Philips vs Matsushita Case

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    CorporateStrategyPhilipscase 1

    Internationalization Strategy and

    Organizational Structure

    Emelie Gustafsson

    Jacek Nagrski

    Katherine Nunes

    Johan Sandstrm

    Michael Steiner

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    Questions!

    WhatwerePhilipsInterna8onaliza8onstrategiesoverthedecades(especiallypre-andpost-1960s)?

    Examineit'sdevelopmentover,me

    ExaminetheInterna,onaliza,onstrategyandorganiza,onalstructure

    Lookforthereasoningandside-effects

    Whatorganiza,onalstructuredoyouthinkwouldfitbestPhilips'strategyandproductpor?oliotoday?Proposeone.

    CorporateStrategyPhilipscase 2

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    Todays Agenda

    1. BACKGROUND2. INTERNATIONALIZATIONSTRATEGY3. ORGANIZATIONALSTRUCTURE4. REASONSANDSIDEEFFECTS5. NEWORGANIZATIONALSTRUCTURE

    CorporateStrategyPhilipscase 3

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    CorporateStrategyPhilipscase 4

    1. BACKGROUND

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    Philips history in short

    Founded191inEindhoven,Netherlands Itallstartedwithlightbulbs Todayac8vewithin3areas;Healthcare,Ligh8ngandConsumerlifestyle Movingfromdecentralizedtocentralized

    CorporateStrategyPhilipscase 5

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    Founded;Eindhoven Startedtoexport Broadenproductline Decentralizing

    192-1930 1930-1960

    Moredecentralizing,par8allyduetoimpendingwar

    BuildonstrengthofNOsbecauseofbombingsinHolland

    NO/PD-matrixstructure

    1960-192

    Low-wageelectronicsmanufacturing

    Lotsofinnova8onbutlowmarketshares

    YellowBooklet;disadvantageofPD/NO-

    matrix

    Concentra8ngproducts

    192-1990

    Closedinefficientplants,around3layoffs,highcompensa8onbylaw

    Focusedmoreoncorebusiness PDsmoredecisionpower Reducedmgmt.board R&Dconcentra8on

    1990-2001

    100factoriesclosed,6layoffs

    TargettoincreaseROAfrom17to24%

    Elimina8ngthePD/NO-matrix 40%increaseinadver8sing Performancegoesup!

    CorporateStrategyPhilipscase 6

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    CorporateStrategyPhilipscase 7

    2. INTERNALIZATION STRATEG

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    Evolved from a national to a worldwidebusiness strategy

    Global Transna8onal

    Interna8onal Mul8na8onal

    Focusonlowco

    sts

    Focusonlocaladap8on

    High

    Low

    Low HighCorporateStrategyPhilipscase

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    Philips moved from Multinational to aGlobal/Transnational company

    CorporateStrategyPhilipscase 9

    Adaptedmanagementtolocalneeds

    Worldwideunifiedmanagementprac8ce

    GlobalandLocalPrac8cesinParallel

    ManagementPrac8ce

    ManufacturingandMarke8ng

    ResearchandProductDevelopment

    Differen8a8ontofitlocalforeigncondi8ons

    Generic,undifferen8atedproductsworld-wide

    Differen8a8onofforeignmarkets,butintegra8onofac8vi8eswherepossible

    Localproductdevelopmenttofitlocalmarketneeds

    Centralizedproductdevelopmentforglobalneeds

    Localdevelopedproducts,butgloballycoordinatedtransferof

    knowledge

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    Market Imperative have been the maindriver of Philips internationalization

    MarketImpera8ve;Accesstonewmarketsextendsproductlifecycle

    Limitedhomemarket

    Increasingcompe88onathomemarket

    Accesstolow-costfactors

    Strategicmovesonforeignanddomes8ccompe8tors

    Changesinpoli8cal,legal,andsocialenvironment

    KnowledgeImpera8ve;Foreignins8tu8onsgiveaccesstouniqueandvaluableknowledge

    Accesstokeydevelopmentpeople,enablesresearch,developmentandinnova8on

    Accesstokeypatentsabroad

    Managementimpera8ve;Managerstakepersonalinterestinforeignac8vity

    Interna8onalfirmsaracttalents

    Careeropportuni8esabroadmo8vatetheorganiza8on

    CorporateStrategyPhilipscase 10

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    Of course there are some counterforcesof Internalization

    CulturalVaryingconsump8onpaerns

    Ins8tu8onalPerformancestandardsNa8onalpriori8es,economicandsocialpolicies

    Localiza8onLocalizedcustomerneedsCustomerpreferencesLocalknowledgeandexper8se

    CorporateStrategyPhilipscase 11

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    CorporateStrategyPhilipscase 12

    PHILIPS VS. MATSUSHITA

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    Globalization vs. Multi domestic

    Globaliza8on(Matsushita) Productisthesameinall

    countries.

    Centralizedcontrol-liledecision-makingauthorityonthelocallevel

    Effec8vewhendifferencesbetweencountriesaresmall

    Advantages:cost,coordinatedac8vi8es,fasterproductdevelopment

    Mul8domes8c(Philips) Productcustomizedfor

    eachmarket

    Decentralizedcontrol-localdecisionmaking

    Effec8vewhenlargedifferencesexistbetweencountries

    Advantages:productdifferen8a8on,localresponsiveness,minimizedpoli8calrisk,minimizedexchangeraterisk

    CorporateStrategyPhilipscase 13

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    CorporateStrategyPhilipscase 14

    3. ORGANIZATIONAL STRUCTURE

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    WW2 and decreased sales during the60s, increased power of NOs

    CorporateStrategyPhilipscase 15

    PD1

    PD2

    PD3

    PD4

    NO1 NO2 NO3 NO4

    REAL

    POWER

    Loca8ons

    Products

    .

    .

    .

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    Organizational structure at 1960, withdecreasing sales

    Na8onalOrganiza8on(NO);Financial,Legal&administra8veresponsibility

    ProductDivisions(PD);Development,produc8on&Globaldistribu8on

    Formalcorporatelevel;Geographic/Productmatrix

    Inreality;NOhadtherealpower In1954Interna8onalConcernCounciliscreated,consistsoftheheadsofNO

    CorporateStrategyPhilipscase 16

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    Reduce # of products production plantsfor increased sales during 70s

    CorporateStrategyPhilipscase 17

    PD1

    PD2

    PD3

    NO1 NO2 NO3 NO4

    REAL

    POWER

    Loca8ons

    Products

    .

    .

    .

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    Continued decrease in profit during the 80sforce Philips to close even more plants, gooffshore and reduce products even more

    CorporateStrategyPhilipscase 19

    PD1

    PD2

    PD3

    NO1 NO2 NO3 NO4

    REAL

    POWER

    Loca8ons

    Products

    .

    .

    .

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    At 1982 the responsibility is given evenmore to PD

    Close40of200inefficientplantsinEurope Focusonsomemainbusinessesandacquireknowledgewereneeded

    Startoffshoremanufacturing PDwasthefinaldecisionmakers S8lldeclinedsaleandstagnatedprofit

    CorporateStrategyPhilipscase 20

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    1987 the business gets even morefocused

    Findfourcorebusinessestofocusat KeepstrengthenPDpowercomparedtoNO Start4globaldivisionsinsteadof14PD ReplaceInterna8onalConcernCouncilwithpolicymakingGroupManagement,consis8ngofPDheads. EachPDmovestotheirmostcompe88vemarket R&Dbudgetincreases Buildingefficientspecializedmul8marketproduc8onfacili8es.Close75outof420remainingplants

    Layoff3000employeesCorporateStrategyPhilipscase 21

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    Close to bankruptcy in 1992 forced Philips tofocus the business even more, and increase

    their innovativeness

    CorporateStrategyPhilipscase 22

    PD1

    PD2

    PD3

    NO1 NO2 NO3 NO4

    REAL

    POWER

    Loca8ons

    Products

    .

    .

    .

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    1990

    Philipswasalmostbankrupt Addi8onal6000employeeswerelaidoff. EveryNOwanttoprotecttheirunit Focusingresources,bysellingpartsofthebusinesses

    LowefficiencycomparedtoJapanesefirms Bemoreinnova8ve Cost-cungandstandardiza8onleadtoignoringdemands(productmyopia)

    CorporateStrategyPhilipscase 23

    In 1996 businesses were sold off they

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    Philips

    Division1 Division2 Division3 Division4 Division5 Division6 Division7

    In 1996 businesses were sold off, theyincreased their presence in Asia and

    changed their structure which resulted in

    positive ROA

    CorporateStrategyPhilipscase 24

    PD1

    PD2

    PD3

    NO1 NO2 NO3 NO4

    REAL

    POWER

    Loca8ons

    Products

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    1996

    Sold40of120majorbusinesses(focusing) Needofmoresimpleandstructuredmarke8ngandmanufacturingorganiza8ontocompetewith

    asia. Produc8ontolowwagecountries,moreconcentratedinasia.

    100Bus&7divisionsinsteadof21PDsandNOs Focusingonmarke8ng&brand Posi8vereturn CorporateStrategyPhilipscase 25

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    2001 ->

    Outsourcingproduc8onwithhighcosts Firstlosssince1996

    CorporateStrategyPhilipscase 26

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    CorporateStrategyPhilipscase 27

    4. REASONS & SIDE EFFECTS

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    SWOT - pros and cons of thisdevelopment

    S W Lowerstructuralcosts Incre

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