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 – geopolitical disruptions, increasing transportation and logistics costs, technology disruption, cloud computing is disrupting traditional business models, wage bills are increasing, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is increasing trade war between United States & China,
talent flight as more people leaving formal jobs, increasing household debt because of falling income levels, 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 -
Ability to recruit top talent
– Philips is one of the leading players in the Medical Equipment & Supplies industry in Italy. It is in a position to attract the best talent available in Italy. The firm has a robust talent identification program that helps in identifying the brightest.
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.
Cross disciplinary teams
– Horizontal connected teams at the Philips are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Digital Transformation in Medical Equipment & Supplies industry
- digital transformation varies from industry to industry. For Philips digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Philips has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
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.
Innovation driven organization
– Philips is one of the most innovative firm in Medical Equipment & Supplies sector.
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.
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.
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.
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.
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.
Weaknesses of Philips | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Philips are -
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.
No frontier risks strategy
– From the 10K / annual statement of Philips, it seems that company is thinking out the frontier risks that can impact Medical Equipment & Supplies industry. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
High cash cycle compare to competitors
Philips has a high cash cycle compare to other players in the Medical Equipment & Supplies industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
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.
High dependence on Philips ‘s star products
– The top 2 products and services of Philips still accounts for major business revenue. This dependence on star products in Medical Equipment & Supplies industry has resulted into insufficient focus on developing new products, even though Philips has relatively successful track record of launching new products.
Slow decision making process
– As mentioned earlier in the report, Philips has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the Medical Equipment & Supplies industry over the last five years. Philips even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Aligning sales with marketing
– From the outside it seems that Philips needs to have more collaboration between its sales team and marketing team. Sales professionals in the Medical Equipment & Supplies industry have deep experience in developing customer relationships. Marketing department at Philips can leverage the sales team experience to cultivate customer relationships as Philips is planning to shift buying processes online.
Low market penetration in new markets
– Outside its home market of Italy, Philips needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
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.
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.
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.
Philips Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Philips are -
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.
Redefining models of collaboration and team work
– As explained in the weaknesses section, Philips is facing challenges because of the dominance of functional experts in the organization. Philips can utilize new technology in the field of Medical Equipment & Supplies industry to build more coordinated teams and streamline operations and communications using tools such as CAD, Zoom, etc.
Loyalty marketing
– Philips has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, 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.
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.
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.
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.
Low interest rates
– Even though inflation is raising its head in most developed economies, Philips can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Using analytics as competitive advantage
– Philips has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in Medical Equipment & Supplies sector. This continuous investment in analytics has enabled Philips to build a competitive advantage using analytics. The analytics driven competitive advantage can help Philips to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
Changes in consumer behavior post Covid-19
– consumer behavior has changed in the Medical Equipment & Supplies industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Philips can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Philips can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Leveraging digital technologies
– Philips can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Medical Equipment & Supplies industry, but it has also influenced the consumer preferences. Philips can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
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.
Threats Philips External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Philips are -
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.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Philips.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Philips needs to understand the core reasons impacting the Medical Equipment & Supplies industry. This will help it in building a better workplace.
Backlash against dominant players
– US Congress and other legislative arms of the government are getting tough on big business especially technology companies. The digital arm of Philips business can come under increasing regulations regarding data privacy, data security, etc.
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.
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.
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.
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.
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.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Philips will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
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.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, Philips may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Medical Equipment & Supplies sector.
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.
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.