Phillips vs Matsushita

Phillips and Matsushita have seen a variety of tactics over the years, which have contributed to the two organizations’ distinct organizational approaches. While Philip focused its activities on a global portfolio of responsive international organizations, Matsushita investigated its global competitiveness through centralized and productive operations (Bartlett and Ghoshal 2002, p. 101). Nonetheless, due to the magnitude of the risks to their business positions and strategic strategies, the two firms have undergone a number of changes. The case explores several issues, history, and vital aspects of Philips and Matsushita, companies that many consumers recognize adequately in the worldwide user electronics market (Bartlett 2009, p. 311). Currently, Philips has its base in Amsterdam, Netherlands, and Matsushita now Panasonic in Osaka, Japan.

By 2001, the companies were to launch a series of strategic plans and organisational restructuring aimed at sustaining their competitive edge. Nonetheless, they perused such goals using different strategies. While Matsushita relied on its centralised operations in Japan to build its core business, the achievements of Philips were founded on a global establishment of autonomous national organisations. As such, they emerged with different organisational capabilities. Accordingly, this case analysis will explore the aspects that made Philips a leading company in consumer electronics and how Matsushita succeeded in displacing Philips in its position. The paper will also outline my views on the change that the companies have made to-date and recommendations to make to the companies_x0092_ top leadership.

How Philips Became the Leading Consumer Electronics Company, Distinctive Competence and Incompetence

Philips in a technology company operating in different countries across the globe with its headquarter in Amsterdam. The primary company divisions deal in lighting, healthcare, and electronics. The healthcare division deals in medical systems while the consumer lifestyle_x0092_s focus is on personal care, consumer electronics, and domestic appliance. The last division is Philips lighting. The company was the largest manufacturer of lighting in 2013.

Gerard Philips and his father founded a small light-bulb company in 1892 in Eindhoven, Holland (Bartlett 2009, p. 311). The venture experienced tough challenges leading to the recruitment of Anton, an excellent sales manager, and Gerard_x0092_s brother. In 1900, the factory became the third largest light-bulb manufacturer in Europe. Philips the differentiated itself from other companies operating in the same industry and as such developed a tradition of caring for its workforce through education, profit sharing, and good pay among other benefits (Bartlett 2009, p. 311). 1899 showed the company hires its first manager to consider operating in the international markets and as such, the company ventured outside Holland and Europe. The countries of operations became Brazil, Canada, the U.S., Australia, and Japan. Nevertheless, all functions of the company continued to be centralised in Eindhoven, and as such, Philip created local ventures to aid in gaining entry into local markets. As a result, late 1890’s, as well as the early 1900s, characterise the factory as a single product company producing light bulbs.

By the 1920’s, the company from its highly centralised operations to a multinational, decentralised organisation with comprehensive product lines in the electrical as well as electronic industries. Its centralised nature characterised sales conducted through third parties. As such, the decentralisation helped it have autonomous marketing companies in Brazil, China, Australia and 14 European countries. The product lines included the production of electronic vacuum tubes and X-ray tubes (in the 1930s) (Bartlett 2009, p. 312). The 1960s and 1760s showed a series of changes in the market such as the creation of the European Common Market eroding trade barriers and Philip_x0092_s attempts at reorganisation.

Before the war, Philips had a decentralised sales organisation with independent marketing companies in different countries around the world. The national organisations (NOs) helped Philips sense and respond to market demands in the countries hence creating a competitive advantage. The post war era also showed the company gain success and generated comprehensive volume of sales. The National Organisations helped serve other markets efficiently. They came after the Second World War and were critical to the distribution of products to the customer. They significantly increased self-sufficiency. Given that, the NOs worked with their local demographics to respond to their varied needs; they influenced much of the product development despite the existence of 14 product divisions in Holland. As such, the company was in a position to diversify its product offerings and meets different demands of their customers (Ford, Garnsey and Probert 2010, p. 83). During the post-war era, Philips became a leading consumer electronics company primarily because of its autonomous business model. Based on the case, the company moved many of its resources and assets away from the home country of operation due to the war. The assets transfer went to North American Philips Corporation and British Philips (Nelson and Wright 1992). The movement included the members of the top management to the United States and vital research laboratories to Surrey, England. As a result, individual companies became independent from the parent company during the war. They understood their customers and adapted their businesses to country-specific market conditions.

Philips initially had a small domestic market and as such went abroad early on making it explore international trade sooner than its competitors did hence realising a competitive advantage. In the 1930s, Philips changed to a multinational company and became a leading consumer electronics corporation since it focused on one product rather than diversification during its early days of operations, being a leader in industrial research and use of independent national organisations (Ford, Garnsey and Probert 2010, p. 87). The NOs built their technical capabilities, enforced specific research to industries through an enhancement of Research and Development budget.

The companies were known for its ability to adapt to the local market conditions, fostering of employee centric values, influential national organisations, its 14 product divisions (PDs) and Nos and the ability to build technical capabilities. Such variables formed the company_x0092_s competencies. The company_x0092_s reputation changed over time after the war and many of the competencies it had turned to be impediments in the 1970s. Trade liberalisation in addition to lower shipping costs in the 1950s and 1960s reduced the rationale of Philips independent NOS (Bartlett 2009, p. 313). Philips_x0092_s competitors such as Matsushita took advantage of the situation to build a robust market share by creating a strong export business. Besides, Philips faced a cost disadvantage given its differentiated products in different countries and decentralised production activities and by 1987,

Moreover, the company could not control all of its subsidiaries and coordinate the product divisions (PDs) in Eindhoven. The lack of effective coordination between the NOs and the PDs made it impossible for Philips to persuade its American subsidiary and the North American Philips Cooperation to sell the V2000 videocassette format. The NACP instead sold VHS, licensed by Matsushita. As such, the company lost its leadership position to Matsushita hence losing its reputation.

Historically, Philips has been known as the leading consumer electronics company in the world. The company established its distinctive competencies making it a world reputable electronics corporation. Its abilities to respond to changing customer needs and cross-functional coordination of activities make it a well-recognised company. Besides, Philips has been good at enduring its commitments to innovation. The past decades have seen the company provide innovative solutions to hospitals_x0092_ problems of patient care and workflow. As such, the company has moved from being a small light-bulb company to an innovative company producing 3D scanners, AlluraClarity interventional X-ray system and the Philips Smart Air Purifier for the 21st century needs (Wojnarowski and Minnear 2002).

Philips had many weaknesses hence making its competitor_x0092_s do better. Its product division did not have real power. NOs ignored the primary welfare of the company and only focused on local profit. Besides, the company had many factories across the world leading to problems such as high costs of operations and challenges of outsourcing. Among other weaknesses of the company also included lack of economy of scale in manufacturing and inadequate abilities to bring its products to the markets despite the existence of many technological innovations.

Notably, Philips became the leading consumer electronics company due to their early internationalisation, protection of assets abroad during World War II, local responsiveness, strong capabilities in manufacturing as well as adequate abilities in innovation. Nevertheless, this case analysis shows that Philips_x0092_ business environment had many challenges and needed effective address through strategic and organisational changes. The challenges made Philips lose its market lead while struggling to keep up with the needed changes after the postwar-boom, which in turn made Matsushita succeed in displacing it from its number 1 position.

How Matsushita Succeed In Displacing Philips As No. 1?, Distinctive Competencies And Incompetence

Matsushita was a Japanese industrialist. He founded Panasonic, the largest consumer electronics corporation in Japan. At 22, Matsushita got a promotion to become an electrical inspector of Osaka Electric Light Company. In 1917, he left the company to set up his own business (Wright and Roy 1999, p. 52). Matsushita dealt in the manufacture of electric lamp sockets and plugs when it was founded, in the 1930s, it increased its product lines to include radios, photographs, irons, and light bulbs as well as transistors radios, tape recorders, household appliances, stereo equipment and television sets during 1950 (Wright and Roy 1999, p. 55). The next decades included the production of microwave ovens, videotape recorders, and air conditioners. Other products that the company deals in entail minicomputers, solar batteries, electric motors, cathode-ray tubes and telephone equipment among others.

In 1918, Matsushita Konosuke, 23, invested his money to start production of double-ended sockets (Bartlett 2009, p. 318). Matsushita later changed swiftly into a multi-product electrical organisation. During this period of expansion, the company engaged in the manufacture of electric irons, battery-powered lamps, and radios. In 1932, the company had 162 employees and established a 250-year corporate plan codified in the creed of the _x0093_Seven Spirits of Matsushita._x0094_ In 1933, Matsushita adopted a divisional structure of operations. Matsushita transformed into a multinational corporation with many plants in different countries across the world In the 1950s and 1960s. Matsushita owned the subsidiaries in the foreign countries as single product plants or rather companies with an international product line for local the markets.

In the post-war era in 1960, the company made introductions of the flood of new products including electric ovens, dishwashers and color TVs. The period also characterised increased production in the electronics industry. Furthermore, the company proliferated via the use of a one-product-one-division structure that fostered self-sufficiency. The slowed post-war growth in later years meant that the firm_x0092_s excellent distribution systems and product line expansion would not work and hence the company looking to export markets. The 1980s characterised a tight central control of the enterprise due to expatriate Japanese in overseas subsidiaries with strong network connections in Japan (Bartlett and Yoshihara 1988, p. 21). The company went through a series of changes over the years and in 2008, Matsushita was given a new name, Panasonic Corporation. Currently, Panasonic is among the largest electronics manufacturers globally and encompasses over 540 corporations.

In replacing Philips as number one company in electronics productions, Matsushita focused its competitive edge in low cost, high quality, and standardised products in the better parts of the 1970s and 1980s (Wright and Roy 1999, p. 57). The company had a rapid process and product innovation and needed to focus on export sales in different regions of the globe. Matsushita had a market share of 40% appliance stores in Japan. The company capitalised on increasing the line of its products to 5,000 through the opening of 25,000 retail outlets. Such strategic moves led to direct access to consumer reactions and market trends hence an increase in the volume of sales.

The company became the first Japanese corporation to adopt a division structure. The structure made the company gives its divisions clear and defined profit responsibilities hence creating a small corporate environment that aided in maintaining growth and flexibility. Besides, the divisions generated competition among themselves. While Philips decentralised its production activities leading to series of cost and managerial problems, Matsushita_x0092_s global organisational model was a centralised process and product innovation (Bartlett and Ghoshal 2002, p. 101). It also made the development and production of its products responsibilities of its divisions. As such, through such strategic plans and effective coordination of the divisions, the company was able to take over the position that Philips previously enjoyed.

Nevertheless, the company could not operate without critical competencies as well as in-competencies. The key competencies included fast follower_x0092_s strategy, broad line of products and centralised structure of operations. On the other side, its in-competencies included inadequate resources of new development, strong leadership and inability to compete adequately with firms that outsourced to low-cost factories.

Over time, the company has developed a change in its structure. It has changed from a global functional model that had a centralised decision-making to an international division model with each division gave profit responsibilities. Matsushita built its global competitiveness on centralised operations in Japan, a real change that had an objective of the Matsushita to obtain local responsiveness as well as maintain their strong global capabilities (Bartlett and Yoshihara 1988, p. 21). Besides, the company_x0092_s reputation is still stable because its overseas subsidiaries have continued to possess a high degree of autonomy as well as dependent on the home-country divisions for technical and product support hence making the company maintain its reputation. The model provides the necessities and the global efficiency for local responsiveness.

The company has been good at giving quality products at competitive prices to the consumers. Besides, it has also focused its competitiveness in standardised products and low costs. The company appeals to consumers what its fellowship strategy, which let other corporations blaze the road with new products, and when the market develops, Matsushita moves in and clutches a large share of it.

The company had a series of weaknesses or in-competencies. The first weakness was its highly centralised nature making their structure inflexible, which resulted in ineffective ways of managing change. Their tall structure and high level of centralisation affected Matsushita’s innovation attempts. Different CEOs tried to improve the company_x0092_s innovation, but it became difficult because of a flat hierarchy (Daft 2007; Deshpandé, Farley and Webster 1993, p. 25). Besides, the collapse of the Japanese economy led to a major decrease in profit as the company was slow to manage changes in its external environment. Another main incompetence was the company_x0092_s dependency on competitors in technical innovation since it was not an innovative corporation from the beginning of operations. During such periods, the critical capabilities were their ability to mass production in low cost. Matsushita has the power to produce similar products as the competitors produce at low costs. They are fast followers and quickly adapt to the market, a risky and dangerous strategy. Additionally, among other incompetence of Matsushita included a high turnover of unsatisfied overseas staff resulting in a lack of initiative from foreign plants.

Looking at what was going on when Matsushita displaced Philips, Philips started to internationalise in 1912 and during this time, the First and Second World War had influenced its organisational design. As such, its multi- business geographical model became unsustainable due to environmental changes in the 1980s. Philips failed to respond quickly to the changing market demands showing incompetence and as a result, its products did not keep up with those of the competitors.

Matsushita started expanding internationally after the end of the Second World War hence was in a position to react to the changing conditions than Philips hence a matching consumer demand. The company_x0092_s organisational design was a representative of a ’global hub,’ a globally integrated approach that became more effective. The company_x0092_s divisional structure effectively reacted to the changing environmental conditions.

The Change, Each Company, has made to Date _x0096_ Objectives of the companies, Implementation, the Impact. Why the Change is Hard for both Of the Companies

There were local and cost pressures when operating outside the hometown. Every organisation was in need to move its strategy towards transnational by reducing costs and modifying products. Such strategic objective did not work for both of the companies. Both Philips and Matsushita failed at the implementation stage of the exaction of their strategic goals. There was a problem with the company_x0092_s organisational structures as it was an aspect of management that became difficult to put through necessary changes. Resistance from employees characterised institutionalised routine that needed a newly established framework to replace the original organisational structures.

Philips

Overtime, Philips objectives have included the need to protect home and overseas sales by technological, political and economic barriers as well as to achieve economies of scale. The implementation of the objectives included developing postwar entities on domestic production facilities and decentralisation of the marketing and sales department in different countries. The objectives had impacts such as underestimation of the role of home product divisions, expansion of R&D division hence an increase market conditions and responsiveness. There were also in the product matrix structure and loss of market share to Matsushita. Other objectives included increasing globalising of the product development and more efficient production facilities implemented through improving the relationships between PD’s and NO’s as well as to decrease costs achieved through a shifting in production to low wages countries. The impact entailed global efficiency, increased profits and an improved market oriented product variety.

Philips_x0092_ structure was decentralised, and most of the managers who had an adequate understanding of organisational dynamics and talents were in NO and not PD, and competitive edge stemmed from the NOs, and as a result, reorganisation would undermine the NOs_x0092_ powers and untangle one of the company_x0092_s key competence (Rugman and Hodgetts 2001, p. 335). Philips generated a better mix of differentiation and standardisation because of a shift in an adaptive differentiated product to a standardised production process. A key difficulty the company faced was the change from a decentralised organisation to a centralised culture. Matsushita

The objectives to develop offshore and establish innovative initiatives in overseas subsidiaries implemented through the launch of operation Localisation; to create a small business environment that provides flexibility and growth implemented via a divisional structure and to cut costs implemented through a restructuring defined the Matsushita_x0092_s changes. The impact of such objectives included divisional structure stimulating competition among divisions hence increasing growth through leveraging technological assets into new products, managers being afraid of a decrease of employment in Japan and increase in profit margins, a reduction of low margin consumer electronics as well as a shifting into digital technologies by the company.

In the past decades, Matsushita has managed to develop a change in its organisational structure from a global functional model that had a centralised decision-making to embrace an international division model. The international division model characterises more profit responsibilities. This type of change has helped the company to obtain local responsiveness as well as maintain strong global capabilities. The subsidiaries in the foreign nations had a high degree of autonomy though dependent on the home-based country divisions for support. Matsushita had a centralised structure with a lifetime employees who made it difficult for it to restructure. Any reorganisation would undermine the company_x0092_s key competence of cost efficiency. Based on the current situation, Philips launched its ’Vision 2010_x0092_, which aimed to simplify its organisational structure in three sectors lighting, consumer lifestyle, and healthcare. Conversely, in 2008, Matsushita rebranded to become Panasonic Corporation as earlier mentioned.

Recommendations to Gerald Kleisterlee and Eumio Ohtsubo and Conclusion

Philips: Gerald Kleisterlee

Philips’ pursuit to becoming a global leader failed despite the company_x0092_s capabilities to innovate as well as develop new products and technologies that became part of its success. As such, it must exploit the capabilities further (Chandler et al. 2009, p. 50). Gerald should try to work towards centralising Philips operations, and its headquarter should be relocated to a more vibrant market to foster the managerial abilities and progressive changes. As a result, Philips will be in a position to service its customers efficiently. The company should also employ more resources to the department of Research and Development to have a chance of engaging in more innovative product lines.

As the company_x0092_s success was in producing new products despite their inability to make successful market introductions, there is a need to reconsider such strategy. The company also needs to improve the coordination and relationships between PDs, NOs and the headquarter to aid in introducing new products and technologies to the markets. Lack of coordination between PDs and the NOs was the primary reason for the company_x0092_s failure. Nevertheless, Philips has attempted to restructure the company to gain control over their national subsidiaries. The company should concentrate on improving its market strategy to position itself.

The restructuring should ensure that the NOs have less power and concentrate on improving corporate marketing strategy. Notably, Philips should not give up on its value proposition and goal of being a ’technology developer and global marketer.’

Matsushita: Ohtsubo

On the other hand, Ohtsubo should revert to its true methods of operations. Its centralised operations with exacting overseas controls are best suited for its model. It was a good idea to outsource Research and Development, hence the company should continue to explore such avenues, and the ability to channel its products quickly to the market past those of the competitors should be improved.

Besides, the company should work towards a more decentralise company to reduce its slow market responsiveness. They should be able to sustain their competitive advantage in low-cost productions and focus on coherence between headquarters and subsidiaries (Chandler et al. 2009, p. 52). The main disadvantage of Matsushita was its centralised operations. To maintain its position as a leading low- cost producer, Ohtsubo should improve on its low- cost production facilities. The company_x0092_s goal is to carry out all its activities following the basic management philosophy.

Conclusion

Phillips and Matsushita have had different strategies in the past many decades making up different organisational strategies of the two companies. While Philip built its activities around a worldwide portfolio of the responsive international organisation, Matsushita looked into its global competitiveness based on centralised and efficient operations. In 2001, the two companies planned to launch a number of strategic plans and organisational restructuring that was to help them sustaining their competitive edge. However, they perused such goals through various strategies such as centralised operations in Japan to build a core business for Matsushita and a global establishment of autonomous national organisations for Philips. As a result, the companies emerged with dissimilar organisational capabilities.

As aforementioned, Philips_x0092_ decentralised organisational design made the company become the leading consumer electronics corporation in the postwar era. Nevertheless, environment changes made it not possible for Philips to maintain the position hence lost to Matsushita, a company that had the capabilities of reacting to the changing environment through implementation of a global functional model. To cultivate distinctive competencies, Matsushita and Philips changed their organisational structure with Philips becoming a more centralised entity and Matsushita developing a more decentralised design. Therefore, the above recommendations are necessary for helping the companies improve their positions.

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