Analysis of three segments of Philips.

Philips changed its core competency and established new on. Why?
o First sound and lighting was the core competency... now concentrating on
healthcare
o Since the accession of chief executive Frans van Houten in 2011, Philips has
transformed itself by divesting traditional audio-visual businesses to Asian
competitors and refocusing on its healthcare, lighting and home appliance
divisions.( https://www.ft.com/content/b2b308c2-1f75-11e3-aa36-00144feab7de)
o Philips lighting could be supported by increased urbanization, increasing power
demand, and increase in house construction
Why purse business in healthcare segment?
Looking for collaborating with government of India for Healthcare
Slow to react in market.

Facts:

In April 2010, when Philips Electronics India Ltd announced its plan to outsource its TV
business to Videocon Industries, the decision came as no surprise.
Through the arrangement, Philips will get royalty income based on turnover. Videocon's
economies of scale in manufacturing and its strong distribution network will help the
Philips brand reach more outlets and reduce the cost per unit.
For professional lighting, Philips's client portfolio includes corporate and government
customers such as Asian Paints, McDonalds India, Cognizant Technologies and Kolkata
Municipal Corporation. In 2005, lighting accounted for slightly over 34 per cent of
revenues. In the past five years, the company's dependence on this segment has grown - it
now accounts for 51 per cent of Philips's revenues.
Today, Philips gets a big chunk of its revenues from audio video multimedia (AVM),
which includes DVDs and home theatre systems. In fact, it leads the DVD market with a
share of over 24 per cent. This, though, could be shortlived. Sector experts say changes in
the AVM in-dustry will keep Philips's consumer electronics business under threat.( sept
30, 2012)
Since 2009, Philips has opened 75 exclusive 'light lounges' in 40 cities. They sell
decorative home lighting products priced between Rs 575 and Rs 45,000. Besides, Philips
has 750 'light shoppes' - shop-in-shops in stores such as the Future Group's HomeTown
and Lifestyle International's Home Centre.
At one point of time it was the benchmark of innovation in audio. Also, inspired
leadership intermittently did boost market share in categories like DVD players for them.
There are also bright spots like the lighting business and the acquisition of Preethi.
Though a multinational, Philips is seen as a home-grown brand like Bata, Surf or

Lifebuoy. Strangely, they never quite leveraged this strength. Thus the mantra for Philips
rejuvenation is more relevant products, better price points, aggressive marketing and the
will to fight. Maybe we can encapsulate the Philips story in just one line: past imperfect,
future tense.
Mumbai Industrial Corridor Development Corporation (DMICDC) has planned to
develop 7 smart cities in states like Gujrat, Haryana, Maharashtra, Rajasthan, Uttar
Pradesh and Madhya Pradesh, which are expected to be completed in 3 phases within
next 10 years wherein government will emphasize on energy efficient lighting products
which is expected to boost the demand of LED lights in the country. Rising urban
population of the country, which stood at 31%, of the total population of the country, in
2011 rose to over 33% by 2015 which is expected to emanate the demand for LED lights
in India.

1) Why delist from Indian market?

Implement long term goals. Being on stock market puts pressure for short
term performance (quarterly results puts pressure).
To get full control
The option to convert their Indian ventures into wholly owned subsidiaries
and delist their shares from the stock markets provided MNCs with
complete control over their Indian ventures, allowed them to repatriate
profits and make more independent investment decisions.

2) Philips changed its core competency and established new on. Why?
Strategy shift from lighting to services
Solution to service rather than product
"Philips is a diversified technology company focused on delivering meaningful
innovation in healthcare, energy-efficient lighting and consumer health and wellbeing," its chief executive Frans van Houten said.
This shows Philips strategy shift from product based (lightings, electronics) to
more of a service based

Segmental Analysis
Three segment driven by:

1) Consumer lifestyle segment:

Reshaping the consumer lifestyle portfolio for the profitable growth.
Repositioning consumer lifestyle towards health and well being
Target to be leader in all personal category
Show data related to Philips leaving consumer lifestyle:
Data showing decrease in tv and lifestyle category
Divesting from unprofitable categories to profitable categories
2) Lighting
3) Healthcare and wellness

Corporate Strategy: Diversification and acquisition, strategic alliance

Generic strategy: Differentiation
Scope: Broad

Why healthcare?
Under sustainable strategy. To be meaningful innovator.
Shift from manufacturing to service
Shift from functional to process
Shift from push strategy to pull strategy

How achieving operational Excellency?

Focus on localization.
Research centres of excellence
Technology incubators

Why lighting? Why medicine? Why consumers?

Competitive advantage of philips