Koninklijke Philips SWOT and PESTLE Analysis

Strength

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Weakness

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Opportunity

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Threat

1. Highly competitive landscape: Being one of the top health technology companies on the basis of sales- with Medtronic, General Electric and Siemen Healthineers, Philips is always surrounded by various competitors. The entry of new competitors in the industry keeps it ever evolving. The company however has maintained its position and emerged as the largest competitor with approximately 13% of the patient monitoring devices. Siemens for example has only three divisions: imaging, diagnostics and advanced therapies. Medtronic on the other hand has four divisions: cardiac and vascular, restorative therapies group, diabetes group and minimally invasive therapies group. Medtronic leads in market share if we assess it on the basis of medical devices for 2018. The company has 5.81% share in the overall market. Philips owns a little more than 4% in the market with GE Healthcare retaining 3.84%. The companies are a part of the top ten medical device companies according to Verdict.
The conglomerates industry has always been one of the industries with fierce rivalry and his no only in the healthcare sector. Philips faces immense competition from LG Electronics, Samsung Electronics, Sony, Motorola Inc. etc. Companies need to be responsive to any new technological development which might help them in production and make sure that they fulfill the requirements of the consumers as well. LG Electronics and Philips are in disputes on legal terms as well. There is a current court case going on between the two rival companies. This makes the competition in the industry even fiercer.

2. Impending global slump worsening macro-economic conditions: All the investors around the world are gearing up for the coming recession in 2020. Many news reports suggest that the trade volumes have seen a shrinkage in December 2017-2018 (year-to-year basis). This is the first time the volumes have seen a slide since January 2016. The U.S. and Japanese inventory-to-sales ratios for electronic goods hit a three-year high in early 2019. A higher inventory-to-sales ratio means that the goods are not being sold as much as they are produced. Because of the same reason, the stock in the storerooms is high. Additionally, the global growth rate of 3.2% (1H19) as compared to that of 4% (1Q18) escalates the risks and makes the company agitated about the future. Furthermore, global smartphone shipments fell 1.2 per cent to 360 million units in the second quarter of 2019, making it the seventh consecutive quarter of decline. Macroeconomic conditions pose a major threat to Philips as the assets of the company- both tangible and intangible, are located in the US, China and EU. Therefore, every change in policies and laws of any region has an impact on not only the international market but the economic situation globally.

3. Slowdown in China: Philips has seen a stagnation of the growth of the company in China. Not only Philips, the country itself has been at a stage of stagnation for some period now. China has relied on debt since the 2008 financial crisis. The country alone accounts for 15% of the total global debt. In order to overcome the reliance on debt, the government has tightened the noose around rules and regulations. The firm guidelines have created a challenge for the companies to gain financial support in the country. The cycle affects the buyers as well. The consumers tend to spend less as they are anxious about the economic future of the country. The consumers have cut back their expenses thereby decreasing their purchasing power and constricting flow of money in the economy.

4. Bribery rackets soiling healthcare giant’s reputation: Philips reputation is dented by the news reports suggesting an unfair play regarding its sales of medical equipment. The case against Philips says that the company ended up using illegal practices in order to receive a massive order from the Health Ministry of Brazil. According to many reports, the company resorted to align with a mediator who would then complete their transaction with the ministry. The mediator, who’s been given the title of ‘mysterious mediator’, submitted the bid for the orders and not Philips itself. Additionally, the price at which the equipment’s were sold to the mediator is way less than the amount received from the government. It was worth $16,700 to the government and initially sold at $9,991. The inflated price allowed the two allied parties to ‘recoup’ the cost of bribes at the cost of the Brazilian taxpayers.
Two of the employees of Philips were charged for racketeering and fraud in August 2018. All the trials and legal settings have taken place in Rio de Janeiro. Meanwhile, SEC, FBI and DoJ have all started their own investigations for the same matter.

Political

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Economic

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Social

1. Growth in Male Grooming products:The growing use of male grooming products in the 2018 will continue until the year 2023. Many companies have increased their line of products to cater the new sector of market. As the society is aging, more fathers are becoming conscious of their looks and personality. Statistics show that more than one-third of American dads care about blocking the signs of aging. This means an increase in products like anti-aging creams, face moisturizers; etc. will experience a growing demand. Additionally, 95% of men (out of 1000) say they use deodorants and 87% say they use body cleansing products. Furthermore, 70% of men use sunscreen/sun protection items while nearly two-thirds use facial skincare. And if we look at the most responsive age group, between 18 and 44, facial skincare users jump to 84%. As Philips is known for its grooming appliances (trimmer, razor, etc.), the company has the opportunity to extend their grooming range making it more profitable than it is.

2. Rising awareness amongst consumers with focus on personalized health: Awareness is growing not only in the case of health, but in terms of products and technology as well. The major global trend making waves is the shift towards personalized health – which is gripping steady momentum in 2019 and beyond. Consumers are aware of all the pros and cons of using a product and they make sure they get real value for the price paid. Philips recently launches an intelligent, personalized suite of solutions to improve consumer health at CES 2019.. As these solutions are personalized, they have data driven insights to help consumers gain professional expertise and advice. A few examples of these include the SmartSleep Analyzer, a clinically proven digital analysis instrument which aids people to learn more about their sleep challenges and obtain information regarding solutions, Philips Sonicare teledentistry expanding oral healthcare which provides consumers with remote dental consultation from licensed dentists within 24 hours, AI-powered shaving solution, smarter aging and caregiving devices and many more. These products have employed new technologies like AI, making them more efficient and effective.

Technological

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Legal

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Environmental

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