NEGOTIATION WRITE UP ON PHILIPS CASE STUDY

SUBMITTED TO: Ms. GARIMELLA RAMANI

Submitted By: Name : Akant Agarwal Section:D (Gurgaon) Student ID : PG20112035

Philips India Ltd- Indian subsidiary of NV Philips Gloempenfabrieken with its head quarters in Mumbai. They deal with electronics range from electronics lamps to television. The companys turnover was approximately Rs.400 crore in the 1980s. The brand enjoyed a strong market presence. Philips brand overseas was exceedingly strong in Television in both Black & White and colour. The CE division distribution system was typically a 3-tier channel system: manufacturer distributor (wholesaler) dealer (retailer or sub dealer) end consumer. The distributor provided after sales service to the products sold by them to their sub-dealers. In Southern region, Philips India had higher brand equity compared to the rest of the country and dealers were more loyal. Philips also faced competition from grey market comprising imported brands like National, Sony, etc. In 1991 the restrictions on Industrial licensing and use of foreign brand in Audio and Tv were removed. The de-licensing opened the gateway for a large number of foreign brands such as Panasonic, Sony, LG, Samsung, etc and slowly these brands were emerging as Philips competitors. The management of H.O felt that the distribution system that Philips followed needed restructuring in this emerging market. QRS was essentially a wholesaler for Philips CE products, Whirlpool refrigerators and washing machines, kitchen appliances, Crompton fans and a host of other consumer durables. QRS had a network of 78 sub-dealers spreaded over entire districts of South Kerala. The sub-dealers were totally dependent on QRS since they had the exclusive agency for these product lines. QRS marked up their

distribution margin without seeking permission from Philips India by eating into the sub-dealers margin as they were not allowed to sell up the products higher than the MRP. The sales personnel of Philips could not match MR. Arunachalams business acumen and he never took them seriously. He preferred talking to only senior managers of the company. ERC was a wholesaler of Philips CE products, branded refrigerators and washing machines, summit kitchen appliances, etc. The head quarter of ERC was in Emakulam. The ERC had a network of 95 sub-dealers spread across the districts of North Kerala. Following QRS, ERC jacked up the distribution margins as well. Their MIS system was also good. MR Abhijit Sen had moved during when the company was doing well in 1990-91 as RM South and came under pressure from the H.O managers of the CE division. Tamil Nadus sales declined from 18% to 29% of the regional sales. Kerala had grown only marginally. MR Abhijit Sen decided to take up the matter with MR. Menon (ERC) and MR Arunachalam (QRS) at their respective offices in Emakulam and Kollam with his sales team. Now the Abhijit Sen has to decide to stay with QRS or to distribute it to subdealers.

Issues:

Philips Falling Market share Introduction of new products Fear of competitors Small growth in a high growing market Deteriorating relationship with distributor Increasing product promotion expenses

Mr. Arunachalam Maintain his style of business His hold has been questioned Finding new business opportunity if Philips strategy is implemented Falling Revenue and increasing cost Threat of loss to his business