Case Synopsis: PHILIPS VERSUS MATSUSHITA
Address the case analysis questions provided for each case. 1. How did Philips become the leading consumer electronics company in the world in the postwar era? What distinctive competencies did they build? What distinctive incompetencies? After the war, the management board decided to build the postwar organization on the strengths of national organizations (NOs) resulting on increased self-sufficiency during the war. As NOs built their own technical capabilities, product development often became a function of local market condition which was more responsive and adaptive marketing. In addition, Philips also became leader in industrial research. Year
| Distinctive competencies
| Distinctive incompetencies
| Gaining control over operation by closing the least efficient local plants and converting the best into International Production Centers (IPCs), which each supplying many NOs.
| 1. Philips had many innovative technologies, but the products to market began to falter 2. Problem with reorganizing the company to deal with its growing problem.
| Replacing the dual commercial and technical leadership with single management at both the corporate and national organizational levels.
| 1. NO ignores main company welfare and focuses on local profit which lead to abandon of its V2000 videocassette format.
| 1. Focusing on core operations by selling peripheral business 2. Classified its business as core (components, consumer electronics, telecommunications and data system, and lighting) and non-core (domestic appliances and medical systems) which allow its management to trim the management board. 3. Dispatching many experienced product-line managers to Philips’ most competitive market 4. Paid attention on research and development 5. Build efficient, specialized, multi-market production by closing 75 of the company’s 420 remaining plants worldwide.
| 1. Major research to marketing, including a 40% increase in advertising to raise awareness and image of the Philips brand. 2. Shifting production into low-wage countries 3. With consumer electronics still as center of Philips future, CEO focused on established technologies such as cellular phones, digital TV, digital videodisc, and web TV
| 1. A few who understood the technology of new priority business after divestment. 2. Morale among middle management was lower as the cost lower
| 1. Outsourced production of TVs, CD players, and components; simultaneously moving the remaining in-house production to low cost countries. 2. Acquiring companies in the high-growth medical and lighting segments, shifting Philips from “consumer electronics” into “a lifestyle company” centered on health and well-being 3. Producing innovative product, such as TV plasma and focusing retail chains to 7 giants. 4. Cut number of divisions to five.
| 1. Too many factories over the world
2. How did Matsushita succeed in displacing Philips as No. 1? What were Matsushita’s distinctive competencies and incompetencies? Matsushita succeed in displacing Philips due to several reasons: a. More variation on new product line expansion (TV sets, transistor radio, color TVs, dishwashers, and electric ovens) b. Opening more retail outlets that gave the company direct access to market trends and quicker local responsiveness. c. Internationalization through export market
d. Building its global leadership through VCRs production, focusing its production by increasing its capacity and volume (that led to enable Matsushita to slash price 50% within 5 years launch) and licensing the VHS format to other manufacture. Matsushita’s distinctive competencies:
a. Strong headquarters-subsidiaries relationship and communication b. Giving oversea sales subsidiaries more choice over the products they sold c. Many retail outlet
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