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Philips sees the bigger picture

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The company extends the ‘Sense & Simplicity’ proposition to reposition itself on the health & well-being plank..

Murali Sivaraman, CEO, Philips Electronics India (file photo)
Murali Sivaraman, CEO, Philips Electronics India (file photo)

Sravanthi Challapalli

It’s a warm and humid 7 a.m. by the beach as the newspersons attending Philips Electronics India’s media event in Cavelossim, Goa, totter into the beachside restaurant for breakfast where company executives, despite the revelry of the previous night, are busy handing out glasses of juice from watermelon and carrots that are being swiftly shredded and juiced in a couple of juicers and blenders. These are some of the latest gadgets that Philips has just launched, signalling its transformation into a company that focuses on health and well-being and aims to offer solutions that incorporate ‘Sense & Simplicity’, its brand promise for the last couple of years.

In September 2007, Royal Philips Electronics announced the Vision 2010 strategy, whereby the company positioned itself as a market-driven, people-centric company. The company has also been redeploying €20 billion of capital that it got from various divestments over the years. At Philips Electronics India, this new focus meant simplifying its business into three core sectors of healthcare, lighting and consumer lifestyle and investing in organic and inorganic growth through acquisitions wherever it sees an opportunity. Last week at Goa, Philips also unveiled a slew of products in the decorative home lighting sector, with the promise of many more to come.

Solutions, not products

The Vision 2010 strategy emphasises solutions that are relevant to the diverse markets the €26-billion company operates in. Over the last couple of years, the company’s Indian arm has launched several products made in India for India, or products from its global portfolio that have been re-engineered to suit Indian conditions better. The ‘One Philips’ approach has the company also changing the way it views its markets, giving equal weightage to both the B2B and B2C segments. The company sees several markets for the various products in these categories. For instance, hospitals could be a market for both its lighting and healthcare solutions, hotels a market for lighting and lifestyle solutions.

Says Murali Sivaraman, CEO, Philips Electronics India: “The market need not be a country; it could be Walmart, as it’s a large global customer, or the Hyatt group, which is a large hospitality chain, or it could be the rural market. The DNA is: make yourself more and more relevant to the local market because that’s where the customer is and that’s where the competition is. In hi-tech companies where supply chains and product creation processes are more embedded globally, it often tends to become like, look, these are the portfolios I’ve got, but I can’t reinvent the wheel so how do I bring the solution to the local market? That continues, because I can’t do everything, I won’t be leveraging the power of Philips globally, but in value spaces and adjacent spaces, or even if one brings in a product like the juicer, more and more let your local organisation be embedded with smart marketing talent who drive it through consumer insights.”

These steps, as well as the appointment of a chief marketing officer to manage the three segments, and move managers from various cities to the new headquarters at Gurgaon to enable them to communicate and interact freely across divisional and functional boundaries, are all part of the company’s moves to reposition itself. And regain its lost glory.

Turnover tales

As observers put it, Philips is one of the most innovative companies in the world but in India, despite its long presence, it has been outdone by the Chinese and the Korean companies because it hasn’t invested in consumer understanding and doesn’t think growth. The declared goal of Rs 5,000-crore turnover by 2008 has been late in coming, partly due to the slowdown and partly due to other reasons. Sivaraman says it’s the decreasing market share in TVs that overwhelms the impression of the company’s image – “it’s such a small part of our category”, and that “the company has consciously decided not to play the volumes game”. “In lighting and healthcare we continue to grow, in lifestyle, kitchens and water we are growing. I could have easily reached the goal by plunging into it and bleeding my balance sheet and hiding that money somewhere in the group but that’s not the intention.”

B. A. Srinivasa, Director of the Chennai-based Vivek’s, believes that a company should maintain its leadership position in the segments it is known for. “Transforming into a health and well-being is a good business strategy as there is more awareness and demand for such products but what you are known for, you should maintain,” he says. The commoditisation of the TV sector is definitely a challenge but Philips should not lose in that category, he adds. “It’s an important category in one’s home and every family member is involved with it, unlike a washing machine where the husband and the children in the family may not be interested.”

In 2007, Philips’ turnover grew by 19 per cent to around Rs 2,700 crore. Due to the slowdown, it won’t grow that much in 2008, though it will grow higher than the GDP (6.5-7 per cent), says Sivaraman. How is the company being affected by the slowdown? “As it has a large portfolio, some segments are hit and some not.” In lighting, there’s a huge demand for energy-efficient solutions, and while retail and housing have slowed down, the government continues to invest in infrastructure. In lifestyle, the first-time buyer is not deferring purchases but those upgrading are.

“The intention is to be a No 1 or 2 and we already are, in several segments,” claims Sivaraman, rattling off their names, “in lighting, we’re leaders in every space we operate in; in patient monitoring and critical care; in imaging systems, it’s a play between GE, Siemens and Philips, and that’s okay, because we bring our own different technologies; in home theatre, DVD, peripherals and accessories; in the kitchens space, we’re No 1 nationally, though sometimes a regional brand could be stronger …”

Related Stories:
Philips to focus on health, wellbeing products
Philips India scouting for M&As; identifies companies

(This article was published in the Business Line print edition dated March 26, 2009)
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