Philips and Matsushita: The Competitive Battle Continues
Introduction
This report will analyze competitive battles that have characterized developments of two of the biggest companies in the electronics industry, Philips and Matsushita, over the years. Philips, officially known as the Koninklijke Philips N.V., or Royal Philips, is a Dutch electronics company established in 1891 by Gerard Philips and his father in Eindhoven, Netherlands. The company currently has its headquarters in Amsterdam, Holland. Philips operates globally, with offices in over 60 countries around the world and a workforce estimated to e about 125,000 people (Marion, 2014). Philps has diversified its products to include products in consumer lifestyle, lighting and healthcare.
Matsushita Electric Industrial Co., Ltd, which changed its name to Panasonic Corporation, is a Japanese multinational company in the electronics industry, with its headquarters in Osaka, Japan. Konosuke Matsushita established the company in 1918 as a vendor for lamp sockets and eventually began manufacturing bicycle lamps in 1927 (Marion, 2014). The company expanded after the World War II o become one of the most recognized international brand with its products bearing the Panasonic name becoming household brands across the world.
The two companies have had historical competitive battles lasting for more than a century. They both employed different strategies, which showed different capabilities and downfalls for the two businesses over the years. Generally, Philips built its success on a foundation of responsive national organizations n contrast to Matsushita, which anchored its operations on a centralized approach with most of the firm's operations taking place in Japan (Marion, 2014). The companies experienced challenges in the 21st century, affecting their prospects of development and growth globally.
Different CEOs of each company took different approaches through the redevelopment and growth of the companies that saw the companies rise and fall on different occasions. While Philips was highly successful in the post WWII era, Matsushita managed to rise to the top in the 1990s. In the 2000s, the companies had different CEOs, who undertook different initiatives to take the companies in different directions as they sought to advance their competition to the next level. The rise and fall of these companies indicates how success of an organization on the global scale depends on its own internal mechanisms and strategies.
How Philips became the leading consumer electronics company after World Wars
Philips experienced exponential growth in the post war era becoming the leading producer of consumer electronics in the world. One of the factors that propelled Philips to greater success on the global scene is its ability to embrace innovation. Philips became highly innovative prior to the World Wars in both its production process and product development. The company engaged in extendedness research before the word war era leading to adoption of new machines to help in the production process (Marion, 2014). This made the company's production process more efficient and sustainable throughout the World War era. Research also helped the company to enlarge its product line to incorporate a diverse range of electronic products including light bulbs, vacuum tubes, x-ray tubes and radios during the 1930s.
Apart from research and in ovation, Philips' success was also founded on the company's strategy to venture in to the global market early on in the 1900s. This fact was necessary for the company's expansion since the market in Holland was so small that it could not accommodate all the mass produced products of the company. The company's initial globalization strategy was very centralized with autonomous marketing and decentralized sales in about 18 countries before the Second World War.
Political and economic events in the 1930s such as the financial depression and the World War II forced the company to rethink its strategies. The company decentralized its operations in to a truly multinational company with local branches of the company given powers to devise their own strategies to respond to their local markets. In anticipation of the Second World War, Philips transferred some of its assets into trusts in foreign countries including USA and Great Britain (Marion, 2014). This helped the company to localize its operations in these countries with national organizations becoming self-sufficient.
After the World War II, Philips continued to exploit its competencies in localization and research strategies to rise to become the world's leading producer of consumer electronics. After the Second World War, Philips was no longer acting as a single and unified corporation in Netherlands, but as a highly decentralized organization with its national organizations acting as autonomous branches responding to different market forces in their own countries. These strategies contributed to the success of Philips after the World War Era.
During this period, Philips managed to create its competencies in research and localization, but also developed various incompetencies that led to its downfall in the 1960s. One problem that Philips encountered was lack of experience in managing a multinational company that Philips has developed in to during the post war era. The company's management experienced challenges in standardizing operations for each of the localized national organization thus inhibiting further growth of the company. The company also experienced further challenges in the US market when the government licensed its competitor to provide Video cassettes. Another strategy that led to failure of the company on the international market was setting up product divisions to balance operation s of the national organizations (Marion, 2014). With these strategies, Philips was unable to take advantages of emerging opportunities in the global market and launch new products that would help the company enforce its dominance in the market.
How Matsushita replaced Philips on the Global market
During the Pre-war era, Matsushita experienced growth in Japan, opening up several branches locally in different parts of the country. During this time, the company was gradually specializing in production of various consumer electronics such as radios, battery-powered lamps and electric irons. The company had taken over the Japanese market before the war era with over 25,000 retail outlets in the domestic market. This local expansion gave the company direct access to consumer reaction and different market trends in the industry, creating a basis for expansion in to the global market after the World Wars.
In the post War era, the company adopted a global strategy by shifting its manufacturing to low wage countries while maintain high value production in Japan. The company remained largely centralized with most production, strategizing and decision making taking place at its headquarters in Japan, despite opening processing plants in the USA and Europe.
With a unified approach on the global market, Matsushita was able to create an effective network of managers who built strong relationships with each other and share amongst themselves various strategies of improving the company. General Managers of different subsidiary branches of the company around the globe travelled very often to the company's headquarters in Osaka, Japan for directions and continued to communicate via faxes and emails on a daily basis. This strategy enabled the company to increase its sales volumes thereby reducing costs and prices of its products and eventually taking over the market from Philips. The company was able to build competencies in terms of managing its subsidiaries, and building a string workforce around the world that was very efficient in marketing its products (Marion, 2014).
During this time, however, Matsushita also experienced various challenges in its strategy, thus threatening its position in the global market. The company built many incompetencies that inhibited growth and further expansion. Among the problems, the company faced include, stifling creativity of foreign branches of the company and lack of innovation. Foreign subsidiaries of the company relied on strategies and directions from the headquarters in Japan and thereby not being responsive to differences in market conditions. The company also failed to produce innovative products during the post war era, thereby limiting any chances of expansion.
Changes the companies have made of late
The decline if the companies in the 1990s called fo0r a change in strategy in order to reorganize operations and restore the companies' pride and position in the market. Both companies realized that their strateg8es were less successful hence the need for change. New CEO of both companies endeavored to take their organizations in different directions in order to realize their objectives. Philips opted to close down less productive branches in Europe, reduced their costs by reducing their workforce and outsourcing some of its operations. The company also tried to change its organizational culture in order to re-establish itself on the market. These new strategies were not without challenges. The company's National Organizations had grown to become powerful branches on their own, making it difficult for the management to change operations of localized branches.
Changing the organizational culture for such a global company can be a difficult task for any CEO. While the steps the company has taken to reorganize itself are god for the company's future, such strategies have led to the company losing some of its competencies that it built over the years. Philips is likely to get back to its position in the future despite experiencing challenges in the short term (Marion, 2014).
On the other hand, Matsushita was trying to decentralize and give more power to foreign subsidiaries. Local managers were given the powers to choose the type of products to sell in their markets, while the company also opened up several regional headquarters in Europe, America and Asia. With these strategy, the company began realizing profits I the early 2000s, an indication that the company is on the right track. It will be very difficult for Matsushita to take up its position in the market unless it begins to embrace innovation (Marion, 2014).
Strategic recommendations for both companies
Both companies are in the same industry and deal in the same type of products. My recommendations for the two companies are therefore similar and can apply to any other company trying to expand on the global scene. Both companies need to invest in development of new products. Innovation is the best strategy for companies to maintain their global appeal. The other recommendation is to localize sales at either local or regional level. This will bring the company closer to consumers and make it easier to respond to changes in consumer tastes. The companies also need to prioritize their decisions and strategies in order to prevent misuse of funds on projects that may not lead to fruition (Marion, 2014).
References
Marion, M. F. (2014). International trade policy and European industry: The case of the electronics business. Cham: Springer.
Required:
1) How did Philips become the leading consumer electronics company in the world in the postwar era? What distinctive competence did they build? What distinctive incompetencies?
2) How did Matsushita succeed in displacing Philips as No. 1? What were its distinctive competencies and incompetencies?
3) 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?
4) What overall strategic recommendations would you make to Gerald Kleisterlee? To Eumio Ohtsubo?
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