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40 Years Ago…And now: Putting the lighting effects back on Philips

“When it’s Philips, You’re Sure” ran the tagline in the eighties for its consumer products. But consumers may have been forgiven for being unsure about a company that had, 17 years before independence, provided light bulbs to Indian homes (at least, those that could afford electricity).

By then, the Netherlands-based Indian subsidiary was steadily losing market share in almost all its core businesses owing to the entry of domestic and foreign competition as a result of Rajiv Gandhi’s partial liberalisation. The end of its monopoly came at a time when the company, headquartered in Bombay, as it was then known, faced growing labour problems in its Bengal factories. Globally, too, its Dutch parent, a pioneer in the analogue age, was struggling to innovate in the digital times.

In many ways, Philips’ fluctuating fortunes in India reflected the ups and downs of Indian economic policy and its name change was one index of this. Starting as Philips Electricals Co (India) Ltd, a subsidiary of Philips & Co in 1930, the name changed to Philips India Pvt Ltd in 1956 when the first industrial policy was framed and the company went public. In 1979, in response to changes in foreign exchange regulation, it changed its name to Pieco Electronics & Electricals Ltd from Philips India Ltd. A few years later, it renamed itself Philips India Limited, a subsidiary of Royal Philips of the Netherlands.

Along the way several product lines were jettisoned, sound systems being one of them. Over the years, the company cut down its operations – from 12 factories to just two in 2002, though later adding three more. It sold its Kolkata factory that used to make televisions to home-grown Videocon, delisted in 2004, and finally outsourced television manufacturing to Videocon in 2010. And, now, Philips does not sell televisions; it used to be a household name across India in TV’s black-and-white era and in the early years of colour. It could not keep up with the feisty Japanese and Korean brands, price disruptors par excellence.

This slippage was also because Philips did not respond to organisational change, and had high overheads. Rajeev Karwal, who was picked to head the consumer business in the early-2000s, after his success at LG, recalls feeling like “a true blue- blood” when he joined. At headquarters, tea was served in a silver service in a guesthouse that was a mansion originally owned by former royal family, the Scindias of Gwalior.

Over the past few years and several rethinks later, the company finally found a focus and a positioning. There is lighting, healthcare, and consumer lifestyle which is fast growing for Philips.

Throughout, Philips has tried to reinvigorate the brand from time to time. Big bang advertising campaigns, followed by a slew of launches such as plasma TVs, in 1998, could not bring back its fortunes. Low-margin products such as DVD and MP3 players and low-end home appliances also did not work out. Revenue from consumer electronics continued to fall – from about 42 per cent in 2005 to 28 per cent in 2010. But for some products, like bulbs and tube-lights, people believed that Philips brought quality, and still remain loyal to the brand.

Philips is now trying to make its focus on lighting business work. “The mandate is to build the future for Philips in India,” says Krishna Kumar, who took over as vice-chairman and managing director at Philips India a year back.

According to Krishna, Philips started with lighting about 124 years back globally, which took the company in two key directions. “Healthcare as a division was started from imaging, which can’t be done without light. In 1980s, globally, Philips decided to have a purpose around our innovations. Before that we were very broad and deep. So, defining the core purpose was the key. And, we decided to deliver meaningful innovations that improve people’s lives with a vision to improve the lives of the 3 billion people in the world by 2025.”

“Between 2008 and 2013, Philips India has been growing at 24 per cent in revenues. We are now at $ 1.2 billion, accounting for 3.5 per cent of Philips’ global revenue. Most of the growth has come in the past five years,” adds Krishna who believes that the company is here for a long haul.

In India, 32 per cent of revenue is from healthcare, about 46 per cent from lighting, and the remaining from consumer lifestyle business.

Philips, however, is eyeing to rapidly move up the value chain. “It’s not that we are an aam admi brand. That’s no more what Philips is. We are the most-penetrated player in lighting, and the second deepest in healthcare,” says Krishna. In consumer lifestyle, which Krishna says is a “rocking category” in India, Philips focus on healthy living (with coffee-makers, air-fryers that are essentially geared for healthy eating and beverages).

The dynamics at Philips might have changed as has the location of its headquarters – from the then Bombay to Gurgaon in the National Capital Region. But, with a young team in India and with Indians in all of Philips’ global offices, including its headquarters, Krishna is hopeful that the company will soon regain its old glory.

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