Marketing Tools and Operations of Philips Ltd - Essay Example

?Marketing Tools and Marketing Operation Table of Contents Table of Contents 2 Introduction 4 Company Analysis 5 PESTEL analysis 8 PORTERS 5 FORCES 11 Threat of new Entrants 11 Marketing Strategy of Philips 12 Marketing Tools 17 Recommendations 18 Operations Management Strategy 18 Order Qualifiers and Order Winners 23 Recommendations 24 Conclusion 25 Bibliography 27 Introduction Royal Philips electronics is a global electronics company which is headquartered at Amsterdam, Netherlands. Originally the company was founded in the year 1891 in Eindhoven by Gerard Philips and his father Frederick but later got shifted. Philips has its presence in more than 100 countries and it employs over 122,000 across the globe. The business line of the company includes healthcare, lighting and lifestyle segments. The vision statement of the company reveals that they are focused on recuperating the lives of people through the use of significant innovative approaches (Philips, n.d.). During the period of 2011 with its whooping sales figures of €22.6 billion the company stood as the market leader in the health care segment and also reached a strong position in the portable entertainment sector and male grooming and shaving segment. The product range of the company includes sound and vision, personal care, mother and child care, household product, home lighting, computer products and phones. Apart from the mentioned categories the company also sells different accessories. Some of the eminent products of the company include Television, portable multimedia like Philips Go Gear, home audio and video system, headphones, shavers & hair removal items, body groomers, bottle feedings for Children’s and fully automated Espresso machines in the house hold category. Other than this the products from Philips lighting segment includes florescent tubes, LED bulbs and different other energy efficient lighting equipments. And the PC products section includes drives and storage devices and different notebook and I-pad accessories. The major competitors of Philips in the different business segments are LG, Sony, P&G Braun and Samsung among the others. Philips also works towards the development of sports. To site an example during the 100th anniversary of Netherlands after its independence the company has established Philips Sports Vereniging or what is popularly known as PSV. It is generally a sports club active in many sports categories. The outcome of the effort was PSV Eindhoven the football club which is admired throughout the football fraternity. The report will highlight the internal strengths and weakness as well as the external opportunities and threats. SWOT will be used as the tool to perform the internal and external analysis of the company. The report will also try to highlight marketing tools and marketing operations of the company. Apart from the aforementioned, the report will also try to put forward a marketing plan for Philips which will help the company towards its development. Company Analysis The company analysis will be done in the form of assessment of the internal and external analysis. The internal strengths & weakness as well as the external opportunities & threats will be taken into account. In order to do so SWOT analysis has been used. SWOT analysis can be defined as a tool which is used to do strategic planning and also used to evaluate the internal strengths & weakness as well as the external opportunities and threats of a company. Therefore it is considered as the essential element which matches the company’s capabilities and resources to the environment where it operates along with its competitors (Richter & Pahl, 2009, p.1). The SWOT analysis of Philips has been illustrated below:- Internal Strengths International presence. Huge Brand value. Wide, good quality and innovative products. Weakness Faces problems in sharing information to the employee around the world. Complexity in Controlling the overall operation of the diversified business. External Opportunity Larger geographical access Continuously explores ways to develop the products. Threats Tremendously competitive market. Emergence of low priced products. To keep the pace with rapidly changing environment. INTERNAL STRENGTHS Philips is considered as one of the most recognized brands of the world. It also portrays a strong brand image. The core values are strictly based on the value for money, quality, innovation, and dominance of the service. The range of the products is good quality and modern. The products and solutions of Philips are very much advanced and intended to meet the requirements of the customers. The company also believes in applying innovations to its product line. The other strengths of the company lie in the operational brilliance and elasticity of the organisation. This feature helps the company to react quickly in the changing environment. The relation with the customers and suppliers also acts as the strength of the company. Philips is also the leading supplier of lighting equipments across the globe. The company also puts its efforts on establishing the strategic alliances for product development. These enable them to bring new products into the market that would have been not possible to develop by Philips itself. Therefore the company unites with a number of global organisations to manufacture modern products and services. INTERNAL WEAKNESSES Philips operates in the market where the level of competition is very high. However the company has a strong base of loyal customer but they should also focus on the customers from the developing markets. The company should move on with the changing trends and also updates the existing products. Another weakness of Philips is that it employs a large number of people who works in different countries. Therefore it becomes a problem for the company to share information and also faces complexity in controlling the operations of diversified businesses. EXTERNAL OPPORTUNITIES The company continuously tries to explore new ways of improving the products and also to tries to offer innovative products to its customers. The Technological products of Philips can be designed more creatively to grab the market of tech savvy peoples. The company can use the opportunity to establish modern and appropriate stores with sitting arrangements which will create a nice atmosphere inside the stores; this will encourage the customers to spend longer time in the stores and eventually made the purchase. EXTERNAL THREATS Most of the companies have understood that the market trends are changing with the demand of quality and value for the product. Different companies have started to manufacture the same class of products on a cheaper value. This acts as one of the biggest threat of the company. Another challenge that is faced by Philips is the tumultuous business environment, where new products are launched within a very short span of time. Therefore, it becomes a necessity for the company to keep track on the new trends and of the business. Apart from this the business of the company also gets hampered for its unavailability in the online market. Presently most of the consumers prefer to buy through online mode; therefore it also acts as a threat to the company. PESTEL analysis Every business organization around the world gets hugely effected by the internal and external factors. Therefore in order to survive in this topsy-turvy business environment companies needs to remain aware about the external aspects in order to develop their strategies. The external factors such as the political, economical, social and environmental issues enormously impact a company’s business. So a company must study all this factors for developing a sound strategy. POLITICAL FACTORS The political factors which affect the activity of an organization are employment laws, tax policies, rules and regulations of the country, political stability and the trade barriers. Since Philips has a global presence it has to deal with a variety of policies and laws which gets changed periodically. For example the European countries are frequently changing the laws pertaining to employment. Therefore Philips can face different types of issues from the countries of its operation. ECONOMIC FACTORS A lot of countries where Philips has its presence are experiencing high economic growth. The economic factors include financial stability of a country, income level and interest rate, inflation rate etc. For example countries like USA, Canada are experiencing economic growth and stable inflation rate. Therefore this gives rise to the purchasing power of the consumers and thus Philips holds the opportunity which is a desirable factor for the company. SOCIO-CULTURAL FACTORS The social and cultural factors vary country wise or region wise. The factors include culture, religion, caste and other cultural aspects. Therefore it becomes very important to consider these factors. Philips operates in many countries and thus faces different socio-cultural aspects. It also becomes important for Philips to get accustomed to these situations. Philips is also considered as an ethical company which will help them to win more customers. TECHNOLOGICAL FACTORS Technology plays a vital role for achieving competitive advantage and is the most vital aspect of globalization. Philips hugely depends upon the technology as the products are pure dependents of technology. New innovation and sound technical infrastructure can simply boost the operations of the company. ENVIRONMENTAL FACTOR Environmental factors include the effect on natural environment due to the manufacturing process of the product. Since Philips is a large producer of electrical and other equipments they may face problems related to environment. LEGAL FACTOR The legal factors are the laws such as consumer rights, health and safety, discrimination and antitrust laws. Philips has to deal enormously with such laws. The laws also differ from one country to the other. Therefore it becomes necessary to remain aware of the laws. PORTERS 5 FORCES Threat of new Entrants Threat of a new entrant is described as the market entry of a new player which can be a potential threat to the company. However in order to enter this industry there are requirements of high capital investment, strong brand name and technical infrastructure and its absence can relatively lower down the threat of a new entrant. Threat of substitute products Substitute products are the products which performs the same function as the main product. The substitute products for Philips in its electronic can be of lower quality and to treat it as the exact substitute, the product must contain substantial product differentiation. Therefore the threat of substitutes is low. Bargaining power of buyers The bargaining power of the buyer refers to the capability of consumers to bargain and downturn the price. Philips has a huge base of loyal customers across the world and the particular product is also important to the customer. However with the availability of other providers such as LG, Sony, P&G Braun and Samsung the bargaining powers of the buyers are high. Bargaining Power of Suppliers Suppliers are also other organizations which provide the company with raw materials, service and even manpower to some situations. The suppliers of the electronics equipments have average concentrations and therefore the bargaining power of the suppliers is moderate. Existing Rivalry This force reflects the competition within the industry. Rivalry within the industry is about the intensity of competition among the organizations pertaining to the electrical segment. The electrical industry is growing with a robust rate and thus with the increasing opportunities the rivalry is likely to be less. However with presence of huge brands like LG, Samsung, Bajaj and other multinational and local ventures have formulated higher rivalry within the industry. Marketing Strategy of Philips A marketing strategy is a part of the overall business strategy of the company. A marketing plan can be defined as the plan which outlines the required marketing efforts by the company. In other words a marketing plan is a structural layout which specifies the steps to be followed for a successful marketing venture (Winston, 1985, p.13). A marketing plan of an organisation concentrates on the overall marketing strategy of the company. The overall marketing strategy is characterized by the 4p’s of marketing mix. The four P’s of marketing includes Product, Price, Place, Promotion (Foodexport, n.d.). Product Strategy- A product strategy is a pivotal function of the company. It resides at the heart of a company’s overall strategy and holds a commanding position. A product strategy is the central function for managing competition (Michael & Baker, 2008, p.22). A good product strategy exemplifies the path of success of a company provided the company has the knowledge of its current standings (Mcgrath, 2001, p.3). In case of Philips their product must contain some creativity and style. The product line of few commodities can be increased to cater to other segments as well. For example the existing version of 3D TV can be upgraded by some add on features. Another important factor is that the products of company can be made colourful so that visibility gets increased. Apart from selling the accessories the company can come up with a branded PC and laptops. Since this sector is growing at an exponential rate, the revenue will also be high. There are also possibilities to move into the sectors like electronic tablet computers as well as smart phones. Given its long presence in the market with electronic products and brand name the consumer acceptance ratio will be higher. Pricing Strategy The pricing strategy plays an indispensable role in the acceptance of a product in the market. Pricing can be stated as the way of influencing the customer to acknowledge the price. (Smith, Smith, 2011. p.8-15). The pricing of the product should be made according to the technical specification of the products. The product with high features and efficiency should be priced high and on the contrary low featured products should be priced low. But for the launch of any new product the company needs to follow penetration pricing method. This will ensure to grab bulk amount of customers at the initial phase. On the whole Philips needs to use different types of pricing method for different variants. For example a product like Go Gear always needs to have premium pricing as it is intended for above average income group. And for some category the company even needs to use market oriented pricing as well. Distribution Strategy This is a general acceptance that distribution channel is the prime factor for any company’s success. Distribution of a product can be defined as the way by which a company delivers its goods and services to the customers or makes it available for the potential customers. Physical distribution is an integral part of marketing mix and the distribution channels which is chosen also plays a crucial role in the availability of the product. The distribution channel to be used by the company is the appointment of distributors at different zones. Each distributor must have a specific assigned territory for carrying out its operation. The company also needs to use its own flagship stores namely Philips Arena, to sell the products directly to the customers. In such stores company can operate without any need of distributors or other intermediaries. But there are areas where there will be unavailability of Philips Arena. Therefore in such locations the company needs to target the multi--brand Consumer Electronics outlets and make use of distributors to supply the products. In order to accomplish all these activities the company needs to create a strong logistics department who will be looking after the transportation of products at the right place and right time. The logistic department needs to work closely with the sales and marketing department for timely delivery of products to the shops and other operating areas. In order to go for the international expansion they can either go for foreign direct investment or through joint ventures. But in case of Foreign Direct Investment it depends solely on the authorization of FDI in the host country. Philips also hugely focuses on the facility locations so as to minimize the cost of transportation, break competitors facilities and to avoid placing unwanted items in front of residential areas. Promotional Strategy Sales promotion nearly accounts 3/4th of the marketing budget of a company. The purpose behind its high end budget allocation is that, it is the only way to communicate with the customers and to let them know about the product. Promotions are used to create awareness for the product. The promotional tools which can be used for this purpose are as follows:- The promotional tools which can be used for Philips inc. are Advertising which includes TV commercials as well as newspaper advertisement. Television is a strong medium of promotion with its programs having high TRP’s. Newspaper can also be used. Sponsorship can also be undertaken apart from the PSV Eindhoven. The company can go for more popular clubs which has international recognition. The purpose for going with the mentioned tools is that the reach of both the medium is quite large and appeals to a mass population as compared to the other existing ones the society. Initially it may seem that the company has to bear more cost but in the long run it will add to the profitability of the company. But standing on 21st century one cannot get away without touching the social media. Some of the biggest platforms which can be used for promotional aspect are Face book, Twitter, You Tube and other social networking websites. People People accounts for an essential element for any service provision. The appropriate use of staffs and people plays a major for a company’s success. In this context Philips accurately recruits and trains its employees to deliver high quality services to its customers. Process Process refers to the system which is used to aid the organization in delivering the intended services. Philips has incorporated lots of process into its system to provide higher customer satisfaction achieve core competency. Physical Evidence Physical evidence is an element of the extended marketing mix and allows the consumer to judge the organization. It is the place where the service of the company gets delivered. Philips has its exclusive retail outlet namely Philips arena. The astonishing outlooks of the showroom are designed keeping in view the importance of a store ambience. A new growth in the industry and high performance culture has been the reason to become more swift and marketing oriented company. The company principally focuses on the marketing activities and spends huge amounts in the process of marketing its products. The extensive distribution network, the exclusive stores and other franchised operation of Philips portrays the marketing orientation of the company. Marketing Tools Marketing tools are the simple tools which are used by the companies to market their products and services. Therefore regardless of the size of company they must make use of the marketing tools. Generally marketing tools include business cards, leaflets, flyers, email campaign and also the official website of the company. Many businesses houses are now also using social networking sites the means of marketing their product. In the context of the company, Philips uses the following marketing tools to sell their product. E-mail marketing – May be there are questions about the applicability of email marketing but it has certainly stand out as one of the effective medias of promotions and marketing of product. Through the use of E-mail marketing can also be used for making online surveys and customer feedbacks. The two of the most popular e-mail marketing tools are outlook and mailman (Idealware, n.d.). Social Networking – Philips has a big presence in the field of social media. The main reason for them to be present is that it adds to the visibility of the company. Advertisements – Philips has a strong presence in the field of advertisements. The operate through both print media as well as the broadcasting media. It has been undertaken to make use of the mass reach of the mediums. Sponsorship – The Company sponsors some of the renowned events of the world. They also sponsor some of the football clubs of the world. They are also actively working in nother sports as well. Recommendations The recommendations for Philips are as follows:- It is highly recommended that Philips should start some programs where they can actively listen to the suggestions and proposals from the customers and staffs of the organisation in the context of the development of the products and services. The company must establish more Philips stores in different parts of the world. They should also focus on the developing market such as Asia and Africa in order to take the opportunity to increase the sales volume and revenue. Philips must also introduce new and efficient ways by which information within the organisation i.e. stores, manufacturing department, head office and other departments can be transmitted more flexibly. It is also recommended that the after sales service of the organisation needs to be developed. This will ensure the customers of the company to remain highly satisfied. Operations Management Strategy Marketing operations is a new discipline in the functioning of corporate marketing. The early adopters of this discipline were Cisco Systems, Adobe and Symantec. But these days numerous other companies across all the industries incorporated marketing operation in their corporate marketing function. The purpose of using marketing operation includes increase in marketing efficiency and to run the marketing functions as an entirely accountable activity. In general marketing function has the following function:- Performance measurement Budgeting and creation of strategic planning Development of the process Professional development Systems of marketing Alignment of the concepts marketing & sales. Technology and automation of marketing. In the context of Philips inc. they also make use of marketing operation in the following context:- Planning & Budgeting – The Company makes use of marketing operation in order to fully plan and budget their annual expanses. Technology and automation - Philips makes use of marketing operation in order to fully automate their marketing process. They make use of the following factors in their marketing operation:- Customer Relationship management Enterprise marketing management E-mail systems Management of web content Other online services. Figure 1 Productivity improvements are a challenge for all the industries. Improvement of Productivity is about reach higher efficiency at all stages I.e. man power, economic condition and energy. Therefore Philips must continuously try to improve the productivity in order to sustain and grow. Strategy of an organisation describes how the company wants to survive in the business environment for a longer period of time. The action and decision of the strategy has a direct impact within the operations of the company. Generally there are five operational performance measurement techniques. They are described below:- Cost: - It is the ability to manufacture the products at a low cost. In the context of the project, the company needs to manufacture the products at a lower price by cutting down the overhead cost. Quality: - Quality is referred to as the capability to produce the goods according to the specification and without any error. Therefore the company must incorporate equipments which will ensure or test that the product is absolutely error free. Speed: - This is referred to as the ability of the company to acccomplish the task quickly and responds to the customer demands. This activity also ensures minimal lead time between the ordering and delivery of the product. Dependability: - This future is about delivering the products to the customer in accordance with the promises. Flexibility: - This is the capability for changing the operations. It comprises of four aspects, they are:- 1. Ability to alter the total volume of total manufacture. 2. Ability to alter the total time of production. 3. Ability to blend different products and services 4. Ability to introduce new and innovative products. Order Qualifiers and Order Winners Order winners and order qualifiers are the terms which refers to the process of how the internal operational capabilities gets converted to the condition which may lead to success in the market place and competitive advantage. The operational people are mainly responsible for providing the order qualifying and order winning criteria. This will also enable the products to gain or win orders in the market. The process gets initiated with corporate strategy and ends with the criterion which keeps the company in the order qualifiers or win’s the customer business. Standardization versus customization Since Philips is a multinational company it has to deal with different issues to draw level with the customer needs. The reasons for product standardization are to maintain the economies of scale, the image of the country of origin and consumer mobility. While on the other hand customization is incorporated to get accustomed with the government laws, climate and other differences. Philips also huge focuses on managing capacity so as to ensure that information technology capacity meets the requirements of present and future in a cost effective way. Make versus Buy The concept of make or buy decision is related to whether the company should manufacture the part internally or should buy it from the suppliers. For example Philips decided to make the internal parts LCD panels as they fear that revealing the component to the outsiders may act as a threat to the company. Recommendations Presently customers of different places prefer to buy their products online. Therefore it is highly recommended that the company must put in efforts to establish online selling option. This will also make sure that the company grabs more customers from different parts of the world where the company actually does not have any presence physically. In order to make it possible the company also needs to have a strong delivery force. The company can also focus on tapping the rural markets. Therefore the company should extensively use distributors and stockiest for the distribution of their product. Direct Retailing and wholesaling is also way by which the company can market its products. In the context of the promotional strategy the company can use innovative techniques such as using of viral advertisements to grab the attention of the potential consumers. The advertisements should be such that it shows something unusual and quickly connects. Philips should make use of social Medias like face-book, twitter and others in order to make their presence felt and increase the visibility of the company. And also they should try to sponsor some big sporting event which will boost the company’s brand image as well as the brand value. Conclusion The research has been conducted in order analyse the internal and external environment of Philips Inc. The report was also meant to analyze the marketing tools and the marketing operations in use at the company. Apart from that the report was to put forward a new marketing plan for the company by which the company can undergo development. Therefore after conducting all the required researches it can be concluded that Philips inc. must come up with some of the new marketing tools in order to promote their product more efficiently in the market place. It is also highly recommended that the organisation must incorporate strong marketing operations in its marketing system. However it is also recommended that the company to develop more innovative and stylish products and in turn add in the consumer satisfaction process. Reference Foodexport. (No Date). The export marketing mix. [Online]. Available at: http://www.foodexport.org/GettingStarted/Content.cfm?ItemNumber=1288. 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