SHANGHAI: The last three days of November were a mad dash for Rudy Provoost, chief executive officer (CEO) of the consumer electronics division at Philips. He was a flurry of activity from the moment he landed in Shanghai.

He met with distributors and partners at the company's China headquarters, where he discussed the rapidly changing domestic market. He spoke to journalists and emphasized Philips' ambitious plans. At a meeting with 350 local employees, he listened to new ideas, and encouraged his staff to work together in pursuit of a common goal in the company's most promising market.

Philips plans for the Chinses consumer electronics market are ambitious. It intends to double its sales over the next two years to exceed 1 billion euros (US$1.18 billion). It hopes to double its overall market share to 7 per cent, with a 15 per cent share of the flat panel TV and LCD (liquid crystal display) monitor market, a 7 per cent hold on the AV (audio-video) entertainment sector, and 5 per cent of the mobile phone market.

Flat panel TVs, home entertainment systems, and mobile phones are the main products in Philips' consumer electronics division, and the company's confidence is justified. It has maintained a sustainable annual growth rate of 30 per cent over the past three years in China. It has also achieved the leading position among international brands in the country's DVD recorder and DVD player markets. Its earphones are top sellers too, and it ranks second in the personal computer monitor and flat TV markets.

With three flagship service centres, 30 imaging stores and over 1,000 authorized locations across the country, the Dutch firm has extended its "Sense and Simplicity" motto to thousands of Chinese consumers.

"China has 350 million households. If each family has one Philips product there's huge market potential for us," Provoost says. He adds that flat screen TVs are the driving force for their business.

"Our TVs were chosen as the best in Europe in both 2003 and 2004. The Chinese market has embraced our new technologies, such as Pixel Plus 2 and AmbiLight. I believe our products will continue to lead the market."

China's demand for flat panel TVs has increased dramatically over the past several years. Statistics from the China Electronic Chamber of Commerce show that the market capacity for flat screen TVs likely hit 1.85 million units in 2005, up by 185 per cent year-on-year.

Provoost says growth in this area will stimulate the development of other products in Philips' consumer electronics division.

"When they (customers) buy our TVs, they will automatically look for home entertainment systems from us," he says.

"After customers use our products, they will be drawn to Philips' brand reputation and quality. When they choose mobile phones, they will also look for our brand."

Philips' mobile phones are famous for their battery power and energy efficiency. The company's phones can sit on standby for up to 850 hours.

Innovative approach

Provoost says that profit growth should be stronger than overall revenue growth.

"We need profits to facilitate further investment, and to reach higher targets."

Innovation is one of the key approaches Philips uses to increase profitability. It directs one-third of its revenue to the development of emerging technologies.

The CEO also says Philips consistently focuses on the high-end of the market, which is important in an increasingly competitive industry. Consumer electronics firms such as Philips are feeling the squeeze because a growing number of information technology (IT) companies are entering the market with their cutting-edge technologies, but Provoost sees it as an opportunity.

"It is a global trend different industries are merging into one another. We are all building a global platform and trying to improve on it. Consumer electronics companies can enter the IT arena and IT companies can reach out to the consumer electronics sector."

Provoost is confident about Philips' technologies.

"We enjoy a solid reputation in China, with our emphasis on quality and our innovative products. We stress the importance of producing technology that is designed with consumers in mind our products are user-friendly, and yet advanced." He says co-operation with local distributors and partners is important.

"We look for mutually beneficial partnerships. We have spent a large amount of money in the promotion and publicity of our products, which shows our commitment to co-operating with our partners."

The company put 80 million euros (US$94.26 million) into its recent global marketing campaign, for example, and 12 million euros (US$14.14 million) of it went to China.

The market itself presents a number of challenges, from rapidly changing consumers, who are becoming increasingly sophisticated, to technological issues such as the convergence of broadband and wireless products.

Philips sees scale and innovation as the best approaches to business development. Its reputation for high-end products is backed by its high-definition TV line and its AmbiLight technology. It will continue to focus on the upper half of the market through wireless solutions.

Royal Philips Electronics is one of the world's biggest electronics companies, with sales of 30.3 billion euros (US$35.48 billion) in 2004.

Active across over 60 sub-sectors, with more than 115,000 registered patents, Philips is currently the leading global producer of lighting products, electric shavers, and DVD recorders.

Its three business areas are healthcare goods, lifestyle products and consumer electronics.

(China Daily 01/09/2006 page2)