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The foundations of Philips were laid in 1891 when Anton and Gerard Philips established Philips & Co. in Eindhoven, Netherlands. The company began manufacturing carbon-filament lamps and by the turn of the century, had become one of the largest producers in Europe. By 1910, with 2,000 employees, Philips was the largest single employer in The Netherlands.
Today Philips is an internationally renowned company in the healthcare, lifestyle and lighting sectors with roughly 128,000 employees. Philips also has a strong commitment to research and development. In 2010, the company increased its R&D spending budget to $2,090.9M. (Datamonitor, 2011) With seven research laboratories worldwide, Philips has created over 130,000 patents. (Philips, n.d.) This dedication to innovation allows the company to remain competitive and penetrate new markets.
One of Phillips’ greatest strengths is its ability to adapt to market conditions. The company saw a $4.45B decrease in revenue during the 2011 fiscal year. Similarly, the company’s profits dropped from $12.65B in 2010 to $11.20B in 2011. To combat this, the company restructured its operations and was able to reduce its SG&A (fixed costs) from $7.93B in 2010 to $7.77B in 2011.Philips also has a strong commitment to research and development. In 2010, the company increased its R&D spending budget to $2,090.9M. Law suits filed against Philips in 1998 and 2009 have served to slightly tarnish the company’s brand image. These allege that Philips intentionally sold defective consumer electronics. While the company discarded its Philips Magnavox line of consumer products in 2009 ("Philips Plasma TV Settlement: Frequently Asked Questions", n.d.), financial data from 2007 to 2011 shows a clear decrease in revenue vs. net income.
In 2010, Philips acquired Italy’s Luceplan – a leading high-end luminaries design company. During the same year, Philips also acquired NCW Holdings, a key player in the LED market. These acquisitions allow the company to penetrate new markets while adding fresh offerings to their current lines.Due to the rising cost of fuel and other sources of energy, the demand for green lighting has increased significantly over the past few years. Globally, two thirds of all lighting installed is based on older, less efficient, and more costly technology. Green energy currently accounts for roughly 38% of the company’s total sales .In the consumer lighting market, General Electric (GE) is Philips’ strongest competitor. GE is twice Philips’ size, and boasts a 9.15% profit margin. This profitability is almost 6 times that of Philips’ modest 1.73%. In the sounds and vision, and personal care markets, Sony and Panasonic trump Philips sales with $78.91B and $95.36B respectively. Counterfeit goods have also been a concern. These counterfeit products not only take revenue from the company, but they also have a negative impact on brand imageMore stringent Environmental and State regulations are also a threat to Philips’ operations. The European WEE (Waste Electrical and Electronic) directive holds manufacturers of electronics financially responsible for the collection and disposal of covered products. Other directives in the EU are aimed towards prevention and correction of environmental impact . This new legislation can increase operations costs for the company.
A multi-media campaign including print, television and radio advertisements should be rolled out incrementally. Extensive psychographic research must be conducted to determine which offerings are the most relevant for each customer segment. Philips must distribute more funds towards R&D for its consumer electronics line. The company must also be proactive in recalling defective products as soon as the defect is discovered. This will demonstrate the company’s concern for its customer base and take great strides in repairing the company’s tarnished image.In order to counteract the recent negative press, it is advised that the company launch a global, philanthropic social media campaign. The target audience will consist primarily of home electronics consumers. This focused campaign will highlight the many social and environmental programs that Philips has implemented. Philips must lower the division’s fixed costs. Philips should seek to reduce the amount of packaging used for its lighting products. Additionally, the company needs to research vendors who can offer this packaging with a more economical price tag.Much as cell phone manufacturers are doing, Philips must seek to create modular, easy to disassemble electronics that will lower the cost of refurbishment or component reclamation. The increased end-of-life value will compensate for profits lost due to the new, stricter environmental regulations.
•Market leadership and brand equity
afford the company increased
•Commitment to research and
development allows the company to
be highly competitive and penetrate
•By aligning operational costs to
current markets, the company was
able to increase productivity by 20%.
•Strong competition from brands like
GE, Sony and Panasonic.
•Counterfeit electronics take revenue
away form the company while
negatively impacting coprorate image.
•Environmental and State regulations
such as WEE and RoHS increase
•Lawsuits against consumer
electronics division tarnish overall
•Legal struggles cost the company
money and reduce profitability.
•Robust growth through acquisitions
such as the Siesta Group in Vienna,
Luceplan in Italy and NCW Holdings, a
leading global designer of LED lights.
•Demand for green lighting is
increasing. In 2010, green lighting
represented 38% of Phillips’ shares.
•Penetration of emerging middle class
markets in India and China.