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PHILIPS ‘SENSE AND SIMPLICITY’

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TABLE OF CONTENTS

CONTENT PAGE

Introduction 1

Corporate Visual Identity

Standardized brand messages and value proposition across cultures

Exhibit 1: The world economic pyramid 1

Exhibit 2: The process of making profits and alleviating poverty 2

Exhibit 3:

Exhibit 4:

Exhibit 5:

Conclusion

Appendices

Appendix 1: Share of global poor by country 8

Appendix 2: Key purchase influencers and their components 9

References 13

MSC IN MARKETING & STRATEGY

2011

MSC IN MARKETING & STRATEGY

2011

MSC IN MARKETING & STRATEGY

2011

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Abstract: The presence of physical borders between countries has become meaningless

for business organizations to much extent due to globalization of markets. In today’s

rapidly changing market environments it has become crucial for organizations in general

and marketers and advertisers in particular to recognize the significance of cultural

anthropology and local values to effectively communicate brand messages across

borders. Despite the fact that many marketers prefer to have standardized marketing

mix variables, elements of corporate visual identity (CVI) too are often tailored when

firms cross their home-country boundaries to establish a desired image. In this paper,

how attractive “Sense and Simplicity” – Philips Electronics’ standardized central

message – is in two different cultures is analyzed.

“Many companies recognize the role of design led innovation. But we at Philips have

gone one step further with a special differentiator in this area: we believe in

simplicity-led design…which is our springboard to even greater innovation.”1

Gerard Kleisterlee, President and CEO Philips, in January 2006.

INTRODUCTION

Globalization of markets with recent developments in information technology has led many

companies to expand their operations as well as their customer-base across borders. This expansion

of business into international markets constitutes strategic decision-making not only regarding the

selection of country to expand into, or the entry mode, but how to segment, position and target the

potential customers as well, to maximize the profits. As a result, global firms develop global products

which lead to global brands and global marketing (van Raaij 1997). Mueller (2004) suggested that

the MNCs become truly global via their branding strategies and marketing messages in host

countries and not just by shifting their headquarters or operations to other countries.

As economic globalization intensifies, standardization of marketing mix elements can be the most

favorable approach to gain economies of scale but to ignore the cultural differences is to invite

failure (Watson et al 2002). Standardization is, however, often not appropriate for varying cultures

around the world (van Raaij 1997). Standardization of mission, proposition, concept and execution –

the four levels of standardization as noted by van Raaij (1997) - does not optimally fit with different

cultures. Standardization of ‘proposition’ – part of corporate visual identity – across borders would

be the focus of this paper in regards to Philips Electronics’ “Sense and Simplicity”, albeit there is not

much literature on globalization of CVI apart from few empirical studies on CVI (Melewar and

Saunders 1999). Though, literature regarding Brand Management suggests that standardization of

branding strategy across borders may be in accordance with building a consistent and well-defined

brand meaning (Bengtsson et al 2009), but what is appropriate for one culture might not work in

another. The managers need to have the ‘interpretive knowledge’ (Ghauri and Cateora 2010, p. 83)

about the cultures.

1 http://dimagemaker.com/2005/09/21/philips-shows-innovations/

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CORPORATE VISUAL IDENTITY

Over the past decade corporate identity – the image that a firm desires to project to its target

market by means of symbolism, communications and behavior (Pelsmacker et al 2007, p 14;

Margulies 1977) – has been brought to limelight and has begun to be associate with the strategic

decisions of organizations (Balmer and Gray 1999). Corporate identity develops the image projected

by an organization and its products (Schmitt 1995) and its affects the perceptions in the long run as

well (Alessandri 2001).

Corporate visual identity (CVI) is part of the corporate identity that organizations use to project their

desired image to its stakeholders. Its components are name, logo, typography, color and slogan. van

Riel and Balmer (1997) suggested graphic design, integrated corporate communication, and a

multidisciplinary approach that focuses on organizational behavior as elements of corporate

identity, taking a broader perspective. Melewar and Saunders (1999) in their study of

standardization versus localization issues for CVI found out that standardization of CVI does not

depend upon the main business of the firms; the standardization of CVI is more influenced by the

“nature and attribute of specific products”. In turn, CVI plays an important role in the purchase

decisions by consumers by augmenting or damaging the company’s image and goodwill (Jun and Lee

2007).

Many companies are faced by the challenge of having a standardized global CVI or localizing their

CVI specifically for various cultures. A true MNE as suggested by Keegan would adapt its CVI

considering the cultural sensitivities and by adapting itself to the local environment. It does mean

that the management needs to abandon their ways of doing business; rather, they should take into

account the differences between the cultures and should accommodate those differences in order

to avoid any misunderstanding (Ghauri and Cateora 2010, p. 103). Many of the firms in consumer

electronics industry follow the model of “produce globally, translate locally” to effectively

communicate their brand messages (van Raaij 1997).

STANDARDIZED BRAND MESSAGES AND VALUE PROPOSITION ACROSS CULTURES

Philips is a multinational Dutch corporation which has a major presence in consumer electronics,

lighting and healthcare and is defined as a diversified health and well-being company. It is one of the

largest electronics companies in the world. In 2009, the company reported consolidated revenues of

$32,774 million and operating profits of $868 million (Datamonitor 360). Philips has market presence

in various culturally distinct countries but has one standardized CVI in general and brand proposition

in particular – to have a consistent brand image across borders – which may have different impact

on consumers in different cultures. Brand consistency requires companies to have all

communication directed towards one, central brand image but when the strategies are executed

locally, the difference between the cultures should be taken into account and there may be

variations in messages across countries and over time (Marks 2009).

Culture and communication campaign correlate to each other and there is an interdependent

relationship between the two. As Wang suggested, “culture provides a campaign with its physical

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and psychological environment and a campaign helps to bring necessary and/or desired changes to a

culture. As world cultures vary, campaign praxes in human societies certainly differ”.

There are cultural differences among the regions as well, taking a broad perspective. The key

element is to define what the brand would stand for in consumers’ minds across borders, for

instance, Asia, i.e. defining the brands value proposition and positioning for Asia. Moreover, its also

important to define what the brand would not stand for. Once defined, every target market would

clearly depict its pros and cons for the brand and communication can then be specifically developed

for each country to be targeted (Marks 2009).

The implications of cultural diversity are enormous for marketing communications and cultural

diversity is not going to vanish immediately (Lewis 1999). Persuasive styles and strategies in the field

of communication may vary across cultures (Jun and Lee 2007). However, if we base our

communication strategies on the assumption that all people living in Europe have exactly the same

cultural values and depict a certain peculiar behavior, the strategy would not be very effective.

Although a firm can employ a global strategy with standardized communication strategies if the

groups that are to be targeted are similar across borders (horizontal segmentation), but a more

effective strategy would be to adopt a differentiation strategy for each country taking advantage of

local differences to be more effective (van Raaij 1997). Van den Bosch, De Jong and Elving (2005)

comment that corporate branding and corporate communication are practiced methods to create

corporate reputation.

van Raaij (1997) noted that four levels where standardisation may take place are mission,

proposition, concept, and execution, and the four different extents are global, adaptation,

differentiation and local (Exhibit 1).

The perception that the world has or is becoming a global village leading to homogenous culture all

around the world is largely misleading; in marketing communications even today, cultural

differences remain a critical element (van Raaij 1997). Marketers and researchers would be better

able to understand the variations of communication campaigns worldwide by placing culture in its

proper position (Wang). Therefore there is a real risk that with increased cultural diversity,

denationalization and deterritorisation; will come increased difficulties in predicting consumers’

behavior towards a brand (Wilson and Liu 2009).

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Philips started off with manufacturing light bulbs and electrical equipment and is credited with

several inventions but even after having technical know-how, the company faced financial

challenges in 1990s due to two reasons. Firstly, the company was operating in too many industries

losing its focus. Secondly, the company did not focus on marketing. Major changes were carried out

inside the company to streamline the processes, and “Let’s make things better” campaign was

launched in 1995 which replaced the 26 slogans used by Philips in various countries to wither the

damages done in the past; thus standardizing the brand message across borders. Later in 2004, the

“Sense and Sensibility” campaign was initiated as the top hierarchical management believed that the

previous campaign was not able to convey the desired image of superiority in design and quality of

Philip’s products (Govind 2007) (Exhibit 2). Philips when conducted in-depth interviews and focus

group research, found out that the customers were interested in latest and ‘user-friendly’

technology. By ‘sense’, Philips meant “intimately understanding the needs and aspirations of

consumers and customers in order to develop innovative solutions” while simplicity referred to

“easy to experience” (www.philips.com).

As per the new brand promise, the company was to develop simple user-friendly products with

simple designs after understanding the unmet needs of the customers. The notion of simplicity was

not only applied to products but within the organization as well.

The execution of this standardized message was carried out across borders following the ‘etic’

approach in which “products and communication are derived from culturally universal criteria, and

are essentially the same for all cultures” (van Raaij 1997). This might be an attractive proposition in

some parts of the world, however it may not be very effective in others. United Kingdom (UK) and

Thailand are selected on account of vertical segmentation – taking into account the differences

between nations and ignoring the differences within a nation – for the analysis of attractiveness of

this market proposition in two different cultures (van Raaij 1997).

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Cultures comprise of and also differ in terms of values, rituals, heroes and symbols. Consumers who

belong to and grow up in a certain culture become habituated to that culture’s values, beliefs and

perception processes (Zhang and Neelankavil 1996). In 1952, two well-known anthropologists,

Kroeber and Kluckhohn, collected 164 definitions of culture; the oldest definition was given by

Taylor. According to Taylor, culture is “a complex whole which includes knowledge, beliefs, art,

morals, laws, customs and any other capabilities and habits acquired by individuals as members of

society” (First 2009). The results of the study conducted by Daghfous et al (1999) clearly show that

individual values have a significant impact on consumers' behavior.

On the account of language solely, this standardized proposition might not be much attractive in

Thailand in comparison to UK, as English is not the native language of Thais and much of the

population does not understand English. Moreover, due to the abstract nature of the proposition, it

is difficult for Thais to make sense of “Sense and Simplicity”. Conversely, British can easily

understand and make sense of Philips’ proposition. On Philips’ website for Thai consumers, all the

content had been translated into Thai – on the assumption or evidence that Thais may not be able to

comprehend the content in English effectively – except the brand name and Philips’ central message

(Appendix 1). Thais may not be able to grasp the implicit meaning of “Sense and Simplicity” as well.

“When communicating value proposition of a brand which is not a strap line but is a central theme

to which everything must adhere, even locally” (Marks 2009), the need to recognize the difference in

the languages across borders and the way in which words are perceived is important to develop

corporate reputation and hence competitive advantage (van den Bosch et al 2005) (Figure 1).

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Hofstede dimensional model of national culture is employed to analyze the attractiveness of “Sense

and Simplicity” in the two countries.

Thailand being high on power distance might be a more appropriate market for Philips, as

consumers purchase global brands to satisfy their need of communicating their own social status

which must be clear in high power distance societies (De Mooij and Hofstede 2010).

On the other hand, the contrast of individualism and collectivism in UK and Thailand respectively,

makes this proposition more attractive for UK and less for Thailand. The proposition seems to have

more individualistic orientation in nature seeming to satisfy personal and individual needs. “Sense

and Simplicity” would be perceived more positively by British in comparison to Thai. Moreover De

Mooij and Hofstede (2010) noted that for consumers in collectivist cultures Thailand for instance,

brand concept is too conceptual as they are less used to conceptual thinking. So this proposition in

Thailand may not add any value to Philips.

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In cultures where uncertainty avoidance is high (Thailand), and people feel threatened by ambiguity

and vagueness, this proposition may not be very effective as for consumers in such cultures it does

not promise anything concrete. They may not accept this brand promise because of its vague nature.

Moreover, people in such cultures are less open for “innovation and change” (De Mooij and

Hofstede 2010), the aspect which is shown in Philips advertisements in relation to “Sense and

Simplicity”. Furthermore, Philips has major presence in healthcare sector and its proposition is more

viable for low uncertainty avoidance cultures where consumers have more active attitude towards

health. In cultures with low power distance and low uncertainty avoidance (such as UK in

comparison to Thailand) people attributed ‘innovative’ and ‘different’ to global brands such as

Philips (De Mooij and Hofstede 2010), which is in accordance with “Sense and Simplicity”.

People, in general, demand ‘latest’ user-friendly technology (Govind 2007), and “Sense and

Simplicity” does not coincide with the desirable attributes. Moreover, as any technology becomes

obsolete over a certain period of time, long-term orientation of Thai culture makes Philips’

proposition less viable for Thailand. Consumers with long-term orientation may not be able to

associate ‘Simple’ with latest innovations.

Cultures also influence consumer behavior in terms of cognitive style, loyalty, consumer

involvement, and legal environment (Exhibit 3). Cognitive styles vary in terms of cultural dimensions.

This may mean that consumers in individualistic cultures such as UK tend to look more actively for

information and acquire knowledge about the product via the media or friends. Whereas consumers

in collectivist cultures acquire information through implicit communication, base their decisions on

personal feelings and do not actively seek information. In collectivist cultures, consumers seek

information from the members of the group that they are part of due to high contact rate among

them (De Mooij and Hofstede 2010). Hence, Philip’s proposition may not have any effect on

consumers in collectivist cultures and may not do any good to Philips.

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The two countries – UK and Thailand – also lie on opposite end of Schwartz seven cultural

orientations map of 76 countries (Appendix 2).

CONCLUSION

Marketing communications in truly globalized world need to be taken care of when companies

target customers from different cultures. People living in different cultures grow up in different

environment with different surroundings, mindsets, values and beliefs. Though the world is

becoming a ‘global village’ but the differences in culture and language will remain there and might

continue to increase. Culture is one of those aspects for marketers which should not be taken grated

for and should not be ignored. Marketers need to pay attention to every detail of their marketing

program when going global; brand message communication is of the most important aspects.

Differences between cultures are going to stay and marketers and brand managers would have to

take into account these differences to effectively market their products. Highly standardized global

communication strategy might not be very effective in all the target markets.

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APPENDIX 1

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APPENDIX 2

Source: Dr. Marieke de Mooij – http://courses.mariekedemooij.com/unav

Source: Schwartz (2006)