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Philips Versus Matsushita

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Zachary Ceban

on 3 June 2014

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Transcript of Philips Versus Matsushita

Where It All Started
1892: Gerard Philips opens small light bulb company in Eindhoven, Holland

1899: Philips began to diversify their business; exporting to Japan, Australia, Canada, Brazil

1900: Philips becomes largest light bulb manufacturer in Europe

For the longest time Philips only manufactured light bulbs.

Company policy was to concentrate on innovations & improvements

History Continues
1912: Philips begins to build sales organizations in the U.S.,
Canada & France

1918: Philips began producing
electronic vacuum tubes &
other products

Rise of WWII
1930’s: In anticipation of the impending war, Philips transfers overseas assets to British Philips and the North American Philips Corporation

Individual national organizations (NO's) become more independent during the war
Maintaining Connections
1954: Corporate established the International Concern Council to formalize regular meetings with NO's

1960’s: Philips begins to experience pressure from the creation of the European common market

1970’s: Company begins reconstruction under new CEO Hendrick Von Riemsdick

Riemsdick proposed a rebalancing between NO's & product divisions (PD's)

Matrix Tiliting
1982: Philips closes additional 40 plants in Europe due to in efficiancy

1984: Philips sells their 100 millionth TV set

1987: Matsushita gains #1 spot ahead of Philips in consumer electronics

Van der Klug Era
Philip's net profit margin during most of the 1980's was between 1% and 2%
- Compared to the competition:
a.) General Electric 9%
b.) Japanese Competitors 3% - 4%

Set a goal to reach a net profit margin of 3% to 4%

Segmented Philips' products into two categories:
- Core: (light bulbs, components, consumer electronics, telecommunications / data systems)

- Non-core: (Domestic appliances & Medical Systems)

Restructured Philips to concentrate on 4 PD's, instead of 14

"Potential Growth" Era
1994: The company begins to move to new growth strategy

1996: Cor Boonstra steps in as CEO, the former CEO of Sarah Lee

1998: Cor Boonstra announces new strategy in preperation of Digital revolution

Kleisterlee's Focus
Repositioned Philips as a "Lifestyle" brand

Removed remaining in-house production to
low cost countries

Reduced personel by 600,000

Reduced the number of retail chains it served
Philips' Success in the Past
Culture embracing technical innovation

Movement of assets overseas caused the national organizations to become self-sufficient

NOs had a great advantage in being able to sense & respond to differences in their local countries
Developed Incompetencies
National organizations became overpowered

No unification thoughout the organization

Unable to establish product divisions & coordinate NO's
Slow implementation of change due to:
- Failed consolidations

- Reduced compentency in R&D

The Winds of Change
Suggestions to Kleisterlee

Relocate specific modules such as:
- Development
- Manufacturing
- Marketing
- Services

Continue developing products under "Lifestyle" brand

Divest Miscellaneous expenses and place in R&D
Once Upon a Time...
1918: Konosuke Matsushita investes ¥100 to start production of double-ended sockets.

The company rapidly expanded, offering different products such as:
- Battery-powered lamps
- Electric Irons
- Radios
1932: KM developed a 250-year plan, broken up into 25 year sections.

He also developed the "
Seven Spirits of Matsushita
," and they are:
Service through Industry Fairness
- Harmony and Cooperation
- Struggle for Progress
- Courtesy & Humility
- Adjustment & Assimilation Gratitude
1932: Matsushita became the first Japanese company to adopt a divisional structure

Each division had a manger and was expected to keep operating profits above 4% of sales

Each division paid 60% of earnings to hq and the remaining 40% financed fixed assets & working capital

1953: The first overseas branch office opens, the Matsushita Electric Corporation of America

1960's: Government pressure in Southeast Asia, Central Amerca, and South America forced the company to open up plants

1970's: Politcal pressure from the North American & European governments caused the company to build plants
Distance Communicating
Overseas companies would report to corporate in two ways:
- wholly owned, single product plants would report to product division

- Sales & marketing subsidaries would report to METC
Yamashita's Plan
In the early to mid 1980's, host countries were receiving high levels of local pressure.

Toshihiko Yamashita launched "Operation Localization" to:
- Boost Offshore production to 25% or half of overseas sales

- Entise oversea companies to become more entrepreneurial in nature
Yamashita’s Successor
In 1986, Akio Tanii tried to expand upon Yamashita's Plan

Tanii's plan called to intergrate oversea & domestic operations

Operations would then be controlled by local markets such as the U.S., Europe, and Southeast Asia

Expressed Change
Yoichi Morishita was Tanii's successor

Around this time Matsushita was still facing difficult times, especially in Japan's consumer electronics market.

Morishita wanted to implement change, but internal resistance prevented him from doing so
Transformed old production lines to modern flexible manufacturing centers.

Company dropped lifetime employment, resulting in:
- Cost reductions
- New generation of managers

Grouped all business into three specific categories:
- Home appliances
- Digital Networks
- Components
Matsushita's name change to Panasonic

Sales decreased 20%

Operating profit drastically decreased 84%

Closed 27 plants & reduced staff
Ohtsubo's Inherited Collapse
Matsushita's Success
Stronger coordination between subsidaries compared Philips

When local markets were saturated, Matsushita followed a
global strategy

Matsushita stayed in control of the company’s subsidiaries
Matsushita's Difficulties
Stifled creativity at the foreign subsidiaries was caused by control

Unable to develop innovative companies overseas
Matsushita's Change
Recommendations for Eumio Ohtsubo
Hire individuals within the country they are working on

Hiring locally & involving those employees help to build strong relationships

Invest more in R&D and become a innovator
Unwilling to restructure inefficent facilities
in Japan

Overall Matsushita's consumer electronics division was reporting profits, however they were also loosing revenues in potential growth areas.

Matsushita reacted slowly to Japan's recesssion, causing them to loose their manufacturing advantage over competitors
Nakamura's Configuration
Full transcript