Philips versus Matsushita

 

One of the most significant factors concerning the modern corporate world is that organizations have to constantly adapt to their markets and market conditions in order to survive. This means that there is need for these organizations to ensure that they undertake changes to their cultures as well as structures in order to ensure that they are not only able to remain competitive, but also make their management more efficient to enhance their profits. A consequence is that those companies that have essentially had long histories have also seen considerable advancements when it comes to the manner through which they handle their operations. For multinational corporations, it is often essential to ensure that they adapt to the prevailing market situations in those countries within which they have operations. This is especially the case considering that these organizations tend to adopt strategies that they deem necessary for the achievement of their missions, which often involves crafting a relationship between the parent company and their subsidiaries in other countries. In this paper, there will be an analysis of the strategies adopted by Philips, on one hand, and Matsushita, on the other. These are companies that have been in operation for a long time and have managed to achieve a considerable chunk of the global market. The various strategies that they have adopted in order to achieve success will be critically analyzed in order to find out the manner through which both Philips and Matsushita were able to organize themselves in a way that ensured their continued relevance and dominance in the global market.

Philips is one of the largest corporations in the world that is especially known by consumers for its electronic products. It is a company that has been in operation for over a century and has since the beginning combined innovation and aggressive marketing in order to achieve considerable growth in the market. One of the reasons behind Philips’ becoming a leading consumer Electronics Company following the post-war era is that it was able to anticipate the conflicts that would hit its native Netherlands and planned ahead for such eventuality. It diversified its operations in such a way that some of them were moved to the UK and others to North America in order to ensure that there would be little disruption to its operations. In addition, it adopted a strategy where it gave most of its subsidiaries in other countries considerable operational freedoms that encouraged them to undertake responsibility for their own operations (Bartlett et al., 2013). The result was that Philips was able to adapt to the market needs of the various countries within which it had operations to such an extent that it was able to advance its own mission without interfering in the daily running of its subsidiaries. The adaptability from Philips because of its fairly lose management style ensured that it was able to become a leader in the consumer electronics market while at the same time maintaining considerable profitability. The achievement of this objective enabled Philips to advance its operations in such a way that it achieved efficiency and also provided its subsidiaries with the independence that they needed to enhance innovation. The innovative products that came about as a result were essential for the enhancement of its aggressive marketing strategy which ensured that the company significantly increased its sales. The result was that they made Philips a recognized brand among consumers during the post-war era.

One of the most important competencies that Philips was able to build was the establishment of fairly independent operations in various countries. The independence of these operations ensured that there was the development of considerable diversity when it came to the products that the company produced as well as the marketing strategies that were adopted in the countries within which it had operations. A consequence was that Philips was able to take advantage of the different market conditions to ensure that it diversified its products in such a way that was attractive to consumers in its different markets. In addition, because of the considerable diversity of operations, where the subsidiaries were not encumbered by a centralized form of management, Philips was able to survive many incidents that could have brought about the collapse of many corporations. Its diversity of operations was highly successful especially during the war period when the company faced a lot of risk from the bombings from both the Allies and Nazis in Europe (Bartlett et al., 2013). The company not only survived these incidents, but it was also able to consolidate itself in the postwar period in such a way that it recovered from the destruction that had taken place in Europe. Another competency that Philips developed involved innovation, because the process was decentralized to such an extent that its subsidiaries, or national organizations, were able to undertake their own product development to suit their various markets rather than relying completely on the Philips’ management at the central office in the Netherlands to preside over development. The achievement of this goal ensured that Philips attained faster development than their more centralized rivals to such an extent that the various divisions were able to come up with unique innovations which added considerably to the Philips brand. The latter made it possible for the managers at the various national branches to attain the competence needed to undertake productive ventures on behalf of the company.

While Philips was able to achieve a great number of its objectives through its decentralized management system, the latter would also prove to be among its most significant incompetencies. This is especially the case considering that the entire decentralized system made it difficult for the top management of the company to make swift decisions when it mattered the most. Changes in strategy for the entire company would take a long time to bring about because there was a failure in the process of making sure that it became more competitive. While its more centralized rivals were able to undergo the changes they needed to remain competitive, Philips, because of the considerable power that it had handed over to its national organizations, was not able to do the same. The case of its American subsidiary is an important example because despite years of attempts by the parent company to gain more control over its operations, this subsidiary often resisted these attempts to such an extent that it bordered on defiance (Bartlett et al., 2013). The lack of a uniform management strategy for the company ensured that there was considerable disorganization in such a way that left the company open to considerable competition from its rivals. Unlike its contemporaries in Japan which had a centralized system of management that ensured uniform management, Philips was encumbered by a large number of divisions and national organizations which made it difficult to undertake action in its own interests. The lack of a comprehensive global strategy as well as resistance from national organizations created a situation where Philips was not able to undertake actions that would have ensured its continued profitability, and this made it possible for its rivals in the market to advance themselves to achieve dominance. The attempts by its various heads to ensure that they remedied the situation sometimes ended up making it worse for the company because Philips had allowed itself to be left behind for too long.

Matsushita is one of the most prominent Japanese corporations in the world with some of its brands being extremely well known to consumers. This company was able to rise to dominance because of its founder’s idea to ensure that it had a long term strategy to its business. This long term strategy served as a guiding presence in the management of the company in such a way that it provided managers with the guidance and directives that they were to follow when it came to dealing with a diverse number of situations (Bartlett et al., 2013). In addition, this company maintained a highly centralized management system which ensured that even in its subsidiaries outside Japan, there was considerable reliance on headquarters on the manner through which the management could be handled. There was initially an active program where all subsidiaries of Matsushita were headed by Japanese expatriates, who were believed to be better able to ensure that the mission and vision of the company was implemented effectively (Bartlett and Ghoshal, 2015). The continued centralized control of its subsidiaries at a time when Philips relied heavily on national organizations gave Matsushita an edge on the market because the latter was able to adapt swiftly to market conditions without hindering its continued growth. Furthermore, this company, because of its centralized management structure and the requirement that the managers of its various subsidiaries visit headquarters in Japan to deliver their reports personally ensured that there was constant monitoring of the situation taking place in all its operations. The initiatives taken by Matsushita’s management helped this company to successfully displace Philips as the most dominant company in the market while at the same time enabling it to swiftly expand into areas that were swiftly developing in the market. Thus, Matsushita’s centralized system enabled the company to adapt to market conditions at a faster pace than was possible for Philips’ decentralized system.

Among the most significant competencies that were achieved by Matsushita was that it was able to recognize the areas of potential growth and act swiftly to develop them. This is especially the case considering that its management recognized early that it could no longer remain competitive while it focused only in Japan because of the considerable rise in the number of rivals who brought a lot of competition within the market (Bartlett, 2009). Therefore, Matsushita’s decision to seek markets outside its comfort zone can be considered among its key competencies, because it ensured that there was the advancement of its objectives to reach new markets while at the same time expands the range of its new products. Furthermore, this company was able to ensure that despite having subsidiaries in other countries, they were strictly managed from Japan, and this was to such an extent that it was able to learn more about market conditions and to adapt its products accordingly. However, despite the considerable success of its centralized system and the manner through which it handled its expansion to the global market, Matsushita also had some incompetencies that it needed to address. Among these was that its centralized management system proved to be a deterrent to innovation among its subsidiaries because the latter often looked to the parent company as a source of new ideas. Matsushita had, for the most part, become a company that sought to ensure that it maintained absolute control over its subsidiaries and while this may have worked in the beginning, it ended up becoming a disadvantage for the company. This is especially the case considering that most of the innovations made by Matsushita originated in its development divisions in Japan, while its subsidiaries around the world only acted as producers of the new products. Moreover, Matsushita’s centralized system made it difficult for the company to swiftly adjust to local market conditions especially in situations where countries undertook to protect the jobs of their people. Therefore, Matsushita was left in a dilemma where it was forced to undertake reforms in conditions of economic uncertainty.

Both Philips and Matsushita have undertaken to ensure that they advance their businesses through the implementation of changes to their management systems. Philips has sought to make sure that it establishes greater control over its subsidiaries across the world while at the same time increasing profitability. This initiative can be considered extremely pertinent, especially considering that it has taken a long time for the company to bring about the changes that it needed to thrive in the market. The changes initiated by Philips could have worked better if there had been less resistance from its various subsidiaries because the latter had essentially transformed themselves into local organizations that did not have a strict allegiance to the parent company. This was a result of the decentralized system that had worked so well in the postwar period but had become a burden to the company’s global strategy. It was therefore essential for Philips to work towards a reduction of its non-profitable holdings while at the same time reestablishing control over a majority of its global divisions. The impact of the process was that Philips was able to stabilize its position in the global market while at the same time ensuring that it increased profitability through selling off, licensing, or outsourcing those divisions that it found were non-performing. Matsushita, on the other hand, was focused more on enhancing the position of its subsidiaries and divisions in such a way that encouraged them to become more innovative. In addition, it sought to make it possible for its subsidiaries to work independently so that they could become more productive through adapting themselves to the markets that they were meant to service. While for the most part the implementation process was successful, this success was often overshadowed by periods of economic crisis that significantly reduced their impact. This is especially the case where the company had instituted considerable reforms that would have ensured its dominant position in the market when the Financial Crisis of 2008 overshadowed its achievements. Despite the setbacks that this company has suffered during the implementation of change to its strategy, Matsushita has been able to weather the storm, and has remained relevant in the market. This is signified by its decision to change its name to Panasonic, after one of its most recognizable brands in the world.

The change process for both companies is extremely difficult because it involves a situation where they essentially have to change their entire organizational culture. These companies have been using the same form of management system and strategy for decades and their employees, especially those who have been with the company for long, have adapted to them. Change is an extremely important factor for companies because it allows them to make sure that they adapt to the prevalent market conditions while at the same time enabling them to maintain and increase their profit margins. However, this process is often one that meets considerable resistance, as seen in the case of Philips, which had maintained a system that had allowed it to work so well that it had become oblivious of the need to constantly change in order to remain relevant in the market. There was a failure to foresee the need to maintain considerable control over its subsidiaries so that when the time came to ensure the implementation of much needed changes, there was considerable reluctance on the part of subsidiaries to follow the path set by the parent company. The case of Matsushita is also significant because it promoted the idea of a highly centralized form of management that left its subsidiaries very little room to maneuver. A consequence was that when the implementation of changes was instituted, there was considerable difficulty on the part of the subsidiaries to adjust on time and the result was that the company’s management had a hard time changing attitudes that has been long established. The change process in both companies came about when it had essentially taken too long for the process to be advanced. This is especially considering that these companies not only had a long history on the global market, but that their managements did not see the immediate need to make changes when their systems at the time were working so well.

 Gerald Kleisterlee has undertaken to restructure Philips in such a way that makes it more competitive in the market. The actions that he has put in place have ensured that there is the advancement of means through which the company makes the first steps towards becoming a more competitive organization in the world (Seebode et al., 2013). However, he has to ensure that there is the establishment of a clear strategy and mission that can be made use of in enhancing the status of the company while at the same time making it possible for its management to swiftly implement changes that are needed to make it more competitive. In addition, he has to ensure that he undertakes to increase greater control over its subsidiaries because while the decentralized system worked well for decades, a more centralized one would be more convenient when it comes to matters concerning the implementation of change as well as creating new focuses for the company. Moreover, rather than outsourcing most of its products, Kleisterlee should undertake to identify those areas that have the most potential for continued growth and encourage Philips’ product developers to come up with new innovations that will significantly enhance the products of this company. In addition, Philips should also get involved in those business areas that are highly competitive, such as the mobile phone industry, where there is considerable demand for new products as well as variety. In this way, Philips will have the capability to remain relevant in the market not only as a brand, but also because of its products, since it will have been able to undertake a process where it becomes a center of innovation.

Ohtsubo took over Matsushita at a time when the company was undergoing a difficult process due to the global financial crisis. A consequence was that he ended up in a situation where despite his best attempts to reform the company, he encountered a diversity of challenges that were essentially out of his control (Bartlett, 2009). The result was that he was forced to undertake some extremely difficult decisions in order to ensure that company’s survival. Therefore, it has become essential for Ohtsubo to make sure that he takes the opportunity of the various challenges that the company is facing in order to institute the reforms that it needs to survive. One of these reforms is to ensure that there is an attempt to significantly reduce the control over day to day activities of Matsushita’s subsidiaries. This process should not be undertaken lightly however, because it has to be balanced in such a way that prevents complete decentralization. The latter could be disastrous for the company because as seen in the Philips case, it could lead to a failure in the implementation of a global strategy. It is also essential for Ohtsubo to encourage subsidiaries to undertake their own innovations rather than relying solely on the parent company for ideas concerning what to produce. Moreover, a reduction in the number of Japanese staff and the adoption of local business management strategies has the potential of going a long way towards the achievement of the company’s objectives. This is because the subsidiaries will have the ability to fully adapt to the needs of their respective markets.

In conclusion, both Matsushita and Philips still have a long way to go before they are able to achieve the changes necessary for the advancement of their continued relevance in the highly competitive market. This is because these companies have long established cultures which have ended up being too ingrained for them to be easily changed. Moreover, these companies have had to face significant crisis, as seen in the global financial crisis which was a direct blow to their business interests because there was a reduction of sales and a drop in share prices. Therefore, these companies have to adopt new strategies aimed at aiding them in their attempt to not only remain relevant, but also help them promote innovation in such a way that ensures that they reestablish their dominance over the market. By entering new markets and making significant investments in the development of new and innovative products, it will be possible to bring about the establishment of proper initiatives aimed at bringing about the achievement of the missions and visions of these two companies.