Philips vs. Matsushita
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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
1.) 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.) Late to market Decentralized organizational structure and autonomous national organizations Example: failure of V2000
3.) 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.) Trade barrier erosion – independent country level subsidiaries rendered unnecessary Rivals moving to low cost regions 5.) Lack of coherence in strategy and structure Failed to adapt to the changing demands and the strengths of the competition
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
National Differences Scale Economies
Achieving Efficiencies
Managing Risks
Innovating, Learning & Adapting
Matsushita benefitted from differences in factor costs such as wages and cost of capital
Matsushita expanded and exploited potential scale economies in each activity
Philips managed different kinds of risks arising from market or policy induced changes
Philips learned from societal differences in organizational and
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
Matsushita benefitted from experience, cost
Architecture
FORMAL NETWORK
INFORMAL NETWORK
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, cultivated competitive behaviour, Decentralized structure to cater to different market tastes
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- one division structure to maintain the ‘hungry spirit’. Various product divisions competed amongst themselves for market, funds, R&D etc
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
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, designed around – healthcare, lighting, and consumer lifestyle Improve delegation of responsibilities to avoid lag in response time
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
Simplified its organizational structure under vision 2010: only 3 product divisions/ sectors Employs134,000 people, holds more than 60,000 registered patents and has sales of EUR 27.0 billion (39 billion US $) Presence in 60 countries Brand promise: Sense and Simplicity Product innovation main business focus Supervisory board above Executive management board- To integrate decision making
Renamed as Panasonic Corporation, Oct 2008 All brands consolidated under Panasonic 556 companies, 14 business domains Own R&D, 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, speech recognition etc.
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