Philips and Matsushita Case Study

Case study on the development of strategy for 2 companies

PHILIPS AND MATSUSHITA

1A.) How did Philips become the leading consumer electronics company in the world in the postwar era? B.) What distinctive competencies did they build? C.) What distinctive incompetence's?

A.)

- Consumer preferences and economic conditions varied between countries.

- Independent NO's were able to sense and respond to differences in various countries

- Product development became a function of local market conditions - had built own technological capabilities - Local differentiation

- created a culture technical innovation

- NO's had real power, reporting to management board - encouraged interaction between autonomous NO's - sent envoys to Eindhoven to represent interests and top management made frequent country visits- High level of communication between subs.

- Cross- functional coordination also occurred at product group level, met monthly to discuss progress and resolve inter-functional differences

- Elite group of expatriate managers represented strong, country orientated views to corporate management

B.)

Strengths:

- Ability to respond to national differences in preferences. E.g. In UK the only way to penetrate the market was through rental businesses. In other richer countries the marketing challenge was to overcome elitist prejudice. local differentiation

- Localized R&D hubs. Product development became a function of local market conditions. NO. Canada: First color TV. Australia: First stereo TV. UK: TV`s with teletext.

- Elite expats

- Diversified knowledge before the war.

- Doing 1 product really well at the start

- Oganizatition with decentralized strong organizations.

- Culture: Dual culture. Stragtegy.

C.)

Weaknesses:

- The creation of ECM eroded trade barriers. Philips was at the time very fragmented/localized. Inability to respond to the need to create scale economies as technology became generic and prices declined. Lost its competitive advantage as peak innovative. New technologies demanded larger production runs than most national plants could handle -

- Philips was no longer able to act as a unified company in order to bring new product technologies to market or to react to recent manufacturing trends. Each NO acted independently- self-interest.

- Slow to market with new products. Difficult to implement new innovations.

- Did not take advantage of manufacturing in low cost countries

- Concerning manufacturing, certain products/components were more efficiently produced in large plants, but NOs did not consolidate their local manufacturing facilities. Should have. Economies of scale

- Japanese companies were more price-competitive.

- Complicated organizational matrix. No clear structure concerning management. Who are responsible? NOs or PDs?

- Strong national organizations, not so strong product departments. Hard to change

- Weakness on strategy, did not respond to market needs. To diversed. Slow to market. Slow to bring information to subs. Little information flow.

- Culture: To little. To dispersed. To autonomous.

2. How did Matsushita succeed in displacing Philips as No 1? What were its distinctive competencies and incompetence's?

- Deliberate underestimation/underfunding of capital to motivate employees

- Intentionally under funded research -> increase competition between divisions forcing them to development of new products- competitive culture

- 25,000 domestic retail outlets (which gave then direct access to market trends and consumer

- Aggressive licensing agreements with others to help penetrate markets and production

- Very efficient: Between 1977 and 1985 increased VCR capacity 33 times. OEM customers GE, Philips outsourced to Matsushita. The increased volume enabled Matsushita to cut prices 50% on VCR.

- Licensed to penetrate markets.

- Manufacturing to low wage countries

- Fast to market.