Question

what recommendations would you make to improve performance potential in each of the firms? why? (philips vs matsushita)

Answer 1

Philips

Over the years Philips has been very successful in developing new products. However, they were not able to successfully introduce them in the markets. So Philips’ pursuit to become a global leader has failed, but it still possesses capabilities that its competitor Matsushita does not. Its ability to innovate and develop new technologies and new products is what made Philips successful and the leading company in the first place and it must try to exploit these capabilities further.

The main reason for Philips’ failure is the fact that there was almost no relationship and coherence between the headquarter, the PDs, and the NOs. To change this unprofitable situation Philips has made many attempts to restructure its company in order to gain more power/ control over their national subsidiaries. Although those attempts were very costly they did not pay off for the company.

In order to make the company profitable by successfully introducing new technologies and new products to the market, Cor Boonstra should make sure that the product is adopted by the whole organization and not only by parts of it. By means of a restructuring of the company this should be possible. The company should be restructured in that way that the NOs have less power and they have no other opportunity than to follow the strategy that is given by the headquarter. Once they achieved a better coherence they can concentrate on improving their corporate marketing strategy to better position their new inventions/ products.

Cor Boonstra could as well follow another strategy to improve the product introduction: by means of licensing their technologies and products the company will gain network externalities and thus a competitive advantage. In this way they can obtain the revenues of their normal sales as well as the revenues of their licences. This might lead to improve their competitive advantage and their profits, too, as they will be able to invest the money to further develop new products.

An important factor is that Philips should not give up its value proposition of being a ‘technology developer and global marketer’, which might be the result of outsourcing the majority of its production. e, Philips has to increase its profit base, in order to allocate resources more efficiently worldwide and support inadequacies that can emerge in a local level. Moreover, attention should be drawn on the issue of the difference in the value added per hour in Philips’s European plants compared with that of the Japanese plants, which is significantly higher. Through a close examination of the process that their Japanese counterparts use, Philips’s executives can establish a significant competitive advantage and add value to their production facilities worldwide, as much as cut cost from products or increase their profit margins. Another sector that Philips should concentrate its efforts is that of developing or acquiring further capabilities and competences. The company has lost much of its innovative capabilities and competences that it used to have a few years earlier, due to cuts in the R&D personnel and to the selling of some of its high-tech companies. Moreover, the concentration of Philips on the development of digital products would not be feasible, if the company do not acquire or develop capabilities in the specific sector that though now is lacking.

Philips should capitalize on its long experience and knowledge of the norms and standards of the consumer electronics industry and further promote the production of more segmented products, improve the level of services provided to customers and in parallel increase brand’s awareness among customers for its high quality and value.

Matsushita

Regarding Matsushita it gets obvious that their main disadvantage was their centralized organization, which was the reason for the company’s slow market responsiveness.

Matsushita’s strategy of buying licenses of competitive manufacturers was successful and in order to internationalize throughout the world they made use of their competitive advantage of low- cost production. To maintain this position as a leading low- cost producer Yoichi Morishita should pay attention to further low- cost production facilities, thus, a high local responsiveness is needed. However, the transition to local senior-level management in its foreign subsidiaries has been slow. This is why Morishita’s objective should be to speed up the transition to be able to gain profit from the advantages of globalization and to maintain their competitive advantage. Additionally, a rapid transfer of specific know- how and important processes can be achieved as well as the implementation of more global integration and coordination. Then they will be able to develop a faster reaction to local opportunities as far as the introduction of new products is concerned. Consequently, Matsushita will operate as one unit that focuses on the whole company profit instead of only concentrating on the profit in Japan. , its corporate management also has to be confronted with several issues. Matsushita needs to continue its efforts for further rationalization of production, despite the fact that it might meet the strong resistance of Japanese managers. Still a large percentage of its overseas sales is manufactured in Japan and combined with the rise in the value of the yen; further value has been added to its products. Thus, the company has to transfer more of its production divisions to locations that will guarantee cost-efficiency and benefits from the economies of scale.