Philips V Matsushita Hbr Case

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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?

In anticipation of the impending war in the late 1930s, Philips transferred its overseas assets to two trusts, British Philips and the North American Philips Corporation. It moved most of its vital research laboratories to England and its top management to the United States. Isolated from their parents and supported by the assets and resources transferred abroad, the individual country organizations became more independent during the war. The war crippled their industrial plant in the Netherlands. This allowed management to build on the strengths of the national organizations (NOs). Their increased self-sufficiency during the war allowed them to become adept at responding to country-specific market conditions. The NOs were able to develop adaptive marketing, enabling them to respond to consumer preferences and economic conditions in a nimble fashion. Philips sustained a culture of embracing technological innovation, and exploited its strengths in industrial research, creating labs to address production and scientific problems. This enabled them to broaden its product line.

While the foreign operations opportunities were attractive to the Philips workforce, the emphasis of the NOs within the corporate hierarchy left them with an inability to deal with the changing international competitive environment. Their attempt to tilt the matrix in the 1970s and 1980s by setting up Product Divisions was slow and unsuccessful at improving sales and profits. There was little coordination between the PDs, which held product management and long-range direction responsibility, and NOs, which were responsible for local profits and had input into product planning. The decentralized structure of their organization, once a competency, eventually left them at a disadvantage when trying...
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