Royal Philips is a leading technology company dedicated to improving people’s health and providing better outcomes across the health continuum from healthy living and prevention to diagnosis, treatment, and home care. Philips uses advanced technology and deep clinical and consumer insights to create integrated solutions (Dhayne et al., 2019). The company has approximately 81,000 employees selling and providing services in more than 100 countries (Dinh-Le et al., 2019). Philips Healthcare is one of the world’s leading high-tech equipment manufacturers, with a sales turnover of about 7 billion euros per year (Sayapina, 2020). The company invests 12% of its annual revenues in further research and development (Agboola et al., 2022). Philips Healthcare is a leader in coronary angiography, ultrasound, patient monitoring, CT, MRI, interventional cardiology equipment, and medical information systems.
The mission of Royal Philips Electronics is to improve people’s quality of life through the timely implementation of the latest technology. In a world where the presence of technology in people’s everyday lives is steadily increasing, the company strives to be the leading provider of health care, lifestyle, and advanced technology solutions, opening the door to the world of the future. Its goal is to become the most attractive company in its industry to shareholders. The company’s values include consumer satisfaction, fulfilling commitments, personal development, and mutual support (Phillips et al., 2019). The stated strategy is to:
- Increase the company’s earnings by placing capital in the most profitable projects;
- To strengthen the position of the Philips brand and consolidate the main achievements in the sphere of health care, lifestyle, and technologies in order to grow and develop further in the chosen categories of business and regions;
- Build and develop constructive relationships with business partners, customers, and consumers alike;
- Continue to invest in R&D and maintain strongest position in intellectual property and patents;
- Strengthen and develop core businesses;
- Improve performance through excellence and business process improvement (Harrison et al., 2019).
The brand strategy for Royal Philips Electronics is built on the idea of “from complicated to simple.” This campaign aims to instill in customers’ thoughts and hearts the idea of a strong, unified company that excels in technology, lifestyle, and health care. Philips intends to spend 80 million euros on a full advertising campaign to reach customers worldwide (Kling et al., 2021). While other tech companies know the necessity to convert complex technology into user-friendly gadgets, Philips is the first to do so and has announced adopting proactive steps in this area. Other businesses seek to come across as trendier and more youthful and produce increasingly complicated equipment. Phillips has taken a different route from complicated to straightforward.
Whether a doctor is utilizing the newest medical technology or the typical consumer using a DVD recorder, consumers want high-tech items to be simple. Whether in health care, lifestyle, or technology, Philips activities follow the guiding idea “from complicated to simple.” Users will find gadgets in each of these that help to exemplify this idea, many of which will be emphasized in the marketing campaign. Fulfilling Phillips’ obligation under the new policy will be a difficulty. The company has sharpened our focus recently as we have carried out the Philips One Company approach. It works for several target audiences, and Philips has to establish a tailored strategy for each.
Performance Review of Each Year’s Progress
Phillips’ strategy is quite successful because it focuses on ease of use and innovation. This makes the company quite competitive. July 18, 2017, Philips Healthcare’s parent company, Royal Philips, recently announced a plan to buy TomTec Imaging Systems in Germany (Narang et al., 2018). TomTec is a top software supplier for analyzing ultrasound imaging data (Kumaresan et al., 2020). TomTec’s operations and more than 100 workers joined the Philips Ultrasound Business Group after the purchase, completed on June 18, 2017, was finalized. The takeover’s financial details were kept private (Mouselimis et al., 2020). This is the Dutch vendor’s ninth purchase since the year’s beginning. The purchase of Spectranetics by the Dutch business Philips for 1.9 billion euros was announced on June 28, 2017 (Phillips et al., 2020). Philips’ revenues climbed from 17.78 billion euros in 2017 to 18.12 billion euros in 2018 (Liu et al., 2021). Consequently, the company’s revenues climbed by 2% and were the most in the Dutch vendor’s history.
The demand for ultrasound machines, medical scanners, and other high-tech medical equipment, particularly in the Chinese market, was a major factor in the increase. Sales for the Diagnosis & Treatment sector, which is focused on medical diagnostic and treatment equipment, increased by 5% to $7.25 billion annually (Mouselimis et al., 2020). Revenues for the Connected Care & Health Informatics business area in 2018 were 3.08 billion euros, a 2% decrease from the previous year (IT solutions mostly for telemedicine) (Chen et al., 2020). Compared to a net profit of 1,87 billion euros in 2017, Philips’ net profit in 2018 was equivalent to 1,1 billion euros (Jayashree et al., 2018). The business blamed the split of its lighting segment Philips Lighting for the decline in profitability. Diagnosis & treatment saw an 8.3% gain in yearly earnings, while Connected Care & Health Informatics saw a decline from 206 to 179 million euros (Szalontai et al., 2021). Philips stated at the end of January 2020 that it was leaving the household appliance market to concentrate only on medical technologies.
In mid-December 2021, Royal Philips signed an agreement to acquire Vesper Medical, a minimally invasive peripheral vascular device developer. The acquirer, through this transaction, will further expand Philips’ portfolio of diagnostic and therapeutic devices with an advanced portfolio of venous stents for the treatment of deep vein disease (Sanders et al., 2021). Grant of $15.4 million to develop obstetric ultrasound application suite November 23, 2021, Philips announced it had received a grant to develop an obstetric ultrasound application suite (Szalontai et al., 2021). The $15.4 million grant from the Bill & Melinda Gates Foundation has improved the quality of obstetric care in low- and middle-income countries (Karg & Makongo, 2019). According to statistics, about 830 women worldwide die daily due to pregnancy and childbirth complications (Kaaya et al., 2021). A considerable decrease in obstetrical fatalities and neonatal mortality and morbidity will result from the developing applications’ ability to aid medical personnel in the early diagnosis of pregnancy problems.
The app bundle is utilized on Philips Lumify mobile ultrasound equipment, previously distributed as a component of worldwide maternal and infant health initiatives. The project builds on the expertise of the Philips Foundation, which aims to expand access to quality medicine in regions where it is most needed (Pande & Bharathi, 2020). For example, one of the foundation’s programs includes training obstetricians and paramedics to perform prenatal ultrasound screening in village clinics in Kenya. Health workers can remotely receive telemedicine consultations from an ultrasound doctor during the tests. On October 24, 2022, Philips announced a 5% reduction in headcount (Kadakia et al., 2023). The layoffs are related to the need to optimize costs amid falling sales. Due to inflation, a significant decline in demand for Philips products is observed in China and, to a lesser extent, in Western Europe.
The company points to difficulties with the supply of components and logistical problems. Another reason for the restructuring is the approximately 70% decline in Philips’ market value due to a widespread ventilator recall program. In June 2021, the company shocked investors by announcing that 5.5 million defective devices had entered the market (Ahamed, 2021). After that, Philips’ capitalization fell by approximately €30 billion. The manufacturer is currently negotiating with the U.S. Department of Justice on issues related to the recall program.
The staff reductions will primarily affect the company’s units in the United States and the Netherlands. Businesses in areas of declining sales will be affected by layoffs. Roughly 4,000 people will lose their jobs overall, and the cost of restructuring over the next quarters will be about €300 million (Greenwood et al., 2020). The company’s reputation has to be repaired, and supply chain issues that disrupted the delivery of many components, including microchips for consumer and medical equipment, need to be fixed.
Competition analysis
The first criterion in Porter’s Five Forces analysis is the threat of competitors. Due to its close connection to the technology sector, where there is much innovation and a constant need for startups, this industry faces a significant risk of new entrants. The government offers several incentives for new ideas, despite the high capital needs in this sector, which increases the risk of new entrants. Technological innovation has increased product diversification. In addition, because it is easy to confirm the viability of a product, they can quickly get investment from a venture capitalist, further increasing the risk of new entrants. By fostering brand loyalty, Philips reduced the risk of new competitors and increased the psychological cost of switching (Gielens et al., 2021). Building a distribution network similar to Philips for new competitors will take time and effort, reducing their threat (Hilbolling et al., 2019). Thus, there is a significant risk of new competitors entering this market.
This industry faces a significant risk of alternatives because so much innovation is taking on in this area. The threat of replacements is substantial for a brand like Philips, given the quality of the alternatives, customer acceptance of an alternative product, and a product designed with the user’s needs in mind. On the other hand, the risk posed by replacements is minimal in short to medium term and tolerable over time. Competitors and new businesses are adding smart technology to their goods to make them more sustainable (Akpan et al., 2020). As businesses strive to provide consumers with greater value and a better user experience, the threat of replacements grows due to people’s shifting views regarding the continued usage of the newest technology accessible in the market.
The third criterion in Porter’s Five Forces analysis is the market power of suppliers. Since there are more options for innovation and businesses are more likely to increase value and enhance the customer experience, there is a high level of consumer market power. Since it is simple for Philips consumers to switch to brands that provide greater value, switching costs are low (Wong et al., 2019). A lack of chips on the market has been shown to raise prices and give buyers more bargaining leverage (Malla et al., 2022). For a corporation like Philips, the risk of direct integration is minimal since manufacturing companies can merge if they believe the business would be more profitable, further boosting the suppliers’ market dominance. It is hazardous for the company to rely too heavily on suppliers’ products.
The fourth criterion in analysis is competition between existing firms. There are already several competitors on the market for a company like Philips. Sony, LG, GE, and other top rivals are just a few (Noam, 2019). The global consumer electronics market is expected to expand dramatically. This demonstrates how competitive the market is, and the fact that there are other companies in this market selling comparable items only serves to heighten fierce competition. They compete with many businesses since their industry is expanding quickly. Many competitors are all fairly balanced. Since switching is inexpensive, competition is also increased.
The purchasers’ negotiating ability is the fifth factor considered. It demonstrates the pressure that consumers place on companies to provide high-quality goods at competitive costs and with top-notch customer service. This power directly impacts Philips’ capacity to accomplish business objectives. Profitability is decreased, and industry competition is increased when there is strong market power. This may be done by launching new items, focusing on new market niches, and utilizing product diversification techniques. These tactics will help Philips maintain a competitive edge in the industry. Thus, the firm’s internal capabilities can be considered the introduction of innovative products, analogs of which do not exist on the market. It also becomes very important for the company to focus on increasing its competitiveness, as the market is very competitive.
Performance analysis
Philips is moving from a broader differentiated strategy to a partially focused one. This is because it is shifting from the well-known electronics and home appliances market to a niche healthcare market with unique and innovative digital and connected medical systems for the public and private sectors. However, Phillips continues to offer lighting products under a different name and still serves the consumer electronics market with razors and toothbrushes. New strengths, weaknesses, opportunities, and dangers are being shaped due to the strategic transition. To accomplish the chosen aims and objectives and to guarantee a lasting competitive advantage, ongoing strategy evaluation is required.
The suggested strategic business model demonstrates how the most crucial assets, including cutting-edge R&D facilities, a skilled workforce, a global footprint, and ample financial resources, should create novel products and structural advancements in labor, procedures, and efficiency. Competitive product and service lines, worker attractiveness, maximum productivity, and, therefore, devoted clients can all contribute to competitive advantage in this situation. Excellence in processes and efficiency must entail protecting the plan’s flexibility and ongoing strategy assessment. When crucial political, economic, social, and technological situations arise, Philips can swiftly modify its plans and take the appropriate actions (Newell & Simms, 2020). For instance, keeping an eye on the specialized healthcare industry and quickly identifying dangers is now easier to comprehend and handle. Another illustration is the strategic decision Philips made for its lighting efforts to focus on producing lighting services rather than lighting goods (Taillard et al., 2021). The greatest strategy to manage environmental issues is in this manner. Of course, the specified course should be continued in this instance.
Segmentation, targeting, and positioning are key components of Philips’ marketing approach. All ages, as well as middle- and high-income groups, are targeted via segmentation. Phillips also concentrated on the Indian small-batch market. However, India’s cities received the most attention. Phillips sells goods in various areas, and its product line is intended to appeal to a wide range of consumers (Stanfield et al., 2021). Almost everyone may become a Phillips customer because of the variety of items available, especially those seeking high-quality goods.
Due to Phillips’ size and diversity in terms of, among other things, age, culture, and position, it has a wide market base of clients. The product line consists of cosmetics, appliances, and medical supplies. Customers that are not conservative and do not subscribe to skeptical views will be Phillips’ target market. It is designed for folks who are eager to test new Phillips goods. In order to please customers, it primarily targets younger age groups, who are more willing to try novel items.
The firm aims to provide simple, inventive, and simple goods with a marketing and positioning approach centered on “reason and simplicity.” Innovation only makes sense when it meets people’s unmet needs and demands. The goods are cutting-edge and were created with the consumer in mind. The business is promoted as one that develops cutting-edge items with a beneficial influence to improve people’s lives. Customer satisfaction is another goal of R&D (Yoon et al., 2020). Consumers can trust the items offered by Phillips thanks to the brand image the company has built.
Future Plans and Recommendations
Philips is working hard to develop solutions that meet consumer demands for connectivity because it recognizes the need to innovate and adapt. The Internet of Things is at the center of Philips’ innovation and how the business interacts with, listens to, and draws inspiration from its customers (Corno et al., 2022). The business must regularly adapt to customer needs and be flexible enough to add value.
Philips can now create more customized, relevant, and effective products than ever, thanks to the Internet of Things, which puts the user in control. The customer has always been at the center of business operations. Over the next five years, Philips will have a great evolution. The company has new opportunities to collaborate with customers to help them live healthier and more fulfilling lives. The company is participating in Plug and Play, a program that connects businesses and investors with startups to accelerate their commercial growth and develop products that improve consumers’ lives (Philip et al., 2020). In the future, it will work with Philips to select the most effective IoT firms among hundreds of candidates. Philips’ willingness to partner with other companies will allow them to lead IoT innovation in the next years and provide entrepreneurs with the resources they need to develop their concepts successfully. With a focus on innovation in sensor data, analytics, connected building lighting, and smart cities, Philips is seizing the opportunity and looking to add value to its existing business model.
Thus, Philips wants to become a business that provides outstanding growth and profitability in the lighting solutions sector. In addition to direct consumer use, Philips should consider expanding alliances with authorities and significant businesses. The startup wants to create city streetlights that could be more actively controlled by weather and light conditions or businesses that could better manage the lights in their office buildings by the clock. These two industries offer Philips tremendous growth potential, especially if they market the bulbs as long-term cost savings for customers through more efficient use of electricity due to the ability to dim or turn off lights more easily.
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