Question

How would you describe the international business strategy of Philips? What is the historical background that lead to such a strategy? Discuss the pros and cons of such a strategy.

Answer 1

The target of Philips is product differentiation in the market. It started its production with home appliances mainly light. This product made huge impact in the market and the demand for these products increased very fast. The mission of Philips is to improve people’s lives through meaningful innovation. They maintain to innovation of new products with sustainability in the market. Philips also improved its production through rural market. They design the products based on the preference of consumers. The new research and development policies also based on the consumer taste and preferences. There is a high level of promotion of the products through advertisement. This high level promotion and the confidence of the products among the consumers increase the demand for products. Later, Philips increased its production by increasing the different segments of production. They expanded products from home appliances to the healthcare also. The increasing confidence among the consumers leads to expand of Philips product.
Advantages of product differentiation:
Provide economic benefits; Benefits in the economy through the different kind of products which attract more customers to the market. This will reduce the sustainability in the market. This will increase the profit margin also. Create competitive advantage in the market.
Achieve higher price point; the additional benefit get from this is the attainment of higher price. The difference in products make better environment in the market.
Promote brand loyalty; When the company differentiate its products, few essentials were stand out. This will bring brand loyalty.
Disadvantages of product differentiation:
Higher cost; this product differentiation increase the cost of production in the market. There is a need of significant research, design and development time and costs emerge for creating single product.  
Inconsistency; the differentiated marketing may lads to inconsistency among the consumers. This will affect the reputation of the company.
Consumer affordability; the innovation of new products with high price may leads to the drop out of the consumers. This new product is competing with the low price firms. This will leads to the reduction of their demand.