This case handles Philips and Matsushita, who are well recognized in worldwide consumer electronics market. Philips is currently located in Amsterdam, Netherlands and Matsushita, now called Panasonic, is based in Osaka, Japan. Both companies were ready to launch a set of tactical initiatives and organizational restructuring by 2001. These initiatives were aimed at preserving their competitive edge. Nevertheless, Philips and Matsushita reached this stage by using different strategies. While Philips built its successes on an internationally establishment of unbiased/ autonomous countrywide organizations, Matsushita was counting on its centralized businesses in Japan.
Both companies thus followed very different strategies and emerged with different organizational features.
By method of comparing these two companies, a good insight in how it is possible that two almost equal companies implemented two very different paths in attempting to become market leader can be gained.
In order to provide a good perception the main tactical issues will be summarized first. Later on, the aspects, that made Philips the leading consumer electronics company will be outlined as well as the incompetencies that the business built.
In order to have the ability to compare both companies the aspect how Matsushita managed to displace Philips as the leading company will be investigated. Also, Matsushita's incompetencies will be called.
Introducing of Philips and Matsushita
History of Philips
Philips was founded in Eindhoven, The Netherlands, in 1892 as a family group run business and by 1900 was the third largest bulb producer in European countries. Philips differentiated itself from other firms in creating a tradition of caring for its employees through education, good pay, profit sharing and
other benefits. In 1899 Philips ventured outside Holland and European countries to
Brazil, Australia Japan, Canada and the U. S. While all functions continued to be centralized in Eindhoven, Phillips created local projects to gain access into local market segments. So in the late 1890's and
early 1900s Philips was an individual product company that made light bulbs. By the 1920's Philips departed from its highly centralized past and rapidly altered itself into a multinational, decentralized company with a broad products in the electronic and electronic establishments. Philips had changed from a highly centralized company whose sales were conducted through third celebrations to a decentralized sales firm with autonomous marketing companies in 14 European countries, China, Brazil and Australia. Matsushita was founded in 1918 as a power socket maker. It evolved swiftly into a multi-product electrical company. Within the postwar boom, Matsushita thrived in the consumer electronics industry and grew speedily by using a one-product-one -section structure that motivated self-sufficiency.
History of Matsushita
Matsushita was founded in 1918 and began as an electrical socket manufacturer. Matsushita changed quickly into a multi-product electric powered company. In the postwar growth, they increased in the electronics industry. In addition they grew quickly by utilizing a one-product-one-division framework that do encourage selfsufficiency. Inside the 50s and 60s Matsushita transformed to a multinational company with several flower globally. The overseas subsidiaries were fully owned sole product crops or companies with a foreign products for local markets. Through the 80s there was limited central control possible due to expatriate japanese in foreign subsidiaries which acquired strong network cable connections in Japan.
Main tactical issues
A first main tactical concern for Philips was the have difficulty between Nos and PDs. This was problem for Philips. While their organizational composition was a geographic/product matrix, the NO's pretended that that they had the real power, this been around in a conflict reagrding to electricity and responsibilities. The No's experienced more influence on top management.
A second main tactical issue was the late entry to the market. Because of a decentralized organizational strucuture philips lacked to go into new products to the marketplace promptly and cheap. For instance, the V200 failed to capture the market, the late entry was one of the reason why because of this. This resulted in a closure of inefficient vegetation, Philips were required to let go 178, 000 of their employees.
According to Matsushita, the higly centralized firm structure was a main strategic issue. Matsushita lacked in their capability to innovate. Matsushita is quite fast in producing a similar product, which is a risky strategy.
Philips as the key gadgets company
After the battle, Philips' management table wished to build the company on the strengths of the nationwide organization (NOs). Which means that the organization headquarter is linked to these various subsidiaries on a one-to-one basis without real integration across them. The increased self- sufficiency of the countrywide subsidiaries during the war experienced allowed these to react to country- specific market conditions. The 3rd party NOs' advantage was the actual fact that they were able to sense and reaction to the differences atlanta divorce attorneys specific market. The NOs were led by a technical administrator and a commercial supervisor. This was a good co-operation, due to the technical aspects analyzed by the technical professionals and the best way to enter the marketplace examined by the commercial supervisor.
Due to the decentralized organizational design Philips could gain a leadership position after the battle. This decentralized organizational design was the 'administrative traditions' of the business's early extension in international market and is seen as rep of a multi-business physical model (Lasserre 2007:70).
At a time when political, economic and technological makes favoured responsiveness to local marketplaces and strategic version, Philips founded several distinctive competences.
Due to
NOs' ability to respond to local market conditions
NOs' development of a complex and innovative functionality (caused by the growth and great independence of the NOs)
The dual leadership system comprising a technical and a commercial manager (cross- useful coordination throughout the organization)
Philips became the best customer consumer electronics company in the world in the postwar time.
Nevertheless, Philips also built some distinctive incompetencies. Due to a lack of structure within the business of production and also marketing, Philips lost its leadership position to Matsushita, its Japanese competitor.
Moreover, Philips had not been in a position to control all of its national subsidiaries and the connection and coordination between your product divisions (PDs), which were located in Eindhoven, and the NOs was very fragile. This lack of coordination/relation between the PDs and the NOs gets evident when Philips didn't persuade the North American Philips Cooperation (NACP), its American subsidiary, to sell the V2000 videocassette format. Rather than following way the headquarter needed them to act, the NACP sold the VHS, that was under certificate from his great competitor Matsushita.
Because of its decreasing sales, Philips started out to lessen costs and restructure its organization. This brought on Philips to ignore new emerging market demands for more segmented products and higher customer services and Matsushita displaced Philips as No. 1 in the buyer electric market.
Philips versus Matsushita
In the period when Philips and Matsushita started to internationalize the difference between both companies, that finally resulted in the main position of Matsushita, gets apparent.
When Philips started to internationalize in 1912 its organizational design has been inspired by the First and Second World Warfare. The multi- business physical model that Philips used was not suitable when the surroundings began to improve in the 1980s. Philips was not able any longer to reply quickly to the changing market needs and their products cannot keep up with the competitor's ones as far as producing costs are worried.
In compare to Philips, Matsushita started out to extend internationally not before the end of the next World War. Thus, Matsushita could better react to the changing conditions than Philips could. Matsushita's organizational design could be best described as a representative of any 'global hub' form of firm (Lasserre 2007:72). Because of this global integrated procedure the company was more effective and a much better transfer of technology across edges was possible. Thus, Matsushita's divisional structure was more likely to respond to the changing environmental conditions in those days than the organizational design Philips used.
Due to its divisional structure Matsushita was able to develop distinctive competencies that helped the company to replace Philips as the key company in the electric market. In contrast to Philips, Matsushita's competencies were the following:
Headquarter's power to control their international subsidiaries. Due to the expatriates Matsushita has brief communication lines. The Headquarter could outvote the subsidiaries even though that they had great autonomy.
Economies of scale due to its early investment funds in low-wage countries.
Their ability to produce the actual people demand thus anticipating on the marketplace (for example the VHS).
Nevertheless, also Matsushita built some distinctive incompetencies that got an influence on its market position. There are two major incompetences that arrose in Matsushita.
Firstly they were highly centralized and their structure was inflexible. This resulted in a sluggish way to control change. The advanced of centralization and their high strucure have lacked Matsushita's advancement efforts. The recent different CEOs did try to increase the innovation, however the hierarchy was level and restructuring occurred. Moreover japan economy collapsed and this resulted major loss of profit. After all Matsushita was sluggish to control changes in the external evironment.
Secondly another major incompetence leads towards their dependency on competition in technical development. Since Matsushita was not an progressive company from the start, their main features were mainly the ability to mass creation towards an inexpensive. Matsushita is mostly fast in producing a similar product as the opponents produce. They conform quick to the marketplace. This plan is a little riskful, it is quite dangerous to count on other businesses regarding to the innovation process.
Additionally thera are some other incompetences that needs to be taken into consideration. Matsushita has a high turnover by unsatisfied international staff because of high control form Japan's highly centralized R&D operations. This cause a lack of initiative from foreign plants, they may be too dependent for the headquarter. This is stongly necessary for their technology development in international companies. The inability of the desructruction and creation program of Nakamura created confusion in the firm and has resulted in a decrease of turnover.
The procedure for change of Philips and Matsushita
Response to strategic and structural changes for Philips & Matsushita
Philips:
Objective 1: A safeguard of international sales and home company by techonological, monetary and political barriers.
Implementation: growing postwar organizations on home production facilities
Objective 2: economies of scale
Implementation: A decentralization of the sales and marketing department in 14 European countries, China, Brazil and Australia.
The impact of both objectives: Philips used a geographic/product matrix framework. The subsidiaries control of resources often underestimaded the role of home product divisions. The R&D section continued indie and expanded internationally. This resulted in a growing of country specific market conditions and increasing responsiveness.
Other implications:
The use of geographic/product matrix composition led to complexity.
Lose of market share to successful Japanese organizations, such as Matsushita
New products led to marketing disasters
Objective 3: The integration should be upgraded, there was a lack of communication.
Implementation: International Concern Council 1954
Impact: increased integration of managers with Nos and an improved coordination between Nos and home country.
Objective 4: A globalizing of the merchandise development, an increased control over local subsidiaries and targeting more efficient creation facilities
Implementation: The associations of the managers between PD's and NO's. With the aim to increase range of creation and move of goods. It was also important to close inefficient plant life and cover efficient plant life into International Products Centres. This might increase control PD professionals over NO's
Objective 5: Decrease costs, because of the competitive benefit of competition with cost leadership.
Implementation: Shifting creation to low wages countries. The PD/NO matrix dissapeared. There was an increaded concentration on new market requirements to acquire higher customer service. Philips focused on consumer electronics and shifted their resources to marketing. This resulted in a 40% increase advertising to generate knowing of the Philips brand
Impact: A much better market oriented product variety, global efficiency, the coordination increased income.
The development of common markets in the 60s and the erosion of trade barriers increased the necessity for globalization. Observed can be that Philips shifted towards a local focus, whereas the whole world was market to sustain competition. The centralization resulted a more worldwide procedure regarding to decision making, coordination and control of key functions (marketing and R&D. ) Those key functions were connected whick resulted in more market-oriented products. However, centralization experienced a huge effect on integrate operations, which contributes to less complexity and less cost/time effective. We agree that Philips created an improved mixture of standardization and differentiation anticipated to moving an adaptive differntiated product towards a standardized development process (economies of range. )
A main difficulty was the differ from a decentralized company to a centralized culture. This is a different way of acting and considering, more global thinking rather than number country.
The way Matsushita changes can be identified by the next objectives:
Objective 1: To develop just offshore and develop ground breaking and entrepreneurial initiatives in the international subsidiaries. This is implemented by Toshihiko Yamashita, who launched " operation Localization. "
The managers were afraid of a loss of work in Japan, increased abroad development would be the trouble of export sales.
Objective 2: Creating a little business evironment to provide growht and versatility. This was carried out by the divisional framework. The impact was that the divisional strucutre stimulated competition among divisions, motivating these to increase expansion by leveraging their technology investments into new developed products.
Objective 3: Chopping costs, because of the company's hight capacity, variety of products and network of merchants changed from resources to liabilities.
Implementation: Morishita integrated a restructuring
Impact: increasing of income, decreasing of low margin consumer electronics and a shifting into digital systems.
Matsushita is rolling out an alteration in their company structure. They have improved from a worldwide functional model, with centralized decision-making towards an international department model, where each department has more income responsibilities. However, Matsushita experienced built their global competitiveness on heir centralized businesses in Japan. The change has been good, because the main purpose of Matsushita is to obtain local responsiveness and preserving their strong global capacities. The international subsidiaries possess an increased degree of autonomy, but are on the other palm dependent on the home-country divisions for products and tech support team. This model offers the requirements on one hand the global efficiency and on the other hands local responsiveness.
Matsushita's and Philips' challenges of strategic and structural changes
The structural changes and social changes resulted in that Matsushita, like Philips, needed a chance to adapt to their new framework. The company's slow movements towards local senior-level management in their abroad subsidiaries and the unsuccessful work to integrate foreign managers at mature levels in the company are good examples of the challenges that Matsushita is facing. Composition and culture needs to be modified.
Current situation
Philips
Philips launched a 'Vision 2010' which attempts to simplify its organizational design by building three areas (Healthcare, Lamps and Consumer Lifestyle). Nevertheless, because of the current monetary situation, the financial targets set within Vision 2010 aren't likely to be met by the end of 2010 due to continuing economic crisis and the producing decreasing demands.
Nowadays, Philips has 134000 employees, contains more than 55000 patent privileges, has 33000 registered trademarks and reaches sales of EUR 27. 0 billion. Its head office continues to be in the Netherlands which is within over 60 countries worldwide (Philips. com 2008).
In 2004 Philips launched its "sense and ease" brand offer by which a fresh way frontward for the business started. The guarantee "Sense and Convenience" reflects Philips' determination to be always a market- powered company that provides products and services satisfying the promise to be "designed around you, easy to experience and advanced" (Philips. com 2008).
The predicted value of Philips brand has increased by 8 % in 2008.
The quest of Philips "Improve the quality of people's lives through well-timed introduction of significant innovations" plainly shows its focus on invention (Philips. com 2008).
Matsushita
In 2008 Matsushita was renamed as Panasonic Firm and all its brands were set up under the Panasonic brand. Nowadays Panasonic is one of the major electronic digital product manufacturers worldwide and comprises over 540 companies.
Panasonic's management philosophy is "Recognizing our duties as industrialista, we will spend ourselves to the improvement and development of world and the well- being of people through our business activities, in so doing enhancing the grade of life throughout the world" (Panasonic Firm 2010).
Recommendations
6. 1. Philips
Over the years Philips has been very successful in growing services. However, they were not able to successfully add them in the market segments. So Philips' pursuit to become a global leader has failed, but it still has features that its competitor Matsushita will not. Its capacity to innovate and develop new solutions and services is what made Philips successful and the best company to begin with and it must make an effort to exploit these capabilities further.
The major reason for Philips' failing is the fact that there was almost no marriage and coherence between your headquarter, the PDs, and the NOs. To improve this unprofitable situation Philips has made many tries to restructure its company in order to get more electric power/ control over their countrywide subsidiaries. Although those endeavors were very costly they didn't pay off for the business.
In order to help make the company profitable by successfully introducing new technology and new products to the marketplace, Cor Boonstra should make sure that the merchandise is implemented by the complete organization and not only by parts of it. Through a restructuring of the business this will be possible. The company should be restructured by doing so that the NOs have less power and they haven't any other opportunity than to follow the strategy that is given by the headquarter. Once they achieved an improved coherence they can concentrate on improving their corporate marketing strategy to better position their new inventions/ products.
Cor Boonstra could as well follow another technique to increase the product benefits: through licensing their systems and products the company will gain network externalities and therefore a competitive gain. In this way they can obtain the revenues with their normal sales as well as the earnings of these licences. This might lead to improve their competitive gain and their earnings, too, as they will be able to spend the money to help expand develop services.
An important factor is that Philips shouldn't give up its value proposition of being a 'technology programmer and global marketer', that will be the result of outsourcing nearly all its creation.
Matsushita
Regarding Matsushita it gets apparent that their main disadvantage was their centralized organization, which was the reason for the company's sluggish market responsiveness.
Matsushita's strategy of shopping for licenses of competitive manufacturers was successful and in order to internationalize throughout the world they used their competitive good thing about low- cost creation. To keep this position as a leading low- cost designer Yoichi Morishita should pay attention to further low- cost production facilities, thus, a higher local responsiveness is necessary. However, the transition to local senior-level management in its foreign subsidiaries has been gradual. This is why Morishita's goal ought to be to increase the transition to be able to gain benefit from the benefits of globalization and maintain their competitive gain. Additionally, an instant copy of specific know- how and important operations may be accomplished as well as the execution of more global integration and coordination. Then they can create a faster a reaction to local opportunities as far as the introduction of services is concerned. Subsequently, Matsushita will operate as you unit that focuses on the complete company profit rather than only focusing on the income in Japan.
Conclusion
Due to the decentralized organizational design Philips was able to end up being the leading consumer electronics company in the postwar age. However, as the surroundings changed, Philips cannot maintain steadily its leading position but lost it to Matsushita, which reacted to the changing environment by employing a global practical model.
To develop distinctive competences, both, Philips and Matsushita, changed their company framework. While Philips became a far more centralised company, Matsushita developed a more decentralized organizational design.
In the finish we can conclude that the most challenging influence that require to be tackled by both companies to enhance their position, is the creation of coherence between subsidiaries and headquarters. Besides, Philips should focus itself on successful bringing out new products and technologies and Matsushita should anticipate on the globalization of the marketplace, so that they can handle sustaining their competitive benefits in low-cost development.
