Philips versus

Matsushita

Bhavna Gaule, 157/45

Deepika Raj, 172/45
IIM Calcutta
 Founded in 1892, Gerard Philips, Eindhoven,
Holland
 Single product focus, employee welfare
 Technology and product development core
strengths
 Decentralized, joint leadership management
style
 Highly autonomous responsive national
organizations
 Founded in 1918 by Konosuke Matsushita
in Osaka, Japan
 Invested 100 yen to produce double-ended
sockets. Expanded to various products
 First Japanese company to adopt the
divisional structure
◦ “One-product-one-division”
◦ Internal competition fostered among divisions
 Flood of products in post war boom
 Matsushita built its success on its
centralized, highly efficient operations in
Japan
1.) Power struggle between Nos and PDs
 NOs had the real power
 PDs found it difficult to get their voices heard
 Difficult to account responsibility

2.) Late to market

 Decentralized organizational structure and
autonomous national organizations
 Example: failure of V2000
3.) Closure of inefficient plants – huge loss of manpower
 Loss of human resource capability on account of cost cutting
 Example : Failure of HDTV technology owing to 37% cut in R&D
personnel

4.) Trade barrier erosion – independent country level subsidiaries

rendered unnecessary
 Rivals moving to low cost regions

5.) Lack of coherence in strategy and structure

 Failed to adapt to the changing demands and the strengths of
the competition
 Highly centralized and inflexible organization
structure: Slow to manage change
 Dependence on competitors for technological
innovation
 Threat of discontinuous innovation which may
drastically change product technology
 Excess capacity and evaporating profits
 Disgruntled overseas staff
 Lack of initiative by foreign plants
 Chaos by ‘Destruction and Creation’program
Philips
Matsushi
ta
 Pursued a multinational approach
 Managing risks against impending wars
 Autonomous national organizations -
controlled their own marketing, production
and R&D decisions to respond to country
specific demands
 Opening up of trade barriers – Shift in
strategy to low cost scale intensive approach
 Matsushita’s main internationalization motive was
market seeking and cost reduction
 It aimed to get benefits from economies of scale by
pooling production & other activities
 Exploited lower factor costs by moving production to low
cost countries
 Increased operational & production flexibility
 Increased bargaining power with suppliers
 Global availability, serviceability and recognition
 Matsushita

Philips
 National Differences Scale Economies Scope
Economies
Matsushita benefitted Matsushita Matsushita
Achieving from differences in expanded and shared
Efficiencies factor costs such as exploited potential investments and
wages and cost of scale economies in costs across
capital each activity products, markets
and businesses

Philips managed Philips did

Managing different kinds of risks portfolio
Risks arising from market or diversification to
policy induced changes create options for
various kinds of
consumers in
different markets
Innovating, Philips learned from Matsushita
Learning & societal differences in benefitted from
Adapting organizational and experience, cost
 Architecture

FORMAL NETWORK INFORMAL NETWORK

 Routine
 Company policy to renew plant machinery
 Power conflict between NOs and PDs
 Shutdown of a number of inefficient plants marked
by a great deal of turnover
 Structural changes incompatible with strategy of
the firm
Culture
 Joint leadership, cultivated competitive behaviour,
 Decentralized structure to cater to different market
tastes
 METC and the product divisions used to set detailed
sales and profit targets
 The company hired Japanese managers and
technicians on foreign assignments to build
relationships
 Regular face-to-face meetings between managers of
foreign subsidiaries and the headquarters
 Independent product centers; One product- one
division structure to maintain the ‘hungry spirit’.
 Various product divisions competed amongst
themselves for market, funds, R&D etc
 Centralised decision making
 Reliance of foreign subsidiaries on centre
 Japanese collectivist culture clashed with

American individualist culture

 Lack of technological innovation
 Tendency to outsource
 Internal competition amongst divisions
 Global strategy not aligned to structure:

Lack of integration of business decisions

 Sustained investments in R&D and marketing
 Increase employee morale, reestablish
innovations and efficiencies
 Find a structure in tune with the operational
strategy
The current organizational structure, designed
around – healthcare, lighting, and consumer
lifestyle
 Improve delegation of responsibilities to avoid
lag in response time
 Multi-product divisions created by Nakamura might
be a loss making step for short term but it may
prove beneficial for long term
 Matsushita should encourage innovation in its own
organization and subsidiaries
 Prevent excessive interference of centre in foreign
subsidiaries
 Engage workforce and understand their issues
before implementing organizational changes
 Integrate structure to pursue global strategy
 Simplified its organizational structure under
vision 2010: only 3 product divisions/ sectors
 Employs134,000 people, holds more than 60,000
registered patents and has sales of EUR 27.0
billion (39 billion US $)
 Presence in 60 countries
 Brand promise: Sense and Simplicity
 Product innovation main business focus
 Supervisory board above Executive management
board- To integrate decision making
 Renamed as Panasonic Corporation, Oct 2008
 All brands consolidated under Panasonic
 556 companies, 14 business domains
 Own R&D, production & sales divisions
 Links global risk management activities with business
plans
 Brand slogan: Ideas for life
 Increasing focus on innovation: Usability Centres
 Working on digital technology, speech recognition etc.