What is Philips' present position with respect to its competitors?
Philips concentrates 30-40% of its sales in the consumer electronics industry.
We also manufacture medical equipment, professional equipment, lighting
products, music equipment, etc.
In most of the products we sell, we are one of the top three world manufacturers
in the field. In lighting products, for example, we are the world's leading
company; in television sets, we hold second or third place; in medical equipment,
we hold second place; and in music equipment, we're number one.
The consumer electronics industry has experienced severe difficulties
in recent years. How do you see the future? Are the difficulties over?
In Philips' 106 years of history, the company has only reported losses in
two years, 1990 and 1996.
The consumer electronics industry is growing at an annual rate of 3%. However,
in some years, this growth has been negative. The profit margin ranges between
4-6%. Philips is a large company, which means that it takes time for us
to adapt to market fluctuations.
It was the conjunction of these factors that caused those two years of losses.
However, I now feel optimistic; we have a lot of projects in the pipeline.
How did you cope with the last downturn?
Faced with a 5-10% price drop, you have two options: you either manufacture
at lower cost or you sell more. If the company is unable to react, it must
look for other markets. If that is not possible, the next step is to implement
staff cuts. Philips operates about 400 factories. If we were unable to adapt
to the new market situation, we would have to close down factories, which
is a slow and costly process.
One of the hallmarks of consumer electronics is its dynamism. What
new surprises are in the offing?
The digital era. We are talking about a 2,300 billion dollar industry. A
large part of this, more than 300 billion dollars, corresponds to consumer
electronics, personal computers and telephony. Consumer electronics is the
smallest industry, the one that is growing slowest and the only one that
has yet to come to terms with the digital revolution. The major challenge,
therefore, is to change this industry, to digitize it, but this is something
that will happen gradually.
What are Philips' digital projects?
We have just launched the Digital Video Disc (DVD) in the US but this is
just a drop in a huge lake. For example, each year 100 million CD players
are sold thoughout the world. I calculate that this year only 500,000 DVDs
will be sold worldwide and this will be a success.
We're talking about impressive but gradual changes. In consumer electronics,
you never know if a product is going to be a success, particularly considering
the fact that 80% of new products fail.
What are Philips' ambitions for the period from now to the year 2000?
Adapt to the digital era, launch a new product range, leverage our position
in Europe and expand in those markets where we already present, such as
the US.
Of course, we also plan to make a strong entry in the Asian market. You
may not realize it but India, as a country, is going to absorb more television
sets than Philips has ever manufactured in its entire history.
Will digital technology be able to unify the industry?
No, it will not unify the industry. On the contrary, other competitors will
come in. We now compete with Sony, Samsung or Goldstart, but soon IBM, Hewlett
Packard and Compaq will enter the field. |
Jean Pieter Oosterveld
A life in Philips
By the year 2000, we hope
to adapt to the digital era, launch a new product range, leverage our position
in Europe, expand in the US, and make a strong entry in the Asian market
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Popular technology
The developments that have taken place in consumer electronics have
been amazing. How do you see them transforming offices and homes?
In about 2 years time, we will have access to about 2,000 channels at home.
I don't know if this will make people happier but the technology is there.
It is difficult to foresee what people really want and what they are going
to do with it. That is why so many products fail in this industry. Technology,
yes: abundant, easy, and increasingly cheaper... but it is hard to predict
whether it will be accepted by the public.
According to a study made by a Japanese consulting firm, one of the
disadvantages of digital products is their price. How can one successfully
launch highly innovative products at competitive prices?
Yes, I think that this is one of the problems that is going to slow down
digitization. The first digital television set which we will launch on the
North American market next year will cost between $6,000-$8,000. It will
sell. It will be the same as when the first color TV came out: it cost a
lot of money but it sold.
One of the problems that has beset the industry has been the disagreement
about standards for certain products. Is it absolutely necessary that companies
agree?
If you are as strong and big as Microsoft, it is not necessary. You can
do whatever you like. One always talks of standards in audio and video but
not in computers. There are no agreements in the personal computers world
and that's why Apple and Microsoft are competing.
How will the changes that are currently taking place in the distribution
world: electronic marketing, sales via Internet, etc., affect the manufacturers?
It will be a major revolution. The greater the quality of the image a
quality that will enable you to almost touch the product the more it
will be sold by Internet. This will affect particularly the retailers but
not so much the manufacturers like us.
How have the changes in traditional distribution affected Philips?
The current distribution structure has meant major changes for us: the hypermarkets,
the discount stores have meant, for example, that 80% of the television
sets we sell in the US are sold to only five distributors. If you take a
wrong step, if you're not among the brands chosen by those distributors,
then you're out.
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A life in Philips
Industrial engineer, IESE MBA, Dutch nationality, married with three
children, and his entire career spent in the multinational Philips. "Twenty-five
years is a long time but I have never had the feeling of being in the same
company."
Jan Pieter Oosterveld has worked for Philips in three different countries,
nine different functions and three divisions. On May 1, he started in a
new position as the multinational's Corporate Strategy Director, reporting
directly to the president, Cor Boonstra. He is also the senior manager responsible
for the launch and development of the Digital Video Disc (DVD).
He confides that he lost 10 kilos at IESE because he could not speak
a word of Spanish, he only understood it, but he has no regrets about having
chosen it. |
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IESE teaches
you to work in a team and to work hard
Professionally speaking, what has your period in IESE given you?
Something very important. When I completed my MBA, I entered Philips in
a management position that I would have taken five or ten years to reach
without it. For a company like Philips, the combination of engineering and
management was an essential quality that I was able to offer, thanks to
my training at IESE. Apart from that, IESE teaches you to work in a team
and to work hard.
How do you see IESE with respect to its competitors?
IESE is one of the top ten business schools. And it's not me who's saying
it, many renowned publications throughout the world are saying it. For example,
I remember one occasion when I was in an Asian airport, I picked up the
magazine "World Executives Digest", which in its report on business
schools, rated IESE among the world's top ten. Recently, we have performed
an assessment of business schools in Philips. The person responsible for
performing this study was very favorably impressed by IESE.
Your entire career has been in Philips. Isn't it hard to stay in the
same company?
I have just completed 25 years in Philips. In companies as large as Philips,
it's a normal occurrence to stay for so long. I have taken steps in Philips
that other people have to change company to take.
I have worked in Barcelona, Holland, Vienna, in nine different functions
and three different divisions.
So the effect has been the same as working in lots of different companies. |
