Philips

Case # 9 Philips Maps Out a New Direction

CASE ABSTRACT

When Gerard Kleisterlee took over as CEO of Royal Philips Electronics in 2001, the Dutch company’s growth had stalled and its margins were challenged. The company was a motley mix of products such as toasters, electronic components, and semi-conductors. Divisions of the company barely communicated with each other and skeptics were writing the company off as a moribund dinosaur.

Kleisterlee masterminded a quick turned of this multibsuiness company. He made key divestitures and acquisitions and reorganized the company into three divisions. He made Philips more market driven and innovative. However, he has been unable to increase revenues past the 30 billion Euro mark, nor deliver the earnings growth that investors demand. His reorganization work is not yet complete.

KEY POINTS

• The challenges of a global company (Chapter 5: The Global Environment)

• The importance of sound internal analysis to strategy formulation (Chapter 6: Internal Analysis)

• The factors that influence the business strategy of a firm (Chapter 8: Business Strategy)

• The approaches that companies take to implement their strategy (Chapter 10: Implementation)

RELATED CHAPTERS

Chapter 5 (The Global Environment), Chapter 6 (Internal Analysis), Chapter 8 (Business Strategy), and Chapter 10 (Implementation).

DISCUSSION QUESTIONS AND ANSWERS

1. How has Royal Philips Electronics performed since Gerard Kleisterlee took over as CEO?

When Gerard Kleisterlee took over as CEO, Royal Philips Electronics was a stodgy Dutch giant whose growth had stalled and who myriad divisions barely communicated with each other (case paragraph 3). Kleisterlee had a major reorganization job to do.

After Kleisterlee undertook a number of strategic moves, Philips’ performance began to improve. The company took advantage of the popularity of LCD televisions and quickly attained the number 2 spot in...