Académique Documents
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Matsushita
Assignment
2008 MBA/ENG 290G
International Competition in
Technology
Team 1
Value Chain:
Philips vs.
Matsushita
Team 1
Franck Formis, Robert Kong, Vincent Ng, Jameson Slattery, Chuohao Yeo
Porters diamond
Philips Matsushita
Factor Conditions
Initial tradition of bolstering education
Domestic throughout 20th century
Creation of the Common Market in
Since 1998, investing in R&D partnerships
1968 altered factor s of production
and technical exchanges abroad
(land, labor, and capital)
Not a multi-domestic market
Need to broader sources of
anymore
innovation
Demand Conditions
A single market
Growth through post-war boom
New Transistor and circuit-based Shift to export markets
technologies Earlier picture of emerging foreign
Unmet demand demand
Porters diamond (contd)
Philips Matsushita
Related and supporting industries
Principal agreement with GE in A technology exchange and
1919 > World split into 3 spheres licensing agreement with Philips
of influence Licensing of the VHS format to
By 1998, JV with Lucent to target other local manufacturers
VCR segment ~ 45% of
digital revolution
Improved performance profits
of scale
Matsushita: Centralized
Most decision made by headquarters and product division in Japan; local
China
Challenges faced
Philips Too Matsushita Too
decentralized centralized
Powerful and autonomous
Product divisional
national organizations (NOs)
Lack of company-wide
structure
Highly centralized services
strategic cooperation
among NOs Centralized product
Lack of accountability in development
NO/PD matrix Subsidiaries too
Management by technical & dependent on parent
commercial consensus company
Slow to respond Communications between
Inefficient production due to overseas subsidiaries and
local production centers parent company
Empower regional
Key restructuring steps
operations
Local customization of
Rein in NOs
Philips
production
Matsushita
Centralize production Combine single product
Focus on core businesses divisions
Empower global product Tap overseas/external
development innovation
Combine product divisions Remove historical
Remove historical organizational structure
organizational structure Name change to
Panasonic
Outcome and difficulties
faced
Philips Matsushita
Outcome
Continuing low profit Outcome
margins Low profit margins
Competitiveness Competitiveness
impacted impacted
Difficulties Difficulties
Conflicted local loyalties Culture of lifetime
Restructuring for employment
tomorrow using todays Organizational resistance
parameters Difficult Japanese
Cost-cutting in key economic conditions in
aspects, e.g. R&D 1990s
Philips becoming the leading
consumer electronics company
Focused on one product rather than diversifying in early days
Became leader in industrial research
Competence
Independent National organizations.
adept at responding to country-specific market conditions
Built their own technical capabilities to address local market conditions
consumer reaction
One-product-one-division system
Internal competition
Small business environment
countries
Product divisions were not giving sufficient attention to
international development
Oversea subsidiary companies act little more than implementing agents
New US CE Companies:
Apple, Chumby, Kindle, Microsoft, Roku & Tivo
Each firm is Each firm develops All firms make use Each company Apples distribution is
involved in product and controls the SW of contract manages the heavily skewed
design and components of manufacturers branding, toward direct (online,
development. their product stack. and/or ODM advertising and company-owned
partners. positioning of its retail stores).
Investments both in Each firm makes products.
hardware and use of third-party Partners include: Chumby is primarily
software R&D to HW components Asus Tivo makes use of available through
differentiate their (processors, Celestica distribution online distribution
products. memory, discrete Flextronics relationships with both direct and w/
components, Foxconn cable and satellite partners.
Leverage the R&D batteries, etc.). Quanta providers to market
investments of Wistron and sell its products Kindle is primarily
component Apple acquired PA and services to end direct
suppliers such as Semi and is now users, in addition to
Intel, Nvidia, developing its own Tivos direct Xbox 360 through
Samsung and chips for iPhone, marketing and sales nearly all online and
others. iPod and potentially initiatives. physical retail
Macs. establishments.
Team 2:
Jon Wiesner, Rachel Simon, David
ExpositoCossio, Yanpei Chen,
EmrehanKirimli
Porters Diamond: consumer
electronics industry
Japan: Centralized companies. Japan: highly demanding and
Reluctance to delegate activities. sophisticated internal buyers.
Process innovation rooted in Structure, Huge market.
culture. Huge local rivalry Strategy, Netherlands: small internal
Netherlands: Decentralized Rivalry market. Internationalization
companies. Low local rivalry needed to survive.
Factor Demand
Conditions Conditions
Common
Market
Competencies/Incompetencies
Fragmented product line
Adaptive to diverse markets / (no economies of scale)
1989 crash
Competencies/Incompetencies
Resistance by employees to
Strong culture, visionary leader/ structural change
Philips Matsushita
Historical: legacy of WWII and Cultural: lack of independent thinking by
decentralization of operations overseas subsidiaries
Cultural: strong cultural ties to Eindhoven Organization: legacy of product division
Organization: matrix organizational structure
structure constantly between PD and NO Employees: tradition of lifetime
reorganized employment
Manufacturing: late to outsource Managerial: highly centralized
manufacturing management style
Profitability: low margin business leaves Technological: over-reliance on declining
little room for error products (TVs, VCRs, etc.) and lack of
Technological: big bets on losing innovation
technologies and standards Structural and Macroeconomic: economic
Structural and Macroeconomic: high cost malaise in Japan starting in the 1990s
of layoffs of European workers
Mp3 Player Market
vs.
or Zune by
Microsoft
What has allowed Apple to succeed?
relaxed, casual, collegial environment with high-work ethic
emphasize on innovation and design (teams all over the world)
User Experience Architects Office was established to make
Apple products easier to use or Samsung
and Adidas
What should Philips and Matsushita do to compete?
focus on innovative physical appearance and user interface
add features like wireless sharing, games, etc. which iPod does not have
design more than just a player, also offer software platform that allows
music to be shared from PCs and other devices
partnership with companies to gain more youth population (ex: Samsung
& Adidas vs. iPod & Nike )
Team 3
Philips vs. Matsushita
End customer
house Distribution
Customer
R&D MFG and centers,
service
direct retailers
sales
In-house Outsourced
End customer
Direct
Distribution
and Customer
R&D MFG centers,
online service
retailers
Sales
In-house Outsourced
Corporate culture
Organizational
structure
Apple is vertically integrated, designing its own operating system.
Christian Huth
Lakshmi Jagannathan
Christopher Quek
Daisuke Tanaka
John Michael Wyrwas
Philips challenged with independent national
organization focusing on R&D
Factor Conditions
Dutch legislation prevents
hostile raids
Bureaucracy leads to slow-
moving transformation of
company
CEO succession hinders
continuous development of
Firm Strategy, Structure &
strategy Supporting Industry
Rivalry
Original competitive leadership Technology-sharing agreements
by commercial and technical and offshore manufacturing shall
functions (PD/NO matrix) was lead to reduced costs
succeeded simpler and
structured marketing and
manufacturing organization
Original worldwide portfolio of
responsive national organizations
increases manufacturing costs
(start of outsourcing)
Strong industrial research
Demand Conditions
Adoption to local markets by
independent national
organizations in marketing as
well as in product development
Matsushita with centralized organization and strong
manufacturing capabilities
Factor Conditions
High value-add per hour in
manufacturing
Low labor costs in developing
countries where parts of
manufacturing is outsourced
Early trade-liberalization enabled
Matsushita to start export
business
Firm Strategy, Structure &
Supporting Industry
Rivalry
Worldwide business based on Low shipping rates reduces
centralized, highly efficient logistics costs
organizations in Japan R&D partnerships and
Shift to local sourcing over time, technical exchanges as well
but still in control of output as outsourced R&D (VC,
(quality, productivity etc.) incubator and technology
Expats spreading company partnerships)
culture and technologies Dynamic new digital
Operation Localization - networking technologies and
Internationalization including business models enabled by
manufacturing abroad and internet lead to pressure
increasing independence from
Japan (but still dependent)
Demand Conditions
Japan as home market as early
technology adopter
Worldwide information of local
demand provided by expats
Philips Value Chain
Inbound Logistics
Philips has many suppliers (255+) around the world, but they have a close
connection with all of them
Supply Management plays a key role in value creation, and 74% of Philips
spend on suppliers is now centralized or center-led.
ThePartners for Growth strategic supplier relationship management
program brings Philips together with its top 30 suppliers
Global Supplier Rating System (GSRS) is now operational in all businesses,
resulting in a more professional structural supplier performance
measurement and subsequent improvement actions (84% of Philips
spending went for this last year)
Operations
Low Cost Country Sourcing in China: main supply base and manufacturing
center
Other smaller manufacturing facilities in 25 countries (including
Netherlands, France, Belgium, Hungary, Mexico, Argentina and Brazil)
The Supply Market Intelligence and Services group (SMIS) work closely
together with businesses to identify supply market opportunities around the
world
Philips Value Chain
Research and Development
$2.2 Billion spent on R&D (2007)
Some Areas of Research: Drug Delivery Potential of Microbubbles, Contrast
Agents for Medical Applications, and OLEDs as the future of indoor lighting
Marketing and Sales
Philips sells its products using dedicated sales representatives, telephone
(to big customers), ODMs, OEMs, retail, website, and indirect channels
Philips markets to its big customers (for ex: in healthcare industry) through
its sales force and its small customers (for ex: individual consumers) via
web, TV, and print/advertising
Sales organizations in more than 60 countries
Service
Customer Support is very specialized since Philips products cover many
areas
24 Hour Support for Consumer Electronics (such TV, portable electronics,
etc)
24 Hour Professional Support for its health care products, lighting, and
specialized businesses such as Dictation and Speech Recognition Systems
Specific product-based FAQs and online support along with phone support
Matsushita Value Chain
Inbound Logistics
Matsushita is dependent on the ability of third parties to deliver parts,
components and services in adequate quality and quantity in a timely
manner, and at a reasonable price
It is not dependent on a single supplier, and has no significant difficulty in
obtaining raw materials from suppliers.
In addition to devices/products, Matsushita makes its own components and
devices used in various products ranging from AV equipment and
information and communication devices to home appliances and industrial
equipment.
Works closely with its third party suppliers for timely and quality in the
deliver of its components
Operations
Main Manufacturing center and operations in Japan
Overseas, Matsushita plans to expand its manufacturing bases, particularly
in South China and Vietnam, in response to rising demand for components
and devices.
Matsushitas international business operations is risky because of political
instability as well as cultural and religious difference.
Matsushita Value Chain
Research and Development
$5.6 billion spent in R&D Costs (in 2007)
Develops unique technologies via a high level of cooperation, not only
through in-house production, but also through a sophisticated network of
cooperation among materials, components and devices, and finished
product divisions
Some Areas of Research: Full HD plasma TVs, Blu-ray disc (BD) recorders,
and Energy Efficient/ Eco Friendly Products
Marketing and Sales
Sells to small customers, individual customers, and big industries
Promotes environmentally friendly products
Sells its products using local retailers, phone/online system, retail stores,
and indirect channels (OEMs and ODMs)
Sells its parts and services to the same set of customers
Service
Customer Support is very specialized since Matsushitas products cover
many areas
24 Hour Support for Consumer Electronics (such TV, portable electronics,
etc)
24 Hour Professional Support and Business Support for its small customers
24 Hour Support Specific to OEMs and its industrial customers/products
Philips in the post-war era
Competances Incompetances
Protected company Weak control of
resources through war national organizations
by transferring abroad by Netherlands-based
Strong, self-sufficient product-divisions
national organizations created conflicts in
Product development company strategy
and industrial design Local production plants
responds to regional could not take
customer preferences advantage of
Decentralized economies of scale
marketing and sales
Inability to capitalize
Innovative R&D on R&D
Matsushita Competitive Analysis
Core Strengths:
1. Manufacturing:
Globally standard manufacturing processes created economies of scale
(lower costs) and knowledge transfer between different manufacturing
facilities.
Matsushita shifted certain manufacturing processes to low cost
countries, but kept highly technical manufacturing process located in
Japan. This ensured the highest quality at the lowest cost.
2. R&D:
Centralized R&D process where core designs were established and
local offices made feature requests to tailor products to regional
markets.
Underfunded the Central Research Lab to encourage the development
of marketable technologies.
3. Localized (Regional) Autonomy:
Local offices were given the authority to create and execute local
strategies with oversight from the main office.
Regional offices were able to alter products and product portfolios to
meet local demand.
Matsushita Core Weaknesses
Core Weaknesses:
1. Power of the Central Organization:
The power exerted by the central organization limits regional
innovations.
2. R&D
The R&D structure is good at making marketable products but not
good at creating new technologies.
It is a culture of fast follower R&D.
Organizational Changes: Philips
1950s
Different standards and consumer preferences across countries
led Philips to give power to the NOs
Successful until Common Market eroded trade barriers
1970s
PD>NO
Decrease SKUs, build scale, and increase flow of goods
Create International Production Centers
Slow implementation and NOs continued to have power
1982
Shut inefficient operations
Off-shore manufacturing alliances
PD>NO
Focused on core operations
Sales declined and profits stagnated
Organizational Changes: Philips
1987
Goal: increase profits and beat the Japanese
Strategically linked core businesses
Restructured around 4 core global divisions
Linked PDs with their markets
Halved spending on basic research to 10% of R&D
Huge cuts in plants and employees
Loss of $2.5 billion and a shareholders lawsuit
1990
Cut 22% of workforce
Sold various businesses
Expand software, services, and multimedia
Focused on developing 15 core technologies
Low morale and lack of focus on new market demands for
segmented products and higher consumer service
Organizational Changes: Philips
1996
No taboos; no sacred cows
Slashed 3,000 jobs in N American
Added 3,000 jobs in Asia
Huge cuts
Relocated headquarters to Amsterdam
Bet on digital revolution
Focus on marketing
Achieved objective of a 24% return on net assets
2001
Outsourced mobile phone production
Seeks to sell off manufacturing of mass-produced items
Focused on developing 15 core technologies
Loss of 2.6 billion euros. Become a technology developer
and global marketer?
Organizational Changes: Matsushita
Nakamura
From super manufacturer of products to meeting customer
needs through systems and services
Empower employees to respond to customer needs
Destruction and creation disbanded product division structure
Streamlines plants: now integrated into multi-product production
centers
Streamlines marketing divisions: Panasonic and National
First losses in 30 years accelerated: Matsushita seen as a
takeover target
The Apple Slide
Vertical integration
First to offer excellent hardware, software, and content
iPod and iTunes
Successfully convinced content providers to allow sale of
mp3
R&D
Idea was not internally developed, but execution was
Strong collaboration with Portal Players who did bulk of the
software and hardware development
Manufacturing
Outsourced all manufacturing
Steve Jobs
Genius CEO with a vision
Involved in unusually detailed aspects of daily business
Team 5
Philips vs
Matsushita
Group 5:
Varun Boriah
Sonia Fereres
Dilip Joseph
Brendan Quinn
Ada Zheng
Porters Diamond for Philips vs Matsushita
Factor Conditions
Philips
Geographic location: small country
situated in central Europe
Initial workforce deeply involved in
technological development in appreciation
for firms strategy of investing in
education, housing, improvement of
workers conditions locally.
Expensive local labor
Matsushita
Geographic location: immersed in Asian
market
Skilled, relatively low cost resources
Porters Diamond for Philips vs Matsushita
Demand Conditions
Philips
Limited domestic market pushes
international growth
Close to local market needs & opportunities
due to decentralization (NOs)
Matsushita
Large & highly demanding Asian market for
consumer electronics
Porters Diamond for Philips vs Matsushita
Related & Supporting Industries
Philips
No cluster effect
Lack of domestic competitors
Matsushita
Cluster effect: development of Japanese
consumer electronic industry &
competition
Porters Diamond for Philips vs Matsushita
Firm Strategy, Structure & Rivalry
Philips
Decentralization, local management & diversification
Product specialization (light bulbs) extend technological
advantage to other products
Dual management system: National Organizations (NOs)
and Product Divisions(PDs)
Matsushita
High quality, low cost, standardized products mass
production
Highly centralized organizational structure
Rivalry with other Japanese CE industries (e.g. Sony in
Betamax vs. VHS)
Centralized
Internal Product Value Chain
Decentralized
Physics and Highly centralized in Overseas joint ventures Exported into diverse
chemistry labs built Eindhoven created to gain market markets, i.e. Japan,
to address problems place Australia, etc
Competencies
Local knowledge of market NOs - Can response quickly to local demand
In house R&D - Leader in industrial labs, both Physics and Chemistry
Incompetencies
No clear line to define role of NOs and PDs
Bureaucracy - NOs and PDs conflicts
Slow to bring new product to market
Series of bad decisions - from various CEOs
Centralize to core business & acquire related companies too late
Dead technologies - V2000, CD-I, DCC, analog HDTV
I
Matsushitas competencies and incompetencies
Competencies
Cost advantages
Enhanced Productivity
Cost advantage of Japanese after WW2
Shifting basic manufacturing to Asia
Caught up with foregoing companies
Learn the strengths of others
Adopted the divisional structure
Giving each division clearly defined profit responsibility for its product
Foster internal competition
Adoptedg VHS of JVC instead of Betamax
Increased capacity and reduced price: accounted of 30% of total sale
Incompetencies
Laying off employees is relatively difficult in Japan
Strong influence of the founder, Konosuke Matsushita
I
Changes of Philips and Matsushita
Objectives:
Phillips Establishing effective system and organization to compete in
the global markets, especially with Japanese rivals
Matsushita- Effective internationalization with global expansion of the
businesses
Implementations:
Phillips -focused on core business by selling some businesses but made
lots of bad decisions, Turmoil at top level
Matsushita Localization was fostered but the system centralized to the
Japanese headquarter was remained
Impact:
Phillips Small positive effects on performance
Matsushita Localization effort supported the global business expansion
I
Why hard to change?
Long history
I
The New US Consumer Electronic Companies:
Apple, Tivo, Roku, Chumby, Kindle, Microsoft
What are their positions in the Value Chain?
Unique product designs, i.e. having lots of style, though may not
be cheap.
Excellent marketing and branding exercise, to give the appeal of
consumer items as luxury and personality statements.
Own retail outlets, to have more control over launch and
distribution.
Control over music distribution as well, in the form of itunes.
Over all perception of brand very favorable.
More centralized company organization.
And, last but not the least, the importance of leadership cannot
be more emphasized. Sans Jobs, things might be much different.
What should Philips and Matsushita do to
compete?
KC Chen (Team 7)
Anthony Goodrow
Andrew Liao
Piyapat Tantiwong
Sha Tao
FS
R&SI
Rich R&D resources in UK and US
helped the company to diversify its
assets (research labs) and resources
Matsushita: Porters Diamond
Centralized Decentralized (tilting from PDs to balanced NO/PD
matrix)
Many products, good distribution Localized MFG and R&D
Very good at time-to-market, not always a pioneer
Hierarchy weakened organizational transformation
FS
Lowered domestic
Lack of English post-war growth and
capability required saturated distribution
more staff FC D channels forced
(expatriate company to export
managers)
C Strong yen prompted
overseas production
R&SI
High value electronic components
Philips: Internal Value Chain
Tried to strike a balance between product divisions (PD) and national organizations (NO)
Some PDs merged to form international production centers (IPC)
IPC
PD PD PD
Power
Struggle Communication
link broken
NO NO NO
Matsushita: Internal Value Chain
Parent company in Japan has tight control over all divisions (DIV)
Basic technology at central research laboratory (CRL)
Parent
CRL
No HDQ
R&D
information underfunded,
exchange divisions
compete for
funding
PHILIPS MATSUSHITA
Competencies Competencies
National responsiveness Global scale efficiency
Technology-driven Market-driven rapid
innovation innovation
Operation Innovative capability & Personnel, technology, Nearly no changes on the way
Localization entrepreneurial initiatives material, capital branches operate
To deal with Japans Move production overseas Delivered a sign that he gave up
Morishita downturn & to enhance and start joint venture with looking for innovation
R&D abilities foreign academics internally
To transfer Matsushita
Destruction and creation
from manufacturing to Almost made Matsushita to be
Nakamura program to make flatten the
services to meet takeover
hierarchy
customers
New U.S. CE Companies
Apple
TiVo
Roku
Chumby
Kindle
Microsoft
Position in Value Chain
Tivo, Roku, and Chumby
All three companies are providing a widget to connect the existing
multimedia entertainment to the internet. They do not have the contents
and the widgets are not really technologically advanced, but the idea to
provide an interface for consumers to enjoy shows or programs is become
increasingly popular. Their products opens new markets for both the
entertainment industry and internet applications.
Apple, Kindle
Both are back up by companies that have already developed strong
product (online books and music) and customer bases. The iPod, iPhone,
and Kindle are new channels to sell Apple and Amazons online services.
Microsoft
Microsoft is the largest OS provider on the PC value chain and is
successfully leveraging its large market share to penetrate into any
possible market, such as online services and gaming consoles (XBox).
How can Philips and Matsushita
compete with Apple?
Fuat E. Celik
Gopal Chaudhoory
Ignacio Contreras
Francois Gallet
Camilo Mendez
Porters Diamond
Philips Matsushita
Regionalized focus independent management Centralized focus dependency on
Functional division (Biz vs Engineering) headquarters
Not-invented-here culture Business line division
Government protectionism Copycat / follower culture
Government encourages competitiveness
Firm Strategy,
Factor Demand
Structure and Rivalry
Conditions Conditions
Philips Philips
European countries heterogeneity Heterogeneous European cultures
encourages customization to local
Related and leads to differences in demand
markets (distributed approach) Supporting Industries High income fosters desire for
Expensive labor focuses differentiated / tailored products
companies in product Philips
differentiation strategies Underdeveloped ecosystem derived
Matsushita from lack of competition (world divided Matsushita
Japanese geographical isolation between GE and Philips) Big but isolated domestic market
promotes focus in domestic market drives focus in local market
(centralized approach) Low income in Japan (per-70s)
Cheap labor (pre-70s) focuses Matsushita cultivates low-cost strategies
companies in cost-cutting Developed ecosystem derived from
intense competition (Sony, JVC, Population eager to adopt new
strategies tech
Sanyo, etc)
Porters Diamond Analysis
Philips strategy Matsushitas strategy
The Bad
restructuring reform
The Ugly
Decentralization leads to organizational inertia and the company is slow to react to
changes in market conditions in a World economy
Matsushita Overtook Philips
Matsushita dominated its home market by offering thousands of products at its tens of
thousands of retail locations
Corporate culture valued low cost and High degree of centralization stifled
high profit operations and held each innovation
division accountable for meeting goals
The Bad
Manufacture needed to relocate to
Centralization led to cost- cheaper labor markets to stay
The Good
Matsushita was quick to adopt Weak R&D efforts and expenditure led
standards, allowing it to achieve high to undifferentiated products and
sales volumes on products it would commoditization, which led to shrinking
otherwise struggle with margins
The Ugly
Matsushita is now forced to look outside the company and outsource its innovation in the
hopes of developing differentiated products and more profitable ventures
Philips reorganizes its activities,
focusing on its core competencies
Objectives
Increase profitability
Drive costs down to get back in the competition
Implementation
Focus on core competencies (technology development and
marketing)
Simplification of the network
Outsourcing of manufacturing activities to Asia
Impact
Fairly good financial impact in the 2000s
Huge loss of human capital
Matsushita is moving up the value
chain
Objectives
Become a leader in technology development
Mitigate the R&D risks
Implementation
Increase of the investments in internal R&D
Creation of the PDCC: investment in external R&D (open
innovation leader)
Impact
External growth or Spinning-in
Increased dependency on external factors
Copying Apples Strategy: making the
best of an existing technology
Philips
Small country, immersed in the European eco-system and constantly
exposed to other forces.
Small local work force.
When Philips become international they have the potential and try to
utilize the strength of the different Geographies they operate in.
(Manufacture where its cheap, R&D where they have talent etc.)
However, European regulations require expensive HR.
Matsushita
Substantial local market, in a country that isolated from the rest of the
world.
Local highly skilled and disciplined work force with life dedication to the
company
Japanese norm make it hard to change the HR structure of the org
(Lifetime employment)
Japanese Yen making it hard to export from Japan and creating a need to
Porters Diamond
Demand conditions
Philips
Demand has to come from other parts of the world.
Exposed to all market forces and competition in every single segment.
Matsushita
Substantial local demand with high rewards as well as losses when there
is a slowdown.
Until 2000 centralized strategy with strong product divisions located in
Japan.
At first, hard to compete in international markets because lack of brand.
Later becoming the OEM for other brands (video)
Porters Diamond
Related and supporting industries
Philips
Depend on the country the NO is located in. Not related to specific
industries in particular countries.
Complete decentralization. Each NO totally responsible for its results.
Matsushita for the majority of its life span was highly focused on
central management and Japan based product divisions. The central
R&D got its resources from the product divisions. The international
operations were traditionally just local manufacturing to overcome
import / export obstacles. The main components and knowledge was
always Japanese, most of the value stays in the headquarters.
How did Philips
Lead?
Competencies
Self-sufficiency allowed ability to respond to country-
specific market conditions
Product development as a function of local market
conditions
- (Philips of Canada first color TV; of Australia first
stereo TV; of United Kingdom first TV with teletext)
Direct and frequent communications between NOs and
top management
Development of elite expatriate managers that can
represent country-oriented views
How did Philips
Lead?
Incompetency's
Inability to boost production levels to increasing global
demand
Production within the NOs nations, not the low-wage
areas (East Asian, Central and South America in the 1960s)
Lack of centralized marketing strategy (Philips continued
to innovate, but unable to compete effectively to capture
the mass market (e.g. audiocassette and microwave oven)
Disagreements among the NOs and contradiction with
the research arm of Philips (Philips V2000 videocassette,
superior to Matsushitas VHS, but was outsourced,
branded, and sold by North American Philips under license
from Matsushita)
The history of strong individualized NOs resisted
reorganization
How did Matsushita
overtake?
Competencies
Matsushita was more successful in maintaining control over its
national organizations. It did this by having expatriate
Japanese managers, technicians, and advisors in overseas
offices. Philips national organizations operated independently
from the home base.
Matsushita had more focused company-wide effort on
products. Highly centralized R&D operations in Japan
governed direction of research in overseas companies e.g.
Motorolas TV business. Philips product development differed
between national organizations.
Matsushita was faster at getting products to market than
Philips.
Incompetency's
In the 1990s, Matsushitas management was unwilling to
restructure some of its inefficient production facilities in Japan.
Change is difficult
Philips
Multiple organizational shuffles primarily aimed at becoming
more profitable/efficient and client focused.
Company culture orientated towards R&D rather than
Marketing, difficult to shift focus of existing employees.
Continual cost cutting measures and relocation of HQ affects
the core culture of the firm.
Matsushita
Multiple policies implemented to attempt to decentralise
organisation.
Success in decentralisation difficult due to reluctance to remove
roles from Japan.
Lack of transferring roles resulted in competitors undercutting
the firms pricing structure.
Apples Success
Great Marketing Firm
Distribution Channels include Apple Stores
Use of iTunes as a reverse razor and blade model
Stylish product design
Team 10
Anirban Sen
Raluca Scarlat
Elihu Luna-Thomas
Yilun(Alan)
Porters Diamond-Philips
Factor Conditions
Among largest producer of light-bulb
Geographically diversified research facilities and local tech talents, managers
Trade barriers and tariffsforced to build local production facilities
Demand Conditions
Expansion to Europe, Asia, US, etc., capture world market share
Diversification of product range
Supporting Industries
Globalizing product development and production
Strategy, Structure, & Rivalry
Wrote down assets rapidly to use new production technology (1910s)
Tradition of caring for workers (1912)
Adapt to country specific market conditions National Organizations(1930s)
Restructure(1987), core business vs. non-core business
Outsource most of manufacturing and become technology developer(2001)
Rivalry: GE, Japanese counterparts, and other local competitors
Porters Diamond-Matsushita
Factor Conditions
Highly skilled work force
Post war rebuilt, pro-business
Cost rise in 1960s in Japan
Demand Conditions
Post war boom
Export --> global leadership through VCRs
Domestic market demand collapsed(1999)
Supporting Industries
Fast copycat
Offshore innovations
Strategy, Structure, & Rivalry
First to adopt divisional structure, internal competition(spin off hungry spirit)
Strong centralization gradually weakened (Operation Localization)
Rivalry: GE, Sony, Philips, etc. China, Korea
Value Chain
Global Tech
Domestic, Asia, US, Suppliers Support
Europe
Expansion Global
Individual, Business,
Government Assembly
Service
Global
R&D Logistics
Strategy
Sales &
Marketing
Distribution
Philips success after the war
Matsushita had a long term vision (250 year plan). This was very
uncommon for most international companies. The plan was broken
into 25-year stages.
Philips decentralized operations and R&D during WW2 to US and
UK. This gave those organizations autonomy, but also made it
difficult to control them post-war. An example was the development
of V2000 format, but North American Philips adopted VHS which was
a Matsushita standard.
Philips focused on cost cutting through layoffs and selling off various
businesses and R&D units such as integrated circuits. With new
leadership, and new strategies, some of these business units were
needed and not available to Philips in the development of their
strategy. Therefore, Philips was resigned to continue to outsource
even more of their operations and become a technology developer
and a global marketer.
Matsushitas strengths
Did not move as quickly into low wage labor markets and as a result
lost some competitiveness to companies such as Matsushita.