Philips (0LNG) SWOT Analysis / TOWS Matrix / MBA Resources
Medical Equipment & Supplies
Strategy / MBA Resources
Introduction to SWOT Analysis
SWOT Analysis / TOWS Matrix for Philips (United Kingdom)
Based on various researches at Oak Spring University , Philips is operating in a macro-environment that has been destablized by – increasing inequality as vast percentage of new income is going to the top 1%, there is backlash against globalization, supply chains are disrupted by pandemic , technology disruption, wage bills are increasing, competitive advantages are harder to sustain because of technology dispersion, increasing government debt because of Covid-19 spendings,
customer relationship management is fast transforming because of increasing concerns over data privacy, cloud computing is disrupting traditional business models, 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 United Kingdom
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 -
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.
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 United Kingdom 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.
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.
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.
Highly skilled collaborators
– Philips has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive Medical Equipment & Supplies industry. Secondly the value chain collaborators of Philips have helped the firm to develop new products and bring them quickly to the marketplace.
Training and development
– Philips has one of the best training and development program in Healthcare industry. The effectiveness of the training programs can be measured in – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Sustainable margins compare to other players in Medical Equipment & Supplies industry
– Philips has clearly differentiated products in the market place. This has enabled Philips to fetch slight price premium compare to the competitors in the Medical Equipment & Supplies industry. The sustainable margins have also helped Philips to invest into research and development (R&D) and innovation.
Strong track record of project management in the Medical Equipment & Supplies industry
– Philips is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
Ability to recruit top talent
– Philips is one of the leading players in the Medical Equipment & Supplies industry in United Kingdom. It is in a position to attract the best talent available in United Kingdom. The firm has a robust talent identification program that helps in identifying the brightest.
Weaknesses of Philips | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of Philips are -
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.
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.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Philips supply chain. Even after few cautionary changes, Philips is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Philips vulnerable to further global disruptions in South East Asia.
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 bargaining power of channel partners in Medical Equipment & Supplies industry
– because of the regulatory requirements in United Kingdom, 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.
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.
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.
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.
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.
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.
Philips Opportunities | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities of Philips are -
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.
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.
Lowering marketing communication costs
– 5G expansion will open new opportunities for Philips in the field of marketing communication. It will bring down the cost of doing business, provide technology platform to build new products in the Medical Equipment & Supplies industry, and it will provide faster access to the consumers.
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.
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.
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.
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.
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.
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.
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.
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.
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.
Threats Philips External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats of Philips are -
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.
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.
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.
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.
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.
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.
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.
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Philips in the Medical Equipment & Supplies sector and impact the bottomline of the organization.
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.
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.
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.
Regulatory challenges
– Philips needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Medical Equipment & Supplies industry regulations.
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.