Philips

Philips

1892

• Gerard Philips and his father, Frederik Philips, opened a small light bulb factory in Holland
• Gerard’s brother, Anton, an excellent salesman and manager, joined the company

1899

• Anton hired the company’s first export managers
• The managers spent 8-10 months a year traveling in such diverse places as Japan, Australia, Canada, Brazil and Russia to establish new markets

1900

• Philips was the third largest light bulb producer in Europe
• In Eindhoven, company houses, bolstered education and local services were provided for employees
• Paid its employees so well that other local employers complained

1912

• Set aside 10% of profits for employees
• Electric lamp industry started to show signs of overcapacity, Philips started building sales organizations in the United States, Canada, and France and other cartel-free countries

1918

• Philips began producing electronic vacuum tubes; 8 years later its first radios appeared, capturing a 20% world market share within a decade
• Philips was forced to build local production facilities to protect its foreign sales of these products

1919

• Philips entered into the “Principal Agreement” with General Electric, giving each company the use of the other’s patents. The agreement also divided the world into “Three spheres of influence”: General Electric would control North America; Philips would control Holland; both companies agreed to compete freely in the rest of the world (General Electric also took 20% stake in Philips)
• Philips began evolving from a highly centralized company whose sales were conducted through third parties to a decentralized sales organization with autonomous marketing companies in 14 European countries, China, Brazil and Australia

1930s

• Philips began producing X-ray tubes
• Gerard, an engineer, and Anton, a businessman, began a subtle competition where Gerard would try to produce more than Anton could sell and vice versa
• In anticipation of the impending World War II, Philips transferred its overseas assets to two trusts, British Philips and the North America Philips Corporation in late 1930s
• Moved most of Philips vital research laboratories to Redhill in Surrey, England, and top management to the United States

1954

• The International Concern Council was established to formalize regular meetings among the principal managers from all the NOs and the board of management

1960

• The creation of the Common Market eroded trade barriers within Europe and diluted the rationale for maintaining independent, country-level subsidiaries
• Invented the audiocassette but let its Japanese competitors capture the mass market

1970

• Newly appointed CEO Hendrick van Reimsdijk created an organization committee to prepare a policy paper on the division of responsibilities between the PDs and the NOs
• Late 1970s, his successor CEO, Dr. Rodenburg, continued this thrust. He reinforced matrix simplification by replacing the dual commercial and technical leadership with single management at both corporate and national organization levels

1980s

• Philips developed the V2000 videocasette format – superior technically to Sony’s Beta or Matsushita’s VHS – but could not successfully market the product
• North American Philips rejected the V2000, choosing instead to outsource, brand and sell a VHS product under license from Matsushita

1982

• CEO Wisse Dekker outlined a new global strategy; he created more IPCs and closed inefficient operations – particularly in Europe where 40 of the company’s more than 200 plants were shut

1987

• Cor Van der Klugt succeeded Dekker as chairman
• Philips lost its long-held industry leadership position to Matsushita, and was one of only two non-Japanese consumer electronics companies in the world’s top ten
• Philips’ profit margins of 1% to 2% not only lagged behind General Electric’s 9%, but even its highly aggressive Japanese competitors’ slim 4%

1990

• Van der Klugt and half of the management board were replaced
• Jan Trimmer, the new president, who had spent most of his 35-year Philips career turning around unprofitable businesses
• Under “Operation Centurion,” headcount was reduced by 68,000 or 22% over the next 18 months; Eindhoven workers received 15 months’ pay – the first round of 10,000 layoffs alone cost Philips $700 million

1994

• Divestment of some of Philips’ truly high-tech businesses and a 37% cut in R&D personnel left Philips with few who understood the technology of the new priority businesses

1996

• Philips’ high-definition television (HDT)V technology did not become the industry standard, that its digital compact cassettes (DCC) gamble had lost out to Sony’s Minidisc, and that compact disc (CD-i) was a marketing failure
• October 1996, Trimmer stepped down and the board decided to replace him with a radical choice for Philips – an expertise was in marketing and Asia rather than technology and Europe
• Cor Boonstra was a 58-year old Dutchman who’s years as CEO of Sara Lee, the U. S. consumer products

1997

• 3,100 jobs were eliminated in North America and 3,000 employees were added in Asia Pacific
• The 100 year old Eindhoven headquarters were relocated to Amsterdam

1998

• Boonstra proclaimed consumer electronics as the center of Philips’ future
• Focus on established technologies such as cellular phones (through joint ventures with Marantz and Lucent), digital TV, digital videodisc and web TV
• Boonstra committed major resources to marketing, including a 40% increase in advertising to raise awareness and image of the Philips brand