Philips vs MatsushitaA New Century, a New round

VS

Presented by;Gohar FatimaSadia KhanRabiya KhanJilal Janjua

Philips vs Matsushita

Two players (Dutch & Japanese) organizational restructuring and re-

organization by subsequent CEOs. Impact on company operations.

Value Management

CentralizedBasic scientific

innovation, develop

new products

Decentralized (NOs)Adapt, manufacture, market, and service products within national markets

researchresearch developmentdevelopment manufacturingmanufacturingmarketingmarketing Services etcServices etc

About Philips

From highly centralized to decentralized company.

Founded in 1892 in Eindhoven, Holland and incorporated in 1912.

3rd largest light bulb producer in Europe in 1900. Profit sharing with employees. Exports to Japan, Australia, Canada, Brazil and Russia

commenced in 1899. Building sales organizations (1912) in US, Canada and

France.

About Philips…

Local Joint ventures for market acceptance. Agreement with General Electric & its 20 % stake

in Philips. Product line ; electronic vacuum tuber, x-ray

tubes and radios.

Philips: Organizational Development

Reflection of technical and commercial leadership throughout the organization.

Transfer of assets to British Philips & North American Philips Corp.

Top management to US. More independent operations during war. Self sufficiency addressing the local

preferences.

Continued…..

Product development linked to local market.

Focus on R & D. NOs responsible for financial, legal &

administrative matters. 14 PDs responsible for production,

development and global distribution.

Goals• Profitability. • Defining relationship between PDs and Nos and

assign responsibility.• Cost cutting.

Actions Taken• Closure of inefficient local plants and focus on

converting the best production plants into International production centers (IPCs).

• Single management that looked after the technical as well as the commercial aspects of the business.

Results• The power struggle and lack of central control

continued in the company..

Van Reimsdijk & Rodenburg Reorganizations, 1970

Goals• Cost cutting & increase profitability.• To get rid of bureaucratic culture.• Focus on core operations.

Actions Taken

• Immediate closure of inefficient operations/plants. • Technology sharing and offshore manufacturing

for cost cutting.• Replacement of dual leadership with single

General Manager.Results• Sales declined and profits remained stagnant.

Wisse Dekker Reorganization, 1982

Goals• To regain .top position in consumer electronics

market.• Profitability.• Gain more control over Nos & PDs.Actions Taken• Bifurcation into Core & non core businesses.• Reduction in head office staff by relocating them

to product divisions.• Experienced work force posted to most

competitive markets.• Utilization of globally located work force.• Result oriented R & D. • Major job cuts to cut cost and for financial

recoveryResults• Company declared losses.• Vant Der Klugt and management team was

repleced.

Vant Der Klugt Reorganization, 1987

Jan Timmer, 1990

Goal• Turn around the bankrupt company, expand

software, services & multimedia to become 40% of revenue

• Restart the growth engines on innovative capabilitiesActions Taken

• Cut more jobs, headcount was reduced by 68000 or 22%

• Change the way of working by committing managers to specific financial goals and their accountability for the losses

• Recruited Frank Carruba, the director of HP research, to focus on developing15 core technologies and invested $2.5 billion

Results• 37% R&D personnel cuts left company with few who

understood technology, thus no innovation• Morale was low in middle management due to the

failure of these technologies

Cor Boonstra, 1996

Goal• Production shift to low cost areas, simpler

manufacturing and marketing

Actions Taken• Sold 1/3 of the businesses, shift production to low-

wage countries • Replaced 21 PDs with 7 divisions and 100 business

units• Moved HQ to Amsterdam, reduced the employees

from 4000 to 300• Increased Marketing effortsResult• Performance improved, reaching 24% return on net

assets

Gerard Kleisterlee, 2006

Goal• Increase sales, outsource activities where they

can’t add value • Eliminating more overhead/costly production

plants

Actions Taken• Close non value adding operations, outsource

such activities• Trying to shift to core competencies of

technology developer & global marketerResults• Rise in shareholder pressure• Reported losses

MATSUSHITA

Value Management

Research Research Development Development Manufacturing Manufacturing Marketing Marketing Services etcServices etc

CentralizedApplied product and

process innovation

Centralized (PDs)Develop and manufacture products

Decentralized (NOs)Market and service products within

national markets

Introduction : Matsushita

Founded in 1918 by Konosuke Matsushita in Osaka, Japan

Invested 100 yen to produce double-ended sockets. Expanded to various products

First Japanese company to adopt the divisional structure “One-product-one-division” Internal competition fostered among divisions

Flood of products in post war boom Matsushita built its success on its

centralized, highly efficient operations in Japan

Structure: Matsushita

McKinsey 7s Framework: Matsushita

Structure: Each product was made into its own unique division, to function independently and promote internal competition Systems:

Competitive Divisions, MCA, METC, and MECA allowed Matsushita to develop innovative production and development systems in an efficient manner

Style: 60% profit to headquarters and 40% back to the division provided an extremely profitable organization, while insuring its own future success

Staff: Staff was unique in each division, and could expect lifetime employment

Skills: Efficient, low-cost production

Strategy: Achieve worldwide presence, whether by the Matsushita image, or producing for competitors

Structure

Systems

Style

Staff

Skills

Strategy

Shared Values

Issues: Matsushita

Highly centralized and inflexible organization structure: Slow to manage change

Dependence on competitors for technological innovation

Threat of discontinuous innovation which may drastically change product technology

Disgruntled overseas staff Lack of initiative by foreign plants Chaos by ‘Destruction and Creation’ program

Konosuke Matsushita (KM) ,1918

Goals•To build a successful company through fairness and giving back to the world around them

Actions Taken•Opening of “National Shops”,•Various attempts at product line extension, Outsourced production, Licensing agreements, METC, Worldwide production•Internal competition- One product one division structure

Results•Successful development of efficient, superior VHS production and good relationships

Toshihoko Yamashita, 1982

Goals•To “help overseas companies develop the innovative capability and entrepreneurial initiatives”

Actions Taken•Operation Localization: personnel, technology, material and capital•Allow local division to have more control over their operations•Increased number of local nationals in key positions, local division given choice over products sold, quantities, prices, and features

Results•Overseas productions remained too dependent on the central organization

Akio Tanii, 1986

Goals•To expand on his predecessor’s initiatives of helping the overseas subsidiaries become independent and not simply remain implementing agents of Osaka based product divisions.

Actions Taken•Tried to integrate domestic and overseas operations•Brought foreign subsidiaries under the control of METC and merged METC into the parent company.•Relocated major regional HQ functions from Japan to US, Europe, and Southeast Asia.

Results•Although the changes generated huge cash reserves, the overseas divisions were still very dependent.

Yoichi Morishita, 1993

Goals•Cut HQ staff and decentralize responsibility.

Actions Taken•Slogans of simple, small, speedy and strategic.•Moved 6000 staff to operating jobs•Shift of production offshore to low cost Asian countries.•Management unwilling to restructure due to company culture of lifelong employment. Investment in R&D and technical exchanges.

Results•Resistance within the organization prevented the promised changes.

Kunio Nakamura, 2000

Goals•Raise profitability to 5% of sales by 2004 , flatten hierarchy and empower employees.

Actions Taken•All key HQ functions transferred to overseas offices•Destruction and creation program; disbanded basic organizational product division structure and created multi product production centers.

Results•Company still in deep financial trouble.

Philips Analysis

Decline of success due to the lack of consistency and lack of ability to deal with a changing competitive international environment.

Frequent structural changes No clear strategy since 1960 Struggle to balance the roles of NO’s and PD’s Conflict in terms of power and responsibilities Focus on core products led to giving up on

various products Closure of least efficient plants

Could not manage to produce high-quality, high-tech products and at a low price

Failed to adapt to changing demands and the strengths of the competition, partly due to its confused strategies and its ever-changing structure.

Matsushita Analysis

Copy cat approach very risky Tall structure hindered innovation attempts Restructuring took a lot of time as the

organization was slow to manage changes Attempts such as “Operation Localization” Resistance to change due to culture Could not make overseas subsidiaries more

innovative due to lack of expertise. Delegation of authority but no investment in

innovation.

Recommendations for Philips Investment in R&D and a way to match

the low-cost Japanese advantage of efficiency

Either retain some of its production Invest heavily in its new strategy and

encourage participation of everyone Find a structure and strategy which are

compatible instead of changing one and trying to make the other one fit

Recommendations for Matsushita

Follow a bottom up approach for change management by consulting workforce

Right match between strategy and structure

Pursue a conglomeration and diversification strategy

Have a divisionalised structure. Realize change is not a simple process

and has many potential barriers

Conclusion

Focus on their own capabilities instead of trying to match each other’s

Use different approaches to change