The document discusses the organizational development and restructuring attempts of Philips and Matsushita from the early 20th century to the 2000s. It analyzes how each company struggled with balancing centralized control with local autonomy and adapting to changing market conditions. The document provides recommendations for both companies to focus more on innovation, pursue the right strategic fit, and manage organizational change more effectively.
Original Description:
Presentation on the case Philips Versus Matsushita - A New Century, A New Round
The document discusses the organizational development and restructuring attempts of Philips and Matsushita from the early 20th century to the 2000s. It analyzes how each company struggled with balancing centralized control with local autonomy and adapting to changing market conditions. The document provides recommendations for both companies to focus more on innovation, pursue the right strategic fit, and manage organizational change more effectively.
The document discusses the organizational development and restructuring attempts of Philips and Matsushita from the early 20th century to the 2000s. It analyzes how each company struggled with balancing centralized control with local autonomy and adapting to changing market conditions. The document provides recommendations for both companies to focus more on innovation, pursue the right strategic fit, and manage organizational change more effectively.
Thanks To: Mr. Shahriar Kabir Assistant Professor, Institute of Business Administration, Jahangirnagar University (IBA-JU), Savar, Dhaka GROUP PRESENTATION - CASE # 2
Prepared By
Name ID# Sabbir Ahmed Jannatul Fariya Tabassum S. M. Rahat 201203022
Strategic Management (BUS-514)
Section: 02 (Group-2) Submission Date: April 21, 2018 Philips: Background • Philips was found in 1892 by Gerard Philips in Eindhoven, Holland. • Philips built its success on a worldwide portfolio of responsive national organizations. • Innovation as core strength: • One-product focus • Gerard’s technology prowess • Philips is a “Lifestyle company’ centered on health and well- being • Focus on product development, brand and channel management. 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. Cont.. • 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. Analysis of Reorganization Attempts - Philips 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. – Increase the profit margin (PM) to 3 to 4% from its current PM 1 to 2%. – 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. Timmer Recognition, 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 Boonstra Recognition, 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 Kleisterlee Recognition, 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: Background • 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 Organization’s Foundation: Divisional Structure • In 1933, Introduced Divisional Structure as first Japanese company. • Generated inter divisional competition rather than creating “Small Business” environment. • 36 Product Devisions. • 60% profit to headquarters and 40% back to the division provided an extremely profitable organization, while insuring its own future success. Matsushita: Internationalization • Expanding through color TV (1950 – 1960). • Building Global Leadership through VCRs, 1980. • Changing System and Control (mid of 1980s) • Headquarters-Subsidiary Relations (mid of 1980s) Analysis of Reorganization Attempts - Matsushita Konosuke Matsushita (KM), 1918 • Extensive distribution, product line extension • Licensing agreements, worldwide production • Internal competition- One product one division structure Toshihoto Yamashita, 1982 • Increased localization of operations: personnel & resources • Overseas production remained too dependent on centre • Allowed local divisions to have more operational control Akio Tanii, 1986 • Integrated foreign subsidiaries under METC control • Relocated major regional headquarters to Europe, North America Yoichi Morishita, 1993 • Focused on cost reduction and increasing operational flexibility • Sold 80% of MCI and shifted production to offshore companies • Cut headquarters staff and decentralised responsibility Kunio Nakamura, 2000 • Integrated one-product divisions into multi- product production centers • 'Destruction and Creation' program: Disbanded product division structure • Plants were integrated into multi-product production centres. Findings: Philips • 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 Cont….. • 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. Findings: Matsushita • 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. Recommendation: 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 Recommendation: 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 divisionalied structure. • Realize change is not a simple process and has many potential barriers