GLOBAL PRODUCT STRATEGY OF PHILIPS

Royal Philips is the world’s third largest consumer electronics firm, following market
leaders Matsushita & Sony. The Philips brands include Philips, Norelco, Marantz, &
Magnavox. The co. was set up in 1891 in Eindhoven, Netherlands, primarily as a
manufacturer of incandescent lamps & other electrical products. Philips offers consumer
products, such as communications products (cordless phones, mobile phones, fax
machines); electronics (flat TV, Real Flat TV, digital TV, projection TV, professional
TV, DVD players & recorders, super audio CD, VCR’s, satellite receivers, CD
recorders/players, home theatre systems, Internet audio players, shelf systems, portable
radios, clock radios, PC monitors, multimedia projectors, PC cameras, PC audio, CD
rewritable drives, DVD drives, etc.); home & body care products (vacuum cleaners,
irons, kitchen appliances, shavers, oral healthcare products) & lighting products. Its
professional products include connectivity, lighting, medical systems, semiconductors,
security systems, manufacturing technologies, automotive parts, broadband network & so
on.
Philips developed the electric shaver & invented the rotary heads. They also made major
contributions in the development of TV pictures, its research work leading to the
development of the Plumbicon TV camera tube which offers a better picture quality. It
introduced the compact audiocassette in 1963 & produced its first integrated circuits in
1965. In the 70s its research in lighting contributed to the development of the PL & SL
energy saving lamps. More recent Philips innovations are the Laser Vision Optical Disc,
the Compact Disc & Optical Telecommunication Systems.
Philips expanded in 1970s & 80s, acquiring Magnavox, Signetics & the lamps division of
Westinghouse. Currently, Philips operates in more than 60 countries, with more than
186000 employees & is market leader in many regions for a no. of product categories like
lighting, shavers & LCD displays.
In the 1990s Philips carried out a major restructuring program & changed from a highly
localized production to globalized production; this change translating into a more
efficient concentration of manufacturing from more than 100 manufacturing sites to 36 &
to 14 sites for production. Another important change was the appointment of Gerard
Kleisterlee as president & chairman of board of management in 2001. He is a local
Eindhoven electronic engineer who has worked with the co. for 3 decades. He is
supposed to take the co. back to its original path to success by concentrating on its initial
core activities with a focus on its key areas of profitability. Philips under Kleisterlee’s
leadership will have a strong product orientation & will support an environment in which
product innovation will constitute a primary focus that has been historically Philips
proven path to success.
Among Philips competitors are Matsushita, Sony, Hitachi & Thomson. Matsushita makes
consumer, commercial & industrial electronics under the Panasonic, Technics & Quasar
brands. The Matsushita group includes about 320 operating units in more than 45
countries. Its products are sold worldwide but Asia accounts for more than 70% of its
sales. Sony has entertainment & electronics products like Play Station, Home Video
Game System, Walkman, DVD players, cameras, batteries, semi-conductors, computer
monitors & Fat Screen TV’s. Its entertainment assets include Columbia TriStar & record
labels Columbia & Epic. The co. also operates insurance & finance businesses. Hitachi
manufactures both electronics components & industrial equipment. It also produces
consumer goods like audio & video equipments, refrigerators & washing machines. Like
Philips, Hitachi is focusing on developing Internet related businesses & expanding its
information technology units, which account for more than 30% of its sales. Thomson
Multimedia also manufactures consumer electronics & its products are sold in more than
10 countries & include the brand RCA in US & Thomson in Europe. Almost 60% of its
sales are in the US.
Philips primary mission is to “continually enhance people’s lives through technology &
innovation”. This philosophy is also reflected in its tagline “let’s make things better”,
launched in 1995. Philips focuses on the multisensory impact of its products & their
power to create memories & spur emotions to touch people’s lives on a very personal
level. Philips also aspires to be the world’s leading eco-efficient co. in electronics &
lighting.
While Philips is a household name in European markets, the co. continues to struggle to
spread brand awareness in the US. As recently as 1996, the Philips brand was associated
with milk of magnesia, petroleum, screwdrivers. After spending millions to build brand
awareness, Philips has successfully achieved recognition amongst consumers in the US as
a brand that makes exciting products that improve people’s lives. In 1998, for example,
Philips spent $100 million in advertising, sponsorship, movie tie-ins, & retail promotions
worldwide to boost brand awareness. In the same year, Philips embarked on its Star
campaign in an attempt to create a more human & imaginative brand image. Using
dynamic state of art products, the campaign was able to reach consumers on a very
personal level, thus gaining their trust, loyalty, & brand preference. The campaign
resonated very well with its target market: well educated, independent & carefree
consumers.
Another venue for communicating with its target market is its five year sponsorship of
the US Soccer Federation as of June 2001. This sponsorship is also expected to help
Philips reach more of its young target consumers. Philips has 30 sec air spots on ABC &
ESPN during soccer broadcasts, as well as a presence on stadium billboards, & logo
visibility on all training kits & the Philips branded goal cameras are highly visible.
Apart from the need to generate awareness in the US markets, Philips also recognizes the
need for consolidation & consistency across all of its marketing communication
worldwide. To this end it awarded its $ 600 million account in media buying & planning
to the Aegis Group’s Carat Intl. With Carat’s help it is attempting to create a consistent
brand experience that will give all products a shared look & feel & will demonstrate a
deeper understanding of the consumer.
Because of more consumer focused & brand centric marketing efforts; expanding its
traditional TV & print communications to direct marketing & more unconventional
media Philips hopes to create a total marketing package which will resonate well with the
US consumer & therefore lead to increased US sales. Philips plans to engage in extensive
direct marketing & internet marketing. This is especially possible given Philips alliance
with AOL Time Warner.

Ques. How have Philips strategies worldwide evolved over time?