Philips and Matsushita – Strategic Analysis
Case Source: Harvard Business review – Philips versus Matsushita: The Competitive Battle Continues. by Christopher A. Bartlett . HBS Premier Case Collection. 20 pages. Publication date: Dec 11, 2009. Prod. #: 910410-PDF-ENG
Describes the development of the global strategies and organizations of two major competitors in the consumer electronics industry. Over four decades, both companies adapt their strategic intent and organizational capability to match and counter the competitive advantage of the other. The case shows how each is faced to restructure as its competitive advantage erodes.
Factors that pushed the leading company Philips consumer products are historically foresight prior assessments of the second World War, which included splitting off of and evaluations of the entire European continent company systems. This has created a competitive advantage in world class immediately after the war, because the independent factories were built in the target countries which adapted themselves to local markets and consumer preferences in terms of types of consumer culture Philips marketed the products.
Capabilities uniqueness of Phillips resulted capabilities Financial management and planning of the headquarters, the concentration of R & D on the other hand providing flexible capabilities, innovation and creativity in terms of marketing the products in target markets. As well as the company's research was characterized as applied research connected to the product group through financing cross and while maintaining the affinity for the target markets different. the management structure in common – Technical – Commercial possible decision-making process optimized taking into account technical aspects, financial and marketing headquarters to the boards of junior local. And finally, unlike its competitors, the early 20th century specialized Phillips capability building sales are international.
Company main limitations are:
1. Decentralized company structure. This structure can be almost complete independence with regard to subsidiaries manufacture and sales activities.Structure has an advantage in terms of proximity to the area and the ability of survival (such as Mlh"ha the two) and a disadvantage in terms of control of the parent company and the transfer of Board Decisions and strategic changes.
2. At Phillips was a strategy of local production. Was that the advantage of flexibility to local market but lack any related economies of scale such as this was Lmtzosita. In addition, with regard to valuation of the company as a whole, corporate structure consisting of units of a many independent is not possible to Philips to create strategic moves worldwide such as marketing and standardization of world class products.
3. Look inside social which was a limiting factor was Employee participation in the profits of the company, this will have an impact and financial limitation which was taken over many years. Matsushita's move and bypassing market leadership Philips done by focusing on economies of scale, so by concentrating production in creating cheap little product costs, thereby increasing the attractiveness of products. Also creating a very extensive product offer (5000 products Sony Lmtzosita vs. 80). In addition, Matsushita was in the D – constant internal organization which is generally characterized by increased efficiency in some cases increasing decentralization (marketing and sales) on the one hand and increasing the concentration of the other (administrative). Matsushita took care products for the high quality product while creating low market price and especially the standardization of products. Matsushita's capabilities are characterized by:
1. Production capabilities (centralized production, low price) and creating economies of scale.
2. Control of global marketing
3. Copying technology capability and bring it to market quickly in a short time but also in manufacturing and technology innovation.
a. Centralized strategy has prevented the expansion of sales and marketing.
b. Subsidiaries lacked innovation capabilities mainly due to the limited independence.
c. Lack of adaptability of products to local markets due to administrative centralization. Four. General production surplus and lack of innovation in the departments of R & D. Increasing development teams outside of Japan did not solve this problem.
Philips took the same operational efficiency while Matsushita Lmtzosita sought to innovation as the Philips subsidiaries. Phillips: The purpose of Philips changes were increasing the profitability beyond 1-2 percent.The measure was increasing administrative centralization, reducing products, building economies of scale in production and increasing operational efficiency and logistical.Implementing the changes would involve many difficulties despite repeated attempts of closing factories, consolidating departments and concentrating production of standardized products.Desired result is not reached and Philips remains with fewer profit margins very close to bankruptcy in the 90's. The massive task of re – organization (layoffs, reduction plants, the sale of inefficient units and focus on marketing) of two CEOs in the 90's formed the basis for possible change in product strategy and growth of mid-2000.
Matsushita: The purpose of Matsushita Corporation of changes to the 90 was an imitation of Phillips capabilities in terms of the creativity of their subsidiaries, decentralization of sales and marketing and allowing a degree of changes in the products to fit different markets.Implementing the goals of Matsushita in two main ways. One concentration and administration staff bodies to create an administrative avenue lean and efficient, and concentration of production centers and the expansion of production capabilities for enterprise. On the other hand expansion and decentralization of power and authority of sales and marketing agencies.The result was the continued growth and increasing sales and the company's cash to purchase capabilities of giant American companies (MCA). The financial crisis of the 90 Japan dealt the cards of the robust growth of Matsushita. Moreover headquarters was not committed enough to match the look of the general financial situation in Japan. However, changes in the new company's management strategy early in 2000 such as decentralization down and focusing on the needs of various markets and increasing the flexibility and the company's response in terms of matching services and products allowed the company to rise back in terms of sales and profit.
Our offer two CEOs is merging the two groups one international company large (such as the merger of Sony and Ericsson). Merger will also create an advantage on the one hand in terms of scale, such as manufacturing abilities and efficiency of operations and logistics (the advantages of Matsushita) and other capabilities technology innovation and flexibility in reading the local markets and adjustment products and services to local markets (Phillips) and a massive global presence together. union membership will allow one reducing equivalent products or the creation of brands at different levels and on the other hand general enlargement of the basket of products and services.
4-1 Philips versus Matsushita: The Competitive Battle Continues1.How did Philips become the leading consumer electronics company in the world in the postwar era? What distinctive competence did they build? What distinctive incompetencies?Because of small domestic market, Philips was forced to go abroad early on. This made them explore international business much earlier than other companies. With World War II in sight, Philips had shifted a large part of their company abroad. National Organizations learned to understand their customers and adapt their business locally (local responsiveness) to country-specific market conditions. During the post war era, Philips gained success, and the company was able to adapt to country-specific market conditions. It helped Philips to expand to other countries, and it also generated wide volume of sales. Philips also developed National Organizations(NO’s) in different countries, which helped to serve other markets easily. NO’s were built after the Second World War. They were helpful to distribute products to the customer while taking care of specific customers’ needs as well as country and market needs. They greatly increased self-sufficiency. The company’s change to a multinational company in the 1930s was also a specific point when Philips was the leading electronics company. The way that Philips became the leading consumer electronics company is thanks to focusing on one product rather than diversifying in early days. Therefore, it became the leader in industrial research. And it had independent national organizations. It is because theyfit the country-specific market conditions. Also, they built their own technical capabilities to address local market conditions. Related with prior efforts, it enforced specific research to markets by enhancing the R&D budget. To recap, their competencies were the ability to adaptin Local market conditions, strong national organizations, employee centric values, 14 product divisions(PDs), and NOs built their technical capabilities and product development Philips.But Philips had incompetencies, too. Its product division had no real power. NO ignored main company’s welfare and focused on local profit only. Also, too many factories over the world caused the problem. Because of that, the cost became higher, such as outsourcing. There were also no economy of scale in manufacturing. Although its many technological innovations, the ability to bring products to market was weak.In conclusion, Philips became the leading company due to their early internationalization, local responsiveness, protection of assets abroad during World War II, strong capabilities in manufacturing, and innovation. However, the case shows that Philips’ business environment was changing and needed to be addressed through organizational and strategical changes. After the postwar-boom, Philips lost their lead as they struggled to keep up with the changes.