Transcript Philips vs. Matsushita Assignment

Philips vs. Matsushita
Assignment
2008 MBA/ENG 290G
International Competition in
Technology
Team 1
Team 1
Franck Formis, Robert Kong, Vincent Ng, Jameson Slattery, Chuohao Yeo
Porter’s diamond
Philips
 Factor Conditions
‐ Initial tradition of bolstering
education
‐ Creation of the Common Market in
1968 altered factor s of production
(land, labor, and capital)
 Not a multi-domestic market
anymore
 Demand Conditions
‐ A single market
‐ New Transistor and circuit-based
technologies
 Unmet demand
Matsushita
‐ Domestic throughout 20th century
‐ Since 1998, investing in R&D
partnerships and technical
exchanges abroad
 Need to broader sources of
innovation
‐ Growth through post-war boom
‐ Shift to export markets
 Earlier picture of emerging
foreign demand
Porter’s diamond (cont’d)
Philips
 Related and supporting industries
‐ Principal agreement with GE in 1919
> World split into 3 spheres of
influence
‐ By 1998, JV with Lucent to target
“digital revolution”
 Improved performance
 Strategy, Structure, and Rivalry
‐ Early local production facilities
‐ Autonomous NOs
 Uncoordinated decisions
Matsushita
‐ A technology exchange and
licensing agreement with Philips
‐ Licensing of the VHS format to
other local manufacturers
 VCR segment ~ 45% of profits
‐ Highly centralized operations
‐ High dependence of subsidiaries
 Low competitiveness
Philips value chain
R&D
•Philips
Research has
labs around
the globe
Components
•Acquired from
suppliers. E.g.
critical lamp
components for
LCD panels
Manufacturing
•Outsourced to
low cost nations
•Maintain some
manufacturing
sites. E.g. lighting
has sites in 25
countries
Marketing and
sales
•Sales in more
than 60
countries
•Do their own
marketing
Distribution
•Uses wholesales,
retail stores to
distribute
products
•Also support
limited direct
shipments and
plannings
Red – heavy presence by Philips
Blue – no or light presence by Philips
6
Matsushita value chain
R&D
•Mainly inhouse and
centralized,
PDCC as an
initiative to
“outsourced”
R&D
Components
•Depend on
third-party to
acquire raw
materials and
components,
e.g. steel,
plastic,
semiconductors
etc.
Manufacturing
•Maintain huge
amount of
manufacturing
plants in Japan,
Asia and China
Marketing and
sales
•Mainly carry
out by
subsidiaries
located in
various
countries
Distribution
•Cooperation with
domestic and
overseas massscale retailers.
Red – heavy presence by Matsushita
Blue – no or light presence by Matsushita
7
Value chain comparison
 Centralized versus Decentralized
 Philips: Decentralized


Depend on National organizations to respond to local market.
Moving towards more centralized decision to cut cost and enjoy
economies of scale
 Matsushita: Centralized


Most decision made by headquarters and product division in Japan;
local subsidiaries are mostly sales and marketing
Moving towards localization to response better to customer demand and
preference, PDCC is one of this initiative.
 Outsourcing versus in-house
 Philips: Outsourced

Most manufacturing are outsourced or offshored to low-cost regions.
Mostly retain R&D and sales and marketing only.
 Matsushita: In-house

Directly control most manufacturing operations located in Japan, Asia
and China
Challenges faced
Philips – Too decentralized
Matsushita – Too centralized
 Powerful and autonomous
 Product divisional structure
national organizations (NOs)
 Lack of company-wide
strategic cooperation among
NOs
 Lack of accountability in
NO/PD matrix
 Management by technical &
commercial consensus
 Slow to respond
 Inefficient production due to
local production centers
 Highly centralized services
 Centralized product
development
 Subsidiaries too dependent
on parent company
 Communications between
overseas subsidiaries and
parent company
Key restructuring steps
Philips
Matsushita
 Rein in NOs
 Empower regional operations
 Centralize production
 Local customization of
 Focus on core businesses
 Empower global product
development
 Combine product divisions
 Remove historical
organizational structure




production
Combine single product
divisions
Tap overseas/external
innovation
Remove historical
organizational structure
Name change to Panasonic
Outcome and difficulties faced
Philips
Matsushita
 Outcome
 Continuing low profit
margins
 Competitiveness impacted
 Difficulties
 Conflicted local loyalties
 Restructuring for tomorrow
using today’s parameters
 Cost-cutting in key aspects,
e.g. R&D
 Outcome
 Low profit margins
 Competitiveness impacted
 Difficulties
 Culture of lifetime
employment
 Organizational resistance
 Difficult Japanese economic
conditions in 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
 Enforce market specific research
 Businesses being supported by the research are responsible for the R&D budget
 Incompetence
 Product division had no real power

NO ignores main company’s welfare and focuses on local profit (Ex. V2000 case)
 Too many factories over the world
 Higher cost than simply outsourcing or having one area serves the global market
Matsushita displacing Philips
 Focused on VCR production
 High volume allowed them to slash price quickly
 License VHS format to other manufacturer
 Highly centralized system
 Competence
 Huge number of retail outlets


6x the outlets of rival Sony
Assured sales volume and direct access to market trends and
consumer reaction
 One-product-one-division system
 Internal competition
 “Small business” environment
 Main company acts as a “bank”
Matsushita displacing Philips (cont)
 Competence
 Under fund the central research laboratory
Force it to compete for additional funding from divisions
 Give overseas sales subsidiaries more choice over the products they
sold
 Incompetence
 Over-management
 Expatriate managers located throughout foreign subsidiaries
 Strongly-held commitments to lifetime employment
 Can not compete with companies who outsource to low-cost
Asian 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
R&D
Each firm is involved in
product design and
development.
Investments both in
hardware and software
R&D to differentiate
their products.
Leverage the R&D
investments of
component suppliers
such as Intel, Nvidia,
Samsung and others.
Components
Manufacturing
Each firm develops and
controls the SW
“components” of their
product stack.
All firms make use of
contract
manufacturers and/or
ODM partners.
Each firm makes use of
third-party HW
components
(processors, memory,
discrete components,
batteries, etc.).
Partners include:
Asus
Celestica
Flextronics
Foxconn
Quanta
Wistron
Apple acquired PA
Semi and is now
developing its own
chips for iPhone, iPod
and potentially Macs.
Marketing and
Sales
Each company manages
the branding,
advertising and
positioning of its
products.
Tivo makes use of
distribution
relationships with cable
and satellite providers
to market and sell its
products and services
to end users, in
addition to Tivo’s direct
marketing and sales
initiatives.
Distribution
Apple’s distribution is
heavily skewed toward
direct (online, companyowned retail stores).
Chumby is primarily
available through online
distribution – both
direct and w/ partners.
Kindle is primarily direct
Xbox 360 through nearly
all online and physical
retail establishments.
Roku & Tivo through
direct and major online
and physical retail. Tivo
also distributes through
DirecTV, Comcast, etc.
Apple in the MP3 Market
 Apple designs and controls the major consumer touch
points in the MP3 market
 Device HW and SW, PC SW, and distribution
 Focus on ease of use and HW & SW elegance
 Apple has permeated the retail channels with iPods
 Advertising focus that drives demand & replacement
 Design as a differentiator
 DRM as a lock-in
Philips & Matsushita in the MP3 Market
 Any competitor is unlikely to unseat Apple by doing
the same as Apple or making iterative improvements
 Philips and Matsushita should invest in the next
generation of music consumption
 Prepare for the demise of the music-only device
 Shift to cloud-based subscription services available
anytime to countless types of devices
 Explore business models of giving away the music to
undermine Apple’s current business model
Team 2
Philips
Vs
Matshuita
Team 2:
Jon Wiesner, Rachel Simon, David
ExpositoCossio, Yanpei Chen,
EmrehanKirimli
Porter’s Diamond: consumer
electronics industry
Japan: Centralized companies.
Reluctance to delegate activities.
Process innovation rooted in
culture. Huge local rivalry
Netherlands: Decentralized
companies. Low local rivalry
Structure,
Strategy,
Rivalry
Factor
Conditions
Japan: Highly skilled labor force.
Large number of engineers. Highly
efficient production process.
Traditions deeply rooted
Netherlands: Highly unionized
industry. Expensive workforce.
Entrepreneurial culture. Small
Country located in centre of
Europe. Both countries large
expenditures in R+D
Japan: highly demanding and
sophisticated internal buyers.
Huge market.
Netherlands: small internal
market. Internationalization
needed to survive.
Demand
Conditions
Related and
Supporting
Industries
Japan: Large number of supporting
industries: transportation, copiers,
cameras, audio, appliances,
musical instruments…
Netherlands: medium/high number
of supporting companies: canon,
HP, TomTom, …
Value Chain Comparison
Supply
Philips
Matsushita
Comparison
Raw materials
Lighting
Parts
DAP
CE
Medical Sys
Operations
Manufacturing
Lighting
DAP
CE
Assembly
Medical Sys
Distribution
Retail
Lighting
DAP
CE
Hospital
Medical Sys
Marketing
One Philips
brand
Services
Medical Sys
Raw materials Manufacturing Retail
Merge brands
Components
AVC
into Panasonic
Components
Home App
Home App
AVC
Parts
MEW
Home App
AVC
OEM & Self Use
MEW
Home App
Components
MEW
Philips
actively
consolidating
supplies
Matsushita
heavy focus
on
manufacturing
Both are
mainly retail
with some
enterprise
Both do brand
consolidation
Philips trying
to move in
this direction
Philip’s Success
Common
Market
How they became leader: developed national organizations (NOs)
that were independent, and specialized in local market demand for
specific and diverse technologies.
Competencies/Incompetencies
/
Strong R&D funding /
Strong National Organizations /
Reputation for quality /
Adaptive to diverse markets
Commitment to employees
/
Fragmented product line
(no economies of scale)
Slow to market
Poor global strategy
Technologies lost in market
flooded by competitors
Loss of market shares to low
wage outsourcing competitors
Matsushita’s Success
1989 crash
How they became leader: global scale approach of rapidly
bringing a emerging technologies to saturate the market
Competencies/Incompetencies
/
Fast [follower] to market /
Broad product line /
Strong distribution system,
high retail presence /
Strong culture, visionary leader
Centralized Japanese structure
/
Resistance by employees to
structural change
Weak on innovation
Excess capacity
High overhead
Dependant on center; loss of talent
due to perceived overbearing top
Change and its Challenges
Both Philips and Matsushita have faced enormous challenges and multiple
reorganizations in trying to manage global operations. Both have tried multiple
organizational structures, but have encountered some of the following barriers
Philips
Matsushita
Historical: legacy of WWII and
decentralization of operations
Cultural: strong cultural ties to Eindhoven
Organization: matrix organizational
structure constantly between PD and NO
reorganized
Manufacturing: late to outsource
manufacturing
Profitability: low margin business leaves
little room for error
Technological: big bets on losing
technologies and standards
Structural and Macroeconomic: high cost
of layoffs of European workers
Cultural: lack of independent thinking by
overseas subsidiaries
Organization: legacy of product division
structure
Employees: tradition of lifetime
employment
Managerial: highly centralized
management style
Technological: over-reliance on declining
products (TVs, VCRs, etc.) and lack of
innovation
Structural and Macroeconomic: economic
malaise in Japan starting in the 1990s
Mp3 Player Market
vs.
 What has allowed Apple to succeed?
or Zune by
Microsoft
 relaxed, casual, collegial environment with high-work ethic
 emphasize on innovation and design (teams all over the world)
 User Experience Architect’s Office was established to make
products easier to use
 What should Philips and Matsushita do to compete?
Apple
or Samsung
and Adidas
 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
Team 3: Gonzalo Baez Silvio Filho Brian Gawalt Ryan Stanley
MBA290G, Oct 8, 2008
Comparison of Porter’s Diamond Factors
Factor Conditions
•
•
•
•
•
Both countries have access to a highly skilled workforce due to local availability of specialized research
and high extent to staff training in each country.
High cooperation yet highly regulated labor relations. Tradition of lifelong employment in Japan has
reduced the risk of brain drain.
Limited natural resources (esp. Japan) induces constant attention to value-add services.
Institutions in the Netherlands are considered highly efficient, ethical, and transparent compared to
other countries: corporate boards are effective, government policymaking is transparent, intellectual
property protection strong, and firm behavior ethical.
The Netherlands has highly developed ports and is considered “the gateway to Europe.”
Demand Conditions
•
Japan has a high national demand that includes sophisticated technical users, whereas Philips had to
export early on due to low national demand in the Netherlands.
Related and Supporting Industries
•
•
•
Both countries have national access to companies to suppliers in chemical and other equipment or
machinery industries for production.
The Netherlands includes robust research institutions
Cluster development in Japan related to consumer electronics and semiconductors.
Firm Strategy, Structure, and Rivalry
•
•
Cluster development in Japan indicates fierce domestic rivalry. 8 of the top 10 companies in the field are
Japanese.
Government stability and context has been a major help to Philips as the Netherlands benefits from its
central waterways, advanced neighboring economies, and political stability.
Value Chain Contrast
In-house
R&D
MFG
In-house
•
•
Customer
service
Customer
service
End customer
MFG
Distribution
centers,
retailers
End customer
R&D
Warehouse
and
direct
sales
Outsourced
Direct
and
online
Sales
Distribution
centers,
retailers
Outsourced
Philips had a decentralized approach for manufacturing and sales.
Matsushita had nearly everything centralized in Japan. Marketing
competitive advantage over manufacturing.
Changes in Market Leadership
Post-war Philips rose to dominance through strong R&D, technical development, and ability of national
organizations to independently structure market offering
•
Small national market instigated robust export function and global sales and marketing force
•
Vital research facilities and top management transferred overseas as WWII approached
•
WWII destroyed factories, so chose to rebuild on strengths of National Organizations
•
•
•
•
•
•
Independence of management to act
Ability to sense and respond to differences in national demands of countries of operations related to marketing
Take advantage of surrounding talent and cultures for independent technical capabilities as well
Developed strong competency in R&D and technical development
Lacked good centralized planning (no advantage from economies of scale) and slow to market.
Current strategy to move/outsource low-end manufacturing and focus on design/development makes
sense given national and firm competencies. Difficulties lie in the strength of national organizations and
Panasonic succeeded Philips in global dominance through central planning, strategic manufacturing choices,
and a strong system of controls
•
Opened plants in low-cost Latin America and Southeast Asia; kept high-value components in Japan.
Allowed outsourcing of minor components. Plants built by division for economies of scale.
•
Aggressive management goals encouraged innovation, but one product-one division led to subsequent
spin-off and strict focus.
•
Overseas operations reported to parent through the product division or the Trading Company.
•
Developed competency in long-term planning, low-cost manufacturing, and being quick-to-market
•
Lacked strong independent R&D near global markets
•
Strategy for more regional control was hard because of ingrained culture and tight controls. However,
implementing “Outsourced R&D” through incubators helps overcome Panasonic’s lagging innovation by
supporting start-ups without difficult cultivation of in-house expertise.
Apple’s keys to success in MP3 market
Organizational
structure
Corporate culture
•
Apple is vertically integrated, designing its own operating system.
•
Apple's stated philosophy is to increase investment in R&D.
•
In-house brands set the standard: iPod & iTunes
•
Rebel spirit: "It's better to be a pirate than join the navy" .
•
Intense work ethic and casual/informal structures.
•
Combines Design and Marketing in one department.
Team 4
2008 Philips vs. Matsushita
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 strategy
Supporting Industry
Firm Strategy, Structure & Rivalry
• Original competitive leadership by
commercial and technical functions
(PD/NO matrix) was succeeded simpler
and structured marketing and
manufacturing organization
• Original worldwide portfolio of
responsive national organizations
increases manufacturing costs (start of
outsourcing)
• Strong industrial research
• Technology-sharing agreements and
offshore manufacturing shall lead to
reduced costs
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 & Rivalry
Supporting Industry
• Worldwide business based on
centralized, highly efficient organizations
in Japan
• Shift to local sourcing over time, but still
in control of output (quality, productivity
etc.)
• Expats spreading company culture and
technologies
• “Operation Localization” Internationalization including
manufacturing abroad and increasing
independence from Japan (but still
dependent)
• Low shipping rates reduces
logistics costs
• R&D partnerships and technical
exchanges as well as outsourced
R&D (VC, incubator and technology
partnerships)
• Dynamic new digital networking
technologies and business models
enabled by internet lead to pressure
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.

The‘Partners 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.

Matsushita’s 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 inhouse 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 Matsushita’s 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

Specific product-based FAQs, manuals, and online support along with phone support
Philips in the post-war era
Competances
 Protected company
resources through war by
transferring abroad

Strong, self-sufficient
national organizations

Product development and
industrial design responds
to regional customer
preferences

Decentralized marketing
and sales

Innovative R&D
Incompetances
 Weak control of national
organizations by
Netherlands-based
product-divisions created
conflicts in company
strategy

Local production plants
could not take advantage
of economies of scale

Inability to capitalize on
R&D
Matsushita – Competitive Analysis

Matsushita was able to displace Phillips as the leader in Consumer
Electronics by:
1.
Successfully capturing the advantages of localization and avoiding the management
difficulties that other global companies encountered.
2.
Leveraging its corporate structure to bring new technologies to market more
efficiently than its competitors.
3.
Implementing manufacturing best practices to keep manufacturing costs low despite
differences in regional inputs.
4.
Outsourced core R&D needs to better recognize new marketable technologies and
business models that were congruent with Panasonic’s Global Strategy.
Matsushita – Core Strengths

Core Strengths:
1.
2.
3.
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.
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.
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:
Power of the Central Organization:
1.

The power exerted by the central organization limits regional innovations.
R&D
2.

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 shareholder’s 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

Yamashita (Operation Localization)
•
•
•
•

4 localizations: personnel, technology, material, and capital
Increased number of local nationals in key positions
Overseas sales subsidiaries given more choice over products they sold
Expressed displeasure with lack of initiative of TV plant in Cardiff
Tanii
•
•
•

Objective: obtaining software source for its hardware
Acquired MCA for $6.1 billion
Japan went into recession, and Tanii forced to resign
Morishita
•
•
•
•
•
“simple, small, speedy, and strategic”
Cut staff and decentralize responsibility
Sold MCA to Seagram at a $1.2 billion loss
Challenges: Korean and Chinese competition; strong yen=weak exports
Increase offshore R&D: Panasonic Digital Concepts Center in California
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
Group 5:
Varun Boriah
Sonia Fereres
Dilip Joseph
Brendan Quinn
Ada Zheng
Porter’s 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 firm’s 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
Porter’s 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
Porter’s 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
Porter’s 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
Philips: Decentralized Organization + 1 Product Specialization
Research
Centralized initial
research & innovation
Product
Development
Manufacturing
Sales &
Marketing
Services
Multinational / Decentralized management, product development, manufacturing,
sales and customer services through PDs, NOs within national/local markets.
Matsushita: Centralized Hub Organization + Mass Production
Research
Product
Development
Manufacturing
Centralized operations: research, innovation & product
development. Expat management
Sales &
Marketing
Local subsidiaries
Services
How did Philips become the leading consumer electronics
company in the world in the post war era? What distinctive
competence did they build? What distinctive incompetencies?
Competencies
Incompetencies
Lighting
Low profit margins (1-2%)
Cassettes / CDs
Fragmented management/poor global
strategy
Centralized Research and Innovation:
quickly develop new products
Organizational asset: NOs to develop
products in individual national markets
Moved research facilities abroad in
anticipation of the war
Slow bringing products to market
(Matsushita beat them to microwave etc)
Dispersed manufacturing/marketing/
services within nations (NOs)
How did Matsushita success in displacing Philips as No. 1? What
were its distinctive competencies and incompetencies?
Competencies
Incompetencies
Ability to mass product at low cost, quick to
market
Not highly innovative
VCR manufacture – including OEM for Philips
and others
Placement of Japanese expat managers in
international plants, strong communication
with HQ
Local autonomy to meet targets
Shifted production to overseas markets (e.g.
China) when Japanese currency
strengthened
“Fast follower” strategy
Centralised R&D in Japan
Complex management processes
Excessive control of R&D (Motorola TV)
What do you think of the change each company has made to
date: the objectives, the implementation, the impact? Why is the
change so hard for both of them?
Philips
Matsushita
Focus on R&D (after sacking 37% of R&D
staff?!)
Created PDCC – strengthened
convergence portfolio
Large bets on technologies that failed
(DCC, CDi, mobile)
Outsourcing innovation – universities,
PDCC
Hasn’t yet outsourced much of its
production
Reduced size of HQ – less top-heavy
Outsourcing some production
Still very decentralized
Still very centralized!
Why is it so hard:
Working against years of inertia
Why is it so hard:
Working against years of inertia
Research
Product
Development
Manufacturing
Sales and
Marketing
Services/
Ecosystem
APPLE: iTunes,
Recording
companies
MICROSOFT:
App developers
CHUMBY:
Netflix
TiVO:
Broadcasters
KINDLE
• KINDLE
KINDLE:
Publishers
Customer
Corporate culture and organizational
structure at Apple
• Apple originally outsourced :
– iPod idea (Tony Fadell)
– iPod hardware development (PortalPlayer)
• Windows compatible through MusicMatch and later iTunes
• Ecosystem created
• Product Marketing and Product Management executed by the same
team
• Apple is vertically integrated: OS, SW/HW, retail stores
• Put Silicon Valley on the map
• Hard-working yet corporate-casual environment.
• Apple’s success based on how they add value to a “cool & simple”
design, whole ecosystem around it and easy-to-use interface.
What should Philips and
Matsushita do to compete
• new features
price erosion
– Reduce retailer and manufacturer inventory
• channel management shifts from classic distribution to
retailers, to broadband providers, to online, to direct to
consumer.
• digital content will shape their hardware demand
• both companies should exploit their competitive advantages
instead of matching each other:
– Philips should invest more in R&D and marketing as a way to compete with
Japanese low cost efficiency. Decide on one structure/strategy instead of
changing it frequently.
– Matsushita: try to implement change in a more effective way, communicating
more with employees/subsidiaries to improve innovation. Partner more, think
ecosystems, think of the “experience” rather than just the product
Team 6
Philips Versus Matsushita
Team 6
Wan-Lin Tseng
Toru Yamagishi
Nuttapong Chentanez
Jim Miller
Ankit Gupta
Philips Porter’s Diamond
Matsushita Porter’s Diamond
Philip’s Internal Product Value Chain
• Late 19th century, early to mid 20th century, mid to late 20th
century
R&D
Manufacture
Marketing
Sales/
Distribution
Physics and
chemistry labs built
to address problems
Highly centralized in
Eindhoven
Overseas joint ventures
created to gain market
place
Exported into diverse
markets, i.e. Japan,
Australia, etc
Independently
performed by NOs
with PDs as nominal
formal research
department
Independently performed
by NOs, with PDs as
nominal formal production
department
Independent NOs were
able to sense and respond
to different markets
efficiently
Independently performed
by NOs with PDs as
nominal formal global
distribution department
Superior
technological
innovations from
PD
NOs made their own
decision of product mix
and which technology
standard to adopt
Inconsistency within the
organization makes
marketing a weak point in
Philip
Decentralized
distribution around the
globe
Centralized lab
doing research on
specific business
areas
Reorganized structure led
to specialized, multimarket production facilities
worldwide
Refocused on marketing
rather than technology;
made worldwide
marketing plan as a whole
Restructured distribution
network work as a whole
again
Matsushita’s Internal Product Value Chain
• Early to mid 20th century, mid to late 20th century
R&D
CRL took care of
basic technology
while product
development
occurred in product
division
Life time research
team: R&D team
moved with
products from
central labs to
product division to
production plant
Manufacture
One-product-one-division:
production was done by
product divisions
Marketing
One-product-onedivision: marketing was
done by product divisions
With corporate treasury as a commercial bank
Went internationally to
search for low-wage
countries, i.e. countries in
Southeast Asia and Central
and South America
One-product-onedivision: marketing was
done by product divisions
Sales/
Distribution
25,000 domestic retail
outlets opened to obtain
sales volume and
customer information as
well
25,000 domestic retail
outlets opened to obtain
sales volume and
customer information as
well
Phillips in post war era
• Phillips built post war era organization with
▫ National Organizations (NOs) oversea
▫ Product Divisions (PDs) at head quarter
• 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
Matsushita’s 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
• Established corporate culture and tradition (e.g.
Seven Splits of Matsushita)
• Bureaucracy (esp. Philips)
• Strong influences on the founder (esp. Matsushita)
I
• The New US Consumer Electronic Companies:
Apple, Tivo, Roku, Chumby, Kindle, Microsoft –
What are their positions in the Value Chain?
▫ New CE companies involved in market analysis,
research & development and product design, i.e. at the
head of the value chain. Maximum value added here
for products like Tivo, Roku or Chumby, which were
quite unique.
▫ Value added at the end too, i.e. distribution and
marketing. Most true for Apple products, given their
aggressive and distinguished marketing style.
▫ Manufacturing generally outsourced to third parties.
• Apple has dominated the MP3 marketplace with 80% market
share. Other major CE manufacturers have failed to date.
With regards to corporate culture and organizational
structure, what has allowed Apple to succeed?
▫ 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?
▫ Innovative product design, and branding very
essential.
▫ More emphasis on marketing.
▫ Partner with content providers, for easy access to
music and video.
▫ Aggressive product launching and distribution.
Team 7
Philips vs. Matsushita
KC Chen (Team 7)
Anthony Goodrow
Andrew Liao
Piyapat Tantiwong
Sha Tao
October 8th, 2008
Philips: Porter’s Diamond
• Decentralized  Centralized (tilting from NOs to PDs )
• Single product Diversified  Divest non-core businesses
• R&D driven  Localized manufacturing  Outsourcing
FS
• Caring of workers
founded highly
skilled labor forces
and strong
technological base
FC
DC
R&SI
• Rich R&D resources in UK and US
helped the company to diversify its
assets (research labs) and resources
• Holland’s small size
forced the company
to be international
• Lowered trade barrier
prompted to local,
single site production
Matsushita: Porter’s 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
• Lack of English
capability required
more staff
(expatriate
managers)
FC
DC
R&SI
• High value electronic components
• Lowered domestic
post-war growth and
saturated distribution
channels forced
company to export
• Strong yen prompted
overseas production
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
HDQ
No
information
exchange
DIV
DIV
CRL
R&D
underfunded,
divisions
compete for
funding
DIV
DIV
Comparison of Internal Product Value
Chain






Both companies started from highly centralized organization.
– Philips decentralized their organization based on geographic location
– Matsushita decentralized product divisions, controlled by Japanese parent company
The organizations reflected culture in such countries
– Philips (Holland) gave more freedom to NOs
– Matsushita (Japan) has tight control over Divisions.
Philips’ competitive advantage & disadvantage
– NOs can easily customize their products to different markets
– Little communication between NOs and weak control from PD led to repeated
developments of same technology
Matsushita’s competitive advantage & disadvantage
– Central research organization to help leverage basic technology across all divisions
– Each division has strong understanding about customers, but tightly controlled by
parent company
Both companies tried to reduce the operating cost by locating plants in low-wage areas
as well as outsourcing to contract manufacturers.
Repeated reorganizational changes aimed at increasing revenue and profit margin
Philips as CE leader In the post World
War II era



Strong Research & Development efforts
Early in Philips history, Gerard and Anton Philips agreed that strong research and
development efforts were vital to the Philips success. The importance of research and
development is evident in the physics and chemistry lab that developed a tungsten metal
filament bulb that was a great commercial success enabling Philips to compete against its
giant rivals. In the postwar era, Philips continued this tradition with fourteen product
divisions responsible for development, production and global distribution
Independent National Organizations
Another contributing factor to Philips’ success is the National Organizations. These postwar
organizations were highly self-sufficient and extremely adept at responding to countryspecific market conditions-a capability that became a valuable asset in the postwar era.
Communication between National Organizations
However, with the creation of the Common Market in the 1960s, the same National
Organizations to which Philips attributed its postwar success soon became the reason why
Matsushita displaced Philips as the leading consumer electronics company.
Matsushita displaces Philips as CE
leader



Link divisional structure to a global strategy
Autonomous National Organizations
Communications
The autonomy of the divisions linked together through a global
strategy enabled Matsushita to displace Philips as the leading
consumer electronics company in the world.
Competencies & Incompetencies
PHILIPS
MATSUSHITA
Competencies
Competencies
National responsiveness
Technology-driven innovation
Global scale efficiency
Market-driven rapid innovation
Entrepreneurial NOs
Central research and funding
Innovative PDs
Linkages in the value chain
Incompetencies
Incompetencies
Slow technology to market
Poor global strategy
Overseas subs not innovative
Philips: Company Changes,
Implementation, and Impact
Objective
Implementation
Impact
1970s
Rebalancing the managerial
relationship between PD &
NOs.
Slow
NOs seemed as powerful
and independent as ever.
1982
To deal with least profit
units and the slow-moving
bureaucracy
Buy & sell business and
continue to tilt the matrix
between PD & NOs
Sales declined and profits
stagnated.
1987
To deal with the revenue
declining and maintain the
market position
Relocate the management and
close/integrate the business
divisions
President and senior
management were replaced
1990
To deal with the risk of
bankruptcy
Cost-cutting & lay-off. New
focus on the software, service
and multimedia.
Ignored the new worldwide
market demand
1996
To stop bleeding
Shut down/sold un-profit units
and to bet on the digital
revolution.
24% ROA
2001
To increase sales and
revenue
Outsource the manufacturing
Hope to build efficiency
into its global operations
Matsushita: Company Changes,
Implementation, and Impact
Objective
Implementation
Impact
KM’s way
Maintain Central control
Organization since the
company began
Strong Centralization and deincentivized localization
Operation
Localization
Innovative capability &
entrepreneurial initiatives
Personnel, technology,
material, capital
Nearly no changes on the way
branches operate
Integration &
expansion
To put more attention on
the international
development
Merge METC to parent
company to fully integrate
domestic and overseas
operations
Not succeed and due to
economic downturns, Tanii was
forced to resign
Morishita
To deal with Japan’s
downturn & to enhance
R&D abilities
Move production overseas
and start joint venture with
foreign academics
Delivered a sign that he gave up
looking for innovation
internally
Nakamura
To transfer Matsushita
from manufacturing to
services to meet
customers
Destruction and creation
program to make flatten the
hierarchy
Almost made Matsushita to be
takeover
New U.S. CE Companies






Apple
TiVo
Roku
Chumby
Kindle
Microsoft
Position in Value Chain

Tivo, Roku, and Chumby
–

Apple, Kindle
–

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.
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 Amazon’s 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?

Target niche markets
–

Tech-savvy users who desire more features
Change the game
–
Combine technologies (iTune & HDTV)
Team 8
Philips vs. Matsushita
MBA 290G
Prof. Charles Wu
Team 8
Fuat E. Celik
Gopal Chaudhoory
Ignacio Contreras
Francois Gallet
Camilo Mendez
Porter’s Diamond
Philips
• Regionalized focus – independent management
• Functional division (Biz vs Engineering)
• Not-invented-here culture
• Government protectionism
Factor
Conditions
Philips
• European countries’ heterogeneity
encourages customization to local
markets (distributed approach)
• Expensive labor focuses companies
in product differentiation strategies
Matsushita
• Japanese geographical isolation
promotes focus in domestic market
(centralized approach)
• Cheap labor (pre-70’s) focuses
companies in cost-cutting strategies
Matsushita
• Centralized focus – dependency on headquarters
• Business line division
• Copycat / follower culture
• Government encourages competitiveness
Firm Strategy,
Structure and Rivalry
Related and
Supporting Industries
Philips
• Underdeveloped ecosystem derived from
lack of competition (world divided between
GE and Philips)
Matsushita
• Developed ecosystem derived from
intense competition (Sony, JVC, Sanyo,
etc)
Demand
Conditions
Philips
• Heterogeneous European cultures
leads to differences in demand
• High income fosters desire for
differentiated / tailored products
Matsushita
• Big but isolated domestic market
drives focus in local market
• Low income in Japan (per-70’s)
cultivates low-cost strategies
• Population eager to adopt new tech
Porter’s Diamond Analysis
Philips’ strategy
Matsushita’s strategy
In-house innovation and market
differentiation
Centralized approach with focus
in cost advantage and “copied but
better” products

Worldwide consumer electronics demand ended being:



Homogeneous
Price conscious
Matsushita was far more prepared for this scenario:


Follower takes advantage of cost benefits
Centralization builds economies of scale
Internal Product Value Chain
Philips – Market differentiation
Research
(centralized)
Development
(Market A)
Production
(Market A)
Commercialization
(Market A)
Development
(Market B)
Production
(Market B)
Commercialization
(Market B)
Development
(Market C)
Production
(Market C)
Commercialization
(Market C)
Development
(Market D)
Production
(Market D)
Commercialization
(Market D)
Matsushita – Cost advantage based on EOS
Commercialization
(Market A)
Research
(centralized)
Development
(centralized)
Production
(centralized)
Commercialization
(Market B)
Commercialization
(Market C)
Commercialization
(Market D)
Philips Emerged as a World Leader
Highly decentralized NOs were efficient
and competitive within the market they
served
Autonomous corporate subdivisions
had too high a stake in selfpreservation and prevented real
restructuring reform
NOs’ focused on country-specific
markets and adapted quickly to local
market conditions and consumer tastes
and expectations – e.g. TVs
Common Market system removed
advantages of regional specialization,
increased importance of manufacturing
cost competition
Outstanding research division led to
strong technical innovation and new
product development
NOs thwarted centralized product
development by pursuing independent
agendas – e.g. V2000 video cassette
The Ugly
Decentralization leads to organizational inertia and the company is slow to react to
changes in market conditions in a World economy
The Bad
The Good
Forced by the War, Philips divided operations into several quasi-independent
National Organizations (NOs)
Matsushita Overtook Philips
Corporate culture valued low cost and
high profit operations and held each
division accountable for meeting goals
High degree of centralization stifled
innovation
Centralization led to costcompetitiveness, which led to exports
reaching a world market
Manufacture needed to relocate to
cheaper labor markets to stay
competitive, while devotion to domestic
employment weakened restructuring
efforts
Matsushita was quick to adopt
standards, allowing it to achieve high
sales volumes on products it would
otherwise struggle with
Weak R&D efforts and expenditure led
to undifferentiated products and
commoditization, which led to shrinking
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
The Bad
The Good
Matsushita dominated its home market by offering thousands of products at its tens of
thousands of retail locations
Philips reorganizes its activities, focusing on its
core competencies

Objectives



Implementation




Increase profitability
Drive costs down to get back in the competition
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



Implementation



Become a leader in technology development
Mitigate the R&D risks
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 Apple’s Strategy: making the best of an
existing technology

Vertically integrated structure



Control of the value chain
Few high-quality appealing and trendy products based on
existing technologies
Casual corporate culture


Pretty flat organization
Fostering individual excellence
Team 9
Team 9
James An
Zishan Khan
James Su
Boaz Ur
Factor conditions
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 it’s 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 open factories in
cheaper places.
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)
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.
Firm strategy structure and Rivalry
Philips
• Being an innovator.
•Complete decentralization. Each NO totally responsible for its results.
•Diversification of products.
•Philips is a multinational company it is even hard to define it as Dutch.
Matsushita
• Being a fast follower – Matsushita – Copycat
• Until 2000 centralized strategy with strong product divisions and operations located in
Japan.
•Making sure that there are loyal Japanese reps in every company around the globe in
senior positions.
•Matsushita is definitely a Japanese company
Philips value chain is mainly based on an aggregate of NO. They have decentralized
R&D centers and had constantly tried to shift the balance back and forth between PDs
and NO. Finally they decided to create business units responsible for profits. In
essence, these business units hold the value chain for each product. However this
business unit can probably leverage the sales organization that is spread around the
globe.
Matsushita for the majority of its life span was highly focused on central management
and Japan based product divisions. The central R&D got it’s 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.
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
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 (Philip’s V2000 videocassette, superior to Matsushita’s VHS, but was
outsourced, branded, and sold by North American Philips under license from
Matsushita)
• The history of strong individualized NOs resisted reorganization
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. Motorola’s TV business. Philips’ product
development differed between national organizations.
Matsushita was faster at getting products to market than Philips.
Incompetency's
In the 1990’s, Matsushita’s management was unwilling to restructure some of
its inefficient production facilities in Japan. This was due to the company’s
deeply-rooted commitment to lifetime employment.
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.
• Great Marketing Firm
• Distribution Channels include Apple Store’s
• Use of iTunes as a reverse “razor and blade” model
• Stylish product design
• Ability to recognise opportunities to commoditise products
• Strong company culture and shared vision
• Central Product Designer and Leader (Steve Jobs)
Team 10
Philips versus Matsushita
Team 10
Anirban Sen
Raluca Scarlat
Elihu Luna-Thomas
Yilun(Alan)
Porter’s Diamond-Philips
• Factor Conditions
•
•
•
Among largest producer of light-bulb
Geographically diversified research facilities and local tech talents, managers
Trade barriers and tariffs—forced 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
Porter’s 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
Invest
Capture Demand
Domestic, Asia, US,
Europe
Expansion
Individual, Business,
Government
Solution & Delivery
Global
Suppliers
Support
Tech
Support
Global
Assembly
Service
R&D
Strategy
Global
Logistics
Sales &
Marketing
Distribution
Philips success after the war
• Operation based on National Organizations (nearly autonomous
subsidiaries around the world)
• Responsive to country-specific market necessities
• Geographically diversified research facilities brought several
technological breakthroughs
• NO’s keep the Phillips traditional internal competence (Production vs.
Sales)
• Effective in a world of close frontiers
Phillips 60’s-90’s struggles
• Competitors relocating production in low cost of labor regions (South
Asia and Central and South America)
• Inability to align the interests of powerful NO’s, where each manager
represented the particular interest of his region
• Several failed endeavors to globalize production and R&D
• A bureaucratic organization that could not follow the pace of its
Japanese counterparts
• Painful process of shutting down plants, get rid of some business
units, outsource some manufacturing, re-orient company’s main
focus
• Phillips becoming a research, developer and marketer. A lost battle
to be an efficient manufacturer.
Matsushita’s Success
• 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.
Matsushita’s strengths
• Diverse offerings from early in the company’s history. This leads to
greater market penetration.
• Opened 25,000 domestic retail outlets to distribute the products.
These provided sales volume and access to market trends.
• Shifted production earlier than other companies to low-wage
countries in Asia and South and Central America.
• Agreed to give up its own standard and adopt the established VHS
format. This prevented a costly standards war. Instead the company
ramped up production to meet its own needs as well as those of
OEM customers such as Philips.
• Increased sales volume allowed Matsushita to cut unit price 50%
within 5 years of product launch while continuously improving quality.
• Close headquarters-subsidiary relations allowed greater control of
the activities of globally dispersed subsidiaries.
• Gave overseas subsidiaries a greater choice on what products they
sold.
Matsushita’s weaknesses
• Centralized control of foreign subsidiaries caused some negative
backlash.
• Corporate culture of lifetime employment led to inefficient production
facilities. There was resistance to cutting back on manpower and
plant.
• Vertical hierarchy within organization. Front line employees were not
empowered to respond to customer needs due to the centralized
organizational structure.
Philips: Changes
made and impacts
• Started out with one product instead of attempting to diversify. As a
result, they had significant innovations in the light-bulb industry.
• Started with a centralized structure, but was forced to create
autonomous subsidiaries in US and UK during WW2. This resulted in
some loss of control and power by the central organization.
• Did not move as quickly into low wage labor markets and as a result
lost some competitiveness to companies such as Matsushita.
• Power struggle between product divisions and national
organizations. Led to divisive strategies as leadership changed. This
in turn led to poor productivity.
Matsushita: Changes
made and impacts
• Started with one product, but quickly diversified and gained domestic
market penetration by the sheer number of product offerings and
retail outlets.
• Adopted the “product division” structure. This organized the company
based on the product lines that were being developed regardless of
location.
• Developed and established presence in television market. Expanded
production to low wage countries in Asia and South America and
thus drove prices lower and volume higher.
• Adopted VHS standard and began manufacturing and marketing of
VCRs for themselves as well as OEM customers who were their
competitors.
• Began de-centralizing their leadership in response to backlash from
local division workforce.