term profit to do what it thought was ‘right’. The Credo acts as an invaluable unifying force within the firm and is still relevant today.

Our Credo

We believe our first responsibility is to the doctors, nurses and patients, to mothers and fathers and all others who use our products and services. In meeting their needs everything we do must be of high quality. We must constantly strive to reduce our costs in order to maintain reasonable prices. Customers’ orders must be serviced promptly and accurately. Our suppliers and distributors must have an opportunity to make a fair profit.

We are responsible to our employees, the men and women who work with us throughout the world. Everyone must be considered as an individual. We must respect their dignity and recognize their merit. They must have a sense of security in their jobs. Compensation must be fair and adequate, and working conditions clean, orderly and safe. We must be mindful of ways to help our employees fulfil their family responsibilities. Employees must feel free to make suggestions and complaints. There must be equal opportunity for employment, development and advancement for those qualified. We must provide competent management, and their actions must be just and ethical.

We are responsible to the communities in which we live and work and to the world community as well. We must be good citizens- support good works and charities and bear our fair share of taxes. We must encourage civic improvements and better health and education.

We must maintain in good order the property we are privileged to use, protecting the environment and natural resources.

Our final responsibility is to our stockholders. Business must make a sound profit.

We must experiment with new ideas. Research must be carried on, innovative programs developed and mistakes paid for. New equipment must be purchased, new facilities provided and new products launched. Reserves must be created to provide for adverse times. When we operate according to these principles, the stockholders should realize a fair return.