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Case Study: Philips NV

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Philips NV
Philips NV is a Dutch company founded in 1891 and is one of the world’s largest electronics enterprises. There are four main divisions: lighting, consumer electronics, professional products, and components. Their main competitors are Matsushila, General Electric, Sony, and Siemens. In the 1980’s the company had several hundred subsidiaries in 60 countries as well as operating manufacturing plants in more than 40 countries. They employed more than 300,000 people and manufactured thousands of different products. Despite their success in the 1990’s they were in deep trouble. They lost $2.2 billion on revenues of $28 billion. The major reason for their downfall is their inability to adapt to the changing competitive conditions. This case study will go into further detail as to why they
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The first change was removal of trade barriers and new agreement bodies, like GATT and EC, facilitated greater competitiveness among old and new players in the market. Meanwhile, companies from Japan emerged as world-class players in Philips’s home turfs with companies like Matsushita, which manufactured at home but exported its products all over the globe, taking benefit of the economies of scale. Furthermore, R&D costs increased dramatically while product lifecycles reduced, thus reducing the time a company needed to recover its investment. To help make new products successful, mass production was needed to bring in economies of scale but shorter product life cycles limited this possibility as well. The implication of these changes was that previously Philips was more concentrated towards its local market through its national organizations, but new global competitors with global strategies changed the market dynamics. For Philips the environment was rather simple and stable but upon entry of new players the environment became more complex and
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