Johnson & Johnson ($JNJ) is reorganizing its operations in China. Amid a government probe of corruption and pricing policies in the pharma industry, J&J has appointed a local chairman, Jesse Wu, to oversee all three of its Chinese operations--consumer health, devices and diagnostics, and pharmaceuticals.
Despite the timing, J&J says the restructuring move is strategic rather than defensive. As Reuters reports, J&J hopes the more centralized structure will help increase sales. Previously, the three unit chiefs in China were reporting to divisional executives in the U.S.
Last year, the company launched a "strategic initiative" to soup up operations in key emerging markets, The Wall Street Journal says. The idea was to drive growth and improve relations with governments and other decision-makers. As part of that, J&J centralized reporting in Vietnam last year and has been weighing the Chinese re-org since then, spokesman Ernie Knewitz told Reuters.
Still, the domestic reporting system will put the Chinese units under closer watch. As Knewitz tells Reuters, "It definitely adds additional, and centralized, oversight for our whole enterprise in China, but the emphasis is on growing our business," he said.
Wu takes the helm after heading up J&J's global consumer business. Now, he'll handle an operation that generated $2.5 billion in 2012 sales and employs 9,000 people, Reuters notes. He'll be replaced by Hewlett-Packard SVP Lynn Pendergrass.
Wu will have his share of challenges in China. A Shanghai court fined J&J for "monopolistic" pricing, in a case that preceded the government's current pricing probe. In addition to the government investigations, which have everyone in the local industry on high alert, Wu will have to continue smoothing relations with government officials offended by alleged quality-control lapses. Earlier this year, China's FDA accused the company of failing to withdraw products that were recalled elsewhere, and it publicly demanded improvements in quality control. J&J managers met with agency officials in June, and afterward said its local recall policies are the same as those elsewhere.
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