Philips Vs Matsushita (Summary)Essay Preview: Philips Vs Matsushita (Summary)Report this essayPhilips was founded by Gerard Philips and his father in 1892 in Eindhoven, Holland . Then, they recruited Anton Philips (Herards brother), an excellent salesman and manager, and soon after they became the third largest light-bulb producer in Europe. However from its beginning on it always took care for his workers. As an example in Eindhoven it built company houses, bolstered education, and paid its employees so well that other local employers complained. When larger electrical product companies were trying to diversify Philips only focused on one product, light-bulbs which enabled the company to create significant innovations.
They scraped old plants and after advances were made they used new machines or factories. They also became a leader in industrial research, creating physics and chemistry labs to address production problems as well as more abstract scientific ones. After developing the tungsten metal filament bulb, which was a great commercial success, Philips had the financial strength to compete against its giants rivals. Because of Hollands small size Philips was soon forced to expand to other countries for having enough volume to mass produce. So it started building sales organizations in the United States, Canada, and France. All other functions remained highly centralized in Eindhoven. Philips created also local joint ventures to gain more market acceptance.
After entering into an agreement with General Electrics in 1919, giving each company the use of the others patents, Philips began evolving to a decentralized sales organization. It founded independent marketing companies in 14 countries in Europe, China, Brazil and Australia and also broadened its product line significantly. However the great depression which brought trade barriers and high tariffs with it, forced Philips to build local production facilities to protect its foreign sales of these products. Philips had a shared but competitive leadership by commercial and technical functions. It also believed that a strong research was vital to its survival.
In the 1930s, because of the impending war, Philips transferred its overseas assets to British Philips and to the North American Philips Corporation and also moved most of its vital research laboratories to Redhill on Surrey, England and its top management to the United States. Consequently the individual country organizations became more independent during the war. The post war organization was than build on the strengths of the national organizations (NOs) because the increased self-sufficiency during the war had allowed most to become adept at responding to country-specific market conditions. As the NOs built their own technical capabilities, product development often became a function of local market conditons.
The NOs took major responsibility for financial, legal and administrative matters, while the product divisions (PDs), which were located in Eindhoven, were formally responsible for development, production, and global distribution. The research function remained independent. It was clear that the NOs had the real power as they were reporting directly to the management board and each NO also sent representatives to communicate their interests. Within the NOs, the management structure reflected the legendary joint technical and commercial leadership, so most were led by a technical and a commercial manager. However this cross-functional coordination capability was also reflected down through the NOs in front-line product teams, product-group-level management teams and at the senior management committee of the NOs top commercial, technical, and financial managers.
On the other hand, as the creation of the Common Market eroded the trade barriers within Europe in the 1960s, many of the competitors were moving their production to new facilities in low-wage areas in East Asia and South America. And also despite its many technological innovations, Philips ability to bring products to market began to falter.
Then, Philips tries for Reorganization Over the last three decades Philips problems grew and so seven chairmen tried to solve them by reorganizing the organization. The first attempt of reorganization took place in the 1970s. As it was obvious, since the V2000 videocassette format was developed and Philips was forced to abandon it because the North American Philips decided to outsource it, although it was technically perfect, that the NOs were to powerful. So CEO Van Reimsdijk tried to decrease the number of products marketed, build scale by concentrating production and increase the flow of goods among national organizations. He wanted to close the least efficient plants and to convert the best into International Production Centers, each supplying many NOs. So the PDs should gain more control over the manufacturing operations.
Rodenburg, his successor, furthered the Matrix simplification by replacing the dual commercial and technical leadership, which was known as the success-secret of Philips, with single management at the corporate and national organizational levels. So the problems grew even more. The next reorganization took place in 1982 by CEO Dekker. He was aware of the Japanese cost advantage and so he closed inefficient operations. He focused on the core operations by selling some businesses and acquiring an interest in Grundig and Westinghouses North American lamp activities and also supportet technology sharing agreements and entered alliances in offshore manufacturing. To deal with the slow moving bureaucracy, he continued also to replace the dual leadership. Nevertheless he gave the PDs formal product management responsibility and left the NOs responsible for local profits. So he tried to clear out the responsibilities and so to fasten the act of decision-making. Finally he redefined the product planning process, incorporating input from the NOs, but giving global PDs the final decision on long-range direction. So good technologies could be produced, even if the NOs arent sure about their success.
However the sales still declined and profits stagnated. In 1987 Philips had lost its long-held consumer electronics leadership position to Matsushita. The new CEO Van der Klugt defined four core business and also a few non core business which he decided to spun off into joint ventures. He restructured Philips around the four core divisions instead of the 14 PDs. Then he trimmed the management board and formed a new policy-making Group Management Committee which consisted primarily of PD heads and functional chiefs. Finally he also sharply reduced the headquarter staff by reallocating many of them to the PDs, which was perhaps not the best for the motivation of the employees. To link the PDs more directly to the markets he also dispatched many experienced product-line managers to Philips most competitive markets which could also cause dissatisfaction
In 1987, the PDs and other top management of Philips were also being threatened by the merger of Philips and GE. The merged company would be an ever growing manufacturer of products for over the next half decade.
Matsushita’s PD was also already under a lot of scrutiny by the authorities. The PD’s first president was a former member of the US Federal Bureau of Investigation. He led efforts to remove him from the role of CEO of Philips for having a strong influence over both the PD’s control over the German market and its distribution to China as well as many of Philip’s European customer segments.
Matsushita wanted not only to prevent German companies like Philips from making or selling products in China, but also for his own company to be established in such a market. He also wanted a strong market monopoly to ensure that the Chinese government would be able to continue supplying Philips to its suppliers. (Even if the P-POP is not developed properly, some of Philips’ own products might become a problem in the coming decades; one example of this in the late 1990s is the Philips Home Theater and Sennheiser P900 compact speakers.)
A growing market
P-POP was born when the German government took out the reins on October 6 of 1991. While the PDs had established a monopoly on German products, it was also becoming clear the market had changed.
Over the course of the next few years the business moved rapidly and the European Philips market expanded.
Although European products were not necessarily dominant in Europe, the U.S. and British were. Over the next few years, the number of German products from Philips from both sides began to grow.
In 1991, over 1000 Philips products have been purchased in U.S. and Canadian stores. As a result, U.S. retailers now carry nearly half of all German and Canadian models of these products (about one-twentieth of the entire German market). During the same period, the U.S. retailer market experienced an even bigger volume increase than in 1991 (a trend which has accelerated since 1991 during the peak periods of the U.S. market and the U.K.; see the image). European products were not necessarily dominant in Europe, the U.S. and British were. Even though European products were not necessarily dominant in Europe, the U.S. and British were. Over the course of the next few years the business moved rapidly and the U.S. and British were. From the beginning, Philips products had been the undisputed leaders in the German market. Their new model has been largely an amalgamation of European and foreign markets.
For over fifteen years the company had been in the spotlight. When Philips was first introduced two years ago, international customers came to Philips with their expectations that they would be able to get their Philips products to our Europe customers soon and with excellent quality of service. Today, though, we still have very little reason to believe that we can. (At the present moment there are still quite a few U.S. brand brands which don’t have a European customer segment, which accounts partly for the lack of good European sales. But in the market for the new P-POP, we believe that there will only be a small percentage of U.S.-made goods with a domestic customer segment in 1992.) So in spite of the strong demand of most consumers