Alberto VegroEsmeralda Poda

PhilipsRoyal Philips Electronics, more commonly

known as Philips, is one of the largest electronics companies in the world.

This multinational was founded in 1891 as a light bulb manufacturer at Eindhoven, Netherlands

In 2010, its sales were €25.42 billion. The company employs 119,000 people in

more than 60 countries and it has sales and service outlets in 150 different States

Slogan= “Sense and simplicity”

Main inventions: Compact cassette, Laserdisc, Compact

disc, DVD, and Blu-ray

Its articles range from music devices to telephones,video game consoles, razors, electrical component, televisions and healthcare products

Philips Medical SystemsMedical Systems was an area which offered

relatively high and stable growthMedical System referred to the various

equipment used to meet the health need of population:

x-ray machines, imaging systems such as magneting resonance imaging(MRI), diagnostic monitoring, defibrillators, surgical instruments

One-half of the €12 billion cash inflow of Philips was used to finance this sector of the corporation

Medical System as a “world” in constant and rapid evolution

the business most R&D-driven

Dominated by the Big 3: Philips Medical System, GE Healthcare and Siemens Medical Solutions

competition across modalities or imaging

technologies

Philips aim was to become “the premiere healthcare technology company in the world through a relentless pursuit of innovation”

How to achieve rapid gowth, efficiency and improve EBITA?

Expanding the Process of

horizontal scope internationalization

Philips want to build up Medical System by acquisitions and internationalization from a number 3 position, behind General Eletric and Siemens, into the industry leader

Enlarge its narrow portfolio of offerings making purchases around new areas of strenght

Acute care care at home

oncology molecolar imaging

cardiovascolar disease neurology

Process of InternationalizationLabour accounted for 20% of Philips’ costsPressures from the Asian competitors

lower labour costs economies of scale

greater product standardization

Philips had a country-centered structure

Other multinationals were migrating to low-cost countries

where local competitors were nonexistent

Major manufacturers improved economics of product variety

designing standardized cores for their principal products that could easily combined with different/various devices

80% of orders= from developed country + U.S.

Philips shifted her MS’s center of mass to North America,which accounted for 51% of MS’s revenues

U.S marketPhilips MS faces big barriers to growth in the

North American market; the remedies were initiatives focused on this market:

- expanding services and IT offerings - outpatient - specialty facilities - alliances with an U.S. Distribution firm in

order to deepen penetration of small hospital and private clinics

Chinese marketMS lagged a number of Philips’ other product

divisions in Asia-PacificChina was the company’s second largest

country market, after U.SChina had also emerged as the 3° world

largest medical imaging equipment market

Philips’ aim=move heavily into China doubling its total activity

MOVES: - employ more workers indirectly via contract

manufacturers and minority-owned joint ventures

- R&D joint venture with China-based Neusoft, which focused on the economy and mid-range segments for diagnostic imaging products in China

This provides a good fit with Philips high-end product range

- Expanding in China also help to serve other markets like those in Asia Pacific, South America, East Europe

Philips’ competitors:GEGeneral Electeric(GE) is a company founded in 1878 by Thomas EdisonHighly diversified companyThe company operates through four

segments: energy, technology infrastructure, capital finance, consumer & industrial

2004 most valuable company of the world=$400 billion

1°/2° position in each of its business segments

GEH General Electric Healthcare derived its revenues

from diagnosting imaging equipment,services, IT, bio-sciences etc.

GE’s strength=ability to market very well its products

Previous name was GEMS (GE Medical System) whose main activities can be divided into 3 groups:

1)Acquisitions: GEMS has made some major acquisitions in the 1980s in order to internationalize the business It purchased 100 businesses

i.e. GE acquire Thomson’s medical equipment business this gave GEMS a strong base in Europe

GEMS targeted firms that would help it provide a broader range of options to healthcare customers, that delivered products and services at lower costs, plus complementing current businesses

2)Global product Company(GPC)=shifting manufacturing from high cost to low cost countries

This saves 10%-30% on materials and 50% on

labor

3) Development of Local Marketing and Sales within key markets “be more German than the Germans”

Like PhilipsMS, GEH’s revenues tilted towards the U.S.

Like PhilipsMS, GEH continued to place great emphasis on expanding its portfolio of service offerings

GEH has strong views about China:- Exploit it as low-cost manufacturing platform- Transfer there its Headquarters

GE did not compete in the same segments as local Chinese manufacturers 90% of GE’s earnings will have no competition from China

Philips’ competitors:SiemensSiemens AG is a

German multinational conglomerate company headquartered in Munich, Germany. It is the largest Europe-based electronics and electrical engineering company.

Siemens is an integrated technology company with activities in the fields of industry, energy and healthcare. It is organised into six main divisions: Industry, Energy, Healthcare, Equity Investments, Siemens IT Solutions and Services and Siemens Financial Services (SFS).

Siemens and its subsidiaries employ approximately 420800 people across 190 countries and reported global revenue of 76.651 billion euros for 2009.

Consider itself Arch-rival to GE, but it is less profitable than GE operating margin 4% vs. 14% for GE

Siemens Medical Solutions(SMS) is a unit of the firm that deals with Healthcare

70% of SMS’s revenues were accounted for by diagnosting imaging,healcthcare IT and patient monitoring/care systems.

SMS SMS was chronically unprofitable in North America

This was due also to the episode of non compliance with U.S. Norms of good manufacturing practices

Existence of a significant cost disadvantage for SMS

SMS’s product-related costs were 117% of their revenues

Manufacturing=disadvantages because of concentration in high-cost locations, supplier fragmentation and high sales expenses

Deintegration Consolidation of suppliers

Move production out of Germany

Restructuring Process

SMS moved later than GEH and Philips MS to make 2 major acquisitions in the U.S.

SMS= clearly ahead on medical technology excellent reputation in medical imaging technological leadership

SMS had made some attempts to move manufacturing from North America and Western Europe to lower cost countries planned to reduce outsourcing of Healthcare IT and manufacturing equipment to developing countries not at the level of GEH

SMS also plan to double its total sales in China through joint ventures focused on the local market

Its sales are expected to be growing twice as fast as its competitors