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1.0 INTRODUCTION
Philips and Matsushita are both organization that entitles with consumer electric based industry.
Both of the industry were from two different part of the world where Philips from the
Netherlands and Matsushita from Japan. Throughout all the years both organizations had
engaged in a different strategy and emerged with different capabilities of the organizations, this
is because CEO of each company has to be up to date and change from time to time in order to
sustain with the change of the business environment. This report will be discussing about the
motivations, means and mentalities of both company when expanding, the conflicting
environmental faced by the organization, the strategic objectives and building of competitive
advantage of the organizations, innovation models adopted by them and also the organizational
models they adopted.
2.0 Methodology
In this report the data has been taken from the Case Study of Philips & Matsushita (Transnational
Management 5th edition by Mc GRAW), Assumption and analysis result based on the lecture
notes, and lastly discussion with lecturer and also course mates. Some extra information were
searched online as well.
3.0 The Motivation, means and mentality
Philips was founded by Gerard Philips 1892 in Eindhoven, Holland and Matsushita was founded
by Konosuke Matsushita in Osaka, Japan. Both of the organization started off with a small
business scale and throughout the years Philips and Matsushita had been involving in
International Expansion, the motivation for the organization to engaged in the international
expansion are market and resource seeking, increasing economies of scale and scope and etc.
These are the factors that motivate Philips to engage in international expansion. The tables below
show that different time frame Philips and Matsushita was motivated by different factors;
Table 1Table 2
In order for an organization to keep up with the change of the business environment, they must
always be updated with the latest news and situation of the business environment and what are
the facts that would benefit the organization to act as the motive of international expansion of the
business. For each company they will have different views and needs based on the organization’s
situation and will be motivated by different factors. For Philips, it started off as a small scale
economic producing only light bulbs and this created a kind of technology competence for
Philips. In the year of 1899 Philips were forced to go abroad for a larger volume to the mass
production due to the small size of Holland, Anton was the first export manager that Philips
hired to diversify the market such as Australia, Japan Canada Brazil and etc in order to achieve
and economic of scale. In 1912, Philips is aware that the industry of electric lamp was getting
saturated and moving into Canada, United States and France to build new sales organizations.
Philips had begun to broaden its production line in 1918, such as addition of producing electronic
vacuum tubes, radio and X-ray tubes. Due to the depression that brought trade barriers; Philips
has no choice but forced to build local production facilities to protect their foreign sales of those
PHILIPS
1899 Marketing seeking & Increasing the Economic of Scale
1912 Marketing Seeking & Competitive positioning
1919 Resource seeking
1918-1930 Market Seeking & Research and Development
1982 Learning Capabilities
1966-1997 Resource Seeking
Matsushita
1950-1960 Research and Development, Market seeking & Increasing the economies of scale
1960 Resource Seeking & Market Seeking
1970 Competitive positioning
1982 Competitive Positioning
1990 Resource Seeking
1991 Learning Capabilities
products. Generally we see throughout the year Philips has always been motivated by seeking for
resources.
Matsushita- In the early years of Matsushita has similar strategy with Philips; the company grew
rapidly with extremely fast expansion of product line. However, Matsushita had look beyond
expanding its product line and the excellent distributions system for the growth of the company
and they decided to move towards and focusing on exporting after trying different tactics to
boost their sales. In1960s, Matsushita done an expansion through the Colour TV, but due to the
increment of the manufacturing cost in Japan Matsushita has no choice but to move to some
lower wage countries for production. Matsushita had engaged a change or structure of the
operations of the organization to continue improve the business. When applying the motives that
both of the companies intended to internationalize, Philips and Matsushita face the means when
they are expanding abroad, the organization and the foreign country will have to complement
each another. Only by doing this organization can achieve the best situations that benefit the
organization either in ownership advantage, location-specific advantage or strategic
competencies and also a better understanding of local culture of the country. Every company that
went abroad for internationalization have their own level of national responsiveness and global
integration and the organization must also bare in mind that they must have organizational
capabilities before they decided to internationalize. Philips had engaged in a Joint Venture mode
with a local partnering company in year 1912, this is one of the strategy that helps organization
to gain local acceptance. Whereas, Matsushita was focusing on the export market that led them
towards the systematic distribution system. Besides, in1960s Matsushita shifted their production
to low wage countries for resource seeking. When an organization engaged in
internationalization and by considering both the internal and external factors of business the
organization would soon led to a shift to transnational, especially when the organization has high
global integration and also high national responsiveness. From the case study, Philips was
holding on to the Multinational perspective and Matsushita hold on to the Global perspective.
Multinational simply means that the condition of a company that develops their strategies
according to the different location in different places and the production is expanded into several
parts of the world. But the products were produced according to the preference of the consumer
and also the spending ability condition of the local. In Philips case, the TV that they supplied to
various countries was varied one from another and due to the reason that Philips was only
focusing on their production only it has a low global integration. Where on the other hand we can
clearly see that Matsushita has engaged in a wide and global production line and it had high
global integration but low national responsiveness, they also have several headquarters in
different countries; that led them towards having a Global perspective.
Figure 1.0 The Process of Internationalization
4.0 The conflicting environment for Philips and Matsushita
When organization engaged in internationalization, it is important that organization is clear with
the situation of the environment either internal or external. There are three conflicting sets of
external demands which are as follow; Forces for global/cross-border integration and
coordination, Forces for local/national differentiation and responsiveness and lastly the
forces for worldwide innovation and learning. Philips and Matsushita had engaged in these
forces at different time, and it also led to some changes of the company structural context in
order to keep up to the change and deal with the forces that are changing over the time. It is also
important for both organization to identify their core competence in order to capture the value
and stand of their business. However, organization needs to recognize the external forces which
are within the organization these external forces give a huge impact to the business system
function. The forces that an organization would normally face would be customers, competitors,
government, political, technological, creditors and etc all these would affect the business directly
or indirectly. Besides, it is also very important that the firm can successfully operate in the global
market integration and considering implementing the economies of scope and scale. It is one of
the very important factors for both of the organization because this could be used to determine
the position of their business in the market and it also act as a motivation for global coordination.
Philips had engaged and tried to maximize the economies of scale by ensuring all production and
manufacturing were done locally, this is just to protect its foreign sales. Philips had also engaged
with other forces which are interrelated to the business such as the consumer behavior and
preferences, cost and products and also the technological advances in expansion of their
company in other countries. The decision for Philips to first expand business to Holland had
based on the consideration of to ensure the increment in trade. Philips can manage their
companies independently and it also seems to have a strong force on the global integration
dealing with the other global competitors. After Philips switch from centralized to decentralized
it had also broaden its product line and at the mean time also expending the market by
internationalizing. The other force that affects the firm is the responsiveness of the consumer.
The forces of local differentiation and responsiveness were not only caused by the differences in
culture among the nations but also about the government demands towards these new firms. For
each organization that decided to enter to a new foreign market, they will first need to identify
their consumers’ preference and buying behavior so that they would be able to understand and
strategize their products or production to match the local market which is known as the local
responsiveness. Besides each country has a different level of laws and regulation that
organization have to bind with when they decided to engaged in expansion in the specific
country and these companies would have to implement certain strategies in order to gain
acceptance of local consumer. For Philips’ case the organization was cleaver because they had
enter to a new country by using the mode of local joint ventures with one of the local players this
had made life easier for Philips in order for them to penetrate into the local market, they was also
able to determine their competitions around the globe. Whereas Matsushita had engaged in a
different way of approach they had a very wide range of products and they have a very low rate
in national responsiveness and they did not diversify their products according to the countries
that they had supplied. Matsushita had however shifted some of its production to some lower
wage countries in order to cut down the cost.
Last but not least the third force that will affect both the organization and as well as the others
that engaged in internationalization will be the force of worldwide innovation and learning. Due
to globalization there’s always improvement in the technological advancement, this is one of the
reason that led to a change of structure and business production, in order to sustain and keep up
with the environment change. As the technological advancement will cause impacts on the
product life cycle for the organizations, since that the technology has kept improving which
helps to shorten of product life cycle of a product. Furthermore the cost of Research and
Development were increased because of the increasing of innovation to ensure quality and
creation of new products. Philips and Matsushita were both fast moving multinational
corporations; they had to deal with a lot of innovations after the World War II. Matsushita was
faced a bigger challenge as they had a wide range of products and development compared with
Philips, this fast learning and technological advancement will force Matsushita and Philips to
restructure their organization in order for them to survive from the change of the business
environment. When both Matsushita and Philips had responded to restructure their production
and organization it also automatically led them towards a higher level of responsiveness of
national preference to increase their demand. This eventually led to a shift of both organizations’
mentalities to transnational. These are the respond of both Philips and Matsushita responded
towards the conflicting environments.
5.0 The Strategic of Organization and means of building competitive advantage.
For each organization that operating in the world, every one of them will have their own goals
and objective to achieve, same goes to both Philips and Matsushita. Both of these companies
would probably have a common goal to achieve which is to be the world leading electronic
industry in innovation and productions. In order to achieve the goal, Philips and Matsushita will
have to attain their strategic objectives which is needed in every company that providing specific
detail and plans on how to operate the company’s business in order to reach the goal. The three
strategic objectives that are well known are as follow;
a) Global Scale Efficiency
It is very important for a company to adopt the right strategies and also an effective decision
making in the management to improve the standardization and productivity of products. Based
on the case study Matsushita had engaged with this Strategy, this is because they had
standardized their production to increase the efficiency of producing. By standardizing the
production of the company, it is also to increase the efficiency of producing as it does not need to
respond to changes. It is also clearly seen that during the 1960s Matsushita had shifted some of
basic production to low wage countries to lower the cost of input. Besides, Matsushita are known
to have strong Research and Development team that help them obtain better technology to
achieve efficiency and also lowering cost of input.
b) Multinational Flexibility
This strategy is basically to see the ability of an organization to adapt to the new environment,
risk managing and also exploiting the possible opportunity. Philips had obtained this strategy, as
we can clearly see that they had used an easier way to adapt to a new environment which is
through joint venture. By using this strategy Philips can gain a local acceptance by getting a local
partner in their business. Besides, Philips can easily manage the risk and spot opportunities when
they have a local player that understands the market well to help them out. Matsushita engaged
in more wholly own subsidiaries but engaging with local worker that could help them with the
local experiences but it is very limited knowledge they can adopt.
c) Building World-wide Learning
This strategy shows the need for an organization to develop a world-wide learning system, it is
important for an organization to learn from its international exposure and opportunities and
exploit learning. Both Philips and Matsushita had engaged in international expansion and both
had learn from it exposure by seeing how they keep changing time to time and expanding the
product range that they have.
Figure 3- The strategy Positioning of Philips and Matsushita
The means for both of the company to build their competitive advantage are as follow; National
Differences, Exploiting scale and scope of economies. For each different countries there’s
different element being offered that’s where national differences came in as the organization
would need to exploit the differences in different resources and also market potential. For Philips
and Matsushita chooses to shift production to low wage countries and also penetrate the country
with the market that obtain possible opportunities. Besides, both of the companies also exploit
scale of economic as we can see that they tried the best way to obtain low cost production by
producing a large volume or getting a low wage country to produce for them. Philips was
engaged in mass production in Holland to reduce cost whereas Matsushita shifted certain basic
production to low wage countries. The table below shows the engagement of strategic for Philips
and Matsushita.
Philips MatsushitaGlobal Scale Efficiency
Multinational Flexibility
Building World-wide Learning
Engaged Fairly Limited of Engagement
6.0 The innovation model adopted and challenges faced.
Both Philips and Matsushita obtain different innovation models, due to the competition that each
of them faced it will lead them to obtain different innovation model to compete with the
competitor in the market. The three key capabilities that are required to compete in the
innovation area are The Sensing capability, responding capability and lastly implementing
capability. For Matsushita, it had adopted the center for global model as the a structure as we can
see the centralized hub will be the one undergo R&D of product and the idea will then be
implemented to the globe via subsidiaries to the local market. This model faced problems such as
it is insensitive to the market and also the subsidiaries might not be committing to the centralized
hub.
On the other hand, Philips adopted the locally leveraged innovation model as a structure for the
business, as we can see that Philips engaged with a lot of expansion through joint venture and
they have high local responsiveness, which they clearly see that each subsidiary have their
unique capabilities and are shared on worldwide basis. This model would often threatened by a
reason ‘not invented here’; this is a problem that Philips would face.
7.0 The Organizational models adopted by Philips and Matsushita.
Each organization adopted different model as they are influenced by its organization history,
production and also the management, this could be one of the core competencies of the
organization if the model can operate successfully and achieve the objective of the organization
Philips and Matsushita both adopt different organizational models in the case, Philips adopted
decentralized federation and Matsushita adopted centralized hub. Philips has dispersed resources
as they had engaged in expansion with a joint venture mode it is clearly seen that the decision
making are no longer centralized and they allow each nation subsidiaries to make decision to
respond to the local needs, but all these flexibility would let to inefficiency.
On the other hand Matsushita adopted the centralized hub model, this is clearly seen that
because, the centralized hub in Japan would be the hub that undergo all R&D and also new
product development and all the other subsidiaries will only be implementing to the market.
Figure 4 Central Innovations in Centralized Hub Model
Figure 5 Local innovation in Decentralized Federation Model
8.0 Did Philips and Matsushita successfully achieve transnational?
Based on the case study, Philips and Matsushita has yet to develop into a transnational
organization, this is simply because to become a transnational organization the company must
fulfill the characteristics as follow, Global efficiency, national responsiveness and also
worldwide innovation and learning. In order to achieve the goal to be Transnational, organization
should first attempt to solve the limitation of the three organization archetypes by building and
legitimizing multiple internal perspectives which simply means to develop strong management
group such as strong nation subsidiary management that can manage it own without depending
the main company, capable global business management and also worldwide functional
management. Besides it is also important for an organization to have dispersed and
interdependent capabilities and physical asset this is because the national units can achieve
global scale by specializing their activities and they are able to tap into important developments
of market and also technology advancement. Last but not least the robust and flexible integrative
process, it is important for organization develop the ability of management to differentiate its
operating relationship and also the ability of decision making in different perspective. For Philips
and also Matsushita they had yet to reach the transnational stage as Philips could use to work on
the global efficiency whereas Matsushita should improve on their National Responsiveness.
9.0 Conclusion
In conclusion, both organizations had done a good job through the time frame of the case study
especially Philips. Philips had undergo a smart choice of business strategy and management as
they know it is better to focus on lesser product where Matsushita was in a different situation that
they have too much to focus on from product range to business operation. Philips had sustained
through WWI and WWII and yet they are still standing as compare to Matsushita with a wide
range of products.
10.0 References
1- Barlett, C. and Beamish, P.W. (2011) Transnational Management: Text, Case and
Readings in Cross- Border Management, (6th Ed) Mc Graw- Hill International Edition.
2- Dr. Ngat Chin Lim Eunice (2012) International Business Strategy 2 , Session 1 :
Expanding Abroad- Motivations, means, and mentalities.
3- Dr. Ngat Chin Lim Eunice (2012) International Business Strategy 2 , Session 2 :
Understanding International Context- Responding to Conflicting Environmental Forces
4- Dr. Ngat Chin Lim Eunice (2012) International Business Strategy 2 , Session 3 :
Developing Transnational Strategies Building- Layers of Competencies
5- Dr. Ngat Chin Lim Eunice (2012) International Business Strategy 2 , Session 5 : Creating
Worldwide Innovation and Learning – Exploiting Cross- Border Knowledge Management
6-Dr. Ngat Chin Lim Eunice (2012) International Business Strategy 2 , Session 6 :
Developing a Transnational Organization- Managing Integration, Responsiveness and
Flexibility
7- Rekha S., Aeron Lai. (2010). Philips versus Matsushita. Available:
http://www.slideshare.net/rekhasr/philips-versus-matsushitafinal2. Last Accessed 4th April 2012
8-Scott C., Christina C., Maureen S. (2009) Philips Vs Matsishita, Available:
http://www.slideshare.net/smehro/philips-vs-matsushita-scm. Last Accessed 4th April 2012
Table of Content
1.0 Introduction 1
2.0 Methodology 1
3.0 The Motivation, means and mentality 1,2,3,4
4.0 The conflicting environment for Philips and Matsushita 5,6,7
5.0 The Strategic of Organization and means of building
competitive advantage.
7,8,9,10
6.0 The innovation model adopted and challenges faced. 10
7.0 The Organizational models adopted by Philips and
Matsushita.
11,12
8.0 Did Philips and Matsushita successfully achieve
transnational?
12,13
9.0 Conclusion 13
10.0 References 14
Executive Summary
In this report the case of Philips and Matsushita will be studied based on the text and
lecture notes. The motivation means and the mentality of each company will be discussed
and also conflicting environment that they faced. There will also be discussion of strategies,
innovation models and also organization model that both Philips and Matsushita adopted
and lastly the conclusion. All these findings are based on the textbook, lecture notes and
also discussion between lecturers and course mates and also some extra information from
the internet.
Analysis Report
Of
Philips & Matsushita.
