Discuss about the Analysis of Philips versus Matsushita.
The case study reflected the competitive battle between the two famous companies, Philips and Matsushita Electric. Philips initially concentrated on a single product and with the passage of time it evolved as the market leader in industrial research. There was cost pressure for both companies, Phillips and Matsushita when they were operating outside the home country. Both the companies wanted to follow the transnational strategy of reducing cost and modifying the products but they did not succeed. The organizational structure of both the companies stood as a problem for their expansion and growth and it was difficult to change them. Although Philips is decentralized and Matsushita being centralized yet it was difficult for both the companies to expand and capture the market (Nikabadi, Dehghan and Farmanian-Arani 2015).
From 1960s to 1990s, Philips changed its business strategy and the change happened in selling off its business, cutting FTE’s, expanding production in low cost countries, investment in research and development. Philips followed centralized leadership policy. It was forced to create various autonomous subsidiaries in UK and US and it has resulted to loss of power and control. There was struggle between the national organizations and product divisions and this has led to poor productivity. In 1998, the focus was on consumer electronics and other technologies which helped in increasing brand awareness in the market. In 2001, the focus was on product development, channel management and brand awareness. The company outsourced its production of CD players, TVs and other products to the low cost countries such as Mexico, Poland and China (Gunasekaran et al. 2015). Philips sold several of its businesses for components like audio, mobile phone and the semiconductor business. The company focused on high volume and volatile consumer products. It continued its innovation in plasma TV and LCD’s and also on other basic products of the developing market. In the later phase, the company also changed its marketing strategy and reduced the number of retail chains. It focused on giants supermarkets like Wal-Mart and Tesco to capture the market. In 2007, the company communicated its 2010 vision strategic plan to increase its profitability areas. In 2008, the organizational structure was simplified by forming three major sectors: consumer lifestyle, healthcare and lightning. These helped Philips to be customer centric and fulfill the needs of its valuable customers. Phillips targeted to be a leading brand in well being and health sector of business. In the later part of 2008, Philips gave its licensing to Funai for marketing and manufacturing TVs under the brand name of Philips. It also extended its license to cover products such as DVD, Blu-Ray and home theatre in other countries. The 2010 Vision strategy has tried to make Philips as the leading and growing brand in the health sector. The core competency for Philips is innovation but the company needs to realize that to increase its sales, it must focus on its brand and marketing (Wei, Samiee and Lee 2014). The change is hard for Philips because it should narrow down its products and focus on marketing and advertising. The focus of the product must be in accordance with the needs and demands of the customers (Rego, Morgan and Fornell 2013).
During 1950s and 1960s, the company focused on trade liberalization and lowered the shipping cost to expand its export business in TV sets. The company opened its branch office in America and tried to expand its network through selling by merchandisers and discounters. The manufacturing cost has increased and the company tried to move to low wage countries. The company also started to expand by introducing new technologies such as VCR. In 1972, the company tried to open its plant in Canada and other parts of USA. Between 1977 to 1985, the company increased its sales volume and this has increased the profit of Matsushita. In 1980s, it began to shift to local outsourcing and relocated its headquarter from Japan in order to become entrepreneurial in other global countries. Matsushita started with one product initially but it quickly gained market penetration and diversified by the steep number of retail outlets. It has also adopted the structure of product division. It expanded its production to low wage countries and thus began marketing and manufacturing of VCR’s. It also began decentralizing its leadership in relation to the local division of workforce. During the mid of 1980s, the growing number of these global companies helped the parent companies in either of the two ways: it wholly owned the company or a single product of the plant to the correct product division. The product division helped to maintain control in the offshore operation. The international sales of the Matsushita grew rapidly and the host country’s pressure helped to raise concern about the centralized operation of the company. The most important innovation of the company during this period is to increase its innovation for the overseas company and give them more choice and option of their products. Matsushita was centralized and they have many permanent employees which becomes a difficult task if the organization had to restructure and thus this affects the cost efficiency of the company. In April 1998, the company reorganized and strengthened its European Industrial Operation along with the creation of the Panasonic Industrial Europe. The new group so formed had it’s headquarter in Hamburg, Germany and its regional office in varied locations such as UK, Italy, Spain. The turnover of this new group was more than one million Euros and it had achieved its target in the first year of its business. There were more than 300 staffs in marketing, personnel support and sales. The chairman of Matsushita, Kunio Nakamura has declared that the company wanted to take these measures to remain competitive in the global market. Panasonic targeted to become the green innovation company in electronic industry by the end of 2018. The change is hard for Matsushita because they did not analyze the customers demand in the future and adjust the strategies accordingly. The company must integrate the change through various formal strategies and activities (Aguilera-Caracuel and Ortiz-de-Mandojana 2013).
Gerald Kleisterlee, the CEO of Philips had to focus on some particular areas to expand the growth of its business. He must focus on the employee’s morale and adopt a stronger marketing approach. When Gerald Kleisterlee took charge of the company, he outsourced the products of Philips to the countries where the cost of production is very low. This created a reduction in the layoffs as it had increase drastically. This has also affected the cost of production of the company. The employees also get demoralized and have the fear of losing their jobs. Kleisterlee must develop such a strategy which helps to foster engagement of the employees and development of the company. Moreover, the company fails to market it product effectively and this must be taken care of by Keisterlee. Philips being an innovative company must try to remain in the market power (Tajvidi and Karami 2015). Keisterlee must focus on the marketing and branding strategy. Efforts must also be made to increase the market share of the company. Keisterlee must also try to decentralize Phillips if possible. The headquarter of Philips in Holland must be reallocated to some other countries where it can expand its market. This will help the company to serve its customers more efficiently. Keisterlee must check that the company spends adequate amount of money on research and development. This will help Philips to compete with the other companies and expand its production line (Ren, Eisingerich and Tsai, 2015).
The founder of Matsushita, Kanosuke Matsushita developed the company on the basis of a particular philosophy. The development and progress of the company can be attained through the co-operation and the combined efforts of the employees of the company. Matsushita also developed certain standards for the proper attitude of the employees and develop a dedication for their work. Matsushita had a clear vision and he valued the importance of team work and recognized the employees as the valuable assets of the company. So Ohtsubo must try to revise the structure of the management and fulfill the targets of Matsushita. Moreover, Ohtsubo should also develop such a strategy which will help to ensure employees engagement in the company. Efforts must also be made to check that there is proper communication within the employees and the management so that the company can run efficiently. The operation of the company must be centralized and their must be strict measures for the overseas operation. Moreover, research and development must be outsourced so that the company can develop and expand quickly. Ohtsubo must also keep an eye on the marketing of the products and check that the products reach the market easily (Matisoff, Noonan and Mazzolin 2014).
Conclusion
Both the companies must expand its production by improving its innovation strategy and they must outsource the products in low wage countries. Philips and Matsushita must also expand its research and development area and develop a strong bonding with the employees. This will help them to increase their revenue in the long run. Philips adopted a multi-domestic strategy and thus there was no organizational unity and control over the employees. This strategy of Philips did not allow the company to develop its areas on global innovations. It is vital that both the companies must adopt a transactional strategy. This will help both the company to overcome the flaws in global innovation. Moreover, both the companies must also localize the sales in the global or regional level. This will help the companies to bring its consumers closer to them and it will be easier to respond to the taste and preferences of the consumers.
References
Aguilera-Caracuel, J. and Ortiz-de-Mandojana, N., 2013. Green innovation and financial performance: An institutional approach. Organization & Environment, 26(4), pp.365-385.
Gunasekaran, A., Irani, Z., Choy, K.L., Filippi, L. and Papadopoulos, T., 2015. Performance measures and metrics in outsourcing decisions: A review for research and applications. International Journal of Production Economics, 161, pp.153-166.
Matisoff, D.C., Noonan, D.S. and Mazzolini, A.M., 2014. Performance or marketing benefits? The case of LEED certification. Environmental science & technology, 48(3), pp.2001-2007.
Nikabadi, M.S., Dehghan, M. and Farmanian-Arani, M., 2015. The effect of knowledge management strategies on performance of new product development in knowledge-based companies. Indian Journal of Science and Technology, 8(S7), pp.263-277.
Rego, L.L., Morgan, N.A. and Fornell, C., 2013. Reexamining the market share–customer satisfaction relationship. Journal of Marketing, 77(5), pp.1-20.
Ren, S., Eisingerich, A.B. and Tsai, H.T., 2015. How do marketing, research and development capabilities, and degree of internationalization synergistically affect the innovation performance of small and medium-sized enterprises (SMEs)? A panel data study of Chinese SMEs. International Business Review, 24(4), pp.642-651.
Tajvidi, M. and Karami, A., 2015. Product Development Strategy. In Product Development Strategy (pp. 79-124). Palgrave Macmillan UK.
Wei, Y.S., Samiee, S. and Lee, R.P., 2014. The influence of organic organizational cultures, market responsiveness, and product strategy on firm performance in an emerging market. Journal of the Academy of Marketing Science, 42(1), pp.49-70.
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