DMM08
PRODUCT MANAGEMENT
Assignment - I
Assignment Code: 2016DMM08B1 Last Date of Submission: 15th November 2016
Maximum Marks: 100
Section – A (Each question is of 25 marks)
Ques1. What are the various stages of Product Life Cycle? What are the major managerial implication and application of PLC? (15+10)
Ques2. What is a new product development process? Discuss the various stages of NPD in detail with relevant examples? (10+15)
Section – B Case Study (50 Marks)
In April 2010, when Philips Electronics India Ltd announced its plan to outsource its TV business to Videocon Industries, the decision came as no surprise. The five-year pact, under which Videocon is handling Philips's TV manufacturing, distribution and sales in India, is aimed at restoring the profitability of the TV business. Philips was once a dominant player in the segment, with a market share of around 15 per cent in the early 1990s, but business eroded as Korean and Indian brands grabbed market share. As volumes fell, the company struggled to run its TV factory in Pune efficiently. It took the third-party route to manufacture CRTs and imported LCD screens, but this didn't help. Then the company licensed the unit to Videocon.
Through the arrangement, Philips will get royalty income based on turnover. Videocon's economies of scale in manufacturing and its strong distribution network will help the Philips brand reach more outlets and reduce the cost per unit.
The downfall of Philips's consumer business - especially TV - began in the late 1990s. The reasons were beyond the control of the management. The entry of Korean chaebols such as Samsung and LG started eating into the market share of older players such as Onida, Videocon and Philips. Philips decided to stick to its usual strategy: relying on technology rather than strengthening distribution and marketing. It didn't want to compete with the Koreans on pricing, and thought the superior technology of its products, be it picture or sound quality, would stand out. "We took a conscious decision not to cut prices," says Kris Ramachandran, former CEO of Philips Electronics India.
In no time, the strategy flopped. The slow-moving Philips couldn't sustain its top position and its market share fell to some 3.5 per cent by 1999. After losing its relevance in the consumer business, Philips did take some steps to address the situation.
In early 2000, it roped in PwC to revamp its consumer product portfolio, set up new processes and overhaul the supply chain. After this, it launched a new range of CRT TVs under the brand name EyeQ. "The idea was to Indianise products to suit local tastes," says Rajeev Karwal, who headed Philips's consumer electronics division in 1999.
The new sets had 300 channels, as opposed to 60 channels in older ones. High-end plasma TVs were also introduced. "The earlier TVs were more suited for Europeans, who like the subtle colors. Indians, on the other hand, have a fondness for saturated and bright colors. The later versions of our TVs focused on targeting this issue," says S. Venkataramani, Non-Executive Director, Philips India.
"Philips was strong in innovation, but lacked aggressive marketing," says Karwal. "When I joined Philips, I brought in fresh blood to challenge internal systems. A country like India requires go-to-market strategies. We tied up with dealers and proved that the technologies of our Korean counterparts are no superior to ours."
Philips also rejigged its skills portfolio. Its workforce went from more than 11,000 in the early 1990s to around 3,500 by 2005. From six legal entities, it became one legal entity. "The focus was on reshaping the company to ensure sustainable, profitable growth," says Ramachandran. A 2001 survey by ad agency JWT further helped Philips improve its brand image. Although the brand was iconic in India for several decades with customers associating the transistor radio and incandescent bulbs with the Philips name, the survey found that people did not associate the brand with high-end technology.
So from 2001 on, most of Philips's ad campaigns emphasised the advanced features of its products. Gradually, the company reclaimed some lost ground. The TV market share went up to eight per cent in 2002.
Although Philips sustained its TV market share at around six per cent in the following years, it lost the way when it shifted focus from TVs to lower margin products such as DVD players, MP3 players and headphones.
When the consumer electronics and appliance market exploded - it went from Rs 20,000 crore in 2005 to Rs 33,000 crore in 2010 - Philips's revenues from the consumer business declined - from nearly Rs 1,091 crore in 2005 to Rs 659 crore in 2010. The revenue mix got overhauled. From over 42 per cent of turnover in 2005, the consumer business fell to some 28 per cent in 2010.
According to some senior executives, this was partly because the CRT division was given less importance at a time when the CRT market was growing in India. "Since the parent company exited the CRT industry in 2006, the Indian arm, too, showed little interest in the business, and it affected the growth momentum," says A.D.A. Ratnam, President of Philips India's consumer lifestyle division.
While the consumer business hit a brick wall, exponential growth in the lighting and health care segments kept Philips going. In lighting, the company has historically been the leader, with a market share of more than 30 per cent - more than twice that of its nearest competitors, Bajaj Electricals, Havells, Wipro Consumer Care and Lighting, and Surya Roshni.
"Whether it's CFL or LED technology, Philips is a pioneer in bringing lighting solutions to India," says Nirupam Sahay, President of Philips's lighting division. "We have a big distribution network and reach out to one million electrical and non-electrical outlets."
For professional lighting, Philips's client portfolio includes corporate and government customers such as Asian Paints, McDonalds India, Cognizant Technologies and Kolkata Municipal Corporation. In 2005, lighting accounted for slightly over 34 per cent of revenues. In the past five years, the company's dependence on this segment has grown - it now accounts for 51 per cent of Philips's revenues.
But even the lighting business has seen plenty of ups and downs. To streamline this segment, the company had to shut down a factory each in Kolkata and Mumbai in the late 1990s. Later, the dumping of Chinese lighting products affected its market share. Timely government intervention in the form of anti-dumping laws helped CFL manufacturers.
Today, Philips gets a big chunk of its revenues from audio video multimedia (AVM), which includes DVDs and home theatre systems. In fact, it leads the DVD market with a share of over 24 per cent. This, though, could be short lived. Sector experts say changes in the AVM industry will keep Philips's consumer electronics business under threat.
"The DVD market is dying," says Deepa Doraiswamy, Industry Manager for electronics and security at Frost & Sullivan South Asia & Middle East. "The transition to store movies and music on a pen drive is already occurring at a fast clip." Still, Philips is doing all it can revive its past glory. Product offerings across all three categories - consumer lifestyle, lighting and health care - have undergone a sea change. Starting with the launch of MP3 players in 2009, Philips has come out with new products, many of which target youth.
"India has a huge young population, so we decided our target customers should be 15 to 30 years old, because that's where buying is going to happen," says Ratnam. "We have to get into the Lifecycle of consumers earlier." It has launched devices priced as low as Rs 150. "The focus is to make products that are not over engineered and are easy to replenish," says Ratnam. "Youngsters don't want to hold on to a product for 10 years."
Philips has revamped its personal care portfolio, and introduced shavers, body groomers and epilators. It roped in John Abraham and Kareena Kapoor as brand ambassadors. This is the first time the Philips brand has been promoted by celebrities in India.
Since 2009, Philips has opened 75 exclusive 'light lounges' in 40 cities. They sell decorative home lighting products priced between Rs 575 and Rs 45,000. Besides, Philips has 750 'light shoppes' - shop-in-shops in stores such as the Future Group's HomeTown and Lifestyle International's Home Centre.
In 2011, Philips acquired leading appliances maker Maya Appliances, which owns the Preethi brand of kitchenware. "For each segment, Philips is trying to redefine the market," says Rajeev Chopra, Philips India's Managing Director and CEO.
Philips's record inspires little confidence in its comeback attempt. Philips lacks a clear cut strategy for India, says Karwal, the former MD. "They are like a bull in a China shop." Will the current strategies work? Does Philips lack a clear vision in India? Does it need to focus more on marketing efforts?
'All Is Not Lost For Philips'
The mantra for Philips's rejuvenation is more relevant products, better price points,and the will to fight: Y.L.R. Moorthi
Philips is first a technology company and then a marketing company. The reverse is true of Samsung and LG (though they enormously improved their products in the last decade). Philips should emulate the marketing aggressiveness of the Korean majors. Here’s how. The one thing that sets the Koreans apart from not just Philips but all other competitors is their speed of execution. Even tried and tested players like Nokia are not able to take the heat. The Korean majors brought their best products globally with little or no time lag to India. They managed to put up manufacturing plants in record time. They showcased their good products through savvy marketing (Golden Eye TV and umbrella health branding by LG). They recruited dealers at an astonishing pace in the early years. In the 1990s, it was Videocon that headed the table for dealer promotions.
In the new millennium, the Korean duo launched a promotion broadside that left little to chance. It touched all stakeholders dealers, customers and even shop boys. All these are object lessons in marketing for competitors like Philips. Besides, there is a certain law of gravity in electronic hardware. Prices of electric goods always fall, be they laptops, VCRs, audio gadgets or mobiles. A company that doesn’t prepare itself for constant product upgrades and a simultaneous price squeeze will fall by the wayside. The Koreans excelled at this balancing act to lead the charts.
That said, all is not lost for Philips. At one point of time it was the benchmark of innovation in audio. Also, inspired leadership intermittently did boost market share in categories like DVD players for them. There are also bright spots like the lighting business and the acquisition of Preethi. Though a multinational, Philips is seen as a home-grown brand like Bata, Surf or Lifebuoy. Strangely, they never quite leveraged this strength. Thus the mantra for Philips’ rejuvenation is more relevant products, better price points, aggressive marketing and the will to fight. Maybe we can encapsulate the Philips story in just one line: past imperfect, future tense.
Y.L.R. Moorthi, Professor (Marketing), IIM Bangalore
________________________________________
'Milking A Dying Cow?'
Philips tried to revive its profitability by focusing on the bottom line and neglecting its strength: innovation: Ankan Biswas
As a brand, Philips was very strong in India till the end of 1990s. A 1997 survey showed that brand awareness was higher for Philips than Coca-Cola. Today, the Philips brand has little significance among youth – the most important market. Its brand dilution happened globally, at a different pace in different regions. Although it started as a lighting company, consumer electronics became its face. It was R&D, not marketing, that gave the brand its strength. Inventions such as the cassette tape, CD and 100Hz TV kept Philips in a leading position in consumer perception.
As the market became competitive and margins razor thin, Philips started losing money in consumer electronics. Philips CE tried to revive its sagging profitability by neglecting its strength: it focused on the bottom line and marketing without strengthening innovation. Its consumer electronics patent pool steadily eroded over the last decade. It tried one strategy after another but failed.
Many of its divisions were connected with consumer electronics, such as semiconductors and components. Philips got rid of these as they did not fit into its new game plan. The last nail in the coffin is the licensing of the TV brand to its lesser competitors. The strategy of milking a dying cow does not augur well with consumers.
Philips strategy today is to become a leader in health care, and retain its top position in lighting with new technologies such as LED. Managing LED will bring back challenges similar to those of the semiconductor division. Philips used its global strategy in the Indian market scenario where the dynamics are different. While Korean brands invested in manufacturing in India, Philips closed its plants. While the Koreans developed India-specific models, Philips tried to introduce expensive models with a bit of tinkering, ruining a once vibrant brand. The brand transformation of Philips is a lesson for all marketers.
Ankan Biswas, Chairman, Digital Broadcast Council, Consumer Electronics and Appliances Manufacturers Association
3. Case Questions:
a. Why firms like Philips should seek to develop a wide portfolio of products? (10)
b. Discuss advantages and disadvantages of the strategy of outsourcing used by Philips? (15)
c. “ Philips is milking the dying cow” discuss with reference to the product life cycle stage? (15)
d. Development of products is based on target consumers. Discuss with reference to the above case. (10)
DMM08
PRODUCT MANAGEMENT
Assignment - II
Assignment Code: 2016DMM08B2 Last Date of Submission: 15th November 2016
Maximum Marks: 100
Section – A (Each question is of 25 marks)
Q1. What basic strategies are available to the marketing manager for handling product at maturity stage?
Q2. Explain diffusion theory and suggest its implications for launching new products?
Section – B Case Study (50 Marks)
TASP Security Software was in a serious trouble. Its flagship product for database security, the “Knowledge Keeper”, was replicated by vicious competitors. Due to historical innovation, the company kept its leading role in the market, but the competition gained a growing market share, and all the products were deemed as equal.
The cruel analysts, having no technological understanding, were spreading rumors that “Knowledge Keeper” market is commoditized, an euphemism implying any kid can implement it, and that the price is going to dive soon.
Arnold, the product manager, quickly diagnosed the problem and announced a new concept that will highlight the unique capabilities of “Knowledge Keeper”. The concept will be branded as “The Divider” and will bring to light the “Knowledge Keeper” technological supremacy. Since the quarterly financial reports were coming along he ordered the developers to “get it done” in four months.
Sigourney, the group manager, was furious: ”Such a product cannot be shipped in four months. We are in the midst of infrastructure projects that we’ll solve the global warming problem! How am I supposed to create a new product with no headcount? – it contradicts the law of energy conservation”.
The developers joined the fury: “How can we code “The Divider” with no definition of its capabilities? We cannot develop a product based on a vague, fuzzy management concept”.
Still, Sigourney approached the task with faith and agility. Having no programmers available, she assigned Ron to the job. Ron was recruited as chief internal security officer, to educate the employees to guard internal information and develop new security guidelines. When he was recruited, he declared he is tired of programming and he wants to focus on research. However, Sigourney remembered that Ron is a Wizard coder from the Amiga assembly days. The rumor was that he made the juggling balls, in the Amiga famous demonstration, disappear into the juggler’s mouth.
Mark, a developer from a different group, was added to help Ron in the task. He did not report to Ron, but the task importance was clearly explained to him and his manager.
Since the time was short, Sigourney decided to focus on five existing product features that were never shown in the user interface. The features were hidden, and it was only possible to activate them by manual changes in obscure INI files. It was also decided to develop a new “SQL Guardian” to validate all the SQL instructions sent to the database are indeed legal.
Sigourney and Ron passionately started working on the task. Ron demanded a requirement document from Arnold, the product manager. Since Arnold was busy handling existing customers’ escalations, everyone agreed the development team would create a mock-up of the UI and Arnold would provide feedback on it. Since most features existed for many years, they decided a detailed design for “The Divider” is not needed.
Work progressed quickly. The team realized the importance of the project, but was somewhat frustrated with the minimal resources allocation. Oberon, the director, reassured them: “We are in an initial phase, if the product succeeds, additional people will be added. Right now, you just need to add few dialogs and text to features we had for the last three versions”.
After six weeks, problems began to raise their ugly head. The mockup was progressing slowly. The GUI developer, coming from another group, was not sure what exactly he is supposed to do. His attempts to get clarifications form Ron got a very slow response, as Ron was busy coding “SQL Guardian” which was the most interesting part of the project. Coming from information security background, he made certain that all the smallest vulnerabilities are blocked, even for DB2 and CA-Ingres. Trying to create the perfect SQL parser resulted in a major setback in the project.
To save the day, Arnold presales tasks were moved to the support department. Arnold worked directly with the UI developer to define the dialogs. The mockup was presented to key customers and sales executives and received great feedback.
Three months along the development, the QA department started warning:”If we don’t get a stable version of the product, there is no way we can complete the testing on time for shipment”.
While Ron worked on the new features, Mark was supposed to integrate the old ones in the new UI. Due to urgent problem in his other group projects, his progress on “The Divider” was quite slow. Although he enjoyed developing new code instead of fixing old bugs, written by the company founders, it was hard to get rid of the obnoxious customer tickets.
Sigourney called for an emergency discussion. “We have to give something to QA. Even if it is not perfect, they can start playing with the product and open bugs. We’ll inform them on the current limitations and they can work around them”
Ron responded “We didn’t code the GUI-engine communication layer yet!” Sigourney shouted at him: “They can configure it with INI files as far as I’m concerned, by the end of the week we are delivering a version to QA”.
Two weeks later Ron sent an initial version to QA. The testers vigorously began opening bugs with hilarious titles: “Nothing Works!”, “GUI Crashes Every 46 Seconds” ,”Spelling Mistakes in Non Existent Help Screens”. The coders raged about QA’s inability to overcome transitory hiccups, and silently ran to fix the problems.
An improved version with most of new features was deployed to QA after a two month delay. Surprisingly, it turned out the old, “existing” features the divider was supposed to expose are hardly working. Since they had no user interface the testers “forgot” to check them. It seemed customers were not using the protections either.
The default setting for the innovative protections was set to off, as it raised too many false alarms. Since there was no visible way to turn them on, only the most advanced and innovative, paranoid customers implemented the protections.
To make things worse, no support tickets were open as well, and the CMO was convinced the product is top notch.
Sigourney shouted at Ron:”How can you provide a product that’s not working? Did you ever test it yourself before deploying to QA? “Ron, who wasn’t the quiet type, responded: “I own the SQL Guardian” that works smoothly. The “Data Crusher” was written by the company founder five years ago and you can talk to him about it. I did not join this company to be a code monkey. You are throwing undefined tasks at me, stealing Mark for other projects and then wonder why things break. I will not stand this hypocrisy”.
Rumors of the problems reached Oberon, the director. He moved three additional developers to help the project. Although Ron felt the project is running out of control, bugs were fixed at a much higher rate. The director ran a daily status meeting to monitor the development and reprioritize trivial bugs. He kept the team confident :”Microsoft ships with many bugs and they still rule the world”,” In a 1.0 version customers are forgiving for minor problems”.
The marketing department published a passionate release note regarding the innovative new concept TASP security will present in. The stock rose and the sales team was energized. The entire R&D helped and people worked around the clock. Following three months of intense work, a Go-No-Go dissuasion was held with QA, R&D and product management.
QA felt the product is not mature enough, but the rest of the team ignored them. There wasn’t a single product they ever approved, not even the successful “Knowledge keeper” .The exhausted Sigourney felt the product is ready and people got tired of the repeating delays. Five months later than the original plan, the pressure was mounting to go ahead and release. Ron was the only opposition, and refused to be responsible for the results. Oberon considered all the options and decided to ship. To comfort Ron all the limitations will be listed in a ten page long release notes paper.
3. Case Questions:
a. What are the key issues in this case? (15)
b. The Company needs to resolve Human resource problems rather than IT problem. Discuss. (15)
c. If you were the director, suggest measure you would have undertaken to resolve the problems. (20)
PRODUCT MANAGEMENT
Assignment - I
Assignment Code: 2016DMM08B1 Last Date of Submission: 15th November 2016
Maximum Marks: 100
Section – A (Each question is of 25 marks)
Ques1. What are the various stages of Product Life Cycle? What are the major managerial implication and application of PLC? (15+10)
Ques2. What is a new product development process? Discuss the various stages of NPD in detail with relevant examples? (10+15)
Section – B Case Study (50 Marks)
In April 2010, when Philips Electronics India Ltd announced its plan to outsource its TV business to Videocon Industries, the decision came as no surprise. The five-year pact, under which Videocon is handling Philips's TV manufacturing, distribution and sales in India, is aimed at restoring the profitability of the TV business. Philips was once a dominant player in the segment, with a market share of around 15 per cent in the early 1990s, but business eroded as Korean and Indian brands grabbed market share. As volumes fell, the company struggled to run its TV factory in Pune efficiently. It took the third-party route to manufacture CRTs and imported LCD screens, but this didn't help. Then the company licensed the unit to Videocon.
Through the arrangement, Philips will get royalty income based on turnover. Videocon's economies of scale in manufacturing and its strong distribution network will help the Philips brand reach more outlets and reduce the cost per unit.
The downfall of Philips's consumer business - especially TV - began in the late 1990s. The reasons were beyond the control of the management. The entry of Korean chaebols such as Samsung and LG started eating into the market share of older players such as Onida, Videocon and Philips. Philips decided to stick to its usual strategy: relying on technology rather than strengthening distribution and marketing. It didn't want to compete with the Koreans on pricing, and thought the superior technology of its products, be it picture or sound quality, would stand out. "We took a conscious decision not to cut prices," says Kris Ramachandran, former CEO of Philips Electronics India.
In no time, the strategy flopped. The slow-moving Philips couldn't sustain its top position and its market share fell to some 3.5 per cent by 1999. After losing its relevance in the consumer business, Philips did take some steps to address the situation.
In early 2000, it roped in PwC to revamp its consumer product portfolio, set up new processes and overhaul the supply chain. After this, it launched a new range of CRT TVs under the brand name EyeQ. "The idea was to Indianise products to suit local tastes," says Rajeev Karwal, who headed Philips's consumer electronics division in 1999.
The new sets had 300 channels, as opposed to 60 channels in older ones. High-end plasma TVs were also introduced. "The earlier TVs were more suited for Europeans, who like the subtle colors. Indians, on the other hand, have a fondness for saturated and bright colors. The later versions of our TVs focused on targeting this issue," says S. Venkataramani, Non-Executive Director, Philips India.
"Philips was strong in innovation, but lacked aggressive marketing," says Karwal. "When I joined Philips, I brought in fresh blood to challenge internal systems. A country like India requires go-to-market strategies. We tied up with dealers and proved that the technologies of our Korean counterparts are no superior to ours."
Philips also rejigged its skills portfolio. Its workforce went from more than 11,000 in the early 1990s to around 3,500 by 2005. From six legal entities, it became one legal entity. "The focus was on reshaping the company to ensure sustainable, profitable growth," says Ramachandran. A 2001 survey by ad agency JWT further helped Philips improve its brand image. Although the brand was iconic in India for several decades with customers associating the transistor radio and incandescent bulbs with the Philips name, the survey found that people did not associate the brand with high-end technology.
So from 2001 on, most of Philips's ad campaigns emphasised the advanced features of its products. Gradually, the company reclaimed some lost ground. The TV market share went up to eight per cent in 2002.
Although Philips sustained its TV market share at around six per cent in the following years, it lost the way when it shifted focus from TVs to lower margin products such as DVD players, MP3 players and headphones.
When the consumer electronics and appliance market exploded - it went from Rs 20,000 crore in 2005 to Rs 33,000 crore in 2010 - Philips's revenues from the consumer business declined - from nearly Rs 1,091 crore in 2005 to Rs 659 crore in 2010. The revenue mix got overhauled. From over 42 per cent of turnover in 2005, the consumer business fell to some 28 per cent in 2010.
According to some senior executives, this was partly because the CRT division was given less importance at a time when the CRT market was growing in India. "Since the parent company exited the CRT industry in 2006, the Indian arm, too, showed little interest in the business, and it affected the growth momentum," says A.D.A. Ratnam, President of Philips India's consumer lifestyle division.
While the consumer business hit a brick wall, exponential growth in the lighting and health care segments kept Philips going. In lighting, the company has historically been the leader, with a market share of more than 30 per cent - more than twice that of its nearest competitors, Bajaj Electricals, Havells, Wipro Consumer Care and Lighting, and Surya Roshni.
"Whether it's CFL or LED technology, Philips is a pioneer in bringing lighting solutions to India," says Nirupam Sahay, President of Philips's lighting division. "We have a big distribution network and reach out to one million electrical and non-electrical outlets."
For professional lighting, Philips's client portfolio includes corporate and government customers such as Asian Paints, McDonalds India, Cognizant Technologies and Kolkata Municipal Corporation. In 2005, lighting accounted for slightly over 34 per cent of revenues. In the past five years, the company's dependence on this segment has grown - it now accounts for 51 per cent of Philips's revenues.
But even the lighting business has seen plenty of ups and downs. To streamline this segment, the company had to shut down a factory each in Kolkata and Mumbai in the late 1990s. Later, the dumping of Chinese lighting products affected its market share. Timely government intervention in the form of anti-dumping laws helped CFL manufacturers.
Today, Philips gets a big chunk of its revenues from audio video multimedia (AVM), which includes DVDs and home theatre systems. In fact, it leads the DVD market with a share of over 24 per cent. This, though, could be short lived. Sector experts say changes in the AVM industry will keep Philips's consumer electronics business under threat.
"The DVD market is dying," says Deepa Doraiswamy, Industry Manager for electronics and security at Frost & Sullivan South Asia & Middle East. "The transition to store movies and music on a pen drive is already occurring at a fast clip." Still, Philips is doing all it can revive its past glory. Product offerings across all three categories - consumer lifestyle, lighting and health care - have undergone a sea change. Starting with the launch of MP3 players in 2009, Philips has come out with new products, many of which target youth.
"India has a huge young population, so we decided our target customers should be 15 to 30 years old, because that's where buying is going to happen," says Ratnam. "We have to get into the Lifecycle of consumers earlier." It has launched devices priced as low as Rs 150. "The focus is to make products that are not over engineered and are easy to replenish," says Ratnam. "Youngsters don't want to hold on to a product for 10 years."
Philips has revamped its personal care portfolio, and introduced shavers, body groomers and epilators. It roped in John Abraham and Kareena Kapoor as brand ambassadors. This is the first time the Philips brand has been promoted by celebrities in India.
Since 2009, Philips has opened 75 exclusive 'light lounges' in 40 cities. They sell decorative home lighting products priced between Rs 575 and Rs 45,000. Besides, Philips has 750 'light shoppes' - shop-in-shops in stores such as the Future Group's HomeTown and Lifestyle International's Home Centre.
In 2011, Philips acquired leading appliances maker Maya Appliances, which owns the Preethi brand of kitchenware. "For each segment, Philips is trying to redefine the market," says Rajeev Chopra, Philips India's Managing Director and CEO.
Philips's record inspires little confidence in its comeback attempt. Philips lacks a clear cut strategy for India, says Karwal, the former MD. "They are like a bull in a China shop." Will the current strategies work? Does Philips lack a clear vision in India? Does it need to focus more on marketing efforts?
'All Is Not Lost For Philips'
The mantra for Philips's rejuvenation is more relevant products, better price points,and the will to fight: Y.L.R. Moorthi
Philips is first a technology company and then a marketing company. The reverse is true of Samsung and LG (though they enormously improved their products in the last decade). Philips should emulate the marketing aggressiveness of the Korean majors. Here’s how. The one thing that sets the Koreans apart from not just Philips but all other competitors is their speed of execution. Even tried and tested players like Nokia are not able to take the heat. The Korean majors brought their best products globally with little or no time lag to India. They managed to put up manufacturing plants in record time. They showcased their good products through savvy marketing (Golden Eye TV and umbrella health branding by LG). They recruited dealers at an astonishing pace in the early years. In the 1990s, it was Videocon that headed the table for dealer promotions.
In the new millennium, the Korean duo launched a promotion broadside that left little to chance. It touched all stakeholders dealers, customers and even shop boys. All these are object lessons in marketing for competitors like Philips. Besides, there is a certain law of gravity in electronic hardware. Prices of electric goods always fall, be they laptops, VCRs, audio gadgets or mobiles. A company that doesn’t prepare itself for constant product upgrades and a simultaneous price squeeze will fall by the wayside. The Koreans excelled at this balancing act to lead the charts.
That said, all is not lost for Philips. At one point of time it was the benchmark of innovation in audio. Also, inspired leadership intermittently did boost market share in categories like DVD players for them. There are also bright spots like the lighting business and the acquisition of Preethi. Though a multinational, Philips is seen as a home-grown brand like Bata, Surf or Lifebuoy. Strangely, they never quite leveraged this strength. Thus the mantra for Philips’ rejuvenation is more relevant products, better price points, aggressive marketing and the will to fight. Maybe we can encapsulate the Philips story in just one line: past imperfect, future tense.
Y.L.R. Moorthi, Professor (Marketing), IIM Bangalore
________________________________________
'Milking A Dying Cow?'
Philips tried to revive its profitability by focusing on the bottom line and neglecting its strength: innovation: Ankan Biswas
As a brand, Philips was very strong in India till the end of 1990s. A 1997 survey showed that brand awareness was higher for Philips than Coca-Cola. Today, the Philips brand has little significance among youth – the most important market. Its brand dilution happened globally, at a different pace in different regions. Although it started as a lighting company, consumer electronics became its face. It was R&D, not marketing, that gave the brand its strength. Inventions such as the cassette tape, CD and 100Hz TV kept Philips in a leading position in consumer perception.
As the market became competitive and margins razor thin, Philips started losing money in consumer electronics. Philips CE tried to revive its sagging profitability by neglecting its strength: it focused on the bottom line and marketing without strengthening innovation. Its consumer electronics patent pool steadily eroded over the last decade. It tried one strategy after another but failed.
Many of its divisions were connected with consumer electronics, such as semiconductors and components. Philips got rid of these as they did not fit into its new game plan. The last nail in the coffin is the licensing of the TV brand to its lesser competitors. The strategy of milking a dying cow does not augur well with consumers.
Philips strategy today is to become a leader in health care, and retain its top position in lighting with new technologies such as LED. Managing LED will bring back challenges similar to those of the semiconductor division. Philips used its global strategy in the Indian market scenario where the dynamics are different. While Korean brands invested in manufacturing in India, Philips closed its plants. While the Koreans developed India-specific models, Philips tried to introduce expensive models with a bit of tinkering, ruining a once vibrant brand. The brand transformation of Philips is a lesson for all marketers.
Ankan Biswas, Chairman, Digital Broadcast Council, Consumer Electronics and Appliances Manufacturers Association
3. Case Questions:
a. Why firms like Philips should seek to develop a wide portfolio of products? (10)
b. Discuss advantages and disadvantages of the strategy of outsourcing used by Philips? (15)
c. “ Philips is milking the dying cow” discuss with reference to the product life cycle stage? (15)
d. Development of products is based on target consumers. Discuss with reference to the above case. (10)
DMM08
PRODUCT MANAGEMENT
Assignment - II
Assignment Code: 2016DMM08B2 Last Date of Submission: 15th November 2016
Maximum Marks: 100
Section – A (Each question is of 25 marks)
Q1. What basic strategies are available to the marketing manager for handling product at maturity stage?
Q2. Explain diffusion theory and suggest its implications for launching new products?
Section – B Case Study (50 Marks)
TASP Security Software was in a serious trouble. Its flagship product for database security, the “Knowledge Keeper”, was replicated by vicious competitors. Due to historical innovation, the company kept its leading role in the market, but the competition gained a growing market share, and all the products were deemed as equal.
The cruel analysts, having no technological understanding, were spreading rumors that “Knowledge Keeper” market is commoditized, an euphemism implying any kid can implement it, and that the price is going to dive soon.
Arnold, the product manager, quickly diagnosed the problem and announced a new concept that will highlight the unique capabilities of “Knowledge Keeper”. The concept will be branded as “The Divider” and will bring to light the “Knowledge Keeper” technological supremacy. Since the quarterly financial reports were coming along he ordered the developers to “get it done” in four months.
Sigourney, the group manager, was furious: ”Such a product cannot be shipped in four months. We are in the midst of infrastructure projects that we’ll solve the global warming problem! How am I supposed to create a new product with no headcount? – it contradicts the law of energy conservation”.
The developers joined the fury: “How can we code “The Divider” with no definition of its capabilities? We cannot develop a product based on a vague, fuzzy management concept”.
Still, Sigourney approached the task with faith and agility. Having no programmers available, she assigned Ron to the job. Ron was recruited as chief internal security officer, to educate the employees to guard internal information and develop new security guidelines. When he was recruited, he declared he is tired of programming and he wants to focus on research. However, Sigourney remembered that Ron is a Wizard coder from the Amiga assembly days. The rumor was that he made the juggling balls, in the Amiga famous demonstration, disappear into the juggler’s mouth.
Mark, a developer from a different group, was added to help Ron in the task. He did not report to Ron, but the task importance was clearly explained to him and his manager.
Since the time was short, Sigourney decided to focus on five existing product features that were never shown in the user interface. The features were hidden, and it was only possible to activate them by manual changes in obscure INI files. It was also decided to develop a new “SQL Guardian” to validate all the SQL instructions sent to the database are indeed legal.
Sigourney and Ron passionately started working on the task. Ron demanded a requirement document from Arnold, the product manager. Since Arnold was busy handling existing customers’ escalations, everyone agreed the development team would create a mock-up of the UI and Arnold would provide feedback on it. Since most features existed for many years, they decided a detailed design for “The Divider” is not needed.
Work progressed quickly. The team realized the importance of the project, but was somewhat frustrated with the minimal resources allocation. Oberon, the director, reassured them: “We are in an initial phase, if the product succeeds, additional people will be added. Right now, you just need to add few dialogs and text to features we had for the last three versions”.
After six weeks, problems began to raise their ugly head. The mockup was progressing slowly. The GUI developer, coming from another group, was not sure what exactly he is supposed to do. His attempts to get clarifications form Ron got a very slow response, as Ron was busy coding “SQL Guardian” which was the most interesting part of the project. Coming from information security background, he made certain that all the smallest vulnerabilities are blocked, even for DB2 and CA-Ingres. Trying to create the perfect SQL parser resulted in a major setback in the project.
To save the day, Arnold presales tasks were moved to the support department. Arnold worked directly with the UI developer to define the dialogs. The mockup was presented to key customers and sales executives and received great feedback.
Three months along the development, the QA department started warning:”If we don’t get a stable version of the product, there is no way we can complete the testing on time for shipment”.
While Ron worked on the new features, Mark was supposed to integrate the old ones in the new UI. Due to urgent problem in his other group projects, his progress on “The Divider” was quite slow. Although he enjoyed developing new code instead of fixing old bugs, written by the company founders, it was hard to get rid of the obnoxious customer tickets.
Sigourney called for an emergency discussion. “We have to give something to QA. Even if it is not perfect, they can start playing with the product and open bugs. We’ll inform them on the current limitations and they can work around them”
Ron responded “We didn’t code the GUI-engine communication layer yet!” Sigourney shouted at him: “They can configure it with INI files as far as I’m concerned, by the end of the week we are delivering a version to QA”.
Two weeks later Ron sent an initial version to QA. The testers vigorously began opening bugs with hilarious titles: “Nothing Works!”, “GUI Crashes Every 46 Seconds” ,”Spelling Mistakes in Non Existent Help Screens”. The coders raged about QA’s inability to overcome transitory hiccups, and silently ran to fix the problems.
An improved version with most of new features was deployed to QA after a two month delay. Surprisingly, it turned out the old, “existing” features the divider was supposed to expose are hardly working. Since they had no user interface the testers “forgot” to check them. It seemed customers were not using the protections either.
The default setting for the innovative protections was set to off, as it raised too many false alarms. Since there was no visible way to turn them on, only the most advanced and innovative, paranoid customers implemented the protections.
To make things worse, no support tickets were open as well, and the CMO was convinced the product is top notch.
Sigourney shouted at Ron:”How can you provide a product that’s not working? Did you ever test it yourself before deploying to QA? “Ron, who wasn’t the quiet type, responded: “I own the SQL Guardian” that works smoothly. The “Data Crusher” was written by the company founder five years ago and you can talk to him about it. I did not join this company to be a code monkey. You are throwing undefined tasks at me, stealing Mark for other projects and then wonder why things break. I will not stand this hypocrisy”.
Rumors of the problems reached Oberon, the director. He moved three additional developers to help the project. Although Ron felt the project is running out of control, bugs were fixed at a much higher rate. The director ran a daily status meeting to monitor the development and reprioritize trivial bugs. He kept the team confident :”Microsoft ships with many bugs and they still rule the world”,” In a 1.0 version customers are forgiving for minor problems”.
The marketing department published a passionate release note regarding the innovative new concept TASP security will present in. The stock rose and the sales team was energized. The entire R&D helped and people worked around the clock. Following three months of intense work, a Go-No-Go dissuasion was held with QA, R&D and product management.
QA felt the product is not mature enough, but the rest of the team ignored them. There wasn’t a single product they ever approved, not even the successful “Knowledge keeper” .The exhausted Sigourney felt the product is ready and people got tired of the repeating delays. Five months later than the original plan, the pressure was mounting to go ahead and release. Ron was the only opposition, and refused to be responsible for the results. Oberon considered all the options and decided to ship. To comfort Ron all the limitations will be listed in a ten page long release notes paper.
3. Case Questions:
a. What are the key issues in this case? (15)
b. The Company needs to resolve Human resource problems rather than IT problem. Discuss. (15)
c. If you were the director, suggest measure you would have undertaken to resolve the problems. (20)
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