Alternative business logic: six points interpretation PHILPS spin off lighting

In September 23, 2014, Holland PHILPS group announced that the Group intends to take the medical care One divides into two., lighting and two businesses operating separately, and further set up two companies, both sides will continue to use the PHILPS brand.

PHILPS CEO 000 haodon (Frans van Houten) said in a telephone conference: "we PHILPS is preparing to build the next century. Independent of our lighting solutions business, which will better enable the business to expand its global leadership, and access to more relevant market opportunities. I do appreciate the courage to make this decision, the current timing is also very suitable for PHILPS to make the next strategic measures. "

The news from PHILPS lighting group spin off, the market reacted positively, investors are optimistic about the restructuring plan, PHILPS shares rose Tuesday in Amsterdam 0.81 euros to 24.31 euros ($31.24), or 3.5%, to become the Amsterdam stock market day is one of the few stocks rose.

Before another global lighting brand OSRAM has spun off from SIEMENS independent market, PHILPS in July this year has its LED packaging division Lumileds and automotive lighting division split out to integrate into a new independent companies. Whether it is the strategic adjustment as the opponent, or the internal reorganization, indicates that stripping PHILPS lighting business is not premeditated Weakness lends wings to rumours., but plans to spin off the gradual implementation of.

LEDinside interpretation of the six aspects of the perspective of the reasons for the PHILPS split lighting business from another perspective, from another perspective to observe the business logic of PHILPS's decision:

1, strategy: refocusing to the core business of medical care, spin off low degree of lighting business.

From the 80s of the last century, the refocusing strategy has a profound impact on the practice of the business community. PHILPS stripped of the cause of the lighting industry, it looks like a simple business spin off, but in a longer time to see the online axis is PHILPS refocusing strategy again practice. Over the past 10 years, PHILPS has focused on the profitability of the business, such as health care, and quit the chip manufacturing and television business, and now has become an independent business will soon become independent. PHILPS group will be more focused on the resources threshold higher, more profitable healthcare business.

Refocusing ranging from professional, is not equal to the simple negation of diversification, but stressed that the correlation between core competence and enterprise business enterprise, emphasize the business to move closer to the core competence of enterprise resources to focus on core business. After the refocusing of the enterprise is still diversified, but the relationship between the business is relatively high, competitive advantage, competitive advantage.

2, operation: the scale of the economy is increasingly prominent, through the spin off to save indirect costs. In addition, after the independence of the two leading global companies, will have a more independent decision-making mechanism to deal with the rapidly changing market.

Large enterprises enjoy economies of scale at the same time, but also have to bear the size of the scale is too large to bring economies of scale. PHILPS group has 113 thousand employees worldwide, in recent years, too bloated organization criticized. The bureaucratic effects caused by too many levels of structure offset the benefits of economies of scale.

The business of lighting and health care business spin correlation smaller into two parts, the two companies are greatly reduced, will significantly reduce the organizational level, improve decision-making efficiency, more flexibility in dealing with more complex market. PHILPS is even more, said the new company will be split after the next year for the company to save 100 million euros (about $128 million 460 thousand) cost, and in 2016 to further save the cost of 200 million euros for the company.

3, brand: integrated brand into a subdivision of the brand, in their respective areas of consolidation brand influence.

According to INTERBRAND's global brand rankings, PHILPS brand value in 2013 reached $9 billion 813 million, up 8% over the previous year, is still the world's top fortieth brands.

However, if the growth trend of brand value in Asia, such as Samsung and other companies, PHILPS's brand value growth for decades can be ignored.

The separation of lighting and medical services will not affect the value of the Philips brand, on the contrary will consolidate the status of leading brands in two segments. After the separation of PHILPS lighting is no longer an international brand of lighting division, and become a leader in the lighting industry companies and leading brands. By focusing on the field of brand influence to enhance the value of the brand as a whole is also the best way to improve the value of Samsung, Samsung is a powerful influence on Samsung's brand value.

4, profit: profitability continued to improve, the need for more powerful and effective incentive mechanism to restore profitability.

PHILPS has the world's first lighting brand lighting market and the highest market share. However, profitability in recent years did not reflect the status of the industry, EBITA long-term hovering below 10%, to explore the reasons, the lighting market many participants, the fierce competition is on the one hand, on the other hand due to the lack of need to group company incentive mechanism, leading to the company into a bureaucratic effect, the relative lack of initiative, the lack of grasp of the market opportunities sensitivity.

After the spin off PHILPS lighting, will have an independent board of Directors Governance