Philips vs. Matsushita

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Case 4: Philips versus Matsushita: A New Century, a New Round

Steve Kotarski
MGT380 – Dr. Tang

Case Synopsis

Two major competitors in the global consumer electronics industry, Philips of the Netherlands and Matsushita of Japan, both have extensive histories that can be traced back more than a century. They have each followed different strategies and have had significant capabilities and downfalls along the way. In general, Philips built its tenured success on a portfolio of responsive national organizations. On the other hand, Matsushita based its global strategy on a centralized and efficient operation through Japan. As they developed and reorganized their international strategies, each company was forced to undertake its strategic posture and restructuring as its competition position fell. During the 1990s, each company experienced specific difficulties to their market share. Both companies struggled to reestablish themselves in the global consumer electronics world. As the year 2000 came around, new CEOs at both companies came up with even more complicated initiatives and reorganizations. Outsiders wondered how each company’s internal changes would affect their endless competitive battle in the industry. The case illustrates how global competitiveness depends on the organizational capability, the difficulty of overcoming deeply rooted administrative heritage, and the limitations of both classic multinational and global models.

Study Questions

1. How did Philips become the most successful company in its business during an era when scores of electrical engineering companies were being formed? What impediments and disabilities did Philips' strategic and organizational capabilities bring with them?

Philips made a strong push to developing new technologies starting in the 1950s and 1960s. Upon doing so, the company also wanted to translate these technologies into products while adapting, producing, and selling these products within individual national markets. During this time period, most of the companies in the electrical products market were bring formed and racing to diversify. However, Philips decided to stick with what they knew best. They made only light-bulbs. In doing so, their strong focus enabled the company to create significant innovations. Continuing on, Philips also became a leader in industrial research by creating physics and chemistry labs to address both production and scientific problems. The labs developed a tungsten metal filament bulb that brought great commercial success. Philips simple structure and significant innovations gave them the financial support they needed to compete in a time period where competitors were seeking major growth. Along with these positives, Philips had several problems that caused them to regress in the industry. Their main issue was its inability to bring products to market, also known as their local responsiveness. Philips was largely dependent on centralized operations and decisions, thus they lacked the flexibility to successfully operate in a multinational environment. In the late 1960s, the creation of the Common Market broke down trade barriers within Europe and diluted the rationale for maintaining independent, country-level subsidiaries. Also, new technologies demanded larger production runs than most national plants could justify, and many of Philips’ competitors were moving production of electronics to new facilities in low-wage areas in East Asia and Central and South America. Despite its many technological innovations, Philips’ ability to bring products to market began to falter. In the 1960s, the company invented the audiocassette and the microwave oven but let its Japanese competitors capture the mass market for both products. A decade later, its R&D group developed the V2000 videocassette format, but was forced to abandon it when North American Philips decided to outsource, brand, and sell a VHS...
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