Philips 2009 Annual Report Download - page 92

Selectively strengthen the portfolio through opening up
new value spaces, including pursuing external
opportunities such as strategic acquisitions and alliances
The acquisition of Saeco International Group S.p.A. of
Italy, one of the world’s leading espresso machine makers,
has helped us consolidate our leadership position in the
coffee-making equipment market.
We focus on the four key platforms of Healthy Life,
Personal Care, Home Living and Interactive Living,
identifying new value spaces within these platforms where
we see considerable scope for growth: Lifestyle
Management, Skin Care, Sleep, Relationship Care, Water
and Air. These value spaces are already showing great
potential as we tap into consumer needs and trends in the
health and well-being domain, while growing our presence
in key categories and channels.
Focus on geographic areas – in particular emerging
markets – with the highest return on marketing
investment
The emerging markets offer higher growth potential than
mature markets. We can leverage our strong brand
presence and equity in these countries – often as high or
even higher than our brand equity in mature markets – to
help capture the available opportunities. We have also
organized accelerator teams around consumer markets
to increase contact with – and responsiveness to – the
local markets.
We are innovating locally to cater for the tastes and
preferences of national and/or regional consumers, while
aiming to ensure that successful ideas can be rolled out
globally. Examples of this include our entry into water
purification in India and air purification in China. We are
currently exploring how to apply these solutions in
mature markets. Another example is the Healthy Variety
rice cooker, designed in China to meet the cooking
requirements of millions in the local market, and launched
in China in November 2009 as a healthy way of preparing
meals.
Increase effectiveness and investment in advertising and
promotion as well as research and development
Our Test to Invest approach has been applied across
various markets in order to determine where we should
focus our spending. We successfully implemented our
Value Campaign, which used various media platforms to
present simple storylines that elaborated on “sense and
simplicity” and gave quantifiable reasons why people
across the globe should buy our products. This was
accompanied by an in-store excellence day, in which all
employees left their desks to ensure the stores were well
stocked.
In order to deliver meaningful and timely propositions to
consumers, running effective and creative innovation &
development programs is vital. We have therefore
concentrated our general innovation & development
efforts in three main sites: two in Asia and one in Europe,
supported by several specialized facilities (e.g. Saeco in
Italy for espresso).
Maintain rigorous cost and organizational discipline,
measured against external and internal benchmarks
We have a continuous business transformation program
in place, called Earn To Invest (E2I). E2I bases performance
measurement on up-to-date internal and external
benchmarks and best practices to achieve best-in-class
performance levels in all functions. Since its inception the
total E2I program has delivered well beyond the initial
target of EUR 200 million in synergies across the former
Consumer Electronics and Domestic Appliances and
Personal Care divisions.
Through E2I we have been able to increase investment in
advertising & promotion and innovation & development
while lowering our sales break-even point. The program
will continue into 2010 as we respond to the economic
environment.
Throughout 2009 we have also optimized our
manufacturing, supply and innovation & development
footprint on an ongoing basis. We have also lowered our
operational break-even point in order to create more
possibilities for future investments and also to increase
the flexibility of our organization to respond quickly to
changing economic conditions.
5.3.6 2009 financial performance
In 2009, Consumer Lifestyle experienced very challenging
market conditions as a result of the global economic
recession. Sales amounted to EUR 8,467 million, a nominal
decline of 22%. Adjusted for unfavorable currency effects
of 1% and portfolio changes, mainly the divestment of
Television in North America and the sale of Set-Top
Boxes in 2008 as well as the acquisition of Saeco and sale
of IT Monitors in 2009, comparable sales declined 17%.
5 Our sector performance 5.3.5 - 5.3.6
92 Philips Annual Report 2009