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Philips versus Matsushita: The Competitive Battle Continues Case Solution
Phillips worked towards developing new technologies in the 1950s and 1960s. These technological advancements resulted in new innovative products. Phillips focused on light-bulb manufacturing and hence made numerous innovations during a time period when many new companies were emerging and entering the market. In light of this, Philips worked towards building their competencies. The company became an industry leader in creating labs which addressed production and scientific issues and problems. Therefore, research was one of the main competitive strengths of the organization. Conversely, the incompetencies the company faced were primarily due to its centralized operations. This resulted in a lack of flexibility for the company to operate in a global environment.
Following questions are answered in this case study solution
How did Phillips become the most successful company in its business during an era when scores of electrical engineering companies were being formed (GE, RCA, EMI, Thomson, Gundig, Matsushita, Hitachi, and Toshiba to name just a few)? What distinctive competencies did they build? What distinctive incompetencies did they build?
How was Matsushita able to overtake Phillips in over 25 years to become #1? What core strategic competencies gave them a competitive advantage? What organizational capabilities embedded those competencies?
What was the downside of Matsushita’s centralized, embedded organization model?
Compare the pros and cons of the Phillips organizational model with the Matsushita model. Did the companies recognize the downsides of their traditional models? Why was it so hard for them to change?
What advice would you have for Mr. Kleisterlee? What do you think of his new strategy to become the “Dell of consumer electronics”
What would you say to Mr. Nakamura and Ohtsubo? Will their restructuring plan allow them to take on the Koreans?
What are the main takeaways from this case?
Case Analysis for Philips versus Matsushita: The Competitive Battle Continues
2. How was Matsushita able to overtake Phillips in over 25 years to become #1? What core strategic competencies gave them competitive advantage? What organizational capabilities embedded those competencies?
During the same era, Matsushita was a rapidly going company expanding into consumer items. The focus of Matsushita was on providing high quality, low cost and standardized products to the market. This was one of its targeted core competencies. Moreover, the company focused a lot on export sales. The company also expanded into the local Japanese market by opening around 25,000 retail outlets carrying a range of 5,000 products. Basic manufacturing was shifted to low wage countries to save costs. These core competencies enabled Matsushita to gain a competitive advantage. The organizational capabilities were primarily the divisional structure the firm followed. Each division was given a profit responsibility, and this increased competitiveness amongst divisions. Moreover, even with the expansion, the company was able to centralize product and process innovation.
3. What was the downside of Matsushita’s centralized, embedded organization model?
The downside to the centralized, embedded organization model that Matsushita followed was the unified global strategy. The control from the headquarters left little room to maneuver for subsidiaries. This resulted in a lack of innovation and restricted creativity. These subsidiaries were only implementing the policies and procedures that were directed by the head office. The high level of centralization reduced the motivation levels of employees. Expatriate managers were relocated, and their main purpose was to translate the policies and ensure compliance. Accounting managers were also Japanese expatriates who reported to the corporate headquarters. This embedded organization structure caused problems for Matsushita which is why they launched the “Operation Localization”.
4. Compare the pros and cons of the Phillips organizational model with the Matsushita model. Did the companies recognize the downsides of their traditional models? Why was it so hard for them to change?
Phillips and Matsushita operated in two ends of the continuum where Phillips had little or no centralization whereas Matsushita was highly centralized. Both the companies faced issues due to these models of operations. Both companies understood that since consumer electronics was a mass market, it was important to have a strong centralized system but at the same time have the flexibility to operate in local market and adapt to requirements of those markets effectively. It was hard for Phillips to change due to its inability to balance relationships between the national organizations (NO’s) and product divisions (PD’s). Conversely, for Matsushita, faced the issue of too much centralization and hence when it wished to shift towards localization the company faced many issues to this dependency.
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