COMPETITOR’S ANALYSIS

Market size

Market size can be defined as the total value of any given market. In terms of healthcare, the

total market was estimated at 140 billion Euros. In such a huge market, Philips has a strong edge

over its competitors to produce healthcare equipments which are very sophisticated and

technologically advanced. In coming years, Philips is planning to increase its market penetration

in coming years by partnering with many hospitals to understand their requirements and then

producing equipments tailored according to their needs.

Qualitative analysis of the market

Qualitative analysis is a part of research which companies often conduct in the form of surveys

to know what customers want and then on the basis of the results, the company will supply the

product with incentives to the customers (Occupy theory, 2014). This analysis is usually

conducted when the when:

 New product or idea has to be introduced

 Identifying strengths or weaknesses of the product

 Observing the reaction of the public on the advertisement and publicity of the product.

Since Philips is an international company, the research it took was also on huge scale involving

thousands of consumers. The analysis was done to analyze the performance of Philips and

comparing it with performance of other companies in market. The results showed that:

 Consumers relied on the products of Philips

  Consumers also stated that lifestyle products of the company did make their lifestyle

better.

SWOT analysis

Strengths

 Philips has sits subsidiaries in more than 100 countries around the globe and has nearly

120,000 employees.

 Philips has a very strong Research and development department which has 7 active

Research and development centers around the world. 8% of the total income of the

company is used to fund its research and development.

 The company offers diverse range of consumer products and has great understanding of

people’s choice.

 Brand loyalty is high among customers of Philips.

 Innovation and technology is one of the major strengths of Philips.

Weaknesses

 It faces increased competition from cheaper consumer products of Chinese companies in

Asian markets.

 The company is facing many law suits which damage the brand image.

 It offers higher priced products as compared to its competitors.

 The electronic appliances market is highly competitive facing increased competition from

both domestic and international brands.

Opportunities

 Further technological advancements in consumer electronics can open new opportunities

for the company.

 It can target emerging markets for its products in order to increase its revenue.

 They collect a lot of data across the globe regarding consumer behavior and preferences

and it can be used to further improve their quality of services.

Threats

 Highly competitive business environment can also act as threat to the existing business of

the company.

 Changes in political environment, rules and regulations set by government can also affect

the company’s operations.

 Threat of cheaper substitutes and increased competition is always present.

 Exchange rate fluctuations can also affect the company’s profitability.

PEST Analysis

Political analysis

Since Philips is a global organization and has business scattered in all over the world,

international political situation in those region affects the operations. The general political

environment remained unfavorable for the business owing to conflicts and terrorism. Internal

conflicts and politics in Middle East, Russia and Ukraine, mass migration of people to Europe,

economic instability of Greece and exit of Britain from Europe are all those factors which

constantly impact international macroeconomic environment in an adverse manner. Although the

growing economies are of a particular interest for Philips, the resultant political environment

which causes destabilization can have significant affect on the company’s financial health

(Annual report, 2015).

Economic

Recently, there has been a decline in the world economy which has affected major organizations

across the world including Philips. Still in 2015, Philips noted 4.5% increase in terms of its

comparable sales in its both healthcare and consumer lifestyle business. Due to increase in the

sale of consumer lifestyle goods, the comparable sales have increased by 2% which improved the

profitability of the company (Annual report, 2015).

Social

It has been a long tradition of Philips to provide innovative solutions for the problems such as

affordable healthcare, efficiency in energy and improving general living standard of people

around the world. Through Philips foundation, it partnered with UNICEF and Red Cross to

provide solutions and innovative products and started various programs to uplift the social

conditions of people (Annual report, 2015).

Technological

Innovation in technology has always been a hallmark of the company as it has strived to become

a world leader in terms of terms of health care and consumer products. In 2015, Philips invested

EUR 21million for Green innovation for the eradication of issues related to clean water, air, and

affordable healthcare.
 Porter’s five forces analysis

Risk of entry by potential competitors- Low

New competitors are required to invest a lot of capital for the start up business. Existing

companies tend to discourage the entry of new competitors as it will result in increased

competition and less share of market (Hill, Jones, 2009). New competitors would find it very

difficult to compete with Philips because the brand recognition and reliability is the main factor

which attracts customers to Philips’ products.

Bargaining power of suppliers- low

Suppliers can exercise their bargaining power by increasing the prices of supplies or limiting the

supplies altogether which will ultimately reduce the profitability of buyer (McIvor, 2005). In

case of Philips, the suppliers have low bargaining power because Philips deals with large number

of supplier from all over the world.

Substitute products- high

This is a factor which many companies often neglect. The threat of substitute means the

consumer can purchase the same product from anywhere else instead of purchasing company’s

own products (Warner, 2010). There are many companies in the industry which are providing

same products as Philips, so the customers have large choice of products as substitutes.
Competitive rivalry- high

There is a fierce rivalry amongst the incumbents of industry if many of them offer same and

undifferentiated products. This will decrease the price of products which is not good for the

profitability of business (Warner, 2016). The industry in which Philips operates is largely

consolidated where buyers have large choice of substitutes which indicates that the companies in

this industry are facing fierce competition.

Bargaining power of buyer- high

The buyers exercise their bargaining power in the form of bargain for high quality products for a

low price (Analoui, Karami, 2013). For Philips, the bargaining power of buyer is very high

because there is no cost of switching from one brand to another and the buyers have relatively

higher choices for substitutes.

Positioning map of consumer lifestyle goods

High quality

Some local European companies such as Vestel,

Beko and Bosch Multinational companies
 Philips, Sony, LG, Braun.

Low price high price

Cheap goods from Chinese companies substitute goods from other brands

Low quality
BARRIERS TO MARKET ENTRY

Government regulations

Philips has business in almost 80 countries around the world which is why the company has to

follow the rules and regulations set by the government. The company has been increasing its

range of health related equipment in consumer lifestyle goods category which is why the

company has to comply with the legislations. In Europe, for example, the company is bound to

follow strict rules regarding Waste from Electrical and Electronic Equipment (WEEE). In United

States, the company has to follow set of rules by FDA and similar regulations in other countries

(Annual report, 2015).

Product differentiation

There are three factors which make Philips products different from rest of the brands which are

brand value, quality of the product and its cost. The brand value is the important thing which

increases the value of Philips’ products. All of the company’s consumer lifestyle products have

Philips logo on them and the unique design which has been the hallmark of Philips makes those

products different from rest.

Quality of the product is another differentiator. Any product of Philips including lifestyle and

healthcare is made from premium quality material which is why those products are costlier than

the company’s cheaper substitutes. Owing to this higher quality, the company guarantees that its

product will last longer than other which is why many people prefer using premium products of

Philips.
Start-Up costs

High start up costs can also act as a barrier to entry for many new companies. Since Philips is in

the industry for more than 125 years, it has matured a lot and does not have capital requirement

problem.

New entrants

New entrants also pose risk to existing companies in the market as they would share the market

and profit which was previously dominated by few companies. Large companies need to worry

about the new entrants as they don’t pose such risks to their business. However, things might

change if the new entrants in the industry are also large companies. Gourmia, a new company

headquartered in Brooklyn, NY, has been striving to find its way into the kitchens and homes of

average Americans. Gourmia has years of experience in making innovative kitchen appliances

and recently introduced its range of Wi-Fi enabled kitchen products which can be operated via a

smart phone app. It doesn’t pose a serious amount of threat to Philips’ market share of consumer

lifestyle products but it has a potential to take over the kitchen appliances market in near future.

Customer analysis

Philips worldwide

Since Philips operates its production business, it has a huge number of clientage all over the

world. It is very difficult to estimate exact number of Philips’ customers but we can take into

consideration the sales figures which can give us an idea regarding the customers’ preference. In

2015, net sales of the company stood at 24,244 million Euros and out of which, sales of 5,347

and 10,912 million Euros were pertaining to consumer lifestyle and healthcare respectively. The
sales of healthcare and consumer lifestyles were increased by 13% and 19% respectively

(Annual report, 2015).

Source: annual report.
Personas

Carol Berk

46 years old

Small Business owner

Uses Philips products in her daily life because she believes the

quality provided by the company is unmatchable.

 References

Analoui, F., Karami, A. 2013. Strategic Management: In Small and Medium Enterprises 1st

Edition.Cengage Learning EMEA; 1st edition

Annual Report, 2015. Philips Annual Report 2015. [Online]. Available at

https://www.annualreport.philips.com/downloads/pdf/en/PhilipsFullAnnualReport2015_

English.pdf retrieved 29 November 2016

Ferrell, O, C., Hartline, M, D., 2010. Marketing Strategy. 5th edition. South-western publications.

New York.

Hill, C, W., Jones, R, G. 2009. Strategic Management Theory: An Integrated Approach 9th

Edition. South-Western College Pub; 9th edition.

McIvor, R., 2005. The Outsourcing Process: Strategies for Evaluation and

Management.Cambridge University press.

Warner, G, A., 2010. Strategic Analysis and Choice: A Structured Approach. Business Expert

Press.