Annual Report 2008
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Capturing opportunities in emerging markets

Within the emerging markets there is a fast-growing middle class, but also the majority of the world population who live on less than $2 a day. For both groups, smart products and solutions tailored to their needs can really improve their lives.

We have a long-established presence, strong brand awareness and a large workforce in the emerging economies. Together with our increasing resource investment, this gives us the home-grown insights needed to produce appropriate and relevant solutions. We have developed innovative technologies and approaches to address particular healthcare and lighting issues, for instance our SureSigns patient monitors and Uday solar-powered lanterns. And we provide market-specific consumer products in response to unique customer needs. For example, the rice cooker range for the Asian market, the water purifier for India and the Maté kettle in countries such as Brazil and Argentina.

While the effects of outdoor air pollution have been well documented, relatively little attention has been paid to the quality of indoor air. Figures released by the World Health Organization in 2007 claimed that in a number of countries – including several emerging economies – indoor air pollution is responsible for a total of 1.2 million deaths a year. Children, WHO noted, were impacted even more than adults in succumbing to acute respiratory conditions attributed to indoor air pollution.

These alarming statistics played a significant part in the creation of Philips’ new Water & Air category.

“More than 70% of consumers feel that the air quality will impact their long-term health,” says Sridhar Kumaraswamy, the Water & Air category leader. “This same research also indicated that about half of households are not satisfied with their indoor air quality. We have chosen to address its provision with a very market-specific approach for our Clean Air Systems range, based on different priorities in each market.”

European air quality under threat

Philips’ insight has shown that Europeans are mostly concerned about the amount of dust and especially allergens in indoor air. “55% say they have a problem with it, even though only 5% of European households own an air cleaner,” says Sridhar. Europe’s growing city populations – two-thirds of Europeans will be city dwellers by 2050 – are being increasingly exposed to a whole range of pollutants, from harmful gases, viruses and bacteria, to fine dust, pollen and cooking waste. The design and construction of modern homes is also less effective in dispersing indoor pollutants.

Emerging markets facing environmental challenges

In emerging markets like China, the situation is somewhat different: “People living in China’s cities face the same indoor air pollution issues as anywhere else – like dust, chemical emissions, pollen, tobacco smoke, bacteria and viruses,” says Sridhar. “However, the expanding economy has created additional environmental challenges as a result of things like construction projects and increased car ownership.”

Awareness of domestic air quality in China is growing, and interest in buying an air cleaner is high (around 85% of households). In China, Philips has focused on addressing family health with its Clean Air Systems. “In a big city like Shanghai,” notes Sridhar, “people might be inhaling over 50 million particles with every breath. Since children breathe even more air than adults – up to twice as much – they will inhale even higher levels of airborne contaminants. So, every breath that a child takes, at home and outdoors, can affect his or her growth and development.”

2008 marked the completion of the installation phase of a six-year program to modernize the healthcare infrastructure of the Republic of Zambia. Part of the Dutch government’s ORET international development initiative, the project has seen substantial improvements made to 71 hospitals across the country. It also has included the training of over 200 local hospital staff, creating a sustainable skills base to ensure a brighter future for the provision of healthcare in the country.

The EUR 25 million project included the installation and maintenance of diagnostic imaging equipment including mobile X-ray, fluoroscopy, ultrasound scanners, operating theaters and dental treatment systems. Funding was provided by the Dutch and Zambian governments, each contributing 50% of the project’s costs.

Working with partners

With overall responsibility for project implementation, we partnered with education provider Fontys to train a local workforce of radiologists, laboratory technicians, nurses, midwives and other medical staff. We partnered with Simed, a provider of turnkey healthcare solutions, to provide surgical and dental solutions for the project.

We will continue to maintain the equipment we installed, and with Fontys we have implemented a train-the-trainer program to ensure that the project’s benefits continue to be realized for years to come.

At the Philips Simplicity Event 2008 held on Moscow’s Red Square, Philips unveiled a range of innovative concepts addressing people’s need to be healthy and to live a healthy lifestyle while maintaining a sustainable environment.

The concepts presented at this fourth edition focused on the responsible domestic use of resources, harnessing renewable energy and the responsible consumption of goods.

Ongoing co-creation

The simplicity-led design concepts are not intended for introduction to the market in exactly the form seen at the Event. Instead, as part of our innovation enrichment strategy, they exist to promote dialogue, to allow people to experience our ideas, to trigger reactions, and to ‘test the water’ for potential products.

All are technologically viable within a three- to five-year time frame and are designed to address the needs and aspirations of people and society.

This is an interactive electronic version of the Philips Annual Report 2008 and also contains certain information in summarized form. The contents of this version are qualified in their entirety by reference to the printed version of the Philips Annual Report 2008. The printed version is available as a PDF file on this website. Information about: forward-looking statements, third-party market share data, fair value information, US GAAP basis of presentation, use of non-US GAAP information, statutory financial statements and management report, revision and reclassifications and analysis of 2007 compared to 2006.
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