lOMoARcPSD|6307430

Philips Matsushita Case Write Up Robert Rogers Mar 2018

International Business Policy (Florida International University)

StuDocu is not sponsored or endorsed by any college or university

Downloaded by John Abruzzi (mdakm47@gmail.com)
 lOMoARcPSD|6307430

MAN 6635 

Philips versus Matsushita: A New Century, A 

New Round 
Robert Rogers 
 

   

 
Downloaded by John Abruzzi (mdakm47@gmail.com)
 lOMoARcPSD|6307430

 
 

Introduction

In business management and strategy development, it is often valuable to do a comparative

analysis of competitors in order to compare and contrast factors for success and challenges. By
observing the differences in culture, geography, management and strategic execution, it is easier
to focus on those policies that tend to have the greatest impact on the success of the enterprise.
An interesting comparison that helps to illustrate this fact is that of competitors in the consumer
electronics space: Philips and Matsushita. By analyzing the different paths taken by a European
company (Philips) and a Japanese company (Matsushita), one can see how local culture drives
corporate culture and the role that those differences play in the success or challenges that a given
company might face.

Philips Path to Being a Global Electronics Leader in the Postwar Era

Philips path from a small country in Holland to a global powerhouse followed a very interesting
path. Instead of driving group through a diversified product offering, Philips focused on driving
individual product innovation. That focus on being the premier light bulb producer was critical
to their growth initially in Europe and then their worldwide expansion. This drive for innovation
covered the entire process: from improved production processes to innovative redesigns of the
light bulb itself.

Initial growth was driven by maintaining a strong, centralized systems but as they expanded
more broadly, their organization became progressively more decentralized to allow for more
direct responsiveness in the local markets. This decentralization broadened even more based on
the protectionist policies that arose because of the Great Depression. More trade barriers and
increased tariffs pushed Philips to focus on local production in order to maintain international
sales levels.

How Matsushita Displaced Philips

 
1 

Downloaded by John Abruzzi (mdakm47@gmail.com)

 lOMoARcPSD|6307430

 
 

Matsushita’s drive to global dominance was driven by a much different corporate culture and
workforce focus. The founder, Konoshuke Matsushita, developed the Matsushita Creed and
Philosophy, which created a corporate environment that was community driven and contribution
to society with profit being a beneficial byproduct of those activities. This Creed and Philosophy
was a major driver to Matsushita’s highly ambitious 250-year plan. Additionally, they used the
post-war environment to establish a broad range of product offerings and retail outlets. This
focus on balancing culture and innovation proved to be critical to Matsushita’s growth.

Ultimately, their global positioning was driven product differentiation after failing to find much
success in creating international partnerships. By using expansion in and demand for color
televisions and VCRs, Matsushita was able to broaden their international scope and progressively
increase their market share. In order to meet market demands and ultimately manufacture for
themselves and other VCR companies, Matsushita established an efficient supplier network using
various locations throughout southeast Asia in order to drive production costs down.
Management remained highly centralized and product-centric but the overall efficiency of the
operations process as well as the innovative developments achieved in their product
differentiation allowed Matsushita to overtake Philips in overall market share.

Distinctive Competencies and Incompetencies Between Philips and

Matsushita

While both companies were driven to success through product innovation, their strategies and
operational structures were fundamentally different. Influenced by their domestic culture,
Matsushita relied more heavily on a centralized form of management with more control
originating from the home office. The benefited them with regards to centralizing branding and
processes but presented challenges with local market adaptations. This centralized system ended
up being both a driver for growth as well as impediment depending on shifts in local market
conditions.

Philips was also influenced by local culture and market conditions but their organizational
structure shifted to that of a matrix system with the local market heads having significant control

 
2 

Downloaded by John Abruzzi (mdakm47@gmail.com)

 lOMoARcPSD|6307430

 
 
over direction and operations. This allowed for significant responsiveness to local market needs
and shifts but proved to an adverse situation when circumstances dictated a centralized/collective
decision-making process. The leads of the national organizations (NOs) for Philips tended to act
in their self interest and this created ongoing challenges when Philips sought to take
collective/company-wide activity.

Objectives, Implementation, Impact and Challenges of Recent Changes-

Philips

Given the severe demands from market shifts as well and internal control issues, Philips has gone
through many years of stagnation and consolidation. This led to several CEOs with a broad
range of backgrounds and exposures to the brand stepping in and seeking to improve the
organization and lead them with a more effective strategy. Universal to those efforts was an
emphasis on unifying the visions and efforts of the NOs and the product divisions (PDs).
Although they had varying levels of success, they almost universally struggled to make headway
in centralizing power and control given the enormous amount of control and self-interest the NOs
had.

These illustrated the major challenge that Philips faced in its objective to move away from their
matrix system of management. Having ceded so much control to domestic markets, the strategy
needed to incentivize a return of some control to a centralized organization. While executives
such as Van Reimsdijk were adept at clearly identifying the issue, they proved far more
challenged in identifying a strategy that would overcome those internal struggles. Additionally,
this focus on changing internal structure seemed to pull Philips away from their focus on
innovative product development and success.

Objectives, Implementation, Impact and Challenges of Recent Changes-

Matsushita

Matsushita’s struggles appear to be the inverse of what Philips was dealing with and lead to
different strategic implementation. Because of their highly centralized system, Matsushita
struggled at times to adapt the the individual market factors that impacted the various countries

 
3 

Downloaded by John Abruzzi (mdakm47@gmail.com)

 lOMoARcPSD|6307430

 
 
where they were operating. Because they operated as a centralized hub, all decision-making
appeared to be driven by the home country with little flexibility for adaptation. This led to
various phases of localization and re-integration as the various presidents of Matsushita sought to
achieve a balance between home country control and local country flexibility.

While efforts were made by Tanii, Morishita, and Nakamura to transform the internal culture of
the company and move it along the spectrum of centralization and de-centralization, most of their
actions spoke to labor management instead of driving innovation. This created many challenges
internally because their strategies lacked the requisite focus on driving innovations in product
and production. While structure is a critical part of strategy, it cannot be divorced from the need
to continue to drive innovation. This is especially true in the consumer electronics space where
competition is tight and margins are small.

Recommendations for Gerald Kleisterlee

Because Gerald Kleisterlee is responding to both internal and external challenges to the
profitability of Philips, he should focus on a two-pronged approach to improve market share and
firm profitability. The first prong should be a re-focus on a major driver for their initial growth
and success: product driven innovation. Consumer/personal electronics is a space that is
controlled by consistent and ongoing innovation. Philips should drive increased profits by
innovating to the front of the market.

The second prong that Kleisterlee should focus on is streamlining their operational structure.
Bridging the operational management gap between local markets and central company
management is a huge driver for success. Their processes and systems need to be simplified and
replicable so as to allow for higher functioning internal controls. This should in no way take
from the flexibility that their country level management has afforded them, but instead it should
create a better symbiosis between the product level management and the NOs.

Recommendations for Kunio Nakamaura

 
4 

Downloaded by John Abruzzi (mdakm47@gmail.com)

 lOMoARcPSD|6307430

 
 

While Matsushita and Philips are dealing with different structural management issues, they can
find their solutions in much the same places: driving innovation in products and internal
structure. As such, Kunio Nakamaura should focus on building an internal structure that drives
innovation both internally and externally.

By building an integrated network system, Nakamaura can thereby focus on building on a culture
of innovation and collaboration instead of the many years of struggling with internal structure.
Balance needs to be achieved between central control and local markets and an integrated
network systems better allows for this balance. Strategy cannot focus solely on structure without
an eye to innovation. Matsushita needs to have an eye firmly focused on innovating in systems
and products in order to compete on a high level in the consumer electronics sector. Having been
able to drive innovation previously, there are many of the original tenets of Matsushita that
Nakamaura can apply in their modern company in order to drive innovation now.

Conclusion

Consumer electronics is a highly competitive market and will continue to be so. For companies
like Philips and Matsushita to succeed, they need to lead in innovative products, branding and
systems. In order the accomplish that strategy, efforts should be made to focus on creating an
integrated network structure within their businesses. This is critical because those
location-specific needs are best balanced with company strategy and global innovation in a
structure that is both top-down and bottom-up. Because Philips and Matsushita have struggled
with profitability at both ends of that spectrum, a balance needs to be struck using a more
integrated network.

Ultimately, as a company expands internationally, it is faced with the competing interests of a

centralized system with those local market needs that exist in each country. That is why an
integrated network offers the most opportunity to global enterprises regardless of their industry.
Fundamentally, strategy succeed most when companies are able to focus more on innovation in
systems and products instead of managing internal power struggles that invariably arise in
centralized and matrix business systems.

 
5 

Downloaded by John Abruzzi (mdakm47@gmail.com)