Philips versus Matsushita

Bhavna Gaule, 157/45 Deepika Raj, 172/45 IIM Calcutta

Founded in 1892, Gerard Philips, Eindhoven, Holland  Single product focus, employee welfare  Technology and product development core strengths  Decentralized, joint leadership management style  Highly autonomous responsive national organizations

Founded in 1918 by Konosuke Matsushita in Osaka, Japan  Invested 100 yen to produce double-ended sockets. Expanded to various products  First Japanese company to adopt the divisional structure

◦ “One-product-one-division” ◦ Internal competition fostered among divisions

Flood of products in post war boom  Matsushita built its success on its centralized, highly efficient operations in Japan

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) Power struggle between Nos and PDs  NOs had the real power  PDs found it difficult to get their voices heard  Difficult to account responsibility 2.1.) Late to market  Decentralized organizational structure and autonomous national organizations  Example: failure of V2000 .

) Closure of inefficient plants – huge loss of manpower  Loss of human resource capability on account of cost cutting  Example : Failure of HDTV technology owing to 37% cut in R&D personnel 4.) Lack of coherence in strategy and structure  Failed to adapt to the changing demands and the strengths of the competition .3.) Trade barrier erosion – independent country level subsidiaries rendered unnecessary  Rivals moving to low cost regions 5.

       Highly centralized and inflexible organization structure: Slow to manage change Dependence on competitors for technological innovation Threat of discontinuous innovation which may drastically change product technology Excess capacity and evaporating profits Disgruntled overseas staff Lack of initiative by foreign plants Chaos by ‘Destruction and Creation’program .

Philips Matsushi ta .

Pursued a multinational approach  Managing risks against impending wars  Autonomous national organizations controlled their own marketing. production and R&D decisions to respond to country specific demands  Opening up of trade barriers – Shift in strategy to low cost scale intensive approach  .

      Matsushita’s main internationalization motive was market seeking and cost reduction It aimed to get benefits from economies of scale by pooling production & other activities Exploited lower factor costs by moving production to low cost countries Increased operational & production flexibility Increased bargaining power with suppliers Global availability. serviceability and recognition .

Matsushita Philips .

cost . Learning & Adapting Philips learned from societal differences in organizational and Matsushita benefitted from experience.National Differences Scale Economies Matsushita benefitted from differences in factor costs such as wages and cost of capital Matsushita expanded and exploited potential scale economies in each activity Achieving Efficiencies Scope Economies Matsushita shared investments and costs across products. markets and businesses Philips did portfolio diversification to create options for various kinds of consumers in different markets Managing Risks Philips managed different kinds of risks arising from market or policy induced changes Innovating.

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Architecture FORMAL NETWORK INFORMAL NETWORK .

 Decentralized structure to cater to different market tastes  . cultivated competitive behaviour.Routine  Company policy to renew plant machinery  Power conflict between NOs and PDs  Shutdown of a number of inefficient plants marked by a great deal of turnover  Structural changes incompatible with strategy of the firm Culture  Joint leadership.

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Various product divisions competed amongst themselves for market.     METC and the product divisions used to set detailed sales and profit targets The company hired Japanese managers and technicians on foreign assignments to build relationships Regular face-to-face meetings between managers of foreign subsidiaries and the headquarters Independent product centers. One product. funds. R&D etc .one division structure to maintain the ‘hungry spirit’.

Centralised decision making  Reliance of foreign subsidiaries on centre  Japanese collectivist culture clashed with American individualist culture  Lack of technological innovation  Tendency to outsource  Internal competition amongst divisions  Global strategy not aligned to structure: Lack of integration of business decisions  .

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designed around – healthcare. lighting. and consumer lifestyle  Improve delegation of responsibilities to avoid lag in response time  .Sustained investments in R&D and marketing  Increase employee morale. reestablish innovations and efficiencies  Find a structure in tune with the operational strategy The current organizational structure.

     Multi-product divisions created by Nakamura might be a loss making step for short term but it may prove beneficial for long term Matsushita should encourage innovation in its own organization and subsidiaries Prevent excessive interference of centre in foreign subsidiaries Engage workforce and understand their issues before implementing organizational changes Integrate structure to pursue global strategy .

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To integrate decision making .000 registered patents and has sales of EUR 27. holds more than 60.0 billion (39 billion US $) Presence in 60 countries Brand promise: Sense and Simplicity Product innovation main business focus Supervisory board above Executive management board.000 people.      Simplified its organizational structure under vision 2010: only 3 product divisions/ sectors Employs134.

 . Oct 2008  All brands consolidated under Panasonic  556 companies.Renamed as Panasonic Corporation. 14 business domains  Own R&D. speech recognition etc. production & sales divisions  Links global risk management activities with business plans  Brand slogan: Ideas for life  Increasing focus on innovation: Usability Centres  Working on digital technology.

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