Execution in the market

Rudy ProvoostSenior Vice President Royal Philips Electronics CEO Global Sales and Services Consumer Electronics

2

Consistency and focus in strategy and execution

• Partnerships with leading retailers• Innovative alliances and new channels• Differentiated business models • Integrated through-the-line marketing• Enhanced supply chain capabilities• Global consumer services platform

3

Partnerships with leading retailers and innovative alliances in new channels

20%

30%

40%

50%

Turnover share Top 10 (concentration)

Partnerships with leading retailers Innovative alliances and new channels

1997 2002

Growth in Europe G10

0

0.4

0.8

1.2

1.6

2.0

1997 1998 1999 2000 2001 2002 2003est 2004 T

In b

illion

€TO

sha

re

top

10

Source: Mintel 2003

4

Differentiated business models and integrated through-the-line marketing

Differentiated business models Integrated through-the-line marketing

In-store Poster

Print advertising

Pric

e

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Profit

PCCoO+Profit

Transport cost

CEregionalCoO+Profit

CEregionalCoO+Profit

CEregionalCoO+Profit

DirectSupply PC Mass Merchant

Specialtystores

ElectronicsRetailer

Retail

RetailRetail

PCCoO+Profit

Retail

CE Mass Merchant

Consumer end price

5

Enhanced supply chain capabilities and global consumer services platform

Enhanced supply chain capabilities Integrated through-the-line marketing

CPFR®Manufacturer Retailer

Collaborative replenishment

Flexible, shipmentsto order

Collaborative forecasting

Collaborative planning

6

A streamlined commercial organization for effective execution across regions and channels

• Solidify our USA position• Capitalize on our stronghold in Europe• Drive growth in Asia• Leverage opportunities in Latin America

7

Solidify our USA position

• Capitalize on our market presenceand brand franchise– Focused account portfolio and

partnerships with winning retailers– Co-equity programs and category mgmt to

drive placement productivity– Streamlined Magnavox business model

• Leverage partnerships– Philips-Nike (Sports)– Philips-Gemini (Accessories)– Philips-DirecTV (Set Top Boxes)

• Execute the business renewal program– Organization realignment and right-sizing– Process reengineering and outsourcing– Streamlined operating models

From 2002 till 2003 YTD

NORTH CAROLINA

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WASHINGTON

MISSISSIPPI

ARKANSAS

OREGON

IOWA

MISSOURI

WISCONSIN

MINNESOTA

SOUTH CAROLINA

ALABAMA

LOUISIANA

KENTUCKY

FLORIDA

TENNESSEE

KANSAS

ILLINOIS

GEORGIA

MARYLAND

NEW JERSEY

MASSACHUSETTS

NEW HAMPSHIRE

MICHIGAN

INDIANAOHIO

WEST VIRGINIAVIRGINIA

PENNSYLVANIA

MAINE

DELAWARE

NEW YORK

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Philips - Magnavox business model

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8

Capitalize on Europe

• Leverage our leadership position with the trade

– Strategic partnerships with international top-10 – Category management for priority categories– Integrated e-Commerce, supply chain and service

platform• Drive profitable growth through expansion

and differentiated business models– Development of new channels and alliances– Differentiated B2C and B2B business models– Double-digit growth plans in emerging markets

• Execute the business renewal program– Organizational realignment and fine tuning– Integrated geographical clusters I.s.o N.S.O.s– Streamlined operating models

Growth G10

+31% +7%21%

11.6%15.1% 5%

10%

0

0.4

0.8

1.2

1.6

2.0

1997 1998 1999 2000 2001 2002 2003 2004 est

In b

illion

€

9

Drive growth in Asia

• Organize for profitable growth in China, and capture opportunities in other key markets

– Expansion and upgrade of distribution – Focused brand investments in priority categories– Business plans for high potential markets (India)

• Structural footprint for sustainable success – Intensify alliances and partnerships– Alignment and integration of industrial and

commercial footprint for synergy and scale– Integrated economic model with right balance of

local manufacturing and sourcing• Execute the business renewal program

– Organization realignment and right sizing– Rationalization support functions– Streamlined operating models

Philips - MTV

10

Leverage opportunities in Latam

• Leverage our leadership position in Brazil and brand equity across the region

– Capitalize on DWIDE success to drive FTV – Focused brand investments in priority

categories – Extend the retailer partnership programs

• Capture key opportunities – Mexico turnaround plan– New Carribean, Platino and Pacific clusters for

more effective execution– New policies for margin optimization and better

working capital management • Execute the business renewal program

– Organizational realignment and right sizing– Synergy and scale through shared services and

systems, and common infrastructure – Streamlined operating models

Example DWIDE

11

Winning formula for execution in the market

Partnerships with leading retailersInnovative alliances and new channels

Differentiated business models Integrated through-the-line marketingEnhanced supply chain capabilitiesGlobal consumer services platform

Solidify our USA positionCapitalize on our stronghold in Europe

Drive growth in AsiaLeverage opportunities in Latin America