Our strategic focus 4

4 Our strategic focus

4.2 How we create value
Understanding and meeting peoples needs
Building upon our long history of innovation, we take a systematic approach to value creation. Our starting point is
always to understand the specific challenges local people face whether they be a doctor, a real estate developer, a
hospital director, a city planner, a consumer, etc.

Having gained these deep insights, we then apply our innovative competencies, strong brand, global footprint and
talented, engaged people often in value-adding partnerships to deliver solutions that meet these needs. Making
the world healthier and more sustainable.

To measure the impact our solutions are having around the world, we have developed our independently verified Lives
Improved model. We take a two-dimensional approach social and ecological to improving peoples lives. Products
and solutions that directly support the curative (care) or preventive (well-being) side of peoples health, determine the
contribution to the social dimension. The contribution to the ecological dimension is determined by means of our Green
Product portfolio, such as our energy-efficient lighting.

Our business system

With its four interlocking elements, the Philips Business System (PBS) is designed to help us deliver on our mission and
vision and to ensure that success is repeatable. As we execute our strategy and invest in the best opportunities,
leverage our unique strengths and become operationally excellent, we will be able to consistently deliver value to our
customers, consumers and other stakeholders.

Group strategy: We manage our portfolio with clearly Excellence: We are a learning organization that
defined strategies and allocate resources to applies common operating principles and practices
maximize value creation. to deliver to our customers with excellence.
CAPs: We strengthen and leverage our core Path to Value: We define and execute business plans
Capabilities, Assets and Positions our deep that deliver sustainable results along a credible Path
customer insights, technological innovation, global to Value.
footprint, our people, and the trusted Philips brand
as they create differential value.

The Creating value for our stakeholders diagram, based on the International Integrated Reporting Council framework,
shows how with the Philips Business System at the heart of our endeavors we use six different forms of capital to
drive value in the short, medium and long term.

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 Our strategic focus 4.2

Capital input Creating value for our stakeholders Value outcomes

Human Intellectual Financial Manufacturing Natural Social

We employ diverse We apply our We raise the funds we We apply Lean We are a responsible We contribute to our
and talented people innovation and need from techniques to our company and aim to customers and
and give them the design expertise to shareholders and manufacturing minimize the society through our
skills and training create new products other capital processes to environmental products and
they need to ensure and solutions that providers. We allocate produce high- impact of our supply solutions, our tax
their effectiveness meet local customer this capital to the quality products. We chain, our payments, the
and their personal needs. businesses and manage our supply operations, and also products and
development and markets we think offer chain in a our products and services we buy, and
employability. the best prospects for responsible way. solutions. our investments in
growth and returns. local communities.

Human Human
Employees 104,204, 35% female Employee Engagement Index
Training spend EUR 50 million on 71% positive
450,000 courses, over 1 million Sales per employee EUR 232,659
hours through Philips University Employee benefit expenses
48,092 employees in growth EUR 7,107 million
geographies

Intellectual Intellectual
Invested in R&D EUR 1.9 billion New patent filings 1,750 and IP
(Green Innovation Royalties EBITA EUR 284 million
EUR 495 million) 54% Green Product sales
Employees in R&D 11,462 in 60
R&D centers across the globe Capabilities, Assets
including growth markets and Positions
Our unique strengths
Financial Financial
Debt EUR 5.8 billion Comparable sales growth 2.2%
Equity EUR 11.8 billion EBITA as % of sales 5.7%
Market capitalization Free cash flow EUR 325 million
EUR 21.6 billion Strategy Excellence Dividend EUR 730 million
Where How we
we invest operate Corporate taxes paid
EUR 280 million

Manufacturing Manufacturing
Manufacturing sites 95, cost of EUR 24 billion products and
materials used EUR 8,446 million solutions sold, corresponding to
Total assets EUR 31.0 billion Path to Value 2.0 billion lives improved
Capital expenditure What we deliver
EUR 522 million

Natural Natural
Energy used in manufacturing CO2 emissions 1,417 kilotonnes
9,702 terajoules 13,800 kilotonnes (estimated)
Water used 2.7 million m3 products put on market
Recycled content in 68.5 kilotonnes waste, of which
our products 13.5 kilotonnes 83% recycled

Social Social
Philips Foundation Brand value USD 10.9 billion
Stakeholder engagement Partnerships with UNICEF and
Red Cross

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 Our strategic focus 4.2

This is an interactive electronic version of the Philips Annual Report 2015 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 2015. 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, IFRS basis of presentation, use of non-GAAP information,
statutory financial statements and management report, reclassifications and analysis of 2015 compared to 2014.

Koninklijke Philips N.V., 2015. All rights are reserved. Reproduction in whole or in part is prohibited without the written consent of the copyright owner.

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