1. what has Philips done to focus on on lighting sector? 2.

2. What were challenges that Philips faced at the beginning of 21st century in
=> seperate Healthcare and Lighting businesses into 2 new companies Middle East Region?
=> purchase smaller national companies => focus/ identify which country
=> develop diff. joint ventures => analyze marketing environment carefully
3. How did Philips select the most attractive market in the Middle East Region?
=> think of politic & demographic
=> pin a framework to calculate strategy
4. a) Explain about the factors impacting to lighting market?
=>

CHAPTER 3 | Analyzing the Marketing Environment 91

but also in many professional applications, including 30
percent of offices, 65 percent of the world’s top airports,
30 percent of hospitals, 35 percent of cars, and 55 percent
of major football stadiums.
For 124 years, Philips has been a leader in building
and shaping markets with meaningful innovations in-
cluding the radio, audio cassette, video cassette recorder
(VCR), compact disc (CD), and digital versatile disc
(DVD). In order to succeed in its markets, Philips must
carefully and continuously analyze the marketing en-
vironment. At the beginning of the 21st century, Philips
needed a new and coherent marketing strategy for the
entire Middle East region, which had been identified as
one of the key markets by the company. In order to bet-
ter address macroeconomic factors and regional prefer-
Philips’s analysis of market needs—such as demands for energy-
ences, Philips wanted to develop a more integrated and
efficient products like LEDs—has driven its continuous growth in this
less fragmented marketing strategy for the region. region.
The first objective was to select the most attrac- Sergiy Palamarchuk/Alamy Stock Photo
tive markets in the region. Over the years, Philips has
developed a statistical model that displays a correla-
tion between a country’s demand for lighting and its GDP per increase the regional Philips market shares in cooperation with
capita. The company has identified this correlation after careful the local distributor.
analysis of GDP growth rate data and their corresponding sales Today, the lighting market is impacted by multiple fac-
figures. During discussions with agents and distributors in tors, three of which are particularly important. The first
many countries, Philips was completely dependent on its infor- is the macroeconomic situation, which is influenced and
mation about the market size. If Philips miscalculated market shaped by factors such as inflation rate and GDP, and which
size, it missed market opportunities. The key reason why this is influencing new construction and, consequently, the num-
model was developed was so that the company could cross- ber of lighting installations. This key driver was used as a
check market estimations of its agents and distributors. The main indicator by Philips in its model to screen markets in
developed model showed that the demand for lamps and bulbs the Middle East. Another important element used was, and
is a basic need for a country, and as soon as a country starts de- still is, country-specific energy efficiency regulations and an
veloping (which is indicated by the increase in GDP), this basic increase in energy awareness, which are redefining future
need increases. However, as the country’s wealth increases, lighting product portfolios. For example, in 2014 the UAE
the growth in the demand slows down, because basic lighting government announced an energy efficiency regulation on
needs are covered at later stages of economic development. lighting products, which bans the sale of inefficient standard
In order to find the most attractive markets, Philips bulbs while also seeking to reduce carbon dioxide emissions.
Lighting used the model and combined it with market data of Government action limiting certain energy sources—key be-
the Middle East that contained population, GNP growth, and ing nuclear power due to events over the last years—results
GNP per capita. They multiplied the demand for lighting per in additional demands for energy-efficient products such as
capita by the number of inhabitants in a country. Looking at LEDs. For example, Dubai’s government has started an ini-
the regions, Israel and Kuwait had the highest GDP per capita, tiative in 2014 to switch all lighting in government buildings
but their population size was rather small. On the other hand, to LED, which is more energy-efficient and can be digitally
Iraq and Iran were (and still are) large markets for lighting, but controlled. It is these such projects that have helped Philips to
they are very tough to enter because of their politically difficult grow in the region.
situations. Philips has managed to assess these factors which heavily
However, the Philips Lighting Middle East managers did influence and shape the marketing environment for change.
not use market size as the only selection criterion for priority; The company’s ability to understanding current and probable
instead, the model was used as a starting point for discussions future shifts in the lighting market has driven its continuous
with agents and distributors in the respective countries. If growth in this region, making it the market leader in Middle
the Philips sales in large lighting markets were very low, this Eastern countries such as the Emirates, where it has a 38.5
would indicate a low Philips market share. This would lead to percent market share; trailed by Osram, with 22.6 percent; and
a discussion with local agents and distributors about how to General Electric with 16.3 percent.1