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Consumer-Electronics Giant Philips Switches Direction

Posted on: Wednesday, 3 September 2003, 06:00 CDT

Sep. 2--The Dutch electronics giant Philips is making a U-turn in its business strategy for Asia-Pacific by returning to the mass-market segment it abandoned three years ago.

The earlier shift in focus to the high-end market had resulted in a "significant" loss of earnings opportunities -- between 1.2 billion and 1.5 billion baht in sales in Thailand alone from 2000 to 2002 -- according to a company estimate.

Chadil Chulinrak, general manager of the consumer electronics division of Philips Electronics (Thailand), yesterday outlined the group's bid to recoup sales and market share.

As in other Asian countries where it operated, Philips Thailand stopped sales of conventional colour TV sets with 20" and 21" screens and did not aggressively promote its 21" and 25" flat-screen models because of price competition. It focused instead on promoting large-screen units of 29" or more, as well as projection TV sets.

"We are very successful in sales and brand recognition after shifting our focus to the premium segment, competing with Fujitsu and NEC from 2000 to 2002," said Mr Chadil. "However, we lost about 400-500 million baht a year that we could have made from mass-market products to others."

As well, tight credit during the period affected the expansion of premium electronic goods sales in Thailand, he said.

Currently, premium goods make up just 8-10 percent of total sales in the local consumer electronics market.

Philips this month is introducing lower-priced audio-visual products including colour televisions, DVD players and home theatre sets.

For example, it will offer DVD players priced from 6,900 to 7,900 baht per unit, compared with 11,000 baht for earlier Philips models. Home theatre sets, excluding TV monitors, will be priced at 20,000 baht, down from 30,000 baht.

Mr Chadil said that while Philips had returned to the mass market segment, it would not resort to price cutting. Philips products are still an average of 2-8 percent more expensive than those of rival brands such as Sony.

"As long as Philips stays in the market, it is not possible for Japanese and Korean brands to emerge as our competitors in the premium segment," he said.

With the revised strategy, the company expected to gain back between 300 million and 500 million baht a year in sales.

At the same time, the company will continue to focus on expanding in premium product segments where consumers have higher purchasing power, as long as competition is limited and Philips' technology is ahead of its rivals'.

The company yesterday introduced a line of premium, high-definition products with its Pixel Plus technology including projection, plasma and liquid crystal display television sets.

The revised strategies are expected to increase sales of Philips Consumer Electronics by 10-15 percent this year compared with last year.

The company also expects its overall market share in consumer electronics to rise to 12 percent from 8 percent over the next 12 months.

In the first half of this year, sales of consumer electronics products in Thailand dropped by 10 percent from the previous year, due mainly to the impact on the economy of Sars and the war in Iraq, the company said.

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(c) 2003, Bangkok Post, Thailand. Distributed by Knight Ridder/Tribune Business News.

PHG,

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