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Copy of Copy of Philips vs. Matsushita

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Saad Mirza

on 24 June 2014

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Transcript of Copy of Copy of Philips vs. Matsushita

The Competitive Battle Continues
History of PHILIPS
Restructuring of PHILIPS
History of Matsushita
Restructuring of Matsushita
Business Level Strategy of PHILIPS
Question 3
Question 4
: trying to stay afloat, drastic cuts were made over time, many systems/procedures were also adjusted
NOs allowed for customer customization, this proved later to be a problem with NOs having so much informal power
: NOs had informal power over PDs, NOs consisted of two managers; technical and commercial, with some having a 3rd-financial
: Strict accountability when company was unprofitable, drastic employee and manager cuts were made on a regular basis
4 S's for PHILIPS
4 S's for Matsushita
Achieve worldwide presence, whether by the Matsushita image or producing for competitors
Competitive divisions, MCA, METC, MECA allowed Matsushita to develop innovative production and development systems in an efficient manner
Each product was made in its own unique division, to function independently and promote internal competition
60% profit to headquarters and 40% back to the division provided an extremely profitable organization, while ensuring its own future success
Business Level Strategy of Matsushita
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?
How did Matsushita succeed in displacing Philips as No. 1? What were its distinctive competencies and incompetencies?
1918- Founded by Konosuke Matsushita
1932-KM unveiled 250-year corporate plan
1933- First Japanese company to adopt a divisional structure.
1951-Technology exchange and licensing agreement with Philips.
1950s-Trade liberalization and lower shipping allowed Matsushita to build export business
1953-Opened its first overseas branch Matsushita Electric Corporation of America
1960s-Opened of plants in South America & SE Asia
1970s-Establish assembly operations in the Americas & Europe
1977-1985 Matsushita increased VCR capacity 33-fold to 6.8 million units, customers like GE, RCA, Philips and Zenith outsourced to the low-cost Japanese
1980s VCR propelled Matsushita into first place in the consumer electronics industry.
Organizational Structure of Matsushita
Gerard Philips (1892)
One-product focus, used new factories & machines for production efficiencies

Transferring assets & labs overseas, reliance on national organization
Ability to respond to country-specific market conditions
Van Reimsdijk & Rodenburg (1970s)
Yellow Booklet: establish responsibilities between NOs and PDs
International Product Centers were built to increase the flow of goods among NOs, sizing down dual commercial and technology managers to one
Power struggle continued between NOs and PDs
Wisse Dekker (1982)
Reduce financial problems
Shut down many European plants
Sales still declined and profits were stagnant
Van der Klugt (1987)
Beating the Japanese competition
Established 4 core businesses, closed significant amount of plants, reduced R&D spending
Unanticipated losses came with class-action suit and 1/2 management replaced
Jan Timmer (1990)
Turn around the bankrupt company, expand software, services and multimedia
Cut more jobs, committed managers to financial goals
R&D personnel cuts left the company with few who understood technology, thus no innovation
More structure, simpler manufacturing and marketing organization
Sold 1/3 of the businesses, shift production to low-wage countries, replaced PDs with 7 division and 100 business units, and increased market efforts
Performance improved, reaching 24% return on net assets
Cor Boonstra (1996)
Gerard Kleisterlee (2001)
Increase sales, outsource activities where they cannot add value
Closed European plants
Shareholder pressures rise, reported losses
Konosuke Matsushita (1918)
To build a successful company through fairness and giving back to the world around them
Opening of National Shops, various attempts at product line extension, outsourced production, licensing agreements, METC, Worldwide production
Successful development of efficient, superior VHS production and good relationships
To help overseas companies develop the innovative capability and entrepreneurial initiatives
Operation Localization: personnel, technology, material and capital
Overseas productions remained too dependent on the central organization
Fully integrate domestic and overseas operations
Brought foreign subsidiaries under control of METC, then put METC under parent company, purchase of MCA
$17.5 billion in liquid financial assets until the bubble burst in 1992
Simple, small, speedy and strategic
Sold 80% of MCI, shifted production to offshore companies
The driving down of prices and increased competition meant that Matsushita struggled
Raise profitability to 5% of sales, super manufacturer of products, meet customer needs through systems and services
Integrated one-product divisions into multi-product centers , marketing centers for Panasonic brands and National branded products
Earnings estimates had to be adjusted downward and there within Matsushita looking like a good buyout opportunity
Toshihoko Yamashita (1982)
Akio Tanii (1986)
Yoichi Morishita (1993)
Kunio Nakamura (2000)
What they are doing today...
Panasonic Corporation is a worldwide manufacturer of electronic products, which are marketed and distributed on a global scale. Panasonic has evolved into a lifestyle company, in that their brand promises to have their name on products and services that connect with every facet of daily life.
Panasonic Corporation is comprised of three main business segments:
Consumer: AVC Networks Company, Appliances Company
Devices: Automotive Systems Company, Industrial Devices Company, Energy Company
Solutions: Eco Solutions Company, Healthcare Company
Each company has its distinct R&D, production, and sales functions that satisfy specific consumer needs worldwide.
1892-Founded by Gerard Philips
1900-Became largest producer of light-bulbs in Europe
1912-Exported to Japan, Australia, Canada, Brazil and Russia
1919- Entered Principal Agreement with GE to share patents
1926-Radios captured 20% of world market
1930-National Organizational divisions est. in U.S., Australia and France
1951-Technology exchange and licensing agreement with Matsushita
Adept ability to respond to local needs
Independent self-efficiencies of national organizations
Organizational Structure of PHILIPS
Anton & Gerard Philips

Group 7
Haaris Habib
Hassan Zubair
Saad Aamer
Sana Rashid Khan
Taha Saeed
Zahra Haroon

Konosuke Matsushita
Consumer Electronic Industry
History of Philips
Question #1
Restructuring of Philips
History of Matsushita
Question #2
Restructuring of Matsushita
Business Level Strategy
4 S's
Porter's Five Forces
Organizational Structure
Question #3
Question #4
What they are doing today
Case Questions
Question 1
Question 2
Question 3
What do you think of the change each company has made to date- the objectives, the implementation, and the impact? Why is the change so hard for both of them?
Fumio Obtsubo
Matsushita succeeded Philips as the number one consumer electronic leader with their mass-production of the VCR in the 1980s.

Centralized structure aligned with Global strategy
Fast and efficient operations
Quick introduction of new products to market
Highly competitive-internal environment spurred growth
Economies of scale (high quality producer at low cost)

Too much of centralization structure
Inflexible structure (slow to manage change)
High turnover in foreign subsidiaries
Culture decreased flexibility
Subsidiaries too dependent on central headquarters
Reputation of slow innovation and imitation
Changes made to date
The realization that they need to have a strong centralized organization to have economies of scale for production and to also have flexibility to adapt to the desires of local markets.
Porter's Five Forces
Power of Buyers
Threat of New Entrants
Power of Suppliers
Threat of Substitutes
Intensity of Competitive Rivalry
Innovative research and development of new products
Utilization of new advances in production technology
Unable to reap economies of scale
Organizational structure identity
Postwar Era
What recommendations would you make to Gerald Kleisterlee? To Kunio Nakamura?
Functional Structure of a Cost Leadership Strategy
Competitive Form of the Multidivisional Structure for Implementation of an Unrelated Strategy
Change so hard?
The change was difficult for both Philips and Matsushita for the reasons that changing of the company culture is difficult as well as changing of an international company.
Objectives, Implementation, Impact of Philips?
Consolidate the most efficient plants into International Production Centers by closing the inefficient plants, cut spending and reorganization. This impacted them in that they were losing money and lost their competence in R&D
Objectives, Implementation, Impact of Matsushita?
Give more power to its overseas subsidiaries such as the 1982 “Operation Localization” by relocated many major regional headquarters, consolidate manufacturing facilities and reorganization. The impact was that Matsushita developed a competence in innovation.
Recommendation for Gerald Kleirsterlee
Not give up on the company’s value proposition of being a technology developer and global marketer, needs to find the correct structure to suit its operations and its strategy by finding a structure that is compatible with its strategy
Recommendation for Kunio Nakamura
Have a new marketing initiative to help the company become locally responsive but the management might have to sacrifice short-term profits for long-term success, seek out someone for consultation with their workforce when going into the large-scale restructuring of the relationship between strategy and structure.
Case Questions
Question 4
Question 1
Question 2
Fundamental Traits of Organizational Effectiveness
1.Everyone has a good idea of the decisions and actions for which he or she is responsible.

2. Important information about the competitive environment gets to headquarters quickly.

3. Once made, decisions are rarely second-guessed.

4. Information flows freely across organizational boundaries.

5.Information did not fl ow freely across organizational boundaries.

6.Important information about the competitive environment did not get to headquarters quickly.

Mapping Improvements to the Building Blocks:
Some Sample Tactics
1. Focus corporate staff on supporting business-unit decision making.

Clarify and streamline decision making at eachoperating level.

Focus headquarters on important strategic questions.

Create centers of excellence by consolidating similar functions into a single organizational unit.

Assign process owners to coordinate activities that span organizational functions.

Establish individual performance measures.

Improve field-to-headquarters information fl ow.

Mapping Improvements to the Building Blocks:
Some Sample Tactics
Define and distribute daily operating metrics to the field or line.

Create cross-functional teams.

Introduce differentiating performance awards.

Expand nonmonetary rewards to recognize exceptional performers.

Increase position tenure.

Institute lateral moves and rotations.

Broaden spans of control.

Decrease layers of management.
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