This is a very brief and heavy assignment and it has finance, accounting, and management tasks involved. I have not posted the case yet. The attachment is just a list of introductions that need to be

External Assessment

The strategic group that this external is based on is the health care industry consists of businesses which provide medical services and instruments, Equipment and facilities. The health care industry includes various segments with major being Health care services, Medical equipment and Gadgets e.g. Health Technology, Pharmaceuticals, Hospital Supplies, Medical Insurance. (KHARTIT, 2021). Geographic healthcare access includes availability, service variety and distribution, and physical accessibility.

An opportunity of substantially lower ratio of new entrants in the healthcare industry is considered to be true as companies in pharmaceuticals and medical instruments & equipment manufacturing industry usually have to invest a very big amounts of set and R&D. Also, they need to go through a number of restrictions from regulatory authorization for drugs and have to face regulatory hurdles when setting up the manufacturing plant. Many of the smaller size companies which try to enter the industry or to setup manufacturing units are usually acquired by other companies having grater market share and new entrants mostly end up being merged with one of them. (Hotiya, 2020)

A threat of substitute products are considered to be of highest importance in the healthcare industry. According to various studies, customers prefer cheaper prescription products. Cheaper drugs of same prescriptions by competitors may cause a direct threat to the company with expensive drugs in the health care industry (Hotiya, 2020). Another threat of competitive rivalry is also considered to be one of the biggest threats. Every company is investing huge amounts on R&D to develop new drugs to cure diseases or inventing new ways and procedures to make surgical procedure safer and better. And the companies wanted and needed to do such before their competitors. After that, they needed to spend big amounts on advertising and marketing of the products. This way the companies try to seek top mind share of their prescribers, introducing samples to clinics and hospitals. All this lead to a heavy price competition in the market.

Internal Assessment

For a company like Philips operating in Health care industry and more specifically health technology got to have the key success factors as mentioned in Exhibit B to be able to attain sustainability and future benefit.

The Philips Company has been in the tech world for a very long time and had the innovations way before other companies. Innovations in Medical devices, Equipment and pharmaceutical divisions have made Philips company unreachable for its competitors. (Bina, 2014)

Diversity has been one of the main strength and key success factor for the company. The company is currently working in following segments of the industry: developing medical equipment, drugs, vaccinations, procedures, and systems to address a health issue. (Bina, 2014)

Following are the key success factors that the company is currently lacking

The Company is currently limited to some geographical areas and has not expanded in a while so lacking experience in other health care industry internationally. This could create a gap between international demand and trade of such industry. (Ito, 2019)

Reengineer fundamental patient procedures along with patients to take use of technology and provide a vastly improved patient engagement and experience.

To conclude with the VRIO analysis (Exhibit B), the Philips Company has competitive advantage over its rival firms in R&D and Medical Equipment manufacturing. But the company do have Weaknesses e.g. Marketing, Selling & Distribution.

Financial assessment

We will use the following ratios from Exhibit C to assess Philips group’s financial performance: Return on Assets (ROA), Return on Equity (ROE), Quick Ratio, Debt to Equity Ratio (D/E), and Price-Earnings Ratio (P/E).

Their ROA shows that they have managed to effectively use their assets to generate profit steadily. The impact of Covid-19 has dramatically reduced major healthcare groups’ ROA to extremely low values – some at around 1% (Macrotrends, 2022). Philips group has proven to be robust of their environment and we expect them to elevate their ROA in the next five years after Covid-19.

In contrast, their ROE is low and D/E ratio is high compared to their peers (Macrotrends, 2022). They are borrowing money and that will increase their annual fixed expenses and decrease their dividends to shareholders. This is undesirable for their stockholders and will not attract future investors in the long-run. They have high leverage which will be detrimental in the next five years if there is no direct action taken.

Their Quick Ratio is below 1 and retains its trend in subsequent years, which indicates that they do not have strong capabilities to quickly liquidate their assets in order to pay their short-term debts (Hill et al, 2017). They need convert their assets into liquid assets better in the next five years.

Philips group’s P/E ratio is in the higher tiers compared to their peers (Macrotrends, 2022). This means their investors are willing to pay substantially more than how much the company is earning. In the upcoming five years, Philips group will need to increase their payouts to investors and prove that they are, in fact, growing more yearly in order to retain their capital.

References

Bina, S. S. (2014, May 19). 10 Critical Success Factors for the Future of Healthcare. Retrieved from beckershospitalreview.com: https://www.beck ershospitalreview.com/hospital-management-administration/10-critical-success-factors-for-the-future-of-healthcare.html

Google.com/finance

Hill, C. W., Jones, G. R., & Schilling, M. A. (2014). Strategic management: Theory & cases: An integrated approach. Cengage Learning.

Hotiya, S. (2020). Porter's five forces model - Health Care Industry. Retrieved from 12manage.com: https://www.12manage.com/forum.asp?TB=healthcare_management&S=2

Ito, R. (2019, October). Health Care Industry: Special Issues. Retrieved from insigniam.com: https://insigniam.com/indispensability-improving-medical-service/

Khartit, K. (2021, October 31). Healthcare Sector. Retrieved from Investopedia: https://www.investopedia.com/terms/h/health_care_sector.asp

Macrotrends.net

EXHIBIT A (EXTERNAL ASSESSMENT)

EXHIBIT B (VRIO)

EXHIBIT C (FINANCIAL RATIOS)

*share prices provided by Google.com/finance

Investors seem to over-value Philips group, Gross margin is lower than competitors

ROA is promising but ROE and Leverage Ratios are worsening

Current and Quick Ratios are not optimistic, Activity Ratios are low compared to peers

Net Present Value (NPV) Assessment (EXHIBIT)

After taking a look at the assessments, we are now able to discuss and configure two alternatives that may help Philips to increase their earnings and improve the quality of their company. What we can see from the VRIO analysis is that they have competitive advantages as well as one weakness in their marketing sector. This makes it obvious that we can use the competitive advantages to our benefit and that we need to do something about their marketing strategies. We have come up with two alternatives which are both focusing on the marketing sector. Phillips needs to build up an online presence to increase the exposure it receives as well have more communication with its customers. Our second alternative focuses on another marketing strategy which involves using billboards as well as print ads which will be distributed across the country and their geographic focus area. Each of the alternatives should increase the exposure that the company receive but we will decide upon one of them depending on the effects that it will have on the different criterias. If they invest another value of 210 million dollars for either alternative we can calculate it at a discount rate of 5% for the online presence and 10% for the billboard/print option over the next 5 years.

Assumptions and Justifications (EXHIBIT)

The company will need to implement some necessary changes in their marketing and selling/distribution sectors. We strongly believe that by first focusing on the marketing sector, the selling sector will increase simultaneously.

Our assumption is that the company will need to invest a percentage of their profits into developing new marketing strategies to increase their exposure. Viral graphic content will also give customers the option to see their product in use and get an idea of what the product looks like, how it is used, and if it fits their needs.

Since the company is very focused on oral health in the retail area, they can start offering their products different forms such as online. However for the online service they would need to ensure that the customers get all the information they need to make an informed decisions, which is very vital in healthcare. Philips group should think about having a consultant ready for live-time chat on their online platforms, this could include websites, online stores, and social media profiles. This should give the company a boost in the right direction, because in todays world people grow more and more health conscious and having a live consultant available when browsing through the products available, it can help them to find the perfect fit for them.

These two projects are focusing on a short term change. For this company to be successful in the long run, they need to work on developing a service that is in-person and online for the customers ease and will be able to be one without leaving the house. The consultant online is a start, however it will need to be developed and changed to include video-calls, diagrams, and more data that can help customers decide even better what kind of health products/services they want and need.