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Koninklijke Philips SWOT & PESTLE Analysis

ID : 52595753| Nov 2019| 15 pages

COMPANY PROFILE -Koninklijke Philips

Business Sector :Health Technology

Operating Geography :The Netherlands, Europe, Global

About Koninklijke Philips :

Koninklijke Philips N.V. (Royal Philips) is the parent company of the Philips Group, headquartered in Amsterdam, the Netherlands. The company was founded in 1891 by Gerard Philips. This Dutch multinational conglomerate incorporated on November 14, 2000, is a health technology company with a focus on improving people’s health. The Company's business is classified into Personal Health businesses, Diagnosis & Treatment businesses, Connected Care & Health Informatics businesses, and Lighting. Each of them have their own management and are self-sufficiently responsible for their businesses. There is an additional unit named as Others as well. Philips has a primary listing on the Euronext Amsterdam stock exchange and is a component of the Euro Stoxx 50 stock market index. It also features on the New York Stock Exchange where it has a secondary listing. As of early 2019, Philips has employee strength of 77,400 from 120 nationalities.
Koninklijke Philips N.V’s vision statement reads “At Philips, we strive to make the world healthier and more sustainable through innovation. Our goal is to improve the lives of 3 billion people a year by 2030. We will be the best place to work for people who share our passion. Together we will deliver superior value for our customers and shareholders.” The USP of Koninklijke Philips N.V. lies in being one of the largest electronics companies in the world, currently focused in the area of healthcare and lighting. The company leads in Diagnostic Imaging, Image-Guided Therapy, Patient monitoring and Health informatics, as well as in consumer health and home care.

Koninklijke Philips Revenue :


€18,121 million – FY ending 31st Dec, 2018 (y-o-y growth 2%)
€17,780 million– FY ending 31st Dec, 2017

Competitive Analysis of Koninklijke Philips

SWOT
PESTLE
The SWOT analysis of Koninklijke Philips is presented below:
Strengths
Weaknesses
1. Delivering Meaningful Innovations
2. Balancing a Diversified Portfolio to align with goals
3. Digitalization of Healthcare
4. Robust growth through Acquisitions and Mergers
5. Consistent Shareholder Returns
6. Customer Satisfaction at the heart of all operations
1. Series of Failed Synergies
2. Increased Contingent Liabilities
Opportunities
Threats
1. Ageing Global Population and rise in Chronic Disease
2. Green Innovation to achieve Carbon neutrality
3. IT Healthcare transforming diagnosis and treatment
4. Low usage of Digital Health Technologies in US
5. Diagnostic & Treatment is focused on growing market share & profitability
1. Highly competitive landscape
2. Impending global slump worsening macro-economic conditions
3. Slowdown in China
4. Bribery rackets soiling healthcare giant’s reputation
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Detailed SWOT Analysis of Koninklijke Philips

 

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.

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SWOT & PESTLE.com (2019). Koninklijke Philips SWOT & PESTLE Analysis - SWOT & PESTLE.com. [online] Available at: https://www.swotandpestle.com/koninklijke-philips/ [Accessed 18 Nov, 2019].

In-text: (SWOT & PESTLE.com, 2019)

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Koninklijke Philips SWOT and PESTLE analysis has been conducted and reviewed by senior analysts from Barakaat Consulting.

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Koninklijke Philips SWOT & PESTLE Analysis
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