Restructuring Philips
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Case Details:
Case Code : BSTR170 Case Length : 19 Pages Period : 1990-2005 Organization : Philips Pub Date : 2005 Teaching Note :Not Available Countries : Netherlands Industry : Consumer Electronics
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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Excerpts
The Operation Centurion Program
Timmer realized that Philips' poor performance could not be blamed on weak
markets alone. Competition from aggressive Asian companies like Sony was
intensifying especially in Europe. Philips was finding it hard to get its
innovations converted into saleable products quickly. The company's
manufacturing costs were high, and this put a lot of pressure on its profit
margins.
The biggest problem was a highly bureaucratic corporate culture that was very
resistant to change. Facing the tough challenge to change the company's culture, Timmer remarked, "You just can't change a deep-rooted corporate culture in one
or two years. It takes at least five years or longer."...
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Restructuring under Boonstra
One of Boonstra's first moves was to get rid of businesses
that were making significant losses. Philips' 32% equity stake in Grundig was
brought down to 5%. Boonstra also sold off Philips' cable operations, car
navigation systems, and the Super Club video-rental chain. Another problem Boonstra faced was excessive vertical integration in the company...
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Towards One Philips
By 2001, more than a decade had passed since Philips
began restructuring. Timmer's Operation Centurion did not succeed in
changing the company's bureaucratic culture. Boonstra's efforts too
could not achieve a culture change. Now it was Kleisterlee's turn to
fight bureaucracy in the company and bring in a culture that promoted
teamwork. Kliesterlee called his initiative 'Towards One Philips' (TOP),
and through it, he aimed to make Philips work as a single, unified
company. Apart from bringing in a cultural change, the initiative also
aimed to cut costs, develop a range of new technologies and products,
and improve relationship with customers. |
Promoting Collaboration
The TOP program also called for extensive collaboration among
product divisions - a big change from the past when Philips was run as a set of
disparate companies that acted independently (See Exhibit V for corporate
structure of Philips in 2004)...
Excerpts Contd...>>
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