Philips (PHIA) SWOT Analysis / TOWS Matrix / MBA Resources
Medical Equipment & Supplies
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Philips (Italy)
Based on various researches at Oak Spring University , Philips is operating in a macro-environment that has been destablized by – competitive advantages are harder to sustain because of technology dispersion, challanges to central banks by blockchain based private currencies, technology disruption, talent flight as more people leaving formal jobs, cloud computing is disrupting traditional business models, increasing household debt because of falling income levels, digital marketing is dominated by two big players Facebook and Google,
wage bills are increasing, increasing government debt because of Covid-19 spendings, etc
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University, we believe that Philips can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Philips, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Philips operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of Philips can be done for the following purposes –
1. Strategic planning of Philips
2. Improving business portfolio management of Philips
3. Assessing feasibility of the new initiative in Italy
4. Making a Medical Equipment & Supplies sector specific business decision
5. Set goals for the organization
6. Organizational restructuring of Philips
Strengths of Philips | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Philips are -
Low bargaining power of suppliers
– Suppliers of Philips in the Healthcare sector have low bargaining power. Philips has further diversified its suppliers portfolio by building a robust supply chain across various countries. This helps Philips to manage not only supply disruptions but also source products at highly competitive prices.
High switching costs
– The high switching costs that Philips has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Effective Research and Development (R&D)
– Philips has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in – Philips staying ahead in the Medical Equipment & Supplies industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
Operational resilience
– The operational resilience strategy of Philips comprises – understanding the underlying the factors in the Medical Equipment & Supplies industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
High brand equity
– Philips has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Philips to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Learning organization
- Philips is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Philips is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders at Philips emphasize – knowledge, initiative, and innovation.
Ability to lead change in Medical Equipment & Supplies
– Philips is one of the leading players in the Medical Equipment & Supplies industry in Italy. Over the years it has not only transformed the business landscape in the Medical Equipment & Supplies industry in Italy but also across the existing markets. The ability to lead change has enabled Philips in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Organizational Resilience of Philips
– The covid-19 pandemic has put organizational resilience at the centre of everthing Philips does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Successful track record of launching new products
– Philips has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Philips has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Diverse revenue streams
– Philips is present in almost all the verticals within the Medical Equipment & Supplies industry. This has provided Philips a diverse revenue stream that has helped it to survive disruptions such as global pandemic in Covid-19, financial disruption of 2008, and supply chain disruption of 2021.
Superior customer experience
– The customer experience strategy of Philips in Medical Equipment & Supplies industry is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
Analytics focus
– Philips is putting a lot of focus on utilizing the power of analytics in business decision making. This has put it among the leading players in the Medical Equipment & Supplies industry. The technology infrastructure of Italy is also helping it to harness the power of analytics for – marketing optimization, demand forecasting, customer relationship management, inventory management, information sharing across the value chain etc.
Weaknesses of Philips | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Philips are -
Capital Spending Reduction
– Even during the low interest decade, Philips has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the Medical Equipment & Supplies industry using digital technology.
Compensation and incentives
– The revenue per employee of Philips is just above the Medical Equipment & Supplies industry average. It needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Products dominated business model
– Even though Philips has some of the most successful models in the Medical Equipment & Supplies industry, this business model has made each new product launch extremely critical for continuous financial growth of the organization. Philips should strive to include more intangible value offerings along with its core products and services.
Workers concerns about automation
– As automation is fast increasing in the Medical Equipment & Supplies industry, Philips needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow to strategic competitive environment developments
– As Philips is one of the leading players in the Medical Equipment & Supplies industry, it takes time to assess the upcoming competitions. This has led to missing out on atleast 2-3 big opportunities in the Medical Equipment & Supplies industry in last five years.
Need for greater diversity
– Philips has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Philips is slow explore the new channels of communication. These new channels of communication can help Philips to provide better information regarding Medical Equipment & Supplies products and services. It can also build an online community to further reach out to potential customers.
High bargaining power of channel partners in Medical Equipment & Supplies industry
– because of the regulatory requirements in Italy, Philips is facing high bargaining power of the channel partners. So far it has not able to streamline the operations to reduce the bargaining power of the value chain partners in the Medical Equipment & Supplies industry.
Lack of clear differentiation of Philips products
– To increase the profitability and margins on the products, Philips needs to provide more differentiated products than what it is currently offering in the marketplace.
High operating costs
– Compare to the competitors, Philips has high operating costs in the Medical Equipment & Supplies industry. This can be harder to sustain given the new emerging competition from nimble players who are using technology to attract Philips lucrative customers.
Skills based hiring in Medical Equipment & Supplies industry
– The stress on hiring functional specialists at Philips has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
Philips Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Philips are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Philips can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help Philips to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Philips to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Philips to hire the very best people irrespective of their geographical location.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Philips can explore opportunities that can attract volunteers and are consistent with its mission and vision.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Philips can use these opportunities to build new business models that can help the communities that Philips operates in. Secondly it can use opportunities from government spending in Medical Equipment & Supplies sector.
Buying journey improvements
– Philips can improve the customer journey of consumers in the Medical Equipment & Supplies industry by using analytics and artificial intelligence. It can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Better consumer reach
– The expansion of the 5G network will help Philips to increase its market reach. Philips will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Reforming the budgeting process
- By establishing new metrics that will be used to evaluate both existing and potential projects Philips can not only reduce the costs of the project but also help it in integrating the projects with other processes within the organization.
Manufacturing automation
– Philips can use the latest technology developments to improve its manufacturing and designing process in Medical Equipment & Supplies sector. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Reconfiguring business model
– The expansion of digital payment system, the bringing down of international transactions costs using Bitcoin and other blockchain based currencies, etc can help Philips to reconfigure its entire business model. For example it can used blockchain based technologies to reduce piracy of its products in the big markets such as China. Secondly it can use the popularity of e-commerce in various developing markets to build a Direct to Customer business model rather than the current Channel Heavy distribution network.
Developing new processes and practices
– Philips can develop new processes and procedures in Medical Equipment & Supplies industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Use of Bitcoin and other crypto currencies for transactions in Medical Equipment & Supplies industry
– The popularity of Bitcoin and other crypto currencies as asset class and medium of transaction has opened new opportunities for Philips in the Medical Equipment & Supplies industry. Now Philips can target international markets with far fewer capital restrictions requirements than the existing system.
Creating value in data economy
– The success of analytics program of Philips has opened avenues for new revenue streams for the organization in Medical Equipment & Supplies industry. This can help Philips to build a more holistic ecosystem for Philips products in the Medical Equipment & Supplies industry by providing – data insight services, data privacy related products, data based consulting services, etc.
Building a culture of innovation
– managers at Philips can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Medical Equipment & Supplies industry.
Threats Philips External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Philips are -
Shortening product life cycle
– it is one of the major threat that Philips is facing in Medical Equipment & Supplies sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Stagnating economy with rate increase
– Philips can face lack of demand in the market place because of Fed actions to reduce inflation. This can lead to sluggish growth in the economy, lower demands, lower investments, higher borrowing costs, and consolidation in the Medical Equipment & Supplies industry.
Easy access to finance
– Easy access to finance in Medical Equipment & Supplies industry will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Philips can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
Increasing wage structure of Philips
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Philips.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Philips in Medical Equipment & Supplies industry. The Medical Equipment & Supplies industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Barriers of entry lowering
– As technology is more democratized, the barriers to entry to Medical Equipment & Supplies industry are lowering. It can presents Philips with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the Medical Equipment & Supplies sector.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Philips can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate Philips prominent markets.
Consumer confidence and its impact on Philips demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in Medical Equipment & Supplies industry and other sectors.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
High dependence on third party suppliers
– Philips high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Environmental challenges
– Philips needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Philips can take advantage of this fund but it will also bring new competitors in the Medical Equipment & Supplies industry.
Technology acceleration in Forth Industrial Revolution
– Philips has witnessed rapid integration of technology during Covid-19 in the Medical Equipment & Supplies industry. As one of the leading players in the industry, Philips needs to keep up with the evolution of technology in the Medical Equipment & Supplies sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Weighted SWOT Analysis of Philips Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers at Philips needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of Philips is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of Philips is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of Philips to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Philips needs to make to build a sustainable competitive advantage.