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Moving Towards Standardization

By Marketing Research Team, 3EA
Moving Towards Standardization

Royal Philips is the one of the largest consumer electronics firm in the world. The company was established in 1891 in Netherlands, primarily as a manufacturer of incandescent lamp and other electrical products. Later it diversified in to many other areas, such as electronics, small appliances, lighting, semi-conductors, domestic care products etc.

Around the early 1900s, Philips started to diversify its offerings to radio valves and X-ray equipments, and later to televisions. Philips also introduced the compact audiocassette in 1963 and produced its first integrated circuits in 1965.

Philips products:

It offers consumer products such as communications products (cordless phones, mobile phones, fax machines), electronics (TV, digital TV, DVD players, audio CD, VCRs, satellite receivers, CD recorders/players, home theatre system portable radios, PC monitors, multimedia projectors, PC cameras etc.), home and body care products (vacuum cleaners, irons, kitchen appliances, savers etc.) and lighting products etc. Its other products include medical systems, semi-conductors, security systems, manufacturing technology and so on.

In the 1990s, Philips carried out a major restructuring program and changed from highly localized production to Globalize production; this change translated in to a more concentration of manufacturing - from more than 100 manufacturing sites to 36 and 14 sites for production.

Competitors:

These include Matsushita, Sony, Hitachi and Thompson. Matshuhhita Electric Industrial is world's largest consumer electronics firm. Matshushita makes consumer, commercial and industrial electronics products under the brand name of Panasonic, Technics and Quasar brand. Its consumer products include VCRs, CD, DVD players, TVs and home appliances and accounts for about 40% of sales.

Sony is another competitor whose play station home video game systems accounts for nearly 10 percent of the company's electronics and entertainment sales. Sony is the world's second largest company in the world. It also makes semi-conductors, DVD players, batteries, cameras, walkman, stereo systems, computer monitors among other products.

Hitachi, another larger player in the consumer electronic industry, is a leading manufacturer of both electronics components and industrial equipments. It manufactures mainframes, semiconductors, elevators, metal, wire and cable. Hitachi's consumer good includes audio and video equipment, refrigerators, washing machines etc. Like Philips Hitachi is also focusing on Internet - related business and expanding its information technology units.

Finally, Thompson Multimedia is another major competitor and leading manufacturer of both consumer electronics including TV, video cameras, telephones, audio system, and DVD players. Its consumer electronics goods accounts for nearly 80 percent of its sales.

Philip's primary mission is to "continually enhance people's lives through technology and innovation". This philosophy is also reflected in its tagline "Let's make things better". Philips focuses on the multisensory impact of its products and their power to create memories and spur emotions to touch people's lives on a very personal level. It also aspires to be the world's leading eco-efficient company in electronics and lighting.

Problem areas:

While Philips is a household name in European markets, the company continues to struggle to spread awareness in United States. Its target market comprises of well-educated, independent and carefree consumers. In Indian market also, although Philips is a common name; a name considered to be quality, even then they are losing their presence. Many new players have emerged recently and are giving tough competition. Apart from the need to generate awareness in the underdeveloped markets, Philips also recognizes the need for consolidation and consistency across all of its marketing communication worldwide. Thus Philips is attempting to create a consistent brand experience that will give all products a shared look and feel and will demonstrate a deep understanding of the consumer. Become more consumer-focused and get engage in extensive direct marketing and internet marketing.

Now suggestions should be offered to Philips regarding its strategies to create a unified global brand and also need to be analysed are the advantages of their standardization strategy over adaptation.

Case Vitae

As evident from this case, earlier the company was emphasizing on adaptation policy but now it is focusing on standardization. It involves a major restructuring as it has remarkably reduced its manufacturing units. Company's competitors, includes Mitshushita, Hitachi, Sony and Thompson are also doing well in the international market. Now the thrust area is whether they are right in their approach of shifting to standardization, as they also may have to face competition with other local players.

It seems that standardization will lead to the reduction in the production cost, which will certainly reflect in the profit margins. And also with this company can pay more attention on its original policy of innovation. But since the international market is much diversified, product range has to be widened, price wise as well as features wise. As far as the communications is concerned they should continue with their original communication. But what is required is an increase in its amplitude. As their competitors have grown in numbers they have to be more cautious on this front. Internet marketing is a right step to keep a watch globally. But for underdeveloped markets aggressive marketing is advisable. Apart from this they should go for electronic and print media. Also required is to get endorsed with some celebrity of international fame.

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About the author(s)--> Case Study by: Marketing Research Team, 3EA