Restructuring Philips
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Case Details:
Case Code : BSTR170
Case Length : 19 Pages
Period : 1990-2005
Organization : Philips
Pub Date : 2005
Teaching Note :Not Available
Countries : Netherlands
Industry : Consumer Electronics
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Please note:
This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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"Philips has always been great at innovation, but it has
had big problems with marketing."1
- Paul O'Donovan, Analyst at Gartner Inc. in 2004.
"Throughout the 1990s and back even longer than that,
Philips has been unable to grow. We have remained more or less a $30 billion
company, which on the one hand has created excellent intellectual property and
research and development but on the other hand failed to consistently translate
that into winning market positions."2
- Gerard Kleisterlee, President and CEO of Philips in 2002.
Introduction
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Netherlands-based Royal Philips Electronics (Philips) was on the verge of
bankruptcy in May 1990 when the company posted losses of $2.6 billion. At this
point, the top management of the company launched a set of initiatives aimed at
turning the company around. One of the measures initiated was 'Operation
Centurion'which aimed to bring about drastic changes in the work culture of the
company and reduce costs.
The restructuring efforts continued throughout the 1990s when Philips initiated
job cuts, sold unprofitable businesses and closed down many manufacturing
facilities worldwide.
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These efforts helped in improving the financial health of the
company but were not able to address concerns like the bureaucratic work culture
and the company's poor marketing of its products.
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Philips had a history of breakthrough inventions but
the company failed to market them effectively. In late 1999, Philips
embarked on a worldwide marketing campaign for the first time in its
history. Thus, the company made a clean break from its past image as a
technology-oriented company to one that was market-oriented.
Gerry Kaufhold, senior analyst at In-Stat, a technology research firm
based in Massachusetts, US, commented, "Historically, they've been a
great engineering company with less than fantastic marketing, so this
signals sort of an awakening by Philips."3 |
Restructuring Philips
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