Philips Electronics

Introduction

The foundations of Philips were laid in 1891 when Anton and Gerard Philips established Philips & Co. in Eindhoven, the Netherlands. The company begun manufacturing carbon-filament lamps and by the turn of the century had become one of the largest producers in Europe. By 1910, with 2,000 employees, Philips was the largest single employer in the Netherlands at that time. Philips' first research laboratory was established in 1914 and started introducing its first innovations in the x-ray and radio technology stimulated by the industrial revolution in Europe. Over the years, the list of inventions has only been growing to include many breakthroughs that have continued to enrich everyday lives of people.

HISTORY OF PHILIPS:

1891 - 1915 From Light Revolution to Product Evolution

1915 - 1925 Innovation and Diversification: X-rays and Radio Reception

1925 - 1940 First Televisions and Electric Shavers

1940 - 1970 Technology Breakthroughs: Introduction of Compact Audio Cassette

1970 - 1980 Continued Product Innovation for Images, Sound and Data

1980 - 1990 Technological Landmark: the Compact Disc

1990 - 2000 Changes and Successes:

Introduction of DV21st Century: Philips

TodayHeadquarter of Philips Electronics in the Netherlands. Philips is a diversified Health and Well-being company which is focused on improving the lives of the people through timely innovations. Philips integrates technologies and design into people-centric solutions based on fundamental customer insights and the brand promise of "sense and simplicity" as a world leader in healthcare, lifestyle and lighting.Philips employs approximately 121,000 employees in more than 60 countries worldwide. With sales of EUR 26 billion in 2008, the company is a market leader in cardiac care, acute care and home healthcare, energy efficient lighting solutions and new lighting applications as well as lifestyle products for personal well-being and pleasure with strong leadership positions in flat TV, male shaving and grooming, portable entertainment and oral healthcare.

SWOT- Analysis of Philips

SWOT Analysis is a strategic planning method used to assess the Strengths, Weaknesses, Opportunities, and Threats involved in a project or in a business venture of Philips. It involves specifying the objective of the business venture or project and identifying the internal and external factors that are favorable and unfavorable to achieving that objective.

(I) Strengths refer as an attributes of the organization that are helpful to achieving the objective. As stated in annual report of Philips, they was strengthening their position in emerging market by acquiring of India-based Meditronics which is a leading manufacturer of general X-ray systems for the economy segment in India. Besides, Philips also delivers innovation by investing in world-class strengths in end-user insights, technology, design and superior supplier networks. The company has identified a number of strategic initiatives to further strengthen the energy efficiency of their operations and reduce the greenhouse-gas emissions. In 2008, Philips took a significant step in strengthening its Home Healthcare Solutions business by acquiring Respironics which is a provider of innovation respiratory and sleep therapy solutions for hospital and use at home.

(II) Weaknesses refer as an attributes of the organization that are harmful to achieving the objective. The restructuring of Assembleon will adapt the Philips ongoing weakness in the semiconductor market. Inability of Philips to secure and retain the intellectual property rights for products whilst maintaining overall competitiveness could have a negatively impact the result of Philips. Furthermore, Philips has completed acquisition recently and may continue to do so in the future. Acquisition could expose Philips to integration risks and challenge management in continuing to reduce the company's complexity. The integration risks in areas such as sales and service force integration, logistics, regulatory compliance, information technology and finance. Difficulty and complexity of integration may adversely impact the realization of an increased contribution from acquisition. Significant acquisition, administrative and other costs in connection with these transactions may incur including costs related to the integration of acquired business.

(III) Opportunities refer as external conditions that are helpful to achieving the objective. The reason of the global climate change and rising energy costs, there are the major issues that people care about. Philips electronic was embraced the energy challenge as a business opportunity that could help shape the future of lighting on global scale and benefit the society at large. Besides, the healthcare is one of the most pressing global issues in future, Philips are facing a global and growing lack of the healthcare professionals at the same time. These opportunities present Philips with an enormous opportunity and they focus their business on addressing the evolving needs of the healthcare market by developing innovative products and technologies that will contribute to improved the healthcare at lower cost around the world.

(IV) Threats refer as external conditions which could do damage to the performance of the business. The design and construction of modern homes is less effective in dispersing indoor pollutants because of the air quality of European under threat. The European air quality are being increasingly exposed to a whole range of pollutants from harmful gases, viruses and bacteria to fine dust, pollen and cooking waste. Philips may be unable to adapt swiftly the changed of circumstances of an industry and market such as the transition from traditional lighting to energy- saving and LED lighting may drastically change the environment of the business which could have a material adverse affect on its financial condition and results. Acquisitions may also lead to a substantial increased in long-lived assets including the goodwill. However, the write-downs of acquired assets due to unforeseen business developments may materially and adversely affect the earning of Philips.As a conclusion in this section, it is not simply enough to identify the strengths, weaknesses, opportunities, and threats of Philips. In applying the SWOT analysis, it is necessary to minimize or avoid both weaknesses and threats. Weaknesses should be looked at in order to convert them into strengths. Likewise, threats should be converted into opportunities. Philips should try to minimize if the threats could not converted into opportunities. Lastly, strengths and opportunities should be matched to optimize the potential of Philips. Applying SWOT in this fashion can obtain leverage for a company (Marketing Strategy, 1998).

The Major Challenges Affecting Philips

There was a shift from industrial age to information age during late 1990s. In industrial age, most of the assets were equipment, plant and machinery. Financial accounting was played adequate role in valuing at that point of time. However, in information age most of the assets are looked in innovative process, customer relationship and human resources which more in intangible form. Due to those issues, Philips was facing a dismal financial performance during that period and even reported losses during the mid-1990s. During the late 1990s the changing in external environment forced Philips needed to respond quickly to these rapidly changes. Moreover, the existing structure of Philips did not support those kinds of changes. Besides, Philips' operations were spread across several countries, and the products were most often sold in the country in which they were manufactured.Especially with growing wage levels, selling and manufacturing in the same country led to Philips' major markets in Western Europe were cause of high manufacturing costs. On the other hand, the products of Philips could not be priced competitively and growing competition due to Asian manufacturers such as LG and Samsung made Philips realize the need to transform into a flexible organization and shift focus from high-volume business to high-value business, for instance to be more flexible, more innovative and value adding.

Management Accounting Techniques That Adopted

In order to bring in the desired change, Philips embarked on an improvement program was called Business Excellence through Speed and Teamwork (BEST). BEST described a set of methods and tools through which Philips aimed to improved business and financial performance. Philips used various tools and approached as a part of BEST. Some of these were business excellence model, process survey tools and balanced scorecard. The Balanced Scorecard was used to communicate the strategy across Philips' division around the world. The Balanced Scorecard enabled more than 120,000 employees spread across 150 countries understand the existing policies, and plans for the future. Peter Geelen of Philips Corporate Control, Responsible for the Balanced Scorecard Project stated that the aim of balanced scorecard strategy in Philips is to consistently communicate strategy deep down into Philips' 80 businesses and support more than 10,000 managers with tools to turn strategy into action by sharing knowledge, aligning actions, monitoring progress and learning.

Implementing Balanced Scorecard

Philips creating their balanced scorecard through understanding the drivers which present performance is the basis for determining how to achieve its future results. The tool has helped Philips focus on factors critical for their business success and align hundreds of indicators that measure their markets, operation, and laboratories.Critical success factors (CSFs) were identified in every department and divisions with the help of quality department at Philips. The below table is the main four CSFs for Philips which included the area will emphasize on each factor and some example of indicators that had been used.

Critical Success Factors Emphasize on Indicators

Competency " Knowledge "Leadership competence

" Technology "Training days per employee

" Leadership

" Teamwork

Process " Drivers for performance " Capital utilization

" Order response time

Customers " Value proposition " Market share

" Repeat order rate

Financial " Value "Economic profit realized

" Growth "Operational cash flow

" Productivity

Through those CSFs, Philips goal was to translate assumed relationship such as customer satisfaction and product sales into critical success factors to measure performance through identified which financial and customer critical success factors give a competitive edge, and then determined the process CSFs that have the greatest impact on the financial and customer CSFs giving required process, customer, and financial results. In order to express the strategy in measureable objective, Philips links short term actions with long term strategy for made its employees understand their day-to-day activities help achieve the company's stated goals. Top management initially deployed the balanced scorecard by setting annual operational targets, and then was brought down over organizational layers as goals for the divisions worldwide and objective at the business unit level.The balanced scorecard of Philips has four card levels. The levels in decreasing order are strategy review card, operations review card, business unit card and individual employee card. Philips created specific guidelines for metric linkage for the entire company. These guideline states that lower card levels must align with scorecard goals in upper card levels.These four main CSFs is the key balanced scorecard indicators to monitor the implementation of the business strategy at the business unit level. Philips established guideline for the deployment of CSFs at lower level in the company, stating that departments must select CSFs for which the department has a major control responsibility.The management team of each business unit agreed upon those CSFs distinguishes the business unit from competition. They used value map to analyze customer survey data that reflected perceived performance relative to the price for competing products. The outcome of the process CSFs were to determine improvement which can be bring to customer requirements. There competencies of human resources were required to deliver other three perspectives of the card. Financial CSFs used standard financial report metrics.The next step was for each business units to determine key indicators at the business unit level that measure it's CSFs. Assumptions about relationships between processes and results were identified. Afterward, performance drivers had been determined. The targets were set based on the gap between present performance and desired performance for the current year plus two and four years in the future. The targets set are derived from an analysis of market size, customer base, brand equity, world-class performance and innovative capability.Six key indicators consistently came to the forefront for all business units are profitable revenue growth, customer delight, employee satisfaction, drive to operational excellence, organizational development and IT support relate to each other as well as to the balanced scorecard in cascading the card down from the organizational level to the business unit level. Finally, on each quarter year, the balanced scorecard metrics are used as the reporting format for the review of each business unit's performance.

Cost Benefits from Balanced Scorecard

Philips share the metrics quarterly with all employees in order to succeed through traffic light reporting to indicate the actual performance compared with target. Traffic light system which includes red means is at problem area, green means target had been achieved and amber light means performance in with the target. That traffic light system was exemplifying the degree of progress made in the dimension. By implementing of balanced scorecard, Philips had found few cost benefits from it, such as:

i. Simultaneously guided a cultural change effort to increase accountability for results.

ii. The creation of an operational scorecard for action planning and tracking results in real time.

iii. An enhancement to customer service and satisfaction reporting were produced.

iv. Enables employees to understand exactly what they need to do on a daily basis in order to reach company goals.

v. Gaining commitment and participation of management and employees regarding company objective

vi. Promotes the sharing of best practices and creates a communication system worldwide. Balanced scorecard fosters communication, collaboration, and problem solving.

vii. Supports Philips' cultural change to a learning organization by creating a common knowledge base. For instance, if a metric is in the red zone, the employee can quickly access to solve potential problems and avoid repeating, others mistakes, saving time and cost in problem saving.

viii. Balanced scorecard represents an enhancement to the "Yellow Pages" in use at Philips. Roughly 22,000 employees have share knowledge and interest on a voluntary basis by using the pages. Employees who work on similar projects can communicate success and pitfalls using the Yellow Pages on the employee intranet.

Overall, through implementing a global balanced scorecard helped Philips in articulating and communicating their strategy, measuring the driver of their performance and detecting the superiority of one strategy over another. The keys results of balanced scorecard strategy in Philips are enabled employees understand the existing policies and future plans, succeeded in focusing in the diverse set of measures, commitment and initiative of top management made it a big hit in all the subsidiaries and in various line of businesses.

Others Management Accounting Techniques

In order to able compete in this global challenge, our group think that just-in-time (JIT) and total-quality management (TQM) are the two management accounting techniques that can help in Philips toward more success.

Just in time

According to Gill Mould and Maureen King (1995), the companies in the Scottish electronics industry have successfully implemented JIT systems. JIT is a system whose objective is to produce or to procure products or components as they are required by a customer or for use, rather than for stock. JIT is a "pull system" which responds to demand, in contrast to a "push system", in which stock act as buffers between the different elements of the system, such as purchasing, production and sales. JIT production is a system which is driven by demand for finished products whereby each component on a production line is produced only when needed for the next stage. JIT purchasing is a system in which material purchases are contracted so that the receipt and usage of material, to the maximum extent possible, concise.Production systems of Philips must be reliable and prompt, without unforeseen delays and breakdowns. Machinery of Philips must be kept fully maintained and so preventive maintenance is an important aspect of production. Workers at Philips within each machine cell should be trained to operate each machine within that cell and to be able to perform routine preventive maintenance on the cell machines (that means to be multi-skilled and flexible)JIT aims to eliminate all non-value added costs. Value is only added while product is actually being processed. Whilst it is being inspected for quality, moving from one part of the factory to another, waiting for further processing and held in store, value is not being added. Non value added activities within Philips should therefore be eliminated.

Total quality management

Quck Eng Eng and Sha'ri mohd Yusof stated that there is a success of implementation of TQM in the electrical and Electronic sectors in Malaysia. TQM is an integrated and comprehensive system of planning and controlling all business functions so that products or services are produced which meet or exceed customer expectations. TQM is a philosophy of business behavior, embracing principles such as employee involvement, continuous improvement at all levels and customer focus, as well as being a collection of related techniques aimed at improving quality such as full documentation of activities, clear goal setting and performance measurement from the customer perspective.

By implementing of BSC, JIT and TQM together, definitely Philips can be competitive in the global markets with requirement of well implementation.