Porter's Five Forces Analysis and Business Environment

This assignment involves a comprehensive analysis of Porter's five forces model and its relevance to business organizations in different contexts. The study aims to understand how businesses can cope with challenges through market strategies and adapt to new market conditions. It also touches upon the importance of business organization and environment in driving company growth and stability.

Business
Organizations and
Environments in a
Global Context

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
Background information of Philips ............................................................................................1
Background information on business environment in canada....................................................3
Analysis of business scenario......................................................................................................6
Demand and supply scheme........................................................................................................8
CONCLUSION..............................................................................................................................10
REFERENCES..............................................................................................................................11

INTRODUCTION
Business environment is the aggregation of various forces which affects the internal as
well as external environment of organization in which it operates. Koninklijke Philips N. V. was
founded by Gerald Philip in 1891, a multinational conglomerate. Headquarter of Philips is
situated in Amsterdam, it is one of the largest electronics company which is extending its hands
in healthcare and lightning established itself into a modern organisation. Their first invention was
a light bulb. One of the prestigious moments for this company was getting featured on the Forbes
list of The world biggest public company in 2000(Forbes welcome 2017).
Philips is known for being a diverse company. The diversity help the company to address
the challenges in a unique way and satisfy the consumer needs peacefully, and gains trust with
customers. The study briefs about background information of Philips which includes its size,
financial performance and operation, Pestle and swot analysis of Philips, assessment of business
scenario including porter's five forces and demand and supply scheme of Philips emphasizing
inventory innovation, strategic focus, its transportation system and investment in advanced
strategy .
MAIN BODY
Background information of Philips
Size of Company
Koninklijke Philips N.V. is a multinational largest electronic company in the world which
had its headquarter in Amsterdam. Philips was pro founded by Gerard Philips and father Frederik
in Eindhoven in 1891, with the invention of first product i.e., light bulbs. Fredrick was a banker
at Zaltbommel, in 1892 he purchased and financed an setup of an empty factory building in
Eindhoven, from where the company started their first production of carbon filament lamps and
other electro-technical products. After this building was moved to the museum their younger
brother by sixteen years earned degree of engineering and started working with the company and
with the ups and downs in the business along with new invention the slowly slowly upgrade the
name Philips as largest electronic brand. It currently employees 121,888 people across 100
countries. The company dropped the “Electronics” in its name in 2013 and transformed into the
modern organisation. Philips was featured in the Forbes list as The world biggest company in
2000. The company had its tag line “Innovations in you”. Company currently focuses on the
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healthcare and lighting. It is divided into main three divisions : Philips Consumer Lifestyle
which includes Philips consumer electronics and Phillips domestic appliances and personal care ,
Philips Healthcare and Philips Lightning (Charter. and Polonsky. 2017).
Financial performance
Philips generated euro 266 millions form the group activities by Philips healthcare i.e.,
euro 8.852 million , Philips lightning i.e., euro 7.638 million, Philips Consumer and
Lifestyle i.e., euro 5.823 million. In 1939 Philips started making electric shavers under the brand
name Philishave and they also developed Compact Cassette format and Compact disc format
with Sony, and many more other technologies. In 2012,Philips was the largest manufacturer of
lighting in the world measured by applicable revenues. Cash flow from investing activities in
2016 includes euro 144 million related to arbitration and cash flow from financing activities
induces new funding of euro 1.2 billion attracted by Philips Lighting. In research and
development Philips invested euro 1.61 billion in 2011 and which is equal to 7.1% of
sales(Barak, M.E.M. 2016).
Legal rights and structure
Philips Intellectual Property and standards is the wide division which is responsible for
trademark protection, licensing and patenting. Philips holds around 39,000 trademarks, 54,000
patent rights, 4,400 domain name registrations and 70,000 design rights. Philips has prime listing
in the Euronext Amsterdam stock exchange and also the component in the market index of Euro
Stroxton 50 stock. Philips also had its secondary listing in the New York Stock Exchange.
Philips had also acquired Signetics and Magnavox. Since 1913 they also had their sports club
named PSV Eindhoven (Cavusgil and Knight. 2015).
International operations
Philips is expanding in Canada which is located in North America, Canada has the highest
population of 34,300,083 which is the second highest in the world. Canada shares its land border
only with the United States. Canada has vibrant, diversified and continuous economy. Canada is
the richest nation which had tenth largest economy in the world. Philips lightning has already
taken important steps in the economy of the Canada. Philips is strongly working on to grow its
business in the international market with its positive effect on the energy saving. In Canada
Brokefield Lepage Johnson Control (BLJC) reduces its energy consumption by 71 % with the
use of led lights. The Contractual rights and intellectual rights protection and drafting are very
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secure. They had a transparent and independent judiciary with an impressive history. Corruption
is rigorously persecuted. Philips is growing day by day along with new inventions in the
technologies and becoming the international brand with trustworthy customer satisfaction
(Clegg, S.R., Kornberger and Pitsis.2015).
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Background information on business environment in canada
POLITICAL FACTORS.
The political stability in Canada becomes a major factor in the success of the company.
Philips has repositioned itself in the different political environment of different countries. The
various tax policies and labour laws set by the government of Canada has enabled Philips to
trade internationally. Canada has recently signed a free trade agreement which has allowed the
vast businesses including Philips to continuously import and export the goods and services and
eventually enhanced its relation with other countries.
ECONOMIC FACTORS
Canada is considered as the country of mixed economy where the people in addition to
the government has the freedom to make some economic choices which will affect the country
and this ensure its economic stability. The employment level of Canada has markedly increased
& has allowed the consumers to spend great amount on the consumer goods which eventually
benefited the electronic industry(Crane, Matten, Glozer and Spence. 2019).
SOCIAL FACTORS
The living standard and the income of consumers in Canada have grown and due to this,
their demand for the high quality products has also increased. The consumers have become more
health conscious and require highly customized electronic products like smartwatches to track
their physical activity. The changing beliefs and values of the consumers will help the marketers
to design the electronic products and brand message (Gillespie. 2015).
TECHNOLOGICAL FACTORS
Philips is one of the thousand companies who have understood the importance of
technology and is expanding day by day. The tag line of Philips "Innovation in you" has given a
kick to the market and the efficiency to provide the innovative products to the customers has
been a major factor for its success. The R & D team of Philips is constantly working on the
varied needs of the Canada and international customer to design the customised and automated
products (Hamilton and Webster. 2018).
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ENVIRONMENTAL FACTORS.
The government of Canada has set different environmental norms for its citizens and
organizations which they have to remain compliant like waste management, ecology friendly
products, environmental pollution. Keeping these norms in view, Philips have started to spent in
ecological products like LED bulbs which have no mercury and does not releases UV rays.
LEGAL FACTORS
The way of doing the business in Canada relates to various legal issues like discrimination law,
employees law, wages issues, labour laws etc. Philips by using this opportunity provides the
proficient tools to make use of their intellectual property as well as helps to produce the
innovative technologies by licensing its IP (Kolk. 2016).
Illustration1: Pestle analysis
[Source: Scanning the environment: Pestle analysis, 2016]
SWOT ANALYSIS
STRENGTH
Philips has its presence in a diversified market segment like lifestyle, lightning, clinical
healthcare which forms its biggest strength. From past few years Philips has invested a huge
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amount of money on R & D department and has flourished in different parts of the world by
providing highly innovative designed products to its wide customer base (Lewis and et.al,.
2017).
WEAKNESSES
Although Philips has expanded in the field of technology, but with the expansion of the
geographies, it needs to invest more in technology. Moreover, In the recent years, it has
encountered 50 and more legal actions which has affected its brand image in some or the other
way (Mendenhall and et.al., 2017).
OPPORTUNITIES
The growing awareness of the online marketing and e-commerce has opened the doors
for various businesses throughout the world. In this era of technology, Philips is preparing itself
for the grow through the online portal and can utilise this opportunity in the future to increase its
sales (Martin and Siebert. 2016).
THREATS
Philips has its competition with major MNC's liken Sony, Samsung and the substitutes or
the new technologies introduced by them could be an important threat for them. Apart from this,
the increasing cost of labour may hinder its performance and profitability in the long run
(Morden, 2017).
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Analysis of business scenario.
Porter's five force of Philips
Industry Rivals:
Philips is one of the finest company of electronic industry which uses its own very unique
market strategy for their business to flourish. Key rivals of Philips are less they as there are very
less industries which work on this concept. Innovation in technology helps in the market strategy
of the firm. As the advancement in technology increases, as their services are changed time to
time. As the industry upgrades with the technology and to gain more of profitable results. They
need to strategist according to the resources available and the type of competition arouse with the
time being. As quick as the analyzing of data is completed you need to focus on the technical
updates. As the business is expanded with the technical update they start benefiting and adding
the value assets to the organization.
A market research must be done to know the demand of market and to gain the changes made in
the industry. They need to keep a view on the products launched by the rivals and to compete
against those products. They must strategic in such a way that they must keep a pace in the
industry.
Factors which affect the enhancement of the industry are:
·building a sustainable different way on strategy.
·Generating a higher revenue so as competition becomes better.
·Collaborating with rivals to gain a large market size.
Bargaining power of supplier:
Bargaining power of supplier is weak as a bigger firm usually have numbers of supplier.
If the supplier demands more they can be easily removed from the list. They must always stalk
the raw materials, if the bond breaks with supplier the work does not stops. By experimenting
with new elements if the price of raw material goes higher they can change the material by
innovation (Trevino and Nelson. 2016).
Philips has a weak hand in bargaining power of suppliers due to following factors:
·making an effective supply chain.
·By changing use of raw material
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Bargaining power or buyer:
As the Philips is one of the most trusted brand of the lightning industry they have a vast
number of customers across the globe. Innovation in technologies can attract more of customers,
as the innovation is key success to the industry. Bargaining power must be minimized by
providing a brand loyalty to the customers and resolving their issues regarding products.
As they will provide a low pricing strategy to the they will attract more customers building a
strong customer base.
Factors of bargaining power of buyers are:
·building a strong customer base to streamline its sales and production base.
·Innovation of new products to keep a hold in the market.
Threat of substitutes:
There may be many industries which copy the product and sale it with a low pricing,
which affects the strategy of the firm and the pricing gets deviated. Although there are not many
industries in the competition against Philips as it is the most trusted brand in the globe. There are
many small industries in local market but to compete against a brand like Philips is very tough
for them. There are very low profit earning industry and cannot earn as profit as Philips.
Philips produces a product in a very fair price so that maximum revenue can be generated.
Which will be very tough for rivals to achieve (vom Brocke, Zelt and Schlemiel. 2016).
Threats of new entrance:
Threats of new entrance is quiet low for Philips as the market strategy used by them is
very unique if a new rivals enters the market it would be very difficult for them to compete
against a bigger names like Philips, if a new rivals enters and hinders firms existence can be
teamed up and can help in increasing customer base and help in revenue generation.
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Illustration 2: PORTER FIVE FORCES
[source: Porter's five forces, 2019]
Demand and supply scheme
INVENTORY INNOVATION
The supply chain management of Philips deals with the various activities of business like
customers demand, performance of suppliers, manufacturing and production. Its supply chain is
outlined to meet its objective of providing quality service at a low cost which is influenced by
various drivers like lead time, inventory level, manufacturing quality etc. Philips depends on its
acquisition staff to lower production costs by negotiating with the suppliers. The innovation in
inventory management of Philips is designed to ease the access of various products through
having multiple distribution sites which in turn will reduce the delivery time to the Canadians.
The stock and the inventory level is highly influenced by the demand and supply chain which
includes multi channel retailers who are in close contact with the customers. Philips is
continuously making an huge effort for delivering the finished product by managing the
suppliers-customers chain. Moreover, Philips has incorporated the innovation in its technology
system to track all the activities.
STRATEGY & SYSTEM BUILT
Philips is mainly concerned with improving the lives of the people through its remarkable
innovation in every aspect of the business. Its major focus areas are implementing change across
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the world by the growth of resources, and incorporating excellence in the practices to convey
high quality services to customers. The business system of Philips in Canada revolves around
human beings where they emphasizes on hiring talented employees and imparting training and
skills to them, financial where they are keen to raise the capital which they invest in market for
future prospects, Social wherein they become responsible towards their customers and society by
offering the solutions as well as contributing to the local communities, Natural in which they
seek to minimize the environmental problems by effectively managing the supply chain.
TRANSPORTATION MANAGEMENT OF PHILIPS:
Transportation management of Philips includes the strategic improvement of all the
logistics from valuing the incoming of raw material from the supplier on time to the delivering of
product to the respective place. Transportation strategy depends upon the market demands. The
transportation depends upon the costumer requirement as the market demand arises the logistics
need to move the shipment to the desired location, they must keep a track of shipment weather it
is delivered on time or not. Its delivery must not be delayed their packaging must be done
properly.
Mode of transportation must be selected wisely which must be cost efficient and timely.
If the transportation facility will be on time it will add to the company's appraisal. A regular
transportation with a particulars shippers will gain relationship with shipper as his revenue is
dependent on our shipments which provide us with profit. We need to be ready for on spot
changes as changes are likely to occur.
INVESTMENT IN ADVANCED STRATEGY
Philips is the growing advance electric company with the new inventions in the
technologies for easy life style. Along with this Philips is also working with the healthcare
solutions, the Intrusiveness investment group approached Philips healthcare to support them with
strategic planning in healthcare. Philips guide them to analysis strategic discussions and then
they develop fitting model of care and conceptual design for the new facility. They both
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collaborated to complete to complete this project. Philips is implementing new technologies day
by day and investing in many such projects which let them enhance their profitability as well as
stability in the market. Philips is growing internationally and collaborating with many more
companies which helps them to implement more in their technologies strategies and implement
new ideas for a new technology invention. Philips is also working with lesser energy
consumption products which is a sustainable invention for our environment and now a days they
are very much in trend i.e., Led bulbs.
CONCLUSION
From the above study it has been concluded that the SWOT Analysis and PESTLE
analysis of the Philips helps it to enhance their market stability in the global context. With the
overview of Porter's five forces the company easily cope up with challenges they faces during
the market competition among different competitors. Demand and supply schemes used to
improve their market strategies which should be according to new market conditions. Overall
purpose of this study relates to the overall growth of the organization in context with global
stability of the Philips. Business organization and environment plays a very important role in the
growth of the company.
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REFERENCES
Books and Journals.
Charter, M. and Polonsky, M.J.. 2017. Greener marketing: a global perspective on greening
marketing practice. Routledge.
Barak, M.E.M.. 2016. Managing diversity: Toward a globally inclusive workplace. Sage
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perspective on early and rapid internationalization. Journal of International Business
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Clegg, S.R., Kornberger, M. and Pitsis, T.. 2015. Managing and organizations: An introduction
to theory and practice. Sage.
Crane, A., Matten, D., Glozer, S. and Spence, L.. 2019. Business ethics: Managing corporate
citizenship and sustainability in the age of globalization. Oxford University Press.
Gillespie, K.. 2015. Global marketing. Routledge.
Hamilton, L. and Webster, P.. 2018. The international business environment. Oxford University
Press.
Kolk, A.. 2016. The social responsibility of international business: From ethics and the
environment to CSR and sustainable development. Journal of World Business. 51(1).
pp.23-34.
Lewis, H. and et.al., 2017. Design+ environment: a global guide to designing greener goods.
Routledge.
Linnenluecke, M.K.. 2017. Resilience in business and management research: A review of
influential publications and a research agenda. International Journal of Management
Reviews. 19(1). pp.4-30.
Martin, G. and Siebert, S.. 2016. Managing people and organizations in changing contexts.
Routledge.
Mendenhall and et.al., 2017. Global leadership: Research, practice, and development.
Routledge.
Morden, T.. 2017. Principles of management. Routledge.
Trevino, L.K. and Nelson, K.A.. 2016. Managing business ethics: Straight talk about how to do
it right. John Wiley & Sons.
vom Brocke, J., Zelt, S. and Schlemiel, T.. 2016. On the role of context in business process
management. International Journal of Information Management. 36(3). pp.486-495.
Online
Porter's five forces. 2019 [online] Available through:
<https://www.investopedia.com/terms/p/porter.asp>
Scanning the environment:Pestel analysis, 2016 [online] Available
through:<https://www.business-to-you.com/scanning-the-environment-pestel-analysis/>
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