Monday 8 November 2010

SWOT & PEST - Philips

Mission statement

The Philips Inc. is a company with 115 years of history. It has made its way from a small carbon-filament lamps producer to the one of the world's biggest electronics companies. A mission the company was devoted to all this years improving the quality of people's lives through the timely introduction of meaningful technological innovations. (Phillips, 2007) The mission statement shows that the business of the company is developing new technologies which can be used in day to day life in order to make it easier and more comfortable. It is also clearly seen from the mission that the customers of the company are mostly individuals, who buy the product for their own use. According to the statement the customer should probably be seeing the company as a provider of advanced and user friendly technology that improves their lives. The business will be providing solutions in the areas of healthcare, lifestyle and enabling technology and should be the most admired company in the industry.

PEST Analysis of Philips company

All business entities are under the pressure of different factors inside and outside the organization. In order to survive in the global environment, companies in building their strategies have to aware of the outside forces such as political and economic situation inside the country and in the global community, new technologies in the market, socio and cultural influences.

Political Factors

Political factors that affect the activity of an organization are: tax policy, employment laws, environmental regulations, trade restrictions and political stability inside the country. As company maintains sales and service organizations as well as manufacturing operations in many different countries it must deal with a great variety of laws and policies, which additionally change all the time. For example in many countries of European union now taking place dynamic changes in employment law.(Federation of European employees, 2007) Also many countries are now environment concerned and try to reduce pollution. Philips as a large manufacturer can face some problems because of that.

Economic Factors

At the present time a lot of countries where Philips Company has its business are experiencing high levels of economic growth at the moment. For example according to, the economy of the country grew at the fastest rate for two years in the second quarter of 2006 and as it was reported by Office for National Statistics (ONS) reached 2.6% in August 2006. Inflation rate has increased to 2.5% in June 2006; however, the average inflation in 2006 is likely to around 3% that is normal for UK. Because of the high economic growth inflation and interest rates are likely to rise. In 2006 the Bank of England kept the interest rate at 4.5%. For Philips high economic growth means the increasing purchasing power of the population that is desirable for the company.

Socio-Cultural Factors

The social and cultural influences on business vary from country to country, region to region. It is very important that such factors are considered.

Philips operates in many countries therefore they are in vast and diverse socio-cultural arena. It is important for Philips to adapt to these changes in customers expectations from region to region and being able to cater according to them. People in developed countries now also start to pay more attention to the culture of a company, and that fact that Philips is a highly ethical company, which cares about its customers and suppliers will win them more respect from people. Another point about social factor is that people in many countries become wealthier so more now will be able to afford prices of new technology.

Technological Factors

Technology is vital for competitive advantage, and is a major driver of globalization. The main benefits of a better technology are that it allows cheaper and better standard of quality for products and services. It also offers to consumers and businesses more innovative products and services such as Internet banking, new generation mobile telephones, etc.

Philips Company is very dependant on technology. New innovations can significantly improve operations of the company. On the other side if competitors of the company will become more technologically advanced Philips can loose its market share.

Research and development is very expensive and now companies have less time to invent and develop new technologies.

SWOT Analysis of Philips

Every company faces few challenges and weaknesses in its existence, therefore, to know company’s strengths and opportunities is desirable to overcome any difficulties that may arise and successfully predict any trends. SWOT Analysis is a marketing tool that gathers and analyse these information about the company. With help of SWOT, which stands for Strengths Weaknesses, Opportunities and Threats, Philips would know how to deliver their products and right services to its customers effectively.(Kotler, P. 2005)

Internal Strengths

Philips has a recognizable and very strong brand image that was established thorough the years. The core values and the whole icon of Philips are based on the quality, value for money, innovation, and superiority of the service and on the trust. The product range is wide, modern and of good quality.

Philips products and solutions are known to be advanced, easy to use, and designed to meet the needs of all users. Company also has strong intellectual property position as it has a lot of widely used technologies patented as their own innovation.

Philips’s another strength is operations excellence and flexibility of the firm, which helps it to deal with changes. Well built customer and supplier relationships also help the company. Philips is the worlds leading lighting supplier. Strategic alliances are an important part of business at Philips. They enable us to bring new products to the market that we would not have been able to develop on our own. Philips combines with a number of leading global companies to build advanced products and services that touch the lives of people everyday.

Internal Weaknesses

Philips Inc. operates in fields where competitiveness is very concentrated. However it has strong customer base it should not underestimate the emerging customers; it should keep up with new trends and updating the existing products, actively listen new proposals from customers and staff and continue to promote its brand image via effective advertisements.

Another weakness is that Philips employs a huge number of people which work in a variety of different countries. Therefore the company experiences some problems in sharing information between employees and controlling operations of different businesses. New, efficient and less complicated ways of transmitting information between the stores, manufacturing premises, head office and various departments should take place in order to communicate successfully and deliver the most effective customer service.(Philips Company, 2007)

External Opportunities

Philips continuously explores new ways to improve products and to offer innovative products to its consumers. It have created a program through which higher and higher quality levels in all products and services will be reached. Technological products of Philips can be more design oriented.Creating jolly, modern and convenient stores with place to rest and have a coffer is another project, which Philips can undertake. Redevelopment will create good atmosphere in the stores, the changes would encourage customer to stay longer in the stores.

External Threats

More retailers have understood where the market trends are going; quality, value is the key in today retail sector. Many companies started to produce the same quality products on a cheaper price.

Another challenge that not only Philips faces is fast changing environment, where new products are introduced within small space of time. Therefore, keeping track with new trends and products is essential for the business.

Spending habits and way how people shop is changing rapidly. People shop more on line, looking for promotions or wait until the sale period. Therefore, improve on-line facilities; friendlier web page would boost the sale and maintaining small promotions in the stores would invite higher number of visitors into the stores.

Information systems at each management level of Philips Inc.

There are mainly four levels of management of organisations. They are as follows:

a. Strategic level,

b. Management level,

c. Knowledge level and

d. Operational level.

The information system that serves the above four levels of management are Strategic-level systems, Management level systems, Knowledge level systems and Operational –level systems.

Let us now analyse the information requirements at each levels in the management and recommend information systems at each levels of management to support the major business functions of the organisation.

Strategic level: This is the topmost level of management that consists of the senior management who are responsible for making long term decisions. This level deals with the information about external events, rivals, sales, costs, quality, and trends. In this level the decisions are primarily to match factors of the external-business’s environment which affects their organizational capability. Therefore in this level the decision making involves strategies to gain competitive advantage, to become a market leader in the long term outlook.

The information system that is used at this level is called Executive Support System (ESS). Executive Support System (ESS) is a reporting tool (software) that allows you to turn your organization's data into useful summarized reports. These reports are generally used by executive level managers for quick access to reports coming from all company levels and departments such as billing, cost accounting , staffing, scheduling, and more.


Philips Inc can use this information system to track the external events, rivals, sales, costs, quality, and trends and thereby take decisions in respect of new products, cost strategies, strategies to gain competitive advantage etc in the long term outlook.

Management level: The next level is called management level. This consists of middle managers who look after monitoring controlling and administrative activities of the organisations. Therefore at this level the systems that are used are the management level systems that look after the monitoring, controlling and administrative activities. Such information systems are called Management Information Systems and Decision Support System. The systems used in this level are also called the “what if ” systems as it focuses on less structured decisions. For eg. Finding the impact of doubling the sales in the summer period.

The other system that is used at this level is Decision Support System (DSS). Decision Support Systems (DSS) are a specific class of computerized information system that supports business and organizational decision-making activities. Typical information that a decision support application might gather and present would be:

Accessing all of your current information assets, including legacy and relational data sources, cubes, data warehouses, and data marts

Comparative sales figures between one week and the next

Projected revenue figures based on new product sales assumptions

The consequences of different decision alternatives, given past experience in a context that is described


Philips Inc can use this information system to take the “what if” decisions like future assumptions of sales of new product and its impact on revenues etc.

Knowledge level: This is the third level in the management of the organisation. In this level the existing knowledge and the new knowledge is integrated into the operations of the business so as to increase the efficiency of the organisation.

The systems used at this level are: Knowledge Level Systems (KWS) and Office Systems. The KWS are generally used by knowledge workers like doctors, lawyers, engineers etc. Whereas, the Office Systems are used by Data workers such as filing clerks, bookkeepers, and typing staff. Knowledge Work Systems contains features like engineering design workstations which helps in creation and integration of knowledge in the organisation. Office Systems helps the workers to be more efficient in production by supporting the coordination and communication within the organisation.

Knowledge Level Systems is one of the important information systems required by Philips Inc. This is because Philips Inc deals in products that are mostly based on high level technology which requires high volume of innovative knowledge to be dealt with by the engineers and innovators. Therefore such information systems become very important for Philips Inc. for introducing new products. Office Systems are also important for Philips Inc. because of features such as electronic mail systems, word processing and scheduling systems which are very important for increasing efficiency in the production.

Operational level: The bottommost level in the management of organisations is Operational Level. This level consists of the operational managers that are involved in the primary activities of the company such as production, selling, etc. In this level of Philips Inc activities such as production of goods, selling, payment of wages and salaries, stock taking, accounting etc are looked after.

In this level the information system that is recommended is Transactional Processing System(TPS). TPS is useful to accomplish and record the day-to-day routine activities of the organisation. Several types of TPS can be used in PHILIPS INC. such as Payroll System to pay the salaries and wages to its staff, Sales Order Entry System to track the day to day sales, Employee Record System to keep the records of thousands of employees working in Philips Inc. , Inventory System to track the stock levels, etc. Philips Inc can also TPS in its accounts departments to manage the general ledger that tracks the income and expenses of the firm and generates the financial statements of the firm

Use of IS/IT in CRM

Customer relationship management is set of concepts, which companies use to manage their relationships with customers, including the capture, storage and analysis of customer information. There are three aspects of CRM which can each be implemented in isolation from each other: operational, collaborative, and analytical.

Operational CRM provides support to day to day business processes and therefore IS/IT that could be used for enhancing this aspect of CRM are used by operational level. Transaction-processing systems used here in order to add every interaction with a customer to a customer's contact history, and staff can retrieve information on customers from the database as necessary. Philips Company as a business with a website and online customer service will have an advantage here as customers can enter and maintain their details as they buy a product. One of the main benefits of this contact history is that customers even when interacting with another representative or department of a company over a period of time do not have to repeat their interaction history. (Harvard Business Review On Customer Relationship Management, 2001)

Collaborative CRM covers the direct interaction with customers, for a variety of different purposes, including feedback and issue-reporting. A variety of different channels can be used for a contact here, such as internet, email, automated phone (Automated Voice Response AVR), SMS or through mobile email. (McLeod R, 2006)

According to research made by Ian Brooks (2006) sms or mobile email are much more effective then alternative channels. Part of this has to do with the ease of use of particular feedback channels. SMS feedback has many advantages it allows the consumer to give feedback and it allows companies to capture insight from a wider consumer base. (Wikipedia, 2007) Collaborative CRM requires customer interaction systems, eg an interactive website, automated phone systems etc.

Analytical CRM analyses customer data for a variety of purposes, for example, to optimise marketing effectiveness or to aid product and service decision making (e.g. pricing, new product development etc.) Analytical CRM generally makes heavy use of predictive analytics. Analytical CRM requires statistical analysis software as well as software that manages any specific marketing campaigns.

For an effective customer relation management it is crucial for a company to have a centralised customer database that will allow business to run all its systems from the same source, ensuring that everyone uses up-to-date information. IT technology must also ensure that information is available to staff in the most useful format. For analysing customer behaviour tactical management can use data mining tools in spreadsheet programs, which analyse data to identify patterns or relationships.

E-commerce business models:

Traditional business models are increasingly being replaced by newer business models based on relationships enabled by information technologies. Such business models are known as E-commerce business models. (Gangopadhyay, 2002; p 131)

Let us now discuss the various e-commerce business models and determine the most suitable one for Philips Inc.

There are six major e-commerce business models, namely,

  1. Merchant model
  2. Advertising model
  3. Subscription model
  4. Brokerage model
  5. Infomediary model
  6. Auction model

a. Merchant Model: In this model businesses operate through a website which has the product information and the online order mechanism. Customers can select the products online and place an order if they like the product. The merchant model can be further classified into three categories: Click-and-mortar merchants, Virtual Merchant, Build to order merchants.

i. Click-and-mortar merchants: This means traditional brick-and-mortar retail establishment with web storefront. Some examples of such a business model are Tesco, Asda, who also have a web storefront along with traditional brick and mortar stores.

ii. Virtual Merchant: This means a retail merchant that operates only on over the web. Business such as can be regarded as a Virtual Merchant.

iii. Build to Order Merchants: This means providing customised solutions and products to the consumer besides the regular products over the web. A good example of such business model is Dell Computers.

b. Advertising Model: The web advertising model is an extension of the traditional media broadcast model. The broadcaster, in this case, a web site, provides content (usually, but not necessarily, for free) and services (like email, IM, blogs) mixed with advertising messages in the form of banner ads. The banner ads may be the major or sole source of revenue for the broadcaster. The broadcaster may be a content creator or a distributor of content created elsewhere. The advertising model works best when the volume of viewer traffic is large or highly specialized.


c. Subscription model: The subscription model is the model adopted by websites that charge for access to their content, either through a monthly subscription fee or a one time access fee. Websites such as, netflix are good examples of subscription based business model.

d. Brokerage Model: Another e-commerce business model is Brokerage model. In this business model the websites acts as a broker who brings the buyers and sellers of products and services together to engage in transactions. Normally the website charges a fee to at least one party involved in the transactions. An online travel agent such as is an good example of such business model.

e. Infomediary model: In this business model the companies collects, analyzes and sells information on consumers and their buying behavior to other parties who want to reach those consumers. Companies using an infomediary model provide products like free computers or services like free Internet access to consumers in exchange for information about themselves. This information is then sold to other companies who use it to develop more sophisticated, successful marketing campaigns.


f. Auction model: In this business model websites conduct auctions for sellers who can be individuals or merchants. Online auctions have proven very popular with consumers and businesses alike. They offer many benefits to both buyers and sellers. The most common examples of auction sites are and


Philips Company, 2007. Retrieved on 17.07.07 from:

Federation of European employees, 2007. Retrieved on 20.07.07 from:

Kotler P. Marketing Management. Prentice-Hall; 12 Revised Ed edition (1 Mar 2005). P. 223

Harvard Business Review On Customer Relationship Management, Harvard Business School Press (1 Dec 2001)

McLeod R, 2006, Management Information Systems, 10th edition, Prentice Hall, New Jersey, pp. 10, 14, 189, 255

Wikipedia, 2007. Retrieved on 20.07.07 from: