European behemoth Philips Electronics last year posted double-digit revenue growth, year-on-year, in China, a sign the firm is on the track to double its annual revenue in the country within four years, a senior company executive said.

Europe's biggest producer of consumer electronics and lighting, and No 3 in semiconductors, collected US$7.5 billion in revenue in China, said David Chang, president and chief executive officer (CEO) of Philips China.

That was up 11.9 percent compared with the previous year.

Philips' annual revenue in China in 2002 totalled US$6.7 billion.

"The double-digit growth ... is a solid step forward on the journey to doubling it in four years," Chang said.

Philips has been aiming to increase its annual revenue in China to approximately US$12 billion by 2007.

Company Chief Executive Officer (CEO) Gerard Kleisterlee last year said Philips will   "step up R&D (research and development) activities, hire more R&D engineers and transfer more business management activities to China."

The company, he added, plans to establish more joint ventures to reach the ambitious target.

"Philips China contributed more than 20 percent to the firm's global revenues, but our domestic sales are only 7 percent of global sales," Chang said.

"This is the area that we can contribute more in the future."

Philips' revenue in China was composed mainly of two parts: Sales in the country and exports from China.

In February, Philips reported a full year global revenue of 29.04 billion euros (US$36.88 billion).

Sustainable growth

Philips has been aggressively reshuffling its business strategy in China, which it expects to become the largest revenue contributor.

Currently, China is the firm's second-largest market, after the United States.

To reinforce its China strategy, Philips, whose operations range from consumer electronics, small home appliances, semiconductors, lighting to medical and health, has appointed a   "Mr China" for each product division (PD) to form Philips   "China Management Team" (CMT).

The CMT includes Philips China's CEO, CFO (chief financial officer), CTO (chief technology officer), vice-president of human resources, general managers of each PD and IPR (intellectual property rights).

"Apart from deploying global policy in China and approving relevant country polices, CMT focuses on reviewing progress and implementing China strategy with emphasis on addressing cross-PD business opportunities and achieving synergies in a One-Philips way," Chang said.

One of the strategic priorities for Philips in China in the coming years is to support the Chinese Government as it achieves comprehensive, coordinated and sustainable development, the chief executive noted.

"Having focused on charity and environment protection programmes, we will assist the government in creating a good social environment that ensures people from both urban and rural areas have equal access to the benefits of economic development," he said.

Philips in recent years has been focusing on embedding sustainability throughout the organization and processes, as it believes long term sustainability is a matter of business opportunities.

That is also in accordance with visions of Chinese State leaders, who have increasingly emphasized, in recent years, the importance of sustainable growth.

Late last month, Philips released its second annual   "Sustainability Report," in which the firm said it managed last year to reduce packaging material consumption by 11 percent, energy consumption by 9 percent and water consumption by 15 percent.

One important step in Philips' sustainability strategy last year was the extension of the sustainability principles to its 50,000 suppliers worldwide.

Philips spent 19.2 billion euros (US$24.38 billion) to purchase products and services from those suppliers.

Philips last year was ranked No 1 globally by Dow Jones Sustainability Index (DJSI) in its industry group for its efforts in the area of sustainability.

Purchasing is becoming increasingly important to Philips, as it accounts for two-thirds of the firm's total sales, said Barbara Kux, chief procurement officer and member of Philips' Group Management Committee.

"But I'm not only talking about costs; quality, timeliness, reliability and reputation are also essential factors. It is my challenge to work closely together with our partners to become better, faster, cheaper and more sustainable," she said.

This year, Philips will introduce a self-assessment tool and audit methodology to its suppliers worldwide.

The firm also said it expects its product divisions to developed at least one new sustainable and profitable business project by year's end.

Philips last year invested a large sum to establish a recycling center for discarded tubes so it could recover mercury.

The center is capable of recycling 7 million tubes, the firm said.

(China Business Weekly April 6, 2004)