Strategic Management: Philips Balance Scorecard

This report analyzes the strategic performance of Philips, a Dutch technology company, using a balanced scorecard framework. It examines Philips' strategy and value proposition, focusing on product leadership and cost leadership. The report details key performance indicators (KPIs) across financial, customer, internal processes, and innovation and learning perspectives. The analysis includes an examination of Philips' organizational architecture, its suitability, and relevant KPIs such as revenue improvement, cost reduction, and process cycle time. Sustainability initiatives and a strategy map are also discussed. The report concludes with an overview of Philips' strategic risk management approach, encompassing corporate governance, business control frameworks, and general business principles. The overall assessment highlights how effective analysis of the business framework enables informed decision-making, improving the organization's strategic position and maintaining effectiveness.

Running Head: Balance Scorecard
Strategic Management
Balance Scorecard

Balance Scorecard 1
Introduction
Phillips is considered as a Dutch technology organization whose headquarter is situated in
Amsterdam. It mainly focuses on the production of electronics, lighting and healthcare. It was
established by Gerard Philips and Frederik in 1891. It is considered as one of the largest
electronic organization in the world. In this paper, we will study about the different key
performance indicators of Phillips in several areas. This will provide us with a glimpse of the
strategic performance of the organization. Philips employs more than 100,000 people across
more than 50 countries. The organization is specially organized into three different sections such
as Phillips lighting, Philips healthcare and Philips Medical. The organization is considered a
large manufacturer of lighting items and earns large revenue than other existing lighting
organizations. During 2012, Phillips was considered the largest producer of lighting goods. The
organization is known for its high quality of products. With the high quality, the organization
places itself in the eyes of its target customers. Due to this they become brand loyal and prefer
only the products produced by Phillips. The organization produce different types of products
such as Philips Radio, Stirling engine, bulbs, tube lights, and shavers (Hitt, 2012). A large
variety of the products facilitates the organization in capturing a huge market size so that it can
offer products to a large number of customers.
Strategy and Value Proposition
The strategic objective of the organization is to improve the lifestyle of individuals by providing
them innovative products and services. Innovation is the core base of every activity of Philips. It
identifies and understands the global trends and challenges facing the individuals in their daily
lives. It ensures that aspirations and needs of individuals remain at the heart of its innovation

Balance Scorecard 2
endeavors. With its innovative steps, the organization wants to make the whole world sustainable
and healthier (Rothaermel, 2015). The organization wants to provide a suitable place to
individuals where they can share their passion.
The organization takes a systematic approach to creating its value proposition. The organization
delivers value to its customers with the help of following aspects:
 Intellectual: The organization mainly utilizes design and innovation experts who facilitate
effective establishment of new products and solutions that fulfill local customers’
requirements.
 Manufacturing: The organization significantly applies Lean techniques to produce
innovative goods.
 Human: The organization mainly hire talented and diverse individuals and provide them
proper training and skills which they require to perform different functions (Danaei,
2014).
Product Leadership
It is considered as the leader of a market in manufacturing lighting products. The organization
achieved product leadership by following below-mentioned points:
 Innovate in LED products technologically and commercially to grow in the existing
market.
 Utilization of Accelerate program to improve the operational excellence in organization.
 Capture different adjacent value with the help of new business models and services.

Balance Scorecard 3
Cost Leadership
In order to survive in a competitive market, the organization decided to keep its pricing policies
straightforward and simple. The management of the organization mainly decided not to
compromise with its high quality even if some products are higher priced than its competitors.
But, basically, the organization utilizes a competitive pricing strategy for its products which
enable the organization to provide goods at reasonable cost.
Specific KPI's related to strategy and value proposition
The following are the Key performance indicators of Phillips:
 Group Strategy: The organization ensures that it clearly defined its business strategies
and efficiently allocates its resources to enhance value creation.
 Caps: It focuses more on leverage and strengthens its main capabilities, positions and
assets. Technological innovation trusted brand feature, and deep customer insights help
an organization in creating differential value (Parmenter, 2015).
 Excellence: It applies basic operating practices and principles to deliver excellence
services to its products.
Organization Architecture
The architecture of Phillips is diligent t bringing its nationally acclaimed design to every project
while fulfilling the needs of the desired budget. From 1989 the organization has offered
commercial and architectural interior services for ground up, tenant space planning, addition, or
alteration projects. The architecture of the organization mainly includes schematic design, décor

Balance Scorecard 4
services, move management, interior design, construction documents, permitting, design
development, rendering, and planning or programming.
The architecture of Philips mainly specializes in education, industrial design, corporate, medical
and retail design.
Architecture Suitability
The architecture of the organization is well designed and very efficient. Due to the suitable
architecture, the organization is able to utilize the available space efficiently. Adequate
architecture facilitates healthy indoor environment with the effective use of materials and
ventilation, and temperature control.
Specific KPI's related to organization architecture
The key performance indicators for the organization architecture are following:
 Revenue Improvement: An efficient architecture of the organization can significantly
understand with the help of revenue generation capacity of the organization. High
revenue represents improved architecture of the organization, and less revenue represents
the poor architecture of the organization.
 Cost Reduction: Performance of the organization can understand with the help of cost of
its products (Chambers, 2013). The high cost of products represents less control on cost
managing sources, or less cost represents the high efficiency of organization architecture
in cost management.
 Process Cycle time improvement: A good architecture of organization consumes less
processing of time, and poor architecture of organization consumes high processing time

Balance Scorecard 5
of products. This will ultimately enhance the cost of products and delays the overall
system of organization.
Sustainability
Sustainability of organization represents the economic and social performance of the
organization. The sustainability of organization can understand through following:
 Phillips continuously follows external trends to determine the relevant issues of the
organization which will facilitate the organization in making positive contribution
towards society.
 The organizations providing efficient value to its stakeholders by listens and engage the
stakeholders in taking different management decisions. With this purpose, the
organization opens different Ngo's and companies. This will facilitate the organization in
taking sustainable trade initiatives (Boscia, 2014).
 Phillips developed different value creation model to enhance the sustainability of its
different business operations such as global reporting initiatives and G4 sustainability
reporting.
Strategy Map
Strategy Map of the organization defines all strategic goals of the organization. The below
mentioned figure is the strategy map of Phillips:

Balance Scorecard 6
The Balance Scorecard: Key Performance Indicators200
Cascading the Balance Scorecard
Balance scorecard is considered as a management and strategic planning system that is utilized
extensively in industry and business houses, non-profit organizations, and government to link
different business activities to the mission and vision of the organization. It is an efficient tool
which is especially implemented by the organization at its different business levels. The below
mentioned figures the key performance indicators of the organization which represents its overall
profitability and position in the market (Philips Annual Report, 2015):
KPI 2015 2014 Variations
Finance
Net Income (£) € 659 million € 411 million € 248
ROCE (%) 2.5% 2.3% 0.2%
Revenue Growth 6% 5% 1%

Balance Scorecard 7
(%)
EBIT €1372 million €821 million €551
Customer
Market Share
(%)
43% 18% 25%
Marketing spend €1000 million € 913 million € 87 million
Internal Business Processes
Time to Market 14 months 12 months 2 months
Production
Defect Rates (%)
3.0% 2.8% 0.2%
Innovation and Learning
Revenue Per
Head
€23000 thousand €21000 thousand € 2000 thousand
Employee
Turnover
16.6% 14.9% 1.5%
R&D
investments
€ 495 million € 463 million € 32 million

Balance Scorecard 8
Performance Measurement
KPI Analysis
Net Income Enhancement in income of the organization
ROCE Increase ROCE brings various opportunities
Revenue Growth It shows positive signs of growth
EBIT Improved significant performance in existing
market
Market Share Growing market share proves very beneficial for
the expansion
Marketing Spend Increase in marketing expenses enhance
profitability of the organization
Employment Turnover Growing employee turnover not beneficial for
strategic performance of organization.
Investments R&D Large investment on R&D activities enhance
creativity of the organization
Strategic Risk Management
The below-mentioned headings represent an overview of risk management approaches of
Phillips: (Philips Annual Report, 2015)
 Corporate Governance: It is an efficient system which is adopted by the management of
an organization to direct and control its operations. It is believed that good corporate
governance is a vital factor in achieving success in different business operations. A good

Balance Scorecard 9
corporate governance performs high ethical standards and solid control in different
business activities.
 Business control framework of Phillips: This framework of Phillips determines the
business control and risk management standards of the organization. The main aim
behind the creation of this framework is to ensure integrated management control of the
organization operations.
 Phillips General Business principles: The general principles of Phillips mainly
incorporate basic principles for operating all businesses of Philips. They establish
performance standards for individual as well as the company (Humphreys, 2015).
Conclusion
After studying all this, it can be concluded that efficient analysis of business framework
facilitates the organization in developing effective decisions. The efficiency of strategic decision
enforces efficient utilization available opportunities, so it improves the strategic position of the
organization in existing market. Development of appropriate balance scorecard enables the
organization to focus more on its key performance indicators. This can maintain a stage of
effectiveness for the organization.

Balance Scorecard 10
References
"Philips Annual Report 2015". N.p., 2015. Web.
Hitt, M. A., Ireland, R. D., & Hoskisson, R. E. (2012). Strategic management cases:
competitiveness and globalization. Cengage Learning.
Rothaermel, F. T. (2015). Strategic management. McGraw-Hill.
Danaei, A., Hemmati, M., & Mardani, M. (2014). Performance measurement of administration
services using balance scorecard and Kano model. Management Science Letters, 4(4), 703-706.
Humphreys, K. A., Gary, M. S., & Trotman, K. T. (2015). Dynamic Decision Making Using the
Balance Scorecard Framework. The Accounting Review.
Boscia, M. W., & McAfee, R. B. (2014). Using the balance scorecard approach: A group
exercise. Developments in Business Simulation and Experiential Learning, 35.
Parmenter, D. (2015). Key performance indicators: developing, implementing, and using
winning KPIs. John Wiley & Sons.
Chambers, D. W. (2013). KEY PERFORMANCE INDICATORS. The Journal of the American
Dental Association, 144(3), 242-244.

Balance Scorecard 11