Abstract
After facing a certain amount of losses over the years, the Ceo of Philips has decided to undergo reorganization, with the hope of increasing profits. It has dumped some of its outdated products and merged related divisions to cut costs as well as become more focused. It has named this reorganization Vision 2010, which has some set goals and targets to be achieved. This decision has pros as well as cons for the company.
Philips Maps Out a New Direction
Company information
Royal Philips Electronics dates back to 1891 when it started making carbon-filament lamps in the Netherlands. Over the years, the list of inventions has only been growing to include many breakthroughs that have continued to enrich people’s everyday lives. Some of their basic consumer electronics include TVs, VCRs, DVD players, and fax machines. But it also makes light bulbs, electric shavers and other personal care products. In September 2004, Philips launched its “sense and simplicity” brand promise, which marked a new way forward for the company.
Reorganization at Philips
Recently, Philips has announced a reorganization to increase its profits. This is to be called, Vision 2010.One of its aims is to double operating profits by 2010. Philps is now focusing on three main markets i.e healthcare, lighting (formerly Philips Medical Systems) and consumer “lifestyle” products like domestic (formerly Philips Consumer Electronics and Philips Domestic Appliances and Personal Care appliances and consumer electronics). Each division has its CEO to look after its work. This way the employees are much more focused and driven to work for a specific product line. Its LCD TV has also become one of the top LCD TVs worldwide even taking over the Chinese markets. To improve on its lighting division, Philips has also acquired the company “Color Kinetics” last June. Philips says the move will save between 150 million euros (206.58 million dollars) to 200 million euros (275.47 million dollars) in expenses. By 2010, Philips expects the earnings before interest, taxes and amortization margin of its current businesses to exceed 10 percent from its current level of 7.5 percent, which it said was on course.
Strengths of this reorganization
Global brand…it has international brand recognition, and it can work on its current achievement of jumping in the Interbrand global ranking from 65th to 42nd position.
Diversified product and service portfolio….Philips has quite some products available and has vast experience in the electronic market.
Global operations….is has its operations worldwide which is a major plus worldwide.
Weaknesses of this reorganization
Weak cash flow from operation Sluggish revenue growth of consumer electronics division ……since it had been left behind by companies such as GE and Panasonic and they are still a major threat. If again Philip’s fails to prove its worth, one of these companies can take over.
Lost consumer trust ….which is evident from the following comment GE was in a pickle some decades ago, Philips was larger than GE, yet GE turned around into a well know well managed supergiant. Philips stagnated. Even though Philips invented so much of everything in common use. Others ran with Philips concepts and ideas and outsold Philips with their ideas. Samsung and LG came out of nowhere in 10 years, became a common name in the U.S. Philips has been here since the 1930’s!!!
The CEO is aware that the targets set by him are not at all easy to achieve.
What we have changed in the way we approach leadership is first of all that we have required everyone to look beyond the boundaries of his or her own activity.
There is no one big bang that is suddenly going to get us into growth mode. Each of our leaders has to work on several initiatives. Some will fail and some will succeed. You nurture the ones that promise to be successful” (Gerard Kleisterlee speaking in European Business Forum, 2007).