Marketing Case Study

Marketing Case Study

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Marketing Case Study

Introduction

Brief History of the Company

Royal Philips Electronics of the Netherlands is one of the world's biggest electronics companies and Europe's largest, with sales of EUR 267.93 Million in 2007. With activities in the three interlocking domains of healthcare, lifestyle and technology and 161,500 employees in more than 60 countries, it has market leadership positions in medical diagnostic imaging and patient monitoring, colour television sets, electric shavers, lighting and silicon system solutions.

Products and service

In the Electronics segment, the Company is engaged in the development, design, manufacture and sale of various kinds of electronic equipment, instruments and devices for consumer and professional markets. And its products are marketed by sales subsidiaries and unaffiliated local distributors and sold through direct sales via the Internet throughout the world.

a) Nature of Electronic Industry

Today’s electronics industry faces numerous design and manufacturing challenges across a wide range of applications and industries as a result of the complexity of electronics devices. These challenges include a continual demand for product innovation to counter commoditization driven by the highly competitive electronics environment. .

Financial performnce

The company manufactures medical systems, consumer electronics, lighting products and semiconductors . The company recorded revenues of E26,793 million during FY2007, an increase of 0.4% over FY2006. and E976 million during the fiscal year ended December 2006, an increase of 4.7% over 2005. The operating profit of the company was E1,852 million during FY2007, an increase of 5.4% over FY2006. The net profit was E4,168 million in FY2007, a decrease of 22.6% compared with FY2006.

Competitors

Samsung Electronics Company

Samsung Electronics Company, a part of the Samsung group, is one of the leading consumer electronics brands in the world. It manufactures and markets consumer electronic products such as televisions and home appliances. The company recorded revenues of approximately $90,551.2 million during the FY2006, an increase of 5.9% over FY2005. The operating profit of the company approximately $9,548.3 million during FY2006, an increase of 18.9% over FY2005. The net profit was approximately $8,401.

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7 million in FY2006, an increase of 3.7% over FY2005.

Sony Corporation

Sony Corporation engage in the development, design, manufacture, and sale of electronic equipment, instruments, and devices for consumer and industrial markets worldwide. Sony is a leading manufacturer of audio, video, game, communications, key device and information technology products for the consumer and professional markets. Sony recorded consolidated annual sales of approximately $70 billion for the fiscal year ended March 31, 2007.

Marketing Issues and Activities

Macro Environment Issues

Political and Legal

The country has seen political stability. The activities of business operation are eased when peace and stability of a country is ensured. Philips company business activities are subject to various governmental regulations in the different countries in which it operates, including regulations relating to business/investment approvals, trade affairs including customs, import and export control, competition and antitrust, intellectual property, consumer and business taxation, foreign exchange controls, personal information protection, product safety, labor, occupational health and environmental and recycling requirements.

Economical
Rising world demand for energy, business and factories in particular require significant amount of energy in the form of both electricty and petroleum-based fuels inorder to operate this increasement in demand is affects the cost.
The global economy was declining much faster and deeper than expected , as it abandoned profitable targets, sharply lower demand from consumers. The economy dowen turn is also impacting demand in consumer life style mature market sales decling because of portfolio pruning. Since philips is a global firms ,exchange rate movement can have a major effects on profitability and cost.

Social/ cultural

The Netherlands has seen a rise of migrants coming from other countries. It may provide attractive marketing opportunities.

The rising of proportion of people over the age of 45 in the Netherlands creates substantial maketing opportunities because of their higher per capital income.

Technological

The Internet is a major new technology affecting the business landscape. It is a distribution channel, a communications tool, a marketplace and an information system. It can alter the way in which the firm communicates with its customers and suppliers, the way in which it collects customer data, Sellers can reach more customers, gather better data, and communicate more effectively.

Technological advancement in the Philips company has many benefits, leading to economies of scale, cutting down of administrative costs, efficient strategic systems, efficiency in customer services etc.

Micro Environment Issues

i) Customers

Customers have huge expectations in diverse areas such as performance ease of application, sustainability, quality, functionality, and environmental properties. All of the above expectations require special attention from company in order to ensure that its products meet expected standards. Buyers are able to compare products and prices from different suppliers which may increase price competitions between suppliers. In the electronics industry consumers have more product options than ever before. As a result customer has great bargain power.

ii) Competition

The devlopment of substitute products and the development of new product by competitors, the emergence of new channels of distribution and the rise of new customer value and the strong brand of competitors infulences the business operation.These all increases stiff competition. The electronics industry is facing intense cost-based competition commoditization and swift imitation of technology.

Philips also faces competition from companies once considered to be players in separate industries, including Apple and Microsoft,which have now entered segments of the consumer electronics world.

iii) Distributors

The company deals directly with the end-user customer over internet. And make the product available to customers by using the services of distributors such as wholesalers and retailers to supply end users and providing special services such as maintenance and installation.

iv) Suppliers

A very high percentage of components and products is purchased, from more than 20 suppliers. Supplies are subject to conform the philips sustainablity code of suppliers. Therefore the suppliers bargain power is low. Philips uses a standard General Purchase Agreement (GPA) and standard contracts based on processes common to all its businesses. In addition, philips have standardized processes for measuring and evaluating supplier performance, and for reporting the results.

Company Issues

i) Competitive Strategies

The competitive strategies of philips consumer electronics are breakthrough product through innovation and customer understanding, better customer service at lower cost, increases brand loyality and maximize the life time value of each customer, improve customer services through technological innovation. In a nut shell, the compnay Maximise customer pull through global brand strength and portfolio leader ship.

ii) Diversification
Strategic alliances are an important part of business at Philips. They enable philips to bring new products to the market that philips would not have been able to develop by it self. Philips combines with a number of leading global companies to build advanced products and services that touch the lives of people everyday.Philips have over 20 partnerships with other market leaders in their fields. Philips acquired portions of Westinghouse and the consumer electronics operation of Philco and Sylvania which led to new devices and technologies in consumer electronics.
iii) Organizational Structure
Philips is a market-driven company with an organizational structure that reflects the needs of customer base. It has board of management &supervisory board which is elected by the general meeting of shareholders of the company. Currently it operate via three main sectors: Healthcare, Lighting and Consumer Lifestyle, backed up by fourth sector Innovation & Emerging Businesses. This latter contains Research, Design, and all of supporting departments. The aim is always the same: to develop products that touch and improve people’s lives.
iv) Market segmentation, targeting and positioning

Philips is associated with high-technology, reliable and fashionable TV sets. The company has divided the market into small and large screens for television. For example, the company has 14 inches, plasma 25 inches and 29 inches TV sets. Of the total volume of TV sets sold, small TV sets account for 80%, while large screen account for 20 %.

Consumer Segmentation, Market price is the most sensitive and major factor. Every product has its own plus point. Philips has divided its customer .These add up to a differential advantage in the minds of its target customers.

v) Performance
Consumer Electronics generated €10.6 billion in sales in 2006, or 40% of total sales. This was a 1.5% increase from 2005 and a 6.6% increase from 2004. In 2006, Consumer Electronics (CE) was made up of five businesses: Connected Displays, Entertainment Solutions, Peripherals & Accessories, Home Networks and Mobile Phones. The division employs approximately 14,500 people worldwide, with sales and service organizations in more than 50 countries and manufacturing operations. PCE sells heavily and has won a number of awards from the store, such as the Wal-Mart USA and Sam’s USA ‘Supplier of the Year’

Marketing Mix Strategies

Pricing

The company accounted multidimensional character of price for the pricing of its products. Since the company products image and the position of the company are very similar to those of competition, it considered competitors prices and the perceived value of the product to the customers.

Distribution

Philips consumer electronics distribution strategy is another important factor behind the brand's success in the market. CE has made effective use of a variety of different distribution channels, setting different goals for each channel; this multi-pronged strategy has enabled PCE to grow its sales while at the same time strengthening its brand image. The company’s distribution channels, including department stores, distribution centers, in home distribution center, retailer and on line to reach its custeomer.

Product

Philips offers a wide product mix comprising the brand found within its lines of TV, audio equipment, video. As a result of these dynamic market conditions PCE company frequently rely on a product focus driven by innovations in technology.

Marketing Communication

Marketing promotion provides all the marketing and sales products to make the company successful. PCE uses integrated aspects of the promotion mix to deliver a unique campaign. The elements of the promotion mix are: advertising, personal selling, sales promotion, public relation.

Conclusion

The company is facing industry-wide challenges characterized by shrinking margins, an influx of new competitors, the proliferation of distribution channels and the constant push for innovation. The consumer electronics industry today offers consumers more product options than ever before. As a result, the battle for customers has become even more aggressive, making brand alone less of a competitive differentiator. The ability to adjust flexibly to consumer demand and customers’ needs has become increasingly crucial for consumer electronics firms to differentiate and sustain competitive advantage.

Customers have huge expectations on electronices products in diverse areas such as performance, ease of application, sustainability, quality, functionality, and environmental properties. All of the above expectations require special attention from manufacturers.

Recommendations

Philips CE should meet these market challenges head on by implementing a customer-focused approach to brand and product awareness and build relationships with customers beyond the transaction to boost loyalty.

The compnay should facilitate more efficient and effective Web interactions with its direct-to-consumer (D2C) customers and business-to-business (B2B) customers.

Customers’expectations requires special attention from manufacturers in order to ensure that their products meet expected standards. The company should be committed to continuous improvement in environmental performance and take a glimpse at a future in which the functionality of a product will be enhanced and transformed from the conventional areas of protection and aesthetics to meet additional and more specific demands.

Finally, the company should continue to maintain its commitment to product innovation.

Plan of Actions

The company should intensify its Net Promoter Score so that more and more of its customers become loyal to the company and its products

The company should provide necessary training to its employees

The company should revamp its website to improve online sales and customer relationship

The company should invest in continuous research and development programme

The company should adjust to the new way of thinking of the people.
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