Comparing and Contrasting Similar Companies: Philips and Matsushita

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From their early beginnings in the late 1800s and early 1900s, N.V. Philips and Matsushita Electric respectively became two of the largest consumer electronics companies in the world using very different corporate structures and philosophies. Due to the events of World War II, Philips employed a multinational strategy with strong, local units driving innovation, which is historically an uncommon strategy in the consumer electronics industry. On the other hand, Matsushita followed the traditional electronics industry and Japanese philosophy of global standardization, maintaining central control and surveillance over operations abroad to have a lower cost structure and quick response to market demands. While the two strategies are very different, each company experienced great success using their chosen strategy but they also contributed to the precarious positions in which the companies eventually found themselves. This analysis will discuss how both companies should have employed characteristics of each international strategy in order to maintain their position, sales, and profitability in the global consumer electronics industry This essay will also address the cost consequences (monetary and reputation) each company has incurred up to this point trying to change strategies as well as the most important issues facing management for each company: oPhilips: go back to strong national organizations with corporate support, innovation/technology development, more overseas production, better marketing and market research oMatsushita: strengthening, empowering, and building trust with local entities, innovation, update product offerings, and strengthen the Panasonic brand equity/image Philips. The multinational company structure of Philips can be directly attributed to the survival steps the company took to keep the company operational during World War II. Setting up individual and autonomous national organizations (NOs) not only enabled the company to survive the war (which demolished most of its buildings and plants) but set them up for much of their future success that enabled them to become the leading consumer electronics company in the post-war world.

The NOs helped Philips take profit from two of the biggest advantages of the multinational system—customized products and quick response to changing local situations. There is no better example of this than Philips production of televisions. It started with the company’s ability to produce televisions for the different countries despite the differing transmissions standards. Then each country was able to produce the style of television that was in demand: from the furniture-encased TV sets to more contemporary models. The NOs were then able to effectively market those televisions depending on acceptance level and channel preference. Finally, it led to innovation where different Philips NOs were responsible for Canada’s first color television, Australia’s first stereo TV, and the United Kingdom’s first TVs with teletext. Such local responsiveness is impossible in companies employing the globalization strategy.

The major weakness of Philips during this time can be directly attributed to the matrix structure put in place decades earlier with the product divisions (PDs). From a leadership standpoint, it is most often detrimental to a company to have leadership shared by more than one central group. Each entity has no real accountability to the parent company and has no motivation to work together—especially in the case of the NOs because they already had all the power they wanted and a track record of success under the old system. The motivation to set up the PDs is understandable because Philips was trying to establish more central control of operations after World War II. However, by that time, the NOs had become so powerful and effective that the PDs only caused a drag on the momentum the NOs had created. But what Philips failed to realize is that...
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