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Koninklijke Philips N.V.: Assessing Sustainable Growth Rates and Growth Challenges
Student Name
4th Jan 2023
Introduction
This paper will analyze the growth of Koninklijke Philips N.V. (Philips) over the past three years and discuss the challenge currently facing the company and potential strategies to address it. Using the sustainable growth equation, we will calculate and compare the company’s actual growth rates to its sustainable growth rate. We will then analyze the strategic actions taken by Philips to address its growth challenge and recommend potential solutions.
Sales Growth of Philips in last 3 Years
Years
Sales Growth
2019
7.51%
2020
0.31%
2021
-12.18%
Source: Morningstar
Sustainable Growth of Philips in last 3 Years
Years
Profit Margin
Retention Rate
Asset Turnover
Financial Levarge
Sustainable Growth
2019
5.99%
42%
0.73
2.14
3.91%
2020
6.08%
100%
0.71
2.33
10.06%
2021
19.35%
27%
0.58
2.14
6.42%
Source: Morningstar
Overview of Growth Challenges Facing Philips
Philips currently faces several major growth challenges. The company has faced slowing growth in its consumer electronics and lighting segments due to increased competition, as well as decreased profitability in its healthcare segment. In addition, Philips has seen stagnation in some of its core markets, such as Europe and North America. As a result, the company is looking to expand its operations into new, more profitable markets, such as Asia and South America. Lastly, Philips has had limited success with its innovation and research and development efforts, which has hampered the company’s growth.
Analysis of Actions Taken to Address Growth Challenges
Philips has taken a variety of actions in order to respond to its growth challenges, such as diversifying its operations, revamping its product lines, investing in emerging markets, and strengthening its marketing strategies.
· Diversification of Operations
In response to the...