Philips To Muddle in Cutthroat Prices in China? (Part 2)

In part one of the Dazhaoming article last week, a couple of Chinese LED experts offered their perspectives on how low pricing strategies would affect Philips. In this second half more experts offer their valuable insights.

Philips will lose its competitiveness with “low pricing” strategies—Yin Kang, CEO, TUS Lighting

As LED market competition intensifies in China, Philips is losing its financing, technology, product, and manufacturing advantages, said Yin. The reason Philips would be unable to achieve the same C/P ratio as Foshan Lighting and MLS is because these companies are in-house manufacturers. They can turn to mass scale production to lower manufacturing costs, while Philips is completely reliant on OEMs and does not make its own products.

From a market competition angle, how can Philips maintain its market competitiveness if it tries to achieve the same C/P ratio as domestic brands? Philips investments in branding, marketing costs, and production are all much higher than domestic manufacturers.

Philips low pricing strategy is a normal business adjustment-Zhijun Guo, Director, Everfine Photo-E-Info 

In the LED application market, Chinese brands already have significant market competitive advantages, which has diminished traditional lighting giants market advantages, said Guo. If large lighting manufacturers are unable to swallow their pride, it will be very difficult for them to emerge as winners.

Philips “low pricing strategy” proves they are aware of this and are making strategic adjustments, which should be considered normal. It will be difficult to price lighting products at lower prices than MLS or Foshan Lighting, but Philips is probably not making a casual remark by announcing plans to do so.

Philips-styled “low price”-LED blogger Aoying Tang

“I don’t think Philips lighting product manager’s announcement in Hangzhou that the company might be releasing products priced lower than MLS and Foshan Lighting is merely market rumor,” said Tang, who is a LED blogger in China and also the Sales Director of Haining Hinghui Energy Lighting Electric. Philips has probably thoroughly researched and prepared its market strategy to take up larger market share in China. In 2014, Philips Lighting launched 15W LED T8 glass tube lights was its first strategic step. The tactic was “throwing a stone to clear the road.” After that first step taken in 2014, Philips lighting has been analyzing and adjusting its strategy based on large volume of market feedback and compiled statistics. The company has meticulously analyzed and adjusted its strategy since, and taken its second strategic step. It has implemented “close combat” strategies in China, but prices cannot be overtly lowered.

“From my perspective, Philips lighting has finished preparing market resources and strategic deployment in the Chinese market,” said Tang. The company will not be participating in “cutthroat pricing,” but will probably be implementing a “Philips-styled” C/P ratio war.

Philips Lighting business faces difficult future—Pei Dong, Chairman, Fairtek International

Philips low pricing strategy is not a complicated issue, said Pei Dong, Chairman, Fairtek International. The Chinese lighting industry has underwent profound changes in the last 10 years. Philips market position and brand impact have all changed compared to a decade ago, hence Philips low pricing strategy will not have a huge impact on the current LED market.

“I believe it will be very easy for Philips to implement low pricing strategies, but if Philips relies on the low priced market, than companies outlook will be rather pessimistic,” said Dong. If Philips turns its lighting business over to OEMs, and relies on its brand influence, it can still retain certain market shares.

In general, any product pricing adjustments made by Philips will create more difficulties for its future lighting business.

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