Philips N.V.

was founded by Anton and Gerard Philips in 1891 in Eindhoven to

manufacture carbon filament lamps. Among their first major clients were early

electricity companies, who included the provision of lamps in their power

supply contracts. The company, now better known as Philips, is one of the

world’s biggest electronics companies and one of the world’s most respected
brands. It has evolved into a global player and today employs a workforce of

113,687 around the world. A market leader in medical diagnostic imaging,

patient monitoring systems, energy-efficient lighting, and lifestyle solutions for

personal well-being, Philips manufactures more than 50,000 products across

100 countries, in which it also operates sales and service outlets. In 2014, the

firm reported sales of $23,982 billion. But Philips has also stayed true to its

roots—today, it is the world leader in lighting products manufacturing. On

September 23, 2014, Philips announced that it would separate its healthcare and

lighting businesses into two new companies in order to better tailor its offerings
to the specific customer segments and leverage the Philips brand. Giving

independence to the lighting solutions business, Philips claims, will better

enable it to expand its global leadership position and venture into adjacent
market opportunities. Both companies are supposed to be able to make the

appropriate investments to boost growth and drive profitability, ultimately

generating significantly more value for their customers, employees, and

shareholders. Since the 1980s, Philips has participated intensively in the

concentration of the lighting sector by purchasing smaller national companies
such as Companie des Lampes (France), AEG (Germany), and Polam Pila
(Poland).

It has also developed different joint ventures; for example, with Westinghouse

Lamps, Kono Sylvania, and EBT China. Today, Philips Lighting is no. 1 in the

world market for lighting, ahead of competitors like Osram, Halonix, and

Crompton. Their lighting products (light bulbs and lamps) are found all around

the world, not only everywhere at home, 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 including 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 environment. 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 better address macroeconomic factors and regional

preferences, Philips wanted to develop a more integrated and less fragmented

marketing strategy for the region. The first objective was to select the most

attractive markets in the region. Over the years, Philips has developed a
statistical model that displays a correlation between a country’s demand for

lighting and its GDP per capita. The company has identified this correlation
after careful analysis of GDP growth rate data and their corresponding sales
figures. During discussions with agents and distributors in many countries,

Philips was completely dependent on its information about the market size. If
Philips miscalculated market size, it missed market opportunities. The key

reason why this model was developed was so that the company could
crosscheck market estimations of its agents and distributors. The developed

model showed that the demand for lamps and bulbs is a basic need for a country,
and as soon as a country starts developing (which is indicated by the increase in

GDP), this basic need increases. However, as the country’s wealth increases, the
growth in the demand slows down, because basic lighting needs are covered at

later stages of economic development. In order to find the most attractive

markets, Philips Lighting used the model and combined it with market data of

the Middle East that contained population, GNP growth, and GNP per capita.

They multiplied the demand for lighting per capita by the number of inhabitants
in a country. Looking at the regions, Israel and Kuwait had the highest GDP per

capita, but their population size was rather small.

On the other hand, Iraq and Iran were (and still are) large markets for lighting,

but they are very tough to enter because of their politically difficult situations.

However, the Philips Lighting Middle East managers did not use market size as

the only selection criterion for priority; instead, the model was used as a starting
point for discussions with agents and distributors in the respective countries. If

the Philips sales in large lighting markets were very low, this would indicate a
low Philips market share. This would lead to a discussion with local agents and
distributors about how to increase the regional Philips market shares in

cooperation with the local distributor. Today, the lighting market is impacted by
multiple factors, three of which are particularly important. The first is the

macroeconomic situation, which is influenced and shaped by factors such as

inflation rate and GDP, and which is influencing new construction and,

consequently, the number of lighting installations. This key driver was used as a
main indicator by Philips in its model to screen markets in the Middle East.

Another important element used was, and still is, country-specific energy
efficiency regulations and an increase in energy awareness, which are redefining

future lighting product portfolios. For example, in 2014 the UAE government

announced an energy efficiency regulation on lighting products, which bans the

sale of inefficient standard bulbs while also seeking to reduce carbon dioxide

emissions. Government action limiting certain energy sources—key being

nuclear power due to events over the last years—results in additional demands

for energy-efficient products such as LEDs. For example, Dubai’s government

has started an initiative in 2014 to switch all lighting in government buildings to
LED, which is more energy-efficient and can be digitally controlled. It is these

such projects that have helped Philips to grow in the region. Philips has
managed to assess these factors which heavily influence and shape the

marketing environment for change. The company’s ability to understanding

current and probable future shifts in the lighting market has driven its
continuous growth in this region, making it the market leader in Middle Eastern
countries such as the Emirates, where it has a 38.5 percent market share; trailed

by Osram, with 22.6 percent; and General Electric with 16.3 percent