Philips Company Strategic Management - Company Audit, Strategy Implementation, and Evaluation - Research Paper Example

Strategic Management Name: Institution: Date: Executive Summary This Research Paper offers a review of the Philips Company strategic management. The Research Paper conducts an audit evaluating the company strategies against its internal and external environment. As such, it applies the SWOT, PEST and competitors analysis strategies. Based on this analysis, the Research Paper establishes that the organization faces a key strategic challenge in its market approach. This is evident in its focus on the Healthcare industry that is growing competitive. Therefore, the Research Paper recommends a diversification approach in the retail and automotive industries. Under the strategy implementation analysis, the study establishes that its implementation will cost the organization in terms of capacity development through new facilities development as well as human resource capacity enhancement. Further, the study forecasts challenges such as competition and high costs in the strategy implementation. Thus, it recommends its application spread over a three years period. Further, under the evaluation stage, the Research Paper recommends the adoption of the cost-benefit analysis as well as the benchmarking approaches. Finally, the Research Paper concludes that with the implementation of the proposed diversification strategy, Philips Company will increase both its market influence and profitability levels increase. Table of Contents Executive Summary 2 Table of Contents 3 1.0 Introduction 4 2.0 Company Audit 4 2.1 SWOT Analysis 4 2.2 PEST Analysis 5 2.3 Competitor’s Analysis 7 2.4 Ethical Analysis 8 3.0 Strategy Formulation 8 4.0 Strategy Implementation 9 4.1 Implementation Costs 9 4.2 Implementation Timeline 10 4.3 Implementation Challenges 11 5.0 Strategy Evaluation 11 6.0 Conclusion 12 References 14 1.0 Introduction The Philips Company is an international electronics industry on the global market. The Company, established in 1892 has over the years developed into its current global standards in the electronics market. In its expansion strategy, the organization has grown to include market influence not only in the Asian, UAE, but also across Europe and the USA markets. In its foundation, the organization was based on a mission of providing quality electronic products to the global consumer base. To this effect, the organization has over the years expanded in the market through provision of quality products. In order to implement these issues, the organization developed a strategic mission plan on improving peoples’ lives through meaningful innovation. Moreover, the organisation developed a vision of providing a healthier and sustainable global population through innovation. As such, the organization seeks to establish market influence through increased technological services on a global platform. The organization is based on core principles of innovation and competency. The organization concentrates on the healthcare industry (“Philips”, 2014). This Research Paper is an evaluation of the organizational strategic management. As such, the Research Paper develops a strategic plan for enhancing organizationally improved performance. 2.0 Company Audit 2.1 SWOT Analysis In order to evaluate and establish an organization’ internal features both competitive and challenging aspect, it is imperative to conduct strength, weakness, opportunities and threats (SWOT) analysis. A strength analysis on the Philips Company establishes that the organization has a strong brand name that offers its a competitive edge over competitors in the electronics global industry. In this case, the organizational eco design production program, initiated early in 1994, enhanced the production of energy efficient products, adopting the green products tag, this phenomenon was characterized by the green organizational logo that makes the products visible and symbolize their environmental regulations conformance nature. This has not only enhanced increased products sales, but also significantly reduced the organizational production costs. However, a weakness analysis on the organization reveals that the enterprise increased legal suits in the electronics consumer division pause a major challenge to the organizational brand reputation. In addition, a strategic forecast analysis o the organization establishes that the organization has the potential to strategically expand with the globally increased demand for green lighting. The global electronics consumer market has grown environmentally sensitive and is increasingly seeking out to purchase products conforming to these requirements. Thos has resulted to the increased demand for green electronics products, which by 2011, comprised Philips 38% of the total sales (“Philips”, 2014). However, despite the established strengths and growth opportunities, the organization faces the threat of increased counterfeited products that are cheap as well as increased competition from other established brands such as the Sony Company. In this case, the analysis establishes that such organizations have over the years increasingly emulated the Philips green production approach. Therefore, this has negated the organizational brand competitive edge, threatening its overall strategic competitiveness. 2.2 PEST Analysis This Research Paper evaluated the external analysis on the organization. As such, the Research Paper conducted a political, economic, social and technological (PEST) analysis on the market. A pest analysis offers an overall strategic view on the organization. A political situation evaluation of the UAE and the global market establishes that the market possesses a political goodwill facilitating the organizational growth. The political goodwill has enabled the development of regulations supporting the local organizational ventures in the industry. This has enabled the organization enhances its expanded market influence in the market. In addition, an economic evaluation of the environment establishes that the UAE market as over the years experienced increased earnings. The market, through political stability and appropriate economic regulations, has developed to emerge as among the emerging global markets. As such, this implies that the economy has registered increasing though gradual per capita incomes. Consequently, the consumer base has acquired an increased disposable income. Market demand is directly proportional to the existing disposable income. As such, increased disposable income level implies increased market demand. Therefore, this implies that the economy provides increased demand for the Philips products. However, the growing economic trend has increasingly led to market attractiveness. As such, competing multinational organizations have ventured into the market creating increased market share challenges for the organization (Groenveld, 2007). Further, social analysis on the issue establishes that the UAE society attitude towards healthcare services has changed. Traditionally, the society relied on traditional healthcare services and seldom advocated for the development of the formal healthcare sector. As such, only a few of the society members sought formal healthcare services. However, this trend has changed over the years. Cultural beliefs changes as well as integration have resulted to increased healthcare services demand. Therefore, this has resulted to increased healthcare services demand and expansion. The Philips Company has its major consumption base on the healthcare industry. As such, expansion on this industry increases the overall organizational success rates. Finally, technological analysis establishes that the UAE market has over the years embraced technological changes. As such, the majority of the industries in the market have resulted to increased adoption of technology in their operations through the automation approaches. Therefore, this presents the organization with an increased electronics market base. However, drastic changes in the electronics industry expose the organization to products obsoleteness challenges. 2.3 Competitor’s Analysis An industrial analysis on the electronics industry establishes that the Philips Company faces increased market challenges in the global electronics industry from other multinational players such as the Sony and Samsung Companies. The Sony Company derives its major competitiveness from its strong brand name. This is evidenced by the 2011 survey on the Asian market that graded the organization as the most valued brand. Therefore, this strong presence in the market poses a major challenge to the Philips brand competitiveness. Further, the Samsung Company poses a threat to Philips due to its adoption of a diversified market focus. As such, the organization expands its revenue base facilitating increased profit margins. However, the Sony Company has its weakness in its pricing strategy while the Samsung Company has its challenge on the diversification approach, which deprives it the organization concentration benefits, enjoyed by the Philips Company in the Healthcare Industry. Therefore, a competitor’s analysis establishes that despite the challenges, the organization has leverage on its healthcare industry concentration approach (Cooper, 2000). 2.4 Ethical Analysis An ethical analysis on the organization establishes that the organization seeks to establish and adopt ethical approaches in the market. This is developed from the organizational core values. In this case, the organization has developed an ethical corporate social responsibility programs in the market. Through this approach, the organization has established a link between the management and the society. This enhances the development of rational decisions through transparency in the process through consumers’ representation in the board (“Philips”, 2014). 3.0 Strategy Formulation Based on the above strategic audit on the Philips Company, this Research Paper establishes that the organization has strategic challenges that require strategic resolutions. A major strategic issue to the organization is the concentration on the healthcare industry. The Research Paper evaluation recommends a change on this approach. In its analysis, the Research Paper establishes that competitors in the market such as Samsung and the Sony Company adopt this approach. Evidently, this approach has allowed the organizations, a special case on Samsung, establish an increased global market. Studies have been conducted on the merits and rationale for market diversification. Ritossa and Bulgacov (2009) conducted a study to evaluate the advantages of diversification strategies adoption. In its analysis, the study established that the adoption of a diversification approach increased organizations revenue streams. Revenue streams represent the organizational revenue sources from which respective organizations offset their expenses in the market. Revenues gained from such sources enable organizations, provide value to other consumers. The global market is increasingly growing competitive. As such, revenue margins in respective industry sectors have significantly reduced. This has been the strategic challenge at Philips Company. Although the organization has established its influence in the healthcare electronics industry, new entrants into the market such as Sony and Samsung have increased competition, subsequently reducing the overall organizational revenue from the consumer base. Therefore, based on this analysis, this Research Paper recommends a business model change for the Philips Company. Currently, the business model classifies the healthcare electronics industry as its core activity and focus segment. However, this Research Paper recommends that the organization changes its business model to incorporate other sectors in the electronics industry. The organizational misses out on an increased expansion potential in the industry as the majority of the enterprise automate their services. In particular, this Research Paper recommends that the Philips Company should expand its market base and focus to include the retail industry, as well as the automotive industries. These two industries have been registered as among the most developing entities in the market. Further, a review on the market establishes that the market has a bias towards automation of services and products production and distribution processes. Consequently, investing in this marketing industry provides the Philips Company with increased market expansion and increased profitability opportunities (“Philips”, 2014). Therefore, a policy recommending expansion into these markets should be developed by the Philips Company management. 4.0 Strategy Implementation 4.1 Implementation Costs In implementing the proposed diversification strategy for the Philips Company, it is imperative to consider a few strategic issues such as costs, implementation timeline and the potential implementation challenges. On one hand, the diversification strategy implementation will require increased investment capital by the organizational management. First, the organization will require expanding its product line. Therefore, this implies that the organization will be required to conduct two strategic alternatives. One is increase equipments in the existing facilities in order to promote their production capacities. Alternatively, an organization can establish new facilities that will focus on producing products for these new market segments. On the other hand, the organization will be required to invest in the establishment and development of efficient distribution channels. Where possible, the organization should strive to integrate the new products into the existing distribution channels. However, where such channels do not exist or are insufficient, this Research Paper recommends the establishment of new strategic distribution channels. Further, the organization will incur costs in the development of qualified human resource base as well as in the promotion and advertising services in this market. 4.2 Implementation Timeline The proposed diversification strategy is a long term strategy that requires organizational commitment. Moreover, due to the established investment costs, it is imperative to spread its application over a relatively long period. This will allow the organization enough working capital for another expense as well as allow for the adaptation of other resources such as the human resource to the new system. Therefore, this Research Paper recommends a stage process implementation of the strategy. As such, it should be implemented on two phases. The first phase implemented over the first two years should focus on expanding to the retail industry while the second phase, running for a year should focus on the automotive industry. Thus, the strategy implementation will run for a consecutive three years prior to full adoption. 4.3 Implementation Challenges Despite the merits posed by the implementation of the diversification strategy for the Philips Company, this Research Paper anticipates a few strategic challenges. One among the challenges is competition in the new markets. The proposed diversification market segments experience the presence of Philips competitors such as Samsung (West, Ford & Ibrahim, 2010). Therefore, this Research Paper anticipates that the organization will face a challenge to exert its influence and presence in this market. Further, as already discussed, the implementation of this strategy requires a change in the human resource structures. Therefore, this Research Paper argues that the organization will face an eminent human resource shortage challenge in the industry. In order to overcome these challenges, this Research Paper advocates for increased promotional and human resource development and training approaches. 5.0 Strategy Evaluation The process of strategic management has its last phase as evaluation and control. The rationale for this phase is the conformance of the fact that the organizational strategy performs as per the expectations. Therefore, in order to ensure that the Philips Company diversification strategy performs as required, this Research Paper recommends the adoption of cost benefit and benchmarking evaluation tools. On one hand, the cost benefit analysis establishes the costs incurred against established gains on an organizational process. A cost benefit analysis evaluates the economic viability of organizational strategy, based on its revenue contribution. This Research Paper recommends the application of this approach. In order to establish the actual merits and economic rationale of the proposed strategy, the Research Paper recommends that the strategy cost benefit analysis should be conducted upon the completion of the strategy implementation period, which means that it should be conducted after three years. However, after that, the evaluation should be conducted on an annual basis. In addition, this Research Paper recommends the adoption of the benchmarking evaluation technique. Libecap (2009) argued that the approach incorporates the development of a comparison between an organization and its competitors. In particular, organizational strategies are evaluated against the best performing corporations in the market. As such, this Research Paper recommends the implementation of this strategy evaluation on the proposed Philips Company diversification strategy. In this case, the Research Paper recommends the evaluation of the strategy success based on revenues and established market based, against the competitor gains such as the Samsung strategy gains. If established that the proposed strategy falls short of the benchmark, improvement recommendations should be developed to enhance its returns. Moreover, this Research Paper argues that the benchmarking evaluation process should be conducted on an annual basis from the third year of the strategy’s implementation. 6.0 Conclusion In summary, this Research Paper offers a review on the situational analysis at Philips Company, an electronic organization in the UAE market. An organizational audit evaluates the internal, external and the consumer organizational market. The analysis establishes that though pursuing an ethical management practice and with merits in the political goodwill, changing societal structures, technology adoption trends, as well as a strong brand name and identity, faces market challenges. In order to remedy the shrinking revenues challenge, the Research Paper recommends a diversification strategy applicable over a three years period in both the retail and automotive industry. However, the Research Paper establishes that the strategy implementation is bound to experience challenges such as high costs and human resource challenges. Therefore, in order to establish the implementation success rate, the Research Paper recommends the application of both the cost-benefit analysis and the benchmarking evaluation tools. References Cooper, L. G. (2000). Strategic marketing planning for radically new products. Journal of Marketing, 64(1), 1-16. Groenveld, P. (2007). Roadmapping Integrates Business And Technology. Research Technology Management, 50(6), 49-58 Libecap, G. D. (2009). Frontiers in eco-entrepreneurship research. Bingley, UK: Emerald. Philips, (2014). Company Official Website. Retrieved from Ritossa, C. M., & Bulgacov, S. (2009). Internationalization and diversification strategies of agricultural cooperatives: A quantitative study of the agricultural cooperatives in the state of Paraná. Brazilian Administration Review, 6(3), 187-212. West, D. C., Ford, J. B., & Ibrahim, E. (2010). Strategic marketing: Creating competitive advantage. Oxford: Oxford University Press. Read More