Our strategic focus

In a fast-changing world, we are committed to returning superior value to our stakeholders. We will achieve this through leadership in innovation, an absolute focus on the customer, local market relevance, and operational excellence, while costs need to be at least in line with our competitors.

We aim to create value through a deep understanding of our businesses and markets and by building sustainable competitive advantage in each business. In doing so, we will leverage the strengths of the Philips Group – e.g. talented people, outstanding innovation capabilities, a strong brand, a global footprint, leading market positions and a solid balance sheet – to deliver global leadership and benchmark performance.

Accelerate!

In 2011 we launched Accelerate! – our comprehensive change and performance improvement program. The aim of Accelerate! is to create an agile and entrepreneurial Philips. A company with satisfied customers and employees with fulfilling roles. A company that grows and delivers consistent shareholder value. During the year we managed to put many of our Accelerate! enablers in place:

  • We are becoming increasingly customer-centric, focused on meeting local market needs.
  • We apply granular performance planning and management to realize operating plans that are resourced to win.
  • We are transforming Philips from a predominantly functionally orientated organization to one whereby we seamlessly operate along integrated, lean end-to-end customer value chain processes between global businesses and local market teams, so that we deliver with speed and excellence.
  • We are reshaping our operating model for simplicity and speed. The Philips Business System provides us with a blueprint for the company’s way of working.
  • We are establishing a growth and performance culture in which people are eager to win, take ownership, and team up to excel; our incentive and reward systems recognize sustained performance and the right behavior.

Seizing market opportunities

With a deep understanding of many of the longer-term challenges our world faces – from aging populations to the need for efficient energy usage and the desire for personal well-being – and the innovative capability to address these challenges, we strongly believe we can continue to make a meaningful contribution to people’s lives.

Our strong position in many promising markets, coupled with our innovation pipeline, powerful brand and engaged workforce, puts us in an excellent position for the future.

Our sectors

We strive for a balanced portfolio of businesses that have – or can attain – global leadership positions and deliver performance at benchmark levels.

Healthcare: The future of healthcare is one of the most pressing issues of our time. Philips Healthcare is committed to providing meaningful innovations that improve the quality of care, enhance patients’ lives and enable the delivery of better outcomes at lower cost. Our growth strategy is grounded in a fundamental belief that clinical excellence and continuous innovation around the patient experience can fundamentally change healthcare as we know it. Our competitive advantage lies in our clinical perspective, the broad clinical subject-matter expertise within the company, as well as the deep clinical relationships we have with our customer base. This allows us to deliver solutions expertly tuned to the needs of the clinician as well as the financial and operational needs of healthcare administrators, payers, regulators and purchasing organizations by enabling a connected and holistic view of care delivery that tangibly and transparently improves clinical outcomes.

Consumer Lifestyle: Across the world, consumers want to maintain and improve their health and well-being and that of their families. To achieve this, they look for propositions that will improve their lives from brands that they trust. Philips Consumer Lifestyle is on a journey to become a leading player in health and well-being. We have a global footprint, with an established presence in both mature and growth geographies. We have a leading global brand, which is highly trusted across the world. Consumer Lifestyle makes a difference to people’s lives by making it easier for them to achieve a healthier and better lifestyle.

Lighting: Human life revolves around light. Light affects our mood, improves our well-being, and enables us to experience and achieve more. It is a vital part of making our lives fuller, more productive and safer. Our Lighting sector focuses on innovative ways of using light to enhance people’s lives where they live and work – at home, at school, at work, in shops and public places, as well as on the road. Recognizing how resource conservation and climate protection will play an increasingly significant part in human health and well-being, we pay special attention to maximizing the effect of lighting while minimizing the energy required to produce it.

Ongoing focus on growth geographies

Growth geographies are vitally important to Philips. As the number of middle-class households in these markets grows, we expect demand for our products to increase as people have more money to spend on feeling and staying healthy. Therefore, we will continue to make sure we address local needs effectively and to invest in having the right capabilities and resources in place to win in these growth geographies.

We want to be seen as clear leaders in sustainability

We are committed to being a leading company in matters of sustainability. We look at sustainability through the lenses of our sectors and define specific ambitions (to be realized by the end of 2015) for each of them: bring care to 500 million people; improve the energy efficiency of our overall portfolio by 50%; double the global collection and recycling amounts of Philips products as well as the amount of recycled materials in our products.

Our mid-term 2013 financial targets

We measure value through a balanced combination of sales growth and return on invested capital (driven by EBITA, capital turns and free cash flow) in conjunction with other financial, operational and strategic key performance indicators.

Our mid-term financial targets (to be realized by the end of 2013):

  • Comparable sales growth CAGR of 4-6%, assuming real GDP growth of 3-4% per annum
  • Reported EBITA margins of 10-12% for the Group; 15-17% for Healthcare;  8-10% for Consumer Lifestyle (excluding unrelated licenses); 8-10% for Lighting
  • Return on invested capital of 12-14%
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This is an interactive electronic version of the Philips Annual Report 2011 and also contains certain information in summarized form. The contents of this version are qualified in their entirety by reference to the printed version of the full Philips Annual Report 2011. This printed version is available as a PDF file on this website. Information about: forward-looking statements, third-party market share data, fair value information, IFRS basis of presentation, use of non-GAAP information, statutory financial statements and management report, reclassifications and analysis of 2010 compared to 2009.
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Growth geographies are the developing geographies comprising of Asia Pacific (excluding Japan, South Korea, Australia and New Zealand), Latin America, Central & Eastern Europe, the Middle East (excluding Israel) and Africa.

Earnings before interest, tax and amortization (EBITA) represents income from continuing operations excluding results attributable to non-controlling interest holders, results relating to investments in associates, income taxes, financial income and expenses, amortization and impairment on intangible assets (excluding software and capitalized development expenses). Philips believes that EBITA information makes the underlying performance of its businesses more transparent by factoring out the amortization of these intangible assets, which arises when acquisitions are consolidated.

Free cash flow is the net cash flow from operating activities minus net capital expenditures.

Comparable sales exclude the effect of currency movements and acquisitions and divestments (changes in consolidation). Philips believes that comparable sales information enhances understanding of sales performance.

Compound Annual Growth Rate