Philips 2006 Annual Report Download - page 68

Philips Annual Report 200668
Principally this has involved the implementation of
a number of discrete business models that have optimized
the way CE approaches the market across its portfolio
of products and across regions. This has had a positive
impact on CE’s cost structures, ways of working, systems,
tools, distribution mix, commercial policies and processes.
It also allows CE to better serve the needs of its customers
and other stakeholders by focusing on their core
requirements and to realize maximum margins on
its mainstream and premier products.
In addition, CE has optimized its asset-light strategy,
maximizing returns from a value chain it controls but
largely no longer owns. In 2006, the outsourcing level
was around 70%. Together with a de-verticalized supply
base, this gave CE much greater fl exibility in responding
to market demands. Upstream supply and downstream
demand have been connected in a more dynamic way,
enabling nine consecutive quarters of profi tability even
in the face of intense competition.
Regionally, CE has adopted tailored strategies to address
the specifi c circumstances that exist in different parts
of its global operations, including emerging markets.
While reinforcing its traditionally strong position in
Europe, CE has realized top-line growth in North
America, particularly in FlatTV, and maintained its good
performance in Latin America. The decline in Mobile
Phones adversely impacted CE’s market position in Asia.
In terms of its portfolio, CE is continuing to capitalize on
its leadership and innovation in High-Defi nition FlatTVs
and to derive strong returns from its fl agship Ambilight
range; the one millionth Ambilight TV was produced in
the fourth quarter of 2006. In Home Networks, demand
for High-Defi nition and IP-enabled set-top boxes is
growing as consumer access to High-Defi nition content
and IP-enabled services increases. VoIP is another value
space showing explosive growth. Over the next three
years, the European and US VoIP markets are expected
to grow by approximately 125%. CE expects to achieve
a 10% share of the internet cordless telephony domain in
the coming three years. Philips is well positioned to take
advantage of these developments through its partnerships
with Skype™ and Microsoft™. In Entertainment Solutions
we have built up a growing portfolio of products that provide
consumers with access to entertainment and information
both at home and on the move. Philips has established
itself as a leader in the emerging wireless home audio
market, with consumers clearly recognizing the high
value of this
proposition.
“We appreciate everything Philips has
done for Wal-Mart. Your expertise
in our international markets has
helped accelerate our growth in
the consumer electronics, domestic
appliance and lighting businesses.
The coordination of your structured
global account team has dramatically
improved our communication and
allowed us to implement a joint
business strategy.”
Mike Bratcher,
Senior Vice President, Wal-Mart International Division
Philips believes that one of the best ways to achieve growth
is to help its international retail partners to grow their business.
The company has been cooperating with Wal-Mart since 1992.
Since the establishment of the International Retail Board in 2004,
Philips has won several awards, including the 2004 Wal-Mart Mexico
‘Supplier of the Year’ Award and in 2005 the Wal-Mart USA and
Sam’s
USA ‘Supplier of the Year’ Award. In 2006, Philips became
a strategic
supplier and now participates in Wal-Mart’s Supplier
Development Program. Philips is also one of Wal-Mart’s Top 15
suppliers as part of a sustainability alignment initiative. The ‘Wal-Mart
approach’ team
won Gold in the 2006 One Philips Awards, which
celebrate inspirational projects that contribute to sustained, profi table
growth through teamwork across businesses and functions.
6 Financial highlights 8 Message from the President 14 Our leadership 20 The Philips Group