Philips vs Matsushita

A New Century, a New round

VS

Presented by;
Gohar Fatima
Sadia Khan
Rabiya Khan
Jilal Janjua
Philips vs Matsushita

 Two players (Dutch & Japanese)

 organizational restructuring and re-organization by
subsequent CEOs.
 Impact on company operations.
 Value Management

development manufacturing Services

Servicesetc
research
research development manufacturing marketing
marketing etc

Centralized Decentralized (NOs)

Basic scientific Adapt, manufacture, market, and service products within national markets
innovation, develop
new products
About Philips

From highly centralized to decentralized company.

 Founded in 1892 in Eindhoven, Holland and incorporated in

1912.
 3rd largest light bulb producer in Europe in 1900.
 Profit sharing with employees.
 Exports to Japan, Australia, Canada, Brazil and Russia
commenced in 1899.
 Building sales organizations (1912) in US, Canada and France.
About Philips…

 Local Joint ventures for market acceptance.

 Agreement with General Electric & its 20 % stake in Philips.
 Product line ; electronic vacuum tuber, x-ray tubes and radios.
Philips: Organizational Development

 Reflection of technical and commercial leadership

throughout the organization.
 Transfer of assets to British Philips & North
American Philips Corp.
 Top management to US.
 More independent operations during war.
 Self sufficiency addressing the local preferences.
Continued…..

 Product development linked to local market.

 Focus on R & D.
 NOs responsible for financial, legal &
administrative matters.
 14 PDs responsible for production, development
and global distribution.
Van Reimsdijk & Rodenburg Reorganizations, 1970

Goals
• Profitability.
• Defining relationship between PDs and Nos and assign
responsibility.
• Cost cutting.

Actions Taken
• Closure of inefficient local plants and focus on converting the
best production plants into International production centers
(IPCs).
• Single management that looked after the technical as well as
the commercial aspects of the business.
Results
• The power struggle and lack of central control continued in the
company..
Wisse Dekker Reorganization, 1982

Goals
• Cost cutting & increase profitability.
• To get rid of bureaucratic culture.
• Focus on core operations.

Actions Taken

• Immediate closure of inefficient operations/plants.

• Technology sharing and offshore manufacturing for cost
cutting.
• Replacement of dual leadership with single General Manager.

Results
• Sales declined and profits remained stagnant.
Vant Der Klugt Reorganization, 1987

Goals
• To regain .top position in consumer electronics market.
• Profitability.
• Gain more control over Nos & PDs.

Actions Taken
• Bifurcation into Core & non core businesses.
• Reduction in head office staff by relocating them to product
divisions.
• Experienced work force posted to most competitive markets.
• Utilization of globally located work force.
• Result oriented R & D.
• Major job cuts to cut cost and for financial recovery
Results
• Company declared losses.
• Vant Der Klugt and management team was repleced.
Jan Timmer, 1990

Goal
• Turn around the bankrupt company, expand software, services &
multimedia to become 40% of revenue
• Restart the growth engines on innovative capabilities

Actions Taken
• Cut more jobs, headcount was reduced by 68000 or 22%
• Change the way of working by committing managers to specific
financial goals and their accountability for the losses
• Recruited Frank Carruba, the director of HP research, to focus on
developing15 core technologies and invested $2.5 billion
Results
• 37% R&D personnel cuts left company with few who understood
technology, thus no innovation
• Morale was low in middle management due to the failure of these
technologies
Cor Boonstra, 1996

Goal
• Production shift to low cost areas, simpler manufacturing and
marketing

Actions Taken
• Sold 1/3 of the businesses, shift production to low-wage countries
• Replaced 21 PDs with 7 divisions and 100 business units
• Moved HQ to Amsterdam, reduced the employees from 4000 to
300
• Increased Marketing efforts

Result
• Performance improved, reaching 24% return on net assets
Gerard Kleisterlee, 2006

Goal
• Increase sales, outsource activities where they can’t add value
• Eliminating more overhead/costly production plants

Actions Taken
• Close non value adding operations, outsource such activities
• Trying to shift to core competencies of technology developer
& global marketer

Results
• Rise in shareholder pressure
• Reported losses
MATSUSHITA
 Value Management

Research Development Manufacturing Marketing Services

Servicesetc
Research Development Manufacturing Marketing etc

Centralized Decentralized (NOs)

Applied product and Centralized (PDs) Market and service products within
process innovation Develop and manufacture products national markets
Introduction : Matsushita
 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
Structure: Matsushita
 McKinsey 7s Framework: Matsushita

Structure: Each product was made into its own unique

division, to function independently and promote internal
competition Systems: Competitive
Strategy: Achieve Divisions, MCA, METC,
worldwide Structure and MECA allowed
presence, whether
Systems Matsushita to develop
by the Matsushita Strategy innovative production
image, or producing Shared and development systems
for competitors Values in an efficient manner
Style
Skills: Efficient, Skills Style: 60% profit to
low-cost production Staff headquarters and 40%
back to the division
Staff: Staff was unique in provided an extremely
each division, and could profitable organization,
expect lifetime while insuring its own
employment future success
Issues: Matsushita
 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
 Disgruntled overseas staff
 Lack of initiative by foreign plants
 Chaos by ‘Destruction and Creation’ program
Konosuke Matsushita (KM)1918 ,

Goals
To build a successful company through fairness
and giving back to the world around them
Actions Taken
Opening of “National Shops”,
Various attempts at product line extension, Outsourced production, Licensing
agreements, METC, Worldwide production
Internal competition- One product one division structure

Results
Successful development of efficient, superior VHS
production and good relationships
Toshihoko Yamashita, 1982

Goals
To “help overseas companies develop the innovative
capability and entrepreneurial initiatives”
Actions Taken
Operation Localization: personnel, technology, material and capital
Allow local division to have more control over their operations
Increased number of local nationals in key positions, local division given choice
over products sold, quantities, prices, and features

Results
Overseas productions remained too dependent on
the central organization
Akio Tanii, 1986

Goals
To expand on his predecessor’s initiatives of helping the overseas
subsidiaries become independent and not simply remain
implementing agents of Osaka based product divisions.
Actions Taken
Tried to integrate domestic and overseas operations
Brought foreign subsidiaries under the control of METC and merged METC into the
parent company.
Relocated major regional HQ functions from Japan to US, Europe, and Southeast Asia.

Results
Although the changes generated huge cash reserves,
the overseas divisions were still very dependent.
Yoichi Morishita, 1993

Goals
Cut HQ staff and decentralize responsibility.
Actions Taken
Slogans of simple, small, speedy and strategic.
Moved 6000 staff to operating jobs
Shift of production offshore to low cost Asian countries.
Management unwilling to restructure due to company culture of lifelong employment. Investment in
R&D and technical exchanges.

Results
Resistance within the organization prevented the
promised changes.
Kunio Nakamura, 2000

Goals
Raise profitability to 5% of sales by 2004 , flatten
hierarchy and empower employees.
Actions Taken
All key HQ functions transferred to overseas offices
Destruction and creation program; disbanded basic organizational
product division structure and created multi product production centers.

Results
Company still in deep financial trouble.
Philips Analysis
 Decline of success due to the lack of consistency and lack
of ability to deal with a changing competitive international
environment.
 Frequent structural changes
 No clear strategy since 1960
 Struggle to balance the roles of NO’s and PD’s
 Conflict in terms of power and responsibilities
 Focus on core products led to giving up on various
products
 Closure of least efficient plants
 Could not manage to produce high-quality, high-
tech products and at a low price

 Failed to adapt to changing demands and the

strengths of the competition, partly due to its
confused strategies and its ever-changing structure.
Matsushita Analysis
 Copy cat approach very risky
 Tall structure hindered innovation attempts
 Restructuring took a lot of time as the organization was
slow to manage changes
 Attempts such as “Operation Localization”
 Resistance to change due to culture
 Could not make overseas subsidiaries more innovative
due to lack of expertise.
 Delegation of authority but no investment in innovation.
Recommendations for Philips
 Investment in R&D and a way to match the low-
cost Japanese advantage of efficiency
 Either retain some of its production
 Invest heavily in its new strategy and encourage
participation of everyone
 Find a structure and strategy which are compatible
instead of changing one and trying to make the
other one fit
Recommendations for Matsushita
 Follow a bottom up approach for change
management by consulting workforce
 Right match between strategy and structure
 Pursue a conglomeration and diversification
strategy
 Have a divisionalised structure.
 Realize change is not a simple process and has
many potential barriers
Conclusion
 Focus on their own capabilities instead of trying to
match each other’s

 Use different approaches to change