First Financial Daily: How will Philips face the second and third tier cities in China, how will it face competitors in second- and third-tier cities? Will you consider working with local businesses?
Liang Hanfeng: Our intention is to provide consumers with another choice in second- and third-tier cities. In 2006 we have completed a market test in 16 cities, and in 2007 we decided to enter 100 target cities. Since the distribution network in second- and third-tier cities is not very standardized, we consider working with trading partners to promote our products.
"First Financial Daily": In the face of competitors such as GE Lighting also enter the Chinese market, how will Philips respond?
Liang Hanfeng: In fact, the competition between Philips and GE and Osram is not only in China, but globally. Philips has always welcomed competition. We believe that we have an ever-increasing brand and a growing distribution network. When expanding to second- and third-tier cities, our focus is to bring them services and to make our products more valuable and reachable in the market.
"First Financial Daily": As a multinational company, how does Philips balance social welfare and its own economic interests?
Liang Hanfeng: This is related to Philips' own corporate culture. Philips adheres to sustainable development, both corporate and social. For Philips, sustainability involves many aspects, such as safe products, good raw materials, and reduced production processes. In addition, Philips is also actively involved in public welfare undertakings, such as: starting from 1998 to build Hope Primary School, has also donated energy-saving lighting products to schools in many cities.
"First Financial Daily": Philips Lighting has always attached importance to the construction industry market. Has there been a tendency to switch to outdoor advertising signs and other markets recently? How do you see the market turn of Philips Lighting?
Liang Hanfeng: This is not a market turn. It should be exactly the difference in product distribution channels.
Philips Lighting has a complex product structure and we have 4 different distribution channels. Retail channels, wholesale channels, engineering project channels and OEM channels. Wholesale channels are wholesalers' networks, and Philips sells them to dealers, who sell them to smaller dealers. Through retail channels, Philips sells its products to large retailers. In the engineering project channel, Philips' products are mainly used for large-scale projects, such as: the Olympic sports stadium, outdoor lighting and sports facilities lighting. Through the OEM channel, Philips sells its products to manufacturers, such as lighting manufacturers.