Royal Philips Electronics Corp Business to Business Marketing

Business to Business Marketing

Individual Firm Study:

        Royal Philips Electronics Corp.        

1. Company Synopsis

Koninklijke Philips N.V. (Royal Philips Electronics in English) was founded in 1891 as a Dutch diversified technology company for consumer electronics and electrical products (CrunchBase, n.d.). At the end of 2017, it ranked 375 in Fortune Global 500 list (Fortune, 2017), with more than 22 R&D centers, 40 manufacturing sites (Hoovers, 2018) and generated EUR 17.8 billion sales with 73,951 employees across over 100 countries according to the official website (https://www.philips.com/a-w/about/company.html). Philips has three key business units with the largest as Philips Healthcare (Further divisions: Imaging Systems, Patient Care & Clinical Informatics, Home Healthcare Solutions, and Healthcare Transformation Services) contributes more than 45% of the total sales; Followed by Philips Lighting (home, industrial, and municipal light bulbs, fixtures, and systems) for 31% of the total sales; And Philips Consumer Lifestyles (consumer electronics, home & domestic appliances, personal care) for 22% sales (Hoovers, 2018). In terms of Philips’ geographical business clusters, North America is its most matured market generating the highest sales among all others (Appendix I: Table 1) and the Philips Electronics North America Corporation (https://www.usa.philips.com/), founded in 1933 and headquartered in Andover, Massachusetts, is the U.S. subsidiary that oversees the U.S., Canada, and Mexico operations (Bloomberg, 2018).

Being a company with over 100-years history that has both B-to-C and B-to-B portfolios, Philips might be initially more well known for its B-to-C household lightings and personal care products such as light bulbs, shavers, and toothbrush. However, since the year 2013, Philips is making efforts to shift its brand image from a B-to-C consumer electronics company to a global B-to-B business company (Drell, 2014).

1. B2B Customers

Given the three major business divisions – Healthcare, Lighting, and Consumer Lifestyle, Philips’ typical B-to-B clients consist of the hospital, government, EMS, professionals, insurance company, retail store, distributor, and buying group.

Using the healthcare division as an example, Philips provides products and services related to clinical solutions, consulting, customer service solutions, product upgrades & trade-ins, and population health solutions. Since 2006 it had over 40 long-term relationships with healthcare providers with some of its current clients (preferably called partnerships) including Augusta University Health (which is a 15-years, 300 million alliance), Mackenzie Health, Marin General Hospital, MUSC Health, WMC Health, Banner Health, Omaha Children’s Hospital & Medical Center, and Phoenix Children’s (Philips, n.d.).

To elaborate with the Phoenix Children’s Hospital case, it opened the new $40 million, 42,000-square-foot emergency department and Level 1 Pediatric Trauma Center in 2017 using Philips’ advanced medical technologies/solutions including its imaging system in computed tomography (CT), digital radiography (DR), ultrasound; IntelliVue patient monitors; Clinical informatics solutions; and full range consulting services that enabled the hospital to create an effective yet caring treatment environment (e.g., bedside monitoring) and significantly expanded the pediatric treatment capacity from the original 22,000 children, but with previous year actual visits of 87,000 patients, to accommodate 100,000 patients per year (Philips, 2017).

1. Value Proposition and Competitive Differentiation

Value proposition refers to the statements/promises that captures the (unique) benefits a supplier offered to advance the performance of the client. Two concepts from it are points of parity – similar elements to competitors, and points of difference – different elements with the competitor (Hutt & Speh, 2016). If only allows one word to describe Philips’ company value and belief, it would be “Innovation.” Philips has the headline of “Enduring commitment to innovation for the 21st century” and a brand line of “Innovation and You” (Philips, n.d.). Aligning with its value proposition, the company not only has 22 R&D centers around the globe in Netherland, France, Germany, U.K., India, U.S., and China, but also provides Philips Innovation Services with 1,000 globally active specialized experts missioned in accelerates innovations both inside and outside Philips utilizing its rich heritage and resources since 1981(Philips, n.d.). According to the Statista report, Philips had an average of 1,515 new patents filed each year from 2010 to 2017 (Appendix I: Table 2), and an average annual R&D expenses of 1,624 million euros for the recent eight years (Appendix I: Table 3) (Statista, 2017).

Categorized as a health technology company, Philips (7.1%) ranked the third regarding market share next to General Electric (18.8%) and Siemens AG (10.1%) in the U.S. diagnostic imaging machines manufacturing industry (IBIS, 2016). While GE and Siemens still maintained highly diversified business portfolios, Philips is transforming to be more “Focused” – aiming to fully sell down the Philips Lighting division and further into the Healthcare Technology field with the current industry ‘value-based’ transformation (AnnualReport, 2017). For the high-end medical devices market, advanced technology is a key to core competitiveness in the industry. Philips’ innovation also illustrated by its relatively new business model – establishing long-term (in average over 15-years) partnership with healthcare providers such as Mackenzie Health and Granada Hospital to provide the “all-inclusive” diagnostics and medical devices solutions, which achieves monopoly-alike condition for client’s medical device supplies (MedCaptain, 2016). Philips also partnered with the Amazon Web Service (AWS) under the digital trend, integrating the ‘analytics’ and ‘big data’ elements to the value-based healthcare solutions and brought out the HealthSuite digital platform that stores 15 PB actionable patient data and enabled the fastest data transfers from 434 records per minute to 37 million records per 90 mins (Amazon, 2015).