Japanese know-how and can-do may have routed Detroit and driven the haughty Swiss watch industry to the brink of ruin, but they're not running scared in Eindhoven, the Dutch city where Philips n.V., the electrical and electronics giant, makes its world headquarters.
Under the leadership of its new president, 58-year-old Wisse Dekker, Philips is now gearing up to lead a western counter-attack against what it sees as a Japanese bid to dominate the booming world market for consumer electronics products. Philips is "one of the few companies in the world--perhaps the only one--that can stand up in real competition with the Japanese," says the Japanese-speaking Dekker, whose accession to the number one slot at Philips in January 1982 was preceded by a six-year stint at the company's small subsidiary in Japan. He is the first Philips president to be chosen from outside the Philips family, which has controlled the firm since its founding in the nineteenth century.
In Dekker's view, Japanese electronics firms like Sony, Hitachi, Pioneer and Sanyo no longer have any American competitors worthy of the name, except perhaps for RCA, which he feels is now making a respectable bid for the lower end of the video disc market. As for Japan's other European-based rivals, such as France's Thomson-Brandt and West Germany's Grundig, it's nearing "five minutes to twelve," Dekker says.
Founded at Eindhoven, near the Belgian border in southwestern Netherlands, in 1891 by engineer Gerard Philips, Philips quickly became a leading manufacturer of light bulbs. Today, although its 12 product divisions make everything from home appliances to defense systems for NATO, the company is probably best known internationally for its television sets, stereo equipment and hi-fi records. Despite a recent surge by Japanese rival Matsushita, it remains the world's leading producer of color TV sets.
Its U.S. subsidiary, North American Philips, ranks No. 3 in color TV sales, with about 14 percent of the market, following takeovers of Magnavox in 1974 and the TV set and components business of GTE Sylvania in 1981. About 20 percent of Philips' 1981 turnover of $18 billion came from U.S. sales, a figure the company hopes to improve on dramatically in the coming years.
Philips' strategy for taking on the Japanese in the consumer electronics field draws heavily on the unhappy experience of U.S. companies, which it considers a casebook study of how not to operate. C.J. Van der Klugt, Philips vice president and vice chairman for consumer products, believes that U.S. companies lost out to the Japanese because of American management's "strictly black-and-white, bottom line approach."
The downhill slide began some years ago in the radio business, Van der Klugt argues. When U.S. companies discovered that the Japanese could make radios more cheaply than they could, they either gave up trying to compete or subcontracted with them, first for components, then for the whole radio. The result was that the American lead was gradually frittered away.
The same thing happened in the electronics field, according to Dekker. When U.S. companies began contracting out to the Japanese, they lost the control over product development, which Philips considers vital to competitiveness. Thus, today, U.S. firms have virtually no expertise of technical capability in the lucrative video recorder field. "I have made it clear to the Japanese that I don't intend for this to happen in Europe," Dekker states.
Unlike the U.S. companies, Philips has kept a tight grip on product development and components output. The firm spends an average of 7 percent of its annual turnover on research and development, a substantial figure even for the high-tech electronics business. About 80 percent of the components used in manufacturing are produced in-house, and most of the rest are purchased from European companies, not from the Japanese.
But beyond this, Philips believes that the secret of successful competition with the Japanese is not so much a matter of keeping labor costs down, but of having "the right product at the right time at the right price." The company believes its labs have now come up with the right products to enable it to stand toe-to-toe with the Japanese in the consumer electronics field: its video disc player and its compact audio discplayer set.
However, although launched in 1978, Philips' video disc product has not yet caught on the way video cassette recorders and RCA's cheaper video disc recorder have, despite a recognized edge in technology. This has not stopped the company from using the same basic concepts--laser beam optical read-out of digitally encoded discs--at an equally heavy outlay in R&D to produce the compact audio disc player combination.
The compact audio disc, which premieres in Europe in late March and is expected to hit the U.S. market this summer, is made of transparent plastic, is bright silver on its single playing side, and is only about four inches in diameter. It has an "information density" around 50 to 100 times greater than the conventional LP record.
The digitally coded recording is under the disc surface, making it impervious to dirt and damage. Because the recording is read by a laser beam, which tracks the grooveless disc from inside to outside, there is no wear on the record.
There is more to come from the Philips labs. At the end of this year, the firm hopes to launch an 8-mm video recorder, which Philips believes will "revolutionize" the home entertainment industry and "shake up" the 8-mm camera business. And, building on the compact disc technology it has already developed, Philips looks forward to a second generation of audio and visual recorders, using solid-state laser techniques. "Alongside this may well come commercial catalogues, business-data, even newspapers, on flexible, small diameter, low-cost discs," exults a Philips brochure.