BACKGROUND The eighties was characterised by a period of high growth for the consumer electronics market.

Innovative products such as VCRs and CDs were introduced into the market and many of these innovations were driven by Philips. Being a well-known company throughout the world, Philips operates six different product sectors, Lighting, Consumer Electronic Products, Components & Semiconductors, Professional Products & Systems, Software & Services, Miscellaneous (encompassing plastics, metalware and). The company operates in all five continents, yet the Netherlands and Europe still account for over half of the companys turnover. As competition grew, Philips continued to innovate, but began to lose grounds to competitors from Japan who could reduce prices because of their volume advantages leading to economies of scale. Meanwhile considerable awareness and respect for Japanese products and respect for their goods increased exponentially. As the companys centenary drew nearer in 1990, the company was faced with a serious financial crisis which posed a real threat to the future of the business. The crisis triggered a change of leadership with Jan Timmer appointed as Chairman. He embarked on a reappraisal of the strategic review of the company. ISSUES Active in over 100 countries, Philips aims to become one of the top three brands in each market in which it operates, including the West-African sub-region, which means a share of at least 10%. Cor Boonstra, Philips new president knows only too well that Philips is an unfocused player, straddling a myriad of markets with a multitude of products. Dufour, a French marketing analyst for Philips, concedes that Philips currently advertises too many products, confusing consumers. And Matthijs de Jongh, Strategy Director at Kessels Kramer, said that Philips problem is not that it has a stuffy image but that it has a diffuse image. Philips means shavers to some, CD players to others and maybe computer software to a third group. Global brands such as Nike and Levi are clearer and more uniform. Philips will have to reduce the categories of products, and it will take them a decade to become a global brand, The case now considers the main issues surrounding the Philips brand in the consumer electronics market KEY MARKET DYNAMICS The dynamics of the market is such that consumers are not interested in technology itself, they are seeking experiences rather than possessions placing an increasing trust on brand perceptions due to 1

product parity. It is becoming increasingly apparent that brand franchises will be built on what the brand can offer the consumer in terms of benefits. SOME CULTURAL ISSUE Domestic Appliances and Personal Care section, as part of consumer electronic products sector, has been very successful over the last fifteen years being a market leader in Europe and remained profitable. In contrast, the consumer electronic products sector is seen to be staid and conservative as it has operated in a depressed worldwide market over the last fifteen years. It is just beginning to be

profitable. This has created a defensive culture, with individuals less willing to take risks. The Lighting, Components & Semiconductors and Software & Services sectors are seen to be successful and offer a high level of income from operations. THE TURNAROUND Philips underwent dramatic changes in the early nineties. The company embarked on an important internal marketing programme and thousands of managers were involved in a worldwide cascade of meetings. The company developed the Centurion Programme which embraced five simple but highly relevant values in order to strive to become the customers first choice. The values are (1)Delight customers, (2) Value people as our greatest resource (3) Deliver quality and excellence in all areas, (4) Achieve premium return on equity and (5) Encourage entrepreneurial behaviour at all levels.

A branding strategy was implemented and a global communication strategy was also implemented in 2006. The effectiveness of the programme was reflected in strong growth in profits between 2007 & 2010, with 2011 being a somewhat disappointing year. Nonetheless, the stock market in 2011 was very positive about the company, and the share values nearly doubled in that year (from a low of 45.5 NLG to 70 NLG). In future the company is likely to report its share performance in Euro currency. In the 2007 Annual Report, the company Chairman states that: As we begin to return to our profitable base, we are now at the time of writing turning towards a fundamental look at our
group strategy. The digital revolution is upon us, and our strong brand, amazing technological capability and global organisation position us well in the new digital world. Yet we have only just begun to realise the potential that these assets offer, and therefore are undertaking a major effort to redefine our strategy for digital high-volume electronics. We are also turning to a fundamental review of our portfolio of businesses how we define them, the market positions they represent, the linkages among them and most importantly, how we will build profitable growth, edging out from our core businesses.