Philips underwent many structural changes throughout its history in response to changing market conditions and leadership priorities. The latest changes under CEO Boonstra in the 1990s aimed to increase shareholder value by refocusing on core businesses, improving processes, and increasing profitability. However, Philips still faced challenges like intense competition in consumer electronics from Japan and later China, difficulty achieving consistent profits in North America, and ensuring smooth transitions during periods of restructuring and shift in strategies. Future success would require identifying core competencies, analyzing business portfolios, and balancing regional and global priorities through continued organizational evolution.

1. Revitalizing Philips
Presented By:
Group 8

2. BACKGROUND
• Philips – one of the largest electronics and electrical equipment
corporations in the world
• Organizational Structural Changes – an integral part of Philips’
history
• Changes derived from:
- Changing Macroeconomic conditions
- Changing Consumer needs
- Focus on different objectives by different CEOs
• Latest Structural Change took over by Boonstra, appointed as CEO
of Philips on October 1, 1996

3. ENVIRONMENTAL COMPLEXITY OF PHILIPS
Simple + Stable
= Low uncertainty
Complex + Stable
= Low-Moderate uncertainty
Simple + Unstable
= High-Moderate uncertainty
Complex + Unstable
= High uncertainty
Environmental
Complexity

4. Philips - Organizational Structures
1930
• Change headed by Gerard Philips and his brother Anton
• World War II – the driver of the change
• Implementation of N.O.s (National Organizations)
• Each N.O. focused on particular region
1971
• Change headed by CEOs Henk van Riemsdijk/Dr. Rodenburg
• Facing pressure from Japanese companies
• Conversion of some efficient plants into IPCs supplying many Nos and recasting of Main Industry Groups(MIGs) into Product Divisions
(PDs)
• Replacement of dual leadership with single management at corporate and NOs
1982
• Changes headed by CEO Wisse Dekker
• Focus on Acquisitions and divestitures
• Off-shore Manufacturing
• PDs given formal product management responsibility and NOs responsible for local profits
• Reduced size of management board
1987
• Changes headed by CEO Cor van der Klugt
• Reorganized 14PDs into 4 core PDs – Components, Consumer Electronics, Telecommunications and Data, Lightning
• Went into Joint Ventures with GEC in medical systems and Whirlpool in domestic appliances
• Headquarters staff reduced. PDs staff increased. Global workforce reduced by 38000 by 1990
• Plants reorganized to be more efficient and multi-market oriented
• Unexpected loss and rumors of imminent bankruptcy

5. OPERATION CENTURION
• Jan Timmer became CEO in 1990
• Aimed to cut jobs – 68000 jobs within 18 months.
• More stringent performance goals for managers.
• Disposal of loss making businesses – computers and defence
electronics businesses, SRAM chip business etc.
• Investment in future technologies like – HDTV, built in CD-ROMs on
TVs etc.

6. The BOONSTRA ERA (1996 – 2001)
• Became CEO in 1996, was an outsider to head the company.
• More focus on increasing shareholder’s value – a focus that was
missing in Philips for the last 20 years.
• Revamping corporate businesses, fixing, closing or selling non-
performing businesses.
• Building profitable growth from the resources and securing market
leadership position in enough businesses.
• Further process improvements to achieve best in class standards.
• Succeeded by CEO, Gerard Kleisterlee as 11th CEO in 2001

7. The BOONSTRA ERA (1996 – 2001)
Sound & Vision
Car Systems
Business Electronics
Components
Semiconductors
Industrial Electronics
Lighting
Domestic Appliances
Medical Systems
Polygram
Media
Origin
Grundig
Consumer Electronics
Components
Semiconductors
Lighting
Domestic Appliances
Medical Systems
1996
2000

8. Problem Statement
Keeping Philips on a continuous financial and technical
growth trajectory while dealing with issues related to
increase in competition from other organizations.

9. Key Problems
1. Dilemma between Marketing v/s Manufacturing (relatively easier)
2. More Emphasis on vertical relationship between PDs
3. Enhancement of profitability from its Core Consumer Electronics Business
4. Making money in North America, the largest regional market
5. Creation of a new global forum by current CEO
6. Tilt in autonomy from National Organizations to Global Product Divisions
7. Implementation of Best-in-class Corporate Core Processes and Value addition
8. Monthly and Quarterly Monitoring Reconciliation
9. Improvement in usage of Technology for overall Business growth

10. ANALYSIS

11. Dilemma between Marketing v/s Manufacturing
With the improvement in retail sector, many retail chains were
opening up which squeezed margins for the manufacturers.
Moreover, Philips had to invest more in advertisement as they could
no longer rely on store personnel to communicate product benefits.
As a result, Philips was in a dilemma as to what- manufacturing or
marketing – should get preference.

12. More Emphasis on vertical relationship between
PDs necessary?
Till the late 1990s PDs – CE, components and semiconductors were
together known as Consumer Appliances.
The PDs followed a vertical hierarchical relationship – a common
management process.
This though provided better control over the management decisions as
they were taken from the central management but it hindered creativity
and innovation which was the core part of Philips.

13. Enhancement of profitability from its Core
Consumer Electronics Business
Philips core business was Consumer Electronics.
Facing severe competition from Japan which were committed to
keep costs low,export led global expansion, continuous
improvement and time based competition
Now, in the 2000s China was also posing a serious threat to the
leadership of Philips.

14. Capturing North America
• Failure of Consumer Electronics business in US in 1982
• Minority shareholders of North American Philips Corporation were bought
out in 1987
• Reason: Failure of Philips’ V200 Videocassette standard
• Failure of analog HDTV standard in US in 1992
• Failure of CD-i at an estimated cost of 1 billion USD.
• Reasons: Launch Delays, Failure of attempts to co-opt Sony, complex design,
overpricing, etc.
• By 1998, approx. 20% of the employees in North America
• GE – the biggest competitor in North America in both prospective,
lighting and Consumer Electronics PDs
• For changing fortunes, advertisement expenditure increased
• Replacement of Local Brand names with brand “Philips” to improve
visibility

15. The global forum
• Kleisterlee called his initiative “Towards one Philips”
• The TOP group comprised of 100 people
• Aim to make Philips work as a single, unified company
Pros:
• Standardization
• Sharing of Knowledge
• Incorporating new Acquisitions and Divestitures easier
• Unprofitable businesses would be dealt
Cons:
• Cultural changes involved
• Limitations in acquisitions because of common objectives overall
• Expansion more tedious

16. Tilt in Autonomy
• In 1930s, NOs were autonomous
• General Management Boards of NOs given overall responsibility for operations and policies
• NOs reported directly to Board of Management
• By 1982, PDs given formal product management responsibility
NOs left responsible only for local profits
• By 1990, there was shift in power from NOs to PDs
• Boonstra focused completely on PDs and reduced PDs to only 6 in number
Pros:
• NOs focused only on National Expansion while PDs focused on global expansion
• Brand identity and visibility internationally
Cons:
• Regional focus shifted
• Cultural changes involved

17. Best-in-class Processes and Value Addition
• Moving in losses
• Solution: Restructuring by Boonstra but not completely sufficient
• Backed by announcement of 6 Corporate Core Processes
• Strategic Control
• Efficiency Improvement
• Quality Improvement
• Human Resource Development
• Brand Marketing
• Technology Management
• Implementation and Monitoring – a difficult task

18. Technology Management
• Test Marketing practices had to be implemented with close
interaction with customers and launch products
• Construction of new campus to house PD & R&D personnel
together so research could be made more market oriented and
people centric
• The technologies had been filtered from 100 to 20 with business
development officers in lab
• Quantified output from research efforts by focus on factors like
Publications and patents

19. Monthly and Quarterly Monitoring
Reconciliation
• The major problem being faced by Philips was restructuring
impact it had after decades of restructuring
• The question at hand was if it was possible to monthly and
quarterly monitor balance after this restructuring
• Since they had to retain their profits and market share a system
had to be brought about in the system where if not monthly at
least a quarterly monitoring should be done through performance
analysis and market review sessions.
• This would be possible if it was incorporated snugly in the new
restructuring.

20. Recommendations

21. • Shutting down unprofitable businesses - Strategy followed by earlier CEOs.
• Outsourcing production of products like VCRs
• Reduces the overall cost
• Help them focus on innovation of new technology.
• Reducing the headcount - helps in increasing speed as it promotes a culture which
can foster profitable growth.
• Identify Core competencies - then develop further on those skills example of TVs new
market opportunities should be discovered. Philips should develop skills required to
capture such market opportunities.
• Philips should concentrate more on its display arm of electronics as it has a growth
rate comparable to those of PCs.
• Portfolio Analysis is required to help them make a planned decision – for example:
the electronics cluster produces plenty of growth but required significant investment
and is easily affected by the ups and downs of the economy.
• National Value Systems can be created for all regions.

22. Thank You!