1. Philips Lighting
Competitive Position Analysis
Gianina Maria Bumb
2013 1

2. The Lighting Industry
Lighting industry is one of the highest growing markets in
the term of technology and revenues. There are
many factors that influence this specific industry
such as policies and legislation, technology spurs,
ecology, resource effective economy, the shifting
demographics from rural to urban, increasing
human need of time and daylight and so forward.
Though are many factors at stake, some of them are
essential to this line of business, radically changing
the industry. These factors are:
Technology – shifts in tech directly affect lighting
Legislation – can inhibit or encourage lighting
technologies
Societal – socio-economic medium affects the
demand, design and attributes of artificial lighting
Environmental - resource scarcity and pollution
are forcing manufacturers to produce safe and
eco-friendly products.
Lighting markets forecast
(European Lamp Companies Federation)
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Exhibit 1. Luminaires market forecast
Exhibit 2. Lamps market forecast

3. The Lighting Industry
- Environmental Analysis -
2. Societal
As countries evolve, we are witnessing demographic shifts and a
higher degree of urbanization, which will rise the needs of indoor
and outdoor lighting, whereas the need for the manufacturer to
develop a more cost and time efficient production process.
The expanding middle class in growth geographies reflects in a
higher consumption rate and a investment oriented mentality when
it comes to home improvement. This can be seen as a larger client
base for the LED appliances and lamps, opposed to incandescent.
Lifestyle and leisure trends are going towards indoor facilities for
sports and relaxation, opened all year round, which emphasizes the
need for indoor specialized lighting.
Employee health and safety influences the technology used in
lighting as to insure the safety of employees and not to damage
their health and well-being.
1. Technology
Technology changes and so does the market structure as
manufacturers and consumers have scrambled for technology that
is more efficient.
Generally speaking, in recent years, the trends in technology have
been based on integration and multi-tasking. These tendencies
have been adopted by the lighting industry and transposed in a
greater level of integration between controls and luminaires.
Solid State Lighting (SSL) is a the newest lighting technology that
offers the advantage of reducing the consumption of energy for
lighting compared to existing, conventional lighting technologies,
whilst improving light quality. SSL was initially used for mobile and
large displays.
(Source: The European Lighting Industry’s Considerations Regarding the need for an
EU Green Paper on Solid State Lighting, 2011)
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Exhibit 3. The evolution of SSL and market projections

4. The Lighting Industry
- Environmental Analysis -
4. Environmental
• During the life of a lamp 90% or more of the lamps
environmental impact is represented by the use phase, which
is the energy consumption of a lamp. For reducing energy
consumption, lighting has to be energy efficient.
• The scarcity of materials used in manufacturing luminaires
and lamps is a factor that determines further research for
determining new materials to be used in this process.
• The reduction or elimination of toxic materials used in lighting
is another factor that affects the lighting industry. For that
reason, incandescent bulbs relying on mercury are banned in
many countries.
3. Legislation
A string of new legislation mandating greater energy efficiency in
buildings has emphasized the role of lighting and high energy
prices. Therefore, energy efficiency and a move towards
intelligent luminaries have become the major objectives for
both the manufacturers and end users. In the European Union
the emphasis is on energy savings in the lighting sector and a
new legislation that phases out inefficient lighting was
adopted.
Similar initiatives have been made by other countries outside EU
border, in order to phase out the inefficient light bulbs.
Source: ELC
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Exhibit 4. Incandescent light bulbs phase out
Exhibit 5. Lamp life cycle

5. 5 Forces Analysis
Industry competitors
Considering the fact that the lighting market has no more then 5
top competitors whom earnings comprise 65% of the market
there are few incentives to engage in aggressive pricing.
Between many competitors there is a collaboration in respects of
luminaires components, licenses or patents.
There is a high industry growth due to LED lighting.
Substitutes
Considering the variety of lighting products made by Philips, there are no
other substitutes except the same kind of products made by
different competitors.
The only substitute to artificial lighting is sunlight.
Suppliers
There are few alternative suppliers. The cost of switching are high
considering the fact there are different additional costs like
transport, fees or custom component lines.
The quality of the finished product greatly depends on the quality of the
components given by the supplier.
Buyers
Buyers have the power to choose between a large variety of lamps and
luminaires produced by competitors, there are no switching costs to
hedge that from happening. There are many alternative buyers.
Buyers segmentation applies at the product level, more specific, there
are products with different prices depending on their capabilities and
performance, and products customized for different areas: home,
hospital or street lighting.
Potential entrants
Barriers: Incumbents have a competitive advantage given by:
- patents and licenses for lighting components.
- top lighting manufacturers are economies of scale,
- there are steep learning curves in the lighting industry,
considering the importance of R&D and the advances in technology.
Entrants face high sunk costs considering the investment in R&D,
licensing and other costs hard to recover.
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Exhibit 6. 5 Forces Analysis

6. Competitive Life Cycle
Emergent
phase
Growth phase
Mature
phase
LED lighting
OLED lighting
Incandescent lighting
Fluorescent lighting
Philips Lighting produces lamps and
luminaires for incandescent, fluorescent,
LED (light emitting diode) and OLED
(organic light emitting diode) lighting.
Considering the banning of low-
efficiency lighting, incandescent
technology is heading to the end of the
mature phase.
Fluorescent lighting is a substitute for
households, being in a growth phase close
to the mature phase. Is very profitable for
now.
LED lighting is just entering the growth
phase, in the latest couple of years it has
grown very much due to the rising sales in
B2B sector. It is forecasted to rise heavily
in the B2C sector.
OLED lighting is the newest lighting
technology, more efficient than LED, still
in the emergent phase, heading toward
the annealing step.
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Exhibit 7. Competitive life cycle

7. Competitor Analysis
Here are the top worldwide manufacturers
of lamps and luminaires:
1. Philips Lighting
2. Siemens
3. GE Lighting
4. Nichia
5. Cree
6. Toyoda Gosei
7. Acuity Brands
8. Cooper Industries
9. Aixtron
10. Epistar
11. Fagerhult
12. Hubbell
13. Seoul Semiconductors
14. Veeco
15. Zumtobel
Exhibit 8. Competitor information spreadsheet
Manufacturer Strategy
Key competitive
factors
Sales evolution
Philips Lighting
Number one positions
in fluorescent, CFL-I,
HID and incandescence
lighting.
The broadest portfolio
of LED chips, modules,
Applications and
controls through to
designer luminaires.
Holds important IPRs.
Sales € 8.4bn
Siemens / Osram
Number 2 lighting
supplier. Focuses on
retrofit bulbs, OLED.
Holds important IPRs.
Sales € 4bn
G E Lighting
Integrated LED based
solutions. Cooperation
partnerships.
Brand awareness.
Financial and
technological
resources.
Sales € 1.7bn
Nichita
Focused on inorganic
luminescent materials.
Specialized in nitride-
based LEDs
in different colors. Key
patent holder for
high brightness blue
LED.
Sales $ 2.3bn (in 2003)
Cree
Focused primarily on
LED components for
commercial, street and
residential lighting.
Performance vs. Price,
strength of
Intellectual property
rights.
Sales 2010: $ 386.6 mil
Toyota Gosei
Cross-license
agreements with
various competitors.
Focused on nitride
LEDs.
Strength of
intellectual property
rights over blue, green,
purple and white LEDs.
Sales $ 4,6 mil
According to The future of lighting, New Street Research report, 2010
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8. Philips Lighting
Capabilities
Analysis
Capabilities Supply
activities
Research &
development
Production
operations
Sales and
distribution
Service and
support
Processes Initial audit to
asses the risk of
not compiling to
the standards it
needs.
Involving
consumers into
R&D program,
helps design
products fitted to
consumer needs.
- Optimized for
energy and time
efficiency.
Worldwide
distribution
through dealers,
agents and
distributors.
Gathering and
using
information
provided by the
consumer to
design better
products.
People
(skills)
Philips experts
help improve
worker-
management
dialogue for
suppliers.
Philips has top
experts in tech
research,
marketing, and
product design.
53,168
production
employees
worldwide.
Every factory
has a
compliance
officer to ensure
the GBP.
Distributors and
agents are
carefully
selected to
comply with the
Due Diligence
Process.
Employees are
offered in-house
training and free
courses for
personal and
professional
development.
Systems /
tech
Assuring the
compliance
with the Conflict
minerals
provisions and
carbon
footprinting.
9 research
laboratories and
3 incubators in
EU, North
America and
Asia.
124 production
sites worldwide.
100 countries
with sales and
service outlets.
CMR software
and call-centers
worldwide.
Alignment &
sustainability
Philips Supplier
Sustainability
Involvement
Program
improves
sustainability
performance of
its suppliers.
Accelerate
program.
General
Business
Principles (GBP).
Over €400 mil
invested in R&D
in 2011.
Accelerate
program and
GBP.
Sustainable
through the
steep learning
curve.
Ongoing
alignment with
Due Diligence
Process (DDP)
anti-corruption
program.
Accelerate
program, GBP
Philips core capability is to create
consumer oriented products.
Product must be easy to use and
efficient and their design must
illustrate this as well. This starts by
choosing the suppliers who can
provide custom components, at a
good quality. Then, it is up to the
R&D department to build a
prototype of the product that
meets the criteria of sense and
simplicity, functional and design
wise. After the prototype is ready,
it is going to be large scale
produced. Afterwards, the sales
department must place the
product on the market in order to
be bought. Finally, the service and
support department will fix any
problems that arise from the use
of it and resolve customers
complaints.
According to the data provided by Philips Annual Reports 2011 and 2012, Philips Lighting Strategy - Van Houten
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Exhibit 9. Capabilities Analysis

9. Philips Lighting Position
Source: The Future of Lighting, 2011
Exhibit 10. Philips market position
Looking at the competitors analysis we can easily observe that
Philips is the global market leader in lighting, with the
highest sales of € 8.4 bn in 2012, a growth rate of 3.8 and
50,200 employees.
Philips has a strong presence on the lighting market due to its
all-level integration in the digital value chain, by
manufacturing LED components, modules, luminaires and
controls. The company manufactures around 80,000
products and holds number one positions in fluorescent,
CFL-I (compact fluorescent lighting), HID (high-intensity
discharge) and incandescent lighting.
2. Another problematic area is sales personnel and for
this reason, Philips implemented a Due Diligence
Process to prevent corruption, allowing it to control
how the products are being sold.
3. Another competitive advantage is the product itself.
Products are designed by a R&D team and the
customer direct and indirect feed-back (gathered
from customer service and support).
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From the capabilities analysis we can see that:
1. The investments made by Philips in imparting its vision
inside the company and with its partners consists in a
competitive advantage. It gives Philips power over the
employees, the suppliers and the partners, by building
their loyalty.
Because of the great power of suppliers in this industry,
Philips programs and regulations bring the power to the
company.

10. Recommendations
My primarily recommendation is to maintain market leadership, and to do that, the
company must be very adaptable, considering that radical changes will
happen all together with the phasing out of incandescent lighting in the
mature economies (see Environment analysis - legislation page 4).
Because Philips is leader in incandescent lighting, it will have a fall in sales in the
months post phasing out. The company will have to gain back its customers
by promoting the more energy-efficient fluorescent, LED and OLED lamps and
luminaires.
LED and OLED technology is in a growth/emergent phase, considering its energy
efficiency and its growth will be boosted by the phase-out of incandescent
lighting in many countries worldwide, which will determine consumers to
buy fluorescent or LED products. Customers must buy Philips fluorescent, LED
and OLED products, that is why a greater presence on the LED and OLED
market, in both B2B and B2C is recommended.
Marketing actions must be taken in order to promote LED and OLED lighting.
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11. Bibliography
• http://www.faqs.org/sec-filings/111024/VEECO-INSTRUMENTS-INC_8-K/a11-28425_1ex99d2.htm
• The European Lighting Industry’s Considerations Regarding the need for an EU Green Paper on Solid State Lighting, Brussels, 2011
• The future of lighting, New Street Research report, 2010
• Lighting the way, Perspectives on the global lighting market, second edition, McKinsey and Co., 2012
• Philips Annual Report, 2011
• Philips Annual Report, 2012
• Philips Lighting Strategy, Van Houten, 2011
• http://www.lighting.philips.ro/
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