Philips vs Matsushita Case Analysis

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Philips versus Matsushita Case Analysis
Competing Strategic and Organizational Choices

Erik F. Spear
Lynelle C. Vidale
Vannessa. D. Williams
IMAN601, Section 9040
Dr. Mariana Feld
November 2, 2010

Philips versus Matsushita Case Analysis
Competing Strategic and Organizational Choices
Royal Philips NV and Matsushita (owner of the Panasonic brand among others) are two of the world’s biggest electronics multinationals. After successfully building their global empires in the early twentieth century, they have both suffered financially in recent decades. It is therefore interesting to look at why this has happened and what their future prospects are.

Porter’s Five Forces Analysis: Strengths and Weaknesses

Porter (2008) asserts that in every industry there are five forces forming the competitive nature of the industry, and understanding how they interact provides a firm with an opportunity to build an entry strategy that can improve its competitiveness and profits (p. 80).  These forces are threat of new entrants, threat of substitutes, bargaining power of suppliers, bargaining power of buyers, and intensity of rivalry, and they must be assessed for each industry on an individual basis.  The strength and weaknesses of each of these forces indicates the attractiveness of the industry and therefore, must be continuously evaluated not only from an industry perspective, but even more so, by each manufacturer/firm on an individual basis. One of the main reasons for Philips’ early success is arguably because of its focus on manufacturing light bulbs. Other electronics organizations were keen to diversify (Hill), whereas Philips concentrated solely on producing light bulbs and developing new technology for this product. It was, thus, able to build a competitive advantage based on technology, and subsequently, became a market leader in this field. In addition to its technological development, Philips overseas expansion was also a formidable reason for its growth and success. According to Hill, the small size of Holland forced Philips to look beyond its borders. It appeared to successfully pursue an international strategy as there was little pressure for local responsiveness with a simple product such as a light bulb and it was able to benefit from greater economies of scale. Matsushita’s success in the consumer electronics market is just one of many from a hugely successful Japanese electronics industry. Japanese enterprises share many similar elements in their success, particularly their revolutionary working practices such as the use of Just-in-time or Kanban. Consequently, Matsushita’s success in overtaking Philips can be attributed to the success of the Japanese consumer electronics industry as a whole. There are a whole set of interrelated industries and clusters (Porter, 1990), both domestic and international, that aided this company’s transformation from a lamp socket factory in rural Osaka, Japan to an international electronics giant. Figure 1 provides an analysis of the strengths and weaknesses in the global electronic industry, respectively. Figure 1: Porter’s 5 Forces of the Electronic Industry

            Threat of new entrants to the market is driven by entry barriers to newcomers such as economies of scale enjoyed by incumbents, customer loyalty base, customer costs of changing to new suppliers, large capital needed to enter a market, industry experience of incumbents, distribution networks, and government policies (Porter, 2008, p. 81).  The stronger these entry barriers are, the less attractive the industry will be to a newcomer hoping to make a profit.             The threat of substitute products is of great importance because customers may choose alternative products to save on expenses (Porter, 2008, p. 84).  In order to remain competitive in the market, firms will need to adjust pricing to remain competitive, and this may impact profit opportunities, which can...
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