Professional Documents
Culture Documents
Matsushita Assignment
2008 MBA/ENG 290G International Competition in Technology
Team 1
Team 1 Franck Formis, Robert Kong, Vincent Ng, Jameson Slattery, Chuohao Yeo
Porters diamond
Philips
Factor Conditions Initial tradition of bolstering education Creation of the Common Market in 1968 altered factor s of production (land, labor, and capital) Not a multi-domestic market anymore Demand Conditions A single market New Transistor and circuit-based technologies Unmet demand
Matsushita
Domestic throughout 20th century Since 1998, investing in R&D
Growth through post-war boom Shift to export markets Earlier picture of emerging
foreign demand
Matsushita
A technology exchange and
licensing agreement with Philips Licensing of the VHS format to other local manufacturers VCR segment ~ 45% of profits
Highly centralized operations
High dependence of subsidiaries Low competitiveness
Strategy, Structure, and Rivalry Early local production facilities Autonomous NOs Uncoordinated decisions
Acquired from suppliers. E.g. critical lamp components for LCD panels
Outsourced to low cost nations Maintain some manufacturing sites. E.g. lighting has sites in 25 countries
Uses wholesales, retail stores to distribute products Also support limited direct shipments and plannings
Depend on third-party to acquire raw materials and components, e.g. steel, plastic, semiconductors etc.
Depend on National organizations to respond to local market. Moving towards more centralized decision to cut cost and enjoy economies of scale Most decision made by headquarters and product division in Japan; local subsidiaries are mostly sales and marketing Moving towards localization to response better to customer demand and preference, PDCC is one of this initiative.
Matsushita: Centralized
Most manufacturing are outsourced or offshored to low-cost regions. Mostly retain R&D and sales and marketing only. Directly control most manufacturing operations located in Japan, Asia and China
Matsushita: In-house
Challenges faced
Philips Too decentralized
Powerful and autonomous
strategic cooperation among NOs Lack of accountability in NO/PD matrix Management by technical &
commercial consensus
Slow to respond
Matsushita
Empower regional operations Local customization of
production Combine single product divisions Tap overseas/external innovation Remove historical organizational structure Name change to Panasonic
Matsushita
Outcome Low profit margins Competitiveness impacted Difficulties Culture of lifetime employment Organizational resistance Difficult Japanese economic conditions in 1990s
adept at responding to country-specific market conditions Built their own technical capabilities to address local market conditions
Enforce market specific research Businesses being supported by the research are responsible for the R&D budget
NO ignores main companys welfare and focuses on local profit (Ex. V2000 case)
Too many factories over the world Higher cost than simply outsourcing or having one area serves the global market
6x the outlets of rival Sony Assured sales volume and direct access to market trends and consumer reaction
One-product-one-division system Internal competition Small business environment Main company acts as a bank
Force it to compete for additional funding from divisions Give overseas sales subsidiaries more choice over the products they sold Incompetence Over-management Expatriate managers located throughout foreign subsidiaries Strongly-held commitments to lifetime employment Can not compete with companies who outsource to low-cost Asian countries Product divisions were not giving sufficient attention to international development Oversea subsidiary companies act little more than implementing agents
New US CE Companies:
Apple, Chumby, Kindle, Microsoft, Roku & Tivo
R&D Components Manufacturing Marketing and Sales Each company manages the branding, advertising and positioning of its products. Tivo makes use of distribution relationships with cable and satellite providers to market and sell its products and services to end users, in addition to Tivos direct marketing and sales initiatives. Distribution Each firm is involved in product design and development. Investments both in hardware and software R&D to differentiate their products. Leverage the R&D investments of component suppliers such as Intel, Nvidia, Samsung and others. Each firm develops and controls the SW components of their product stack. Each firm makes use of third-party HW components (processors, memory, discrete components, batteries, etc.). Apple acquired PA Semi and is now developing its own chips for iPhone, iPod and potentially Macs. All firms make use of contract manufacturers and/or ODM partners. Partners include: Asus Celestica Flextronics Foxconn Quanta Wistron Apples distribution is heavily skewed toward direct (online, companyowned retail stores). Chumby is primarily available through online distribution both direct and w/ partners. Kindle is primarily direct Xbox 360 through nearly all online and physical retail establishments. Roku & Tivo through direct and major online and physical retail. Tivo also distributes through DirecTV, Comcast, etc.
Focus on ease of use and HW & SW elegance Apple has permeated the retail channels with iPods Advertising focus that drives demand & replacement Design as a differentiator DRM as a lock-in
the same as Apple or making iterative improvements Philips and Matsushita should invest in the next generation of music consumption Prepare for the demise of the music-only device Shift to cloud-based subscription services available anytime to countless types of devices Explore business models of giving away the music to undermine Apples current business model
Team 2
Philips
Vs
Matshuita
Team 2: Jon Wiesner, Rachel Simon, David ExpositoCossio, Yanpei Chen, EmrehanKirimli
Japan: Centralized companies. Reluctance to delegate activities. Process innovation rooted in culture. Huge local rivalry Netherlands: Decentralized companies. Low local rivalry
Japan: highly demanding and sophisticated internal buyers. Huge market. Netherlands: small internal market. Internationalization needed to survive.
Factor Conditions
Japan: Highly skilled labor force. Large number of engineers. Highly efficient production process. Traditions deeply rooted Netherlands: Highly unionized industry. Expensive workforce. Entrepreneurial culture. Small Country located in centre of Europe. Both countries large expenditures in R+D
Demand Conditions
Japan: Large number of supporting industries: transportation, copiers, cameras, audio, appliances, musical instruments Netherlands: medium/high number of supporting companies: canon, HP, TomTom,
Philips
Medical Sys
Matsushita
Raw materials Manufacturing Retail Merge brands Components AVC into Panasonic Components Home App Home App AVC Parts MEW Home App AVC OEM & Self Use MEW Home App Components MEW Philips actively consolidating supplies Matsushita heavy focus on manufacturing
Comparison
Philips Success
How they became leader: developed national organizations (NOs) that were independent, and specialized in local market demand for specific and diverse technologies.
Common Market
Competencies/Incompetencies
Fragmented product line (no economies of scale) Slow to market Poor global strategy
Matsushitas Success
How they became leader: global scale approach of rapidly bringing a emerging technologies to saturate the market
1989 crash
Competencies/Incompetencies
Strong culture, visionary leader
/ Fast [follower] to market / Broad product line / Strong distribution system, high retail presence /
/
High overhead
Dependant on center; loss of talent due to perceived overbearing top
Matsushita
Cultural: lack of independent thinking by overseas subsidiaries Organization: legacy of product division structure Employees: tradition of lifetime employment Managerial: highly centralized management style Technological: over-reliance on declining products (TVs, VCRs, etc.) and lack of innovation Structural and Macroeconomic: economic malaise in Japan starting in the 1990s
relaxed, casual, collegial environment with high-work ethic emphasize on innovation and design (teams all over the world) User Experience Architects Office was established to make products easier to use
focus on innovative physical appearance and user interface add features like wireless sharing, games, etc. which iPod does not have design more than just a player, also offer software platform that allows music to be shared from PCs and other devices partnership with companies to gain more youth population (ex: Samsung & Adidas vs. iPod & Nike )
Team 3
Demand Conditions
Customer service
In-house
Outsourced
End customer
R&D
MFG
Customer service
In-house
Outsourced
Philips had a decentralized approach for manufacturing and sales. Matsushita had nearly everything centralized in Japan. Marketing competitive advantage over manufacturing.
Developed strong competency in R&D and technical development Lacked good centralized planning (no advantage from economies of scale) and slow to market. Current strategy to move/outsource low-end manufacturing and focus on design/development makes sense given national and firm competencies. Difficulties lie in the strength of national organizations and Panasonic succeeded Philips in global dominance through central planning, strategic manufacturing choices, and a strong system of controls Opened plants in low-cost Latin America and Southeast Asia; kept high-value components in Japan. Allowed outsourcing of minor components. Plants built by division for economies of scale. Aggressive management goals encouraged innovation, but one product-one division led to subsequent spin-off and strict focus. Overseas operations reported to parent through the product division or the Trading Company. Developed competency in long-term planning, low-cost manufacturing, and being quick-to-market Lacked strong independent R&D near global markets Strategy for more regional control was hard because of ingrained culture and tight controls. However, implementing Outsourced R&D through incubators helps overcome Panasonics lagging innovation by supporting start-ups without difficult cultivation of in-house expertise.
Organizational structure
Apple is vertically integrated, designing its own operating system. Apple's stated philosophy is to increase investment in R&D. In-house brands set the standard: iPod & iTunes Rebel spirit: "It's better to be a pirate than join the navy" .
Team 4
Christian Huth Lakshmi Jagannathan Christopher Quek Daisuke Tanaka John Michael Wyrwas
Supporting Industry
Technology-sharing agreements and offshore manufacturing shall lead to reduced costs
Demand Conditions
Adoption to local markets by independent national organizations in marketing as well as in product development
Supporting Industry
Low shipping rates reduces logistics costs R&D partnerships and technical exchanges as well as outsourced R&D (VC, incubator and technology partnerships) Dynamic new digital networking technologies and business models enabled by internet lead to pressure
Demand Conditions
Japan as home market as early technology adopter Worldwide information of local demand provided by expats
Inbound Logistics
Philips has many suppliers (255+) around the world, but they have a close connection with all of them Supply Management plays a key role in value creation, and 74% of Philips spend on suppliers is now centralized or center-led. ThePartners for Growth strategic supplier relationship management program brings Philips together with its top 30 suppliers Global Supplier Rating System (GSRS) is now operational in all businesses, resulting in a more professional structural supplier performance measurement and subsequent improvement actions (84% of Philips spending went for this last year)
Operations
Low Cost Country Sourcing in China: main supply base and manufacturing center Other smaller manufacturing facilities in 25 countries (including Netherlands, France, Belgium, Hungary, Mexico, Argentina and Brazil) The Supply Market Intelligence and Services group (SMIS) work closely together with businesses to identify supply market opportunities around the world
Some Areas of Research: Drug Delivery Potential of Microbubbles, Contrast Agents for Medical Applications, and OLEDs as the future of indoor lighting
Philips sells its products using dedicated sales representatives, telephone (to big customers), ODMs, OEMs, retail, website, and indirect channels Philips markets to its big customers (for ex: in healthcare industry) through its sales force and its small customers (for ex: individual consumers) via web, TV, and print/advertising Sales organizations in more than 60 countries
Service
Customer Support is very specialized since Philips products cover many areas 24 Hour Support for Consumer Electronics (such TV, portable electronics, etc) 24 Hour Professional Support for its health care products, lighting, and specialized businesses such as Dictation and Speech Recognition Systems Specific product-based FAQs and online support along with phone support
Inbound Logistics
Matsushita is dependent on the ability of third parties to deliver parts, components and services in adequate quality and quantity in a timely manner, and at a reasonable price It is not dependent on a single supplier, and has no significant difficulty in obtaining raw materials from suppliers. In addition to devices/products, Matsushita makes its own components and devices used in various products ranging from AV equipment and information and communication devices to home appliances and industrial equipment. Works closely with its third party suppliers for timely and quality in the deliver of its components
Operations
Main Manufacturing center and operations in Japan Overseas, Matsushita plans to expand its manufacturing bases, particularly in South China and Vietnam, in response to rising demand for components and devices. Matsushitas international business operations is risky because of political instability as well as cultural and religious difference.
$5.6 billion spent in R&D Costs (in 2007) Develops unique technologies via a high level of cooperation, not only through inhouse production, but also through a sophisticated network of cooperation among materials, components and devices, and finished product divisions Some Areas of Research: Full HD plasma TVs, Blu-ray disc (BD) recorders, and Energy Efficient/ Eco Friendly Products Sells to small customers, individual customers, and big industries Promotes environmentally friendly products Sells its products using local retailers, phone/online system, retail stores, and indirect channels (OEMs and ODMs) Sells its parts and services to the same set of customers Customer Support is very specialized since Matsushitas products cover many areas 24 Hour Support for Consumer Electronics (such TV, portable electronics, etc) 24 Hour Professional Support and Business Support for its small customers 24 Hour Support Specific to OEMs and its industrial customers/products Specific product-based FAQs, manuals, and online support along with phone support
Service
Strong, self-sufficient national organizations Product development and industrial design responds to regional customer preferences Decentralized marketing and sales
Incompetances Weak control of national organizations by Netherlands-based product-divisions created conflicts in company strategy
Local production plants could not take advantage of economies of scale Inability to capitalize on R&D
Innovative R&D
Matsushita was able to displace Phillips as the leader in Consumer Electronics by:
1.
Successfully capturing the advantages of localization and avoiding the management difficulties that other global companies encountered. Leveraging its corporate structure to bring new technologies to market more efficiently than its competitors. Implementing manufacturing best practices to keep manufacturing costs low despite differences in regional inputs. Outsourced core R&D needs to better recognize new marketable technologies and business models that were congruent with Panasonics Global Strategy.
2.
3.
4.
Core Strengths:
1.
Manufacturing:
Globally standard manufacturing processes created economies of scale (lower costs) and knowledge transfer between different manufacturing facilities.
Matsushita shifted certain manufacturing processes to low cost countries, but kept highly technical manufacturing process located in Japan. This ensured the highest quality at the lowest cost.
2.
R&D:
Centralized R&D process where core designs were established and local offices made feature requests to tailor products to regional markets. Underfunded the Central Research Lab to encourage the development of marketable technologies.
3.
Local offices were given the authority to create and execute local strategies with oversight from the main office. Regional offices were able to alter products and product portfolios to meet local demand.
Core Weaknesses:
1. 2.
1950s
Different standards and consumer preferences across countries led Philips to give power to the NOs Successful until Common Market eroded trade barriers
1970s
PD>NO Decrease SKUs, build scale, and increase flow of goods Create International Production Centers Slow implementation and NOs continued to have power
1982
Shut inefficient operations Off-shore manufacturing alliances PD>NO Focused on core operations Sales declined and profits stagnated
1987
Goal: increase profits and beat the Japanese Strategically linked core businesses Restructured around 4 core global divisions Linked PDs with their markets Halved spending on basic research to 10% of R&D Huge cuts in plants and employees Loss of $2.5 billion and a shareholders lawsuit
1990
Cut 22% of workforce Sold various businesses Expand software, services, and multimedia Focused on developing 15 core technologies Low morale and lack of focus on new market demands for segmented products and higher consumer service
1996
No taboos; no sacred cows Slashed 3,000 jobs in N American Added 3,000 jobs in Asia Huge cuts Relocated headquarters to Amsterdam Bet on digital revolution Focus on marketing Achieved objective of a 24% return on net assets
2001
Outsourced mobile phone production Seeks to sell off manufacturing of mass-produced items Focused on developing 15 core technologies Loss of 2.6 billion euros. Become a technology developer and global marketer?
Tanii
Objective: obtaining software source for its hardware Acquired MCA for $6.1 billion Japan went into recession, and Tanii forced to resign
Morishita
simple, small, speedy, and strategic Cut staff and decentralize responsibility Sold MCA to Seagram at a $1.2 billion loss Challenges: Korean and Chinese competition; strong yen=weak exports Increase offshore R&D: Panasonic Digital Concepts Center in California
Nakamura
From super manufacturer of products to meeting customer needs through systems and services Empower employees to respond to customer needs Destruction and creation disbanded product division structure Streamlines plants: now integrated into multi-product production centers Streamlines marketing divisions: Panasonic and National First losses in 30 years accelerated: Matsushita seen as a takeover target
Vertical integration
First to offer excellent hardware, software, and content iPod and iTunes Successfully convinced content providers to allow sale of mp3
R&D
Idea was not internally developed, but execution was Strong collaboration with Portal Players who did bulk of the software and hardware development
Manufacturing
Outsourced all manufacturing
Steve Jobs
Genius CEO with a vision Involved in unusually detailed aspects of daily business
Team 5
Group 5: Varun Boriah Sonia Fereres Dilip Joseph Brendan Quinn Ada Zheng
Philips
Geographic location: small country situated in central Europe Initial workforce deeply involved in technological development in appreciation for firms strategy of investing in education, housing, improvement of workers conditions locally. Expensive local labor
Matsushita
Geographic location: immersed in Asian market Skilled, relatively low cost resources
Philips
Limited domestic market pushes international growth Close to local market needs & opportunities due to decentralization (NOs)
Matsushita
Large & highly demanding Asian market for consumer electronics
Philips
No cluster effect Lack of domestic competitors
Matsushita
Cluster effect: development of Japanese consumer electronic industry & competition
Porters Diamond for Philips vs Matsushita Firm Strategy, Structure & Rivalry
Philips
Decentralization, local management & diversification Product specialization (light bulbs) extend technological advantage to other products Dual management system: National Organizations (NOs) and Product Divisions(PDs)
Matsushita
High quality, low cost, standardized products mass production Highly centralized organizational structure Rivalry with other Japanese CE industries (e.g. Sony in Betamax vs. VHS)
Centralized
Decentralized
Multinational / Decentralized management, product development, manufacturing, sales and customer services through PDs, NOs within national/local markets.
How did Philips become the leading consumer electronics company in the world in the post war era? What distinctive competence did they build? What distinctive incompetencies?
Competencies Lighting Cassettes / CDs Centralized Research and Innovation: quickly develop new products Incompetencies Low profit margins (1-2%) Fragmented management/poor global strategy Slow bringing products to market (Matsushita beat them to microwave etc) Dispersed manufacturing/marketing/ services within nations (NOs)
How did Matsushita success in displacing Philips as No. 1? What were its distinctive competencies and incompetencies?
Competencies Ability to mass product at low cost, quick to market VCR manufacture including OEM for Philips and others Placement of Japanese expat managers in international plants, strong communication with HQ Local autonomy to meet targets Shifted production to overseas markets (e.g. China) when Japanese currency strengthened Fast follower strategy Centralised R&D in Japan Incompetencies Not highly innovative Complex management processes Excessive control of R&D (Motorola TV)
What do you think of the change each company has made to date: the objectives, the implementation, the impact? Why is the change so hard for both of them?
Philips Focus on R&D (after sacking 37% of R&D staff?!) Large bets on technologies that failed (DCC, CDi, mobile) Hasnt yet outsourced much of its production Matsushita Created PDCC strengthened convergence portfolio Outsourcing innovation universities, PDCC Reduced size of HQ less top-heavy Outsourcing some production
Research
Product Development
Manufacturing
Services/ Ecosystem
Customer
APPLE: iTunes, Recording companies MICROSOFT: App developers CHUMBY: Netflix TiVO: Broadcasters
KINDLE
KINDLE
KINDLE: Publishers
Team 6
Late 19th century, early to mid 20th century, mid to late 20th century
R&D
Physics and chemistry labs built to address problems Independently performed by NOs with PDs as nominal formal research department Superior technological innovations from PD Centralized lab doing research on specific business areas
Manufacture
Highly centralized in Eindhoven
Marketing
Overseas joint ventures created to gain market place Independent NOs were able to sense and respond to different markets efficiently Inconsistency within the organization makes marketing a weak point in Philip Refocused on marketing rather than technology; made worldwide marketing plan as a whole
Sales/ Distribution
Exported into diverse markets, i.e. Japan, Australia, etc Independently performed by NOs with PDs as nominal formal global distribution department Decentralized distribution around the globe Restructured distribution network work as a whole again
Independently performed by NOs, with PDs as nominal formal production department NOs made their own decision of product mix and which technology standard to adopt Reorganized structure led to specialized, multimarket production facilities worldwide
Manufacture
One-product-one-division: production was done by product divisions
Marketing
One-product-onedivision: marketing was done by product divisions
Competencies
Local knowledge of market NOs - Can response quickly to local demand In house R&D - Leader in industrial labs, both Physics and Chemistry
Incompetencies
No clear line to define role of NOs and PDs Bureaucracy - NOs and PDs conflicts Slow to bring new product to market Series of bad decisions - from various CEOs Centralize to core business & acquire related companies too late Dead technologies - V2000, CD-I, DCC, analog HDTV
I
Long history
Established corporate culture and tradition (e.g. Seven Splits of Matsushita) Bureaucracy (esp. Philips)
The New US Consumer Electronic Companies: Apple, Tivo, Roku, Chumby, Kindle, Microsoft What are their positions in the Value Chain?
New CE companies involved in market analysis, research & development and product design, i.e. at the head of the value chain. Maximum value added here for products like Tivo, Roku or Chumby, which were quite unique. Value added at the end too, i.e. distribution and marketing. Most true for Apple products, given their aggressive and distinguished marketing style. Manufacturing generally outsourced to third parties.
Apple has dominated the MP3 marketplace with 80% market share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed?
Unique product designs, i.e. having lots of style, though may not be cheap. Excellent marketing and branding exercise, to give the appeal of consumer items as luxury and personality statements. Own retail outlets, to have more control over launch and distribution. Control over music distribution as well, in the form of itunes. Over all perception of brand very favorable. More centralized company organization. And, last but not the least, the importance of leadership cannot be more emphasized. Sans Jobs, things might be much different.
Team 7
FS
Caring of workers founded highly skilled labor forces and strong technological base Hollands small size forced the company to be international Lowered trade barrier prompted to local, single site production
FC
DC
R&SI
Rich R&D resources in UK and US helped the company to diversify its assets (research labs) and resources
FS
Lack of English capability required more staff (expatriate managers) Lowered domestic post-war growth and saturated distribution channels forced company to export Strong yen prompted overseas production
FC
DC
R&SI
High value electronic components
IPC
PD Power Struggle NO
PD
PD
No information exchange
Parent HDQ
DIV
DIV
Both companies started from highly centralized organization. Philips decentralized their organization based on geographic location Matsushita decentralized product divisions, controlled by Japanese parent company The organizations reflected culture in such countries Philips (Holland) gave more freedom to NOs Matsushita (Japan) has tight control over Divisions. Philips competitive advantage & disadvantage NOs can easily customize their products to different markets Little communication between NOs and weak control from PD led to repeated developments of same technology Matsushitas competitive advantage & disadvantage Central research organization to help leverage basic technology across all divisions Each division has strong understanding about customers, but tightly controlled by parent company Both companies tried to reduce the operating cost by locating plants in low-wage areas as well as outsourcing to contract manufacturers. Repeated reorganizational changes aimed at increasing revenue and profit margin
Strong Research & Development efforts Early in Philips history, Gerard and Anton Philips agreed that strong research and development efforts were vital to the Philips success. The importance of research and development is evident in the physics and chemistry lab that developed a tungsten metal filament bulb that was a great commercial success enabling Philips to compete against its giant rivals. In the postwar era, Philips continued this tradition with fourteen product divisions responsible for development, production and global distribution Independent National Organizations Another contributing factor to Philips success is the National Organizations. These postwar organizations were highly self-sufficient and extremely adept at responding to countryspecific market conditions-a capability that became a valuable asset in the postwar era. Communication between National Organizations However, with the creation of the Common Market in the 1960s, the same National Organizations to which Philips attributed its postwar success soon became the reason why Matsushita displaced Philips as the leading consumer electronics company.
Link divisional structure to a global strategy Autonomous National Organizations Communications The autonomy of the divisions linked together through a global strategy enabled Matsushita to displace Philips as the leading consumer electronics company in the world.
MATSUSHITA
Competencies
Global scale efficiency Market-driven rapid innovation
Innovative PDs Linkages in the value chain
Incompetencies
Slow technology to market Poor global strategy
Incompetencies
Overseas subs not innovative
1982
1987
1990
1996
2001
Morishita
Nakamura
All three companies are providing a widget to connect the existing multimedia entertainment to the internet. They do not have the contents and the widgets are not really technologically advanced, but the idea to provide an interface for consumers to enjoy shows or programs is become increasingly popular. Their products opens new markets for both the entertainment industry and internet applications. Both are back up by companies that have already developed strong product (online books and music) and customer bases. The iPod, iPhone, and Kindle are new channels to sell Apple and Amazons online services.
Apple, Kindle
Microsoft
Microsoft is the largest OS provider on the PC value chain and is successfully leveraging its large market share to penetrate into any possible market, such as online services and gaming consoles (XBox).
Tech-savvy users who desire more features Combine technologies (iTune & HDTV)
Team 8
Porters Diamond
Philips Regionalized focus independent management Functional division (Biz vs Engineering) Not-invented-here culture Government protectionism Matsushita Centralized focus dependency on headquarters Business line division Copycat / follower culture Government encourages competitiveness
Factor Conditions
Philips European countries heterogeneity encourages customization to local markets (distributed approach) Expensive labor focuses companies in product differentiation strategies Matsushita Japanese geographical isolation promotes focus in domestic market (centralized approach) Cheap labor (pre-70s) focuses companies in cost-cutting strategies
Demand Conditions
Philips Heterogeneous European cultures leads to differences in demand
Matsushita Big but isolated domestic market drives focus in local market Low income in Japan (per-70s) cultivates low-cost strategies Population eager to adopt new tech
Matsushita Developed ecosystem derived from intense competition (Sony, JVC, Sanyo, etc)
Research (centralized)
Commercialization (Market B)
Commercialization (Market C) Commercialization (Market D)
Autonomous corporate subdivisions had too high a stake in selfpreservation and prevented real restructuring reform
The Bad
The Good
NOs focused on country-specific markets and adapted quickly to local market conditions and consumer tastes and expectations e.g. TVs
Common Market system removed advantages of regional specialization, increased importance of manufacturing cost competition
Outstanding research division led to strong technical innovation and new product development
NOs thwarted centralized product development by pursuing independent agendas e.g. V2000 video cassette
The Ugly
Decentralization leads to organizational inertia and the company is slow to react to changes in market conditions in a World economy
Corporate culture valued low cost and high profit operations and held each division accountable for meeting goals
The Bad
The Good
Manufacture needed to relocate to cheaper labor markets to stay competitive, while devotion to domestic employment weakened restructuring efforts Weak R&D efforts and expenditure led to undifferentiated products and commoditization, which led to shrinking margins
Matsushita was quick to adopt standards, allowing it to achieve high sales volumes on products it would otherwise struggle with
The Ugly
Matsushita is now forced to look outside the company and outsource its innovation in the hopes of developing differentiated products and more profitable ventures
Objectives
Implementation
Focus on core competencies (technology development and marketing) Simplification of the network Outsourcing of manufacturing activities to Asia
Impact
Fairly good financial impact in the 2000s Huge loss of human capital
Objectives
Implementation
Increase of the investments in internal R&D Creation of the PDCC: investment in external R&D (open innovation leader)
Impact
Control of the value chain Few high-quality appealing and trendy products based on existing technologies
Team 9
Team 9
James An Zishan Khan James Su Boaz Ur
Factor conditions
Philips
Small country, immersed in the European eco-system and constantly exposed to other forces. Small local work force. When Philips become international they have the potential and try to utilize the strength of the different Geographies they operate in. (Manufacture where its cheap, R&D where they have talent etc.) However, European regulations require expensive HR.
Matsushita
Substantial local market, in a country that isolated from the rest of the world. Local highly skilled and disciplined work force with life dedication to the company Japanese norm make it hard to change the HR structure of the org (Lifetime employment) Japanese Yen making it hard to export from Japan and creating a need to open factories in cheaper places.
Demand conditions
Philips
Demand has to come from other parts of the world. Exposed to all market forces and competition in every single segment.
Matsushita
Substantial local demand with high rewards as well as losses when there is a slowdown. Until 2000 centralized strategy with strong product divisions located in Japan. At first, hard to compete in international markets because lack of brand. Later becoming the OEM for other brands (video)
Matsushita
Being a fast follower Matsushita Copycat Until 2000 centralized strategy with strong product divisions and operations located in Japan. Making sure that there are loyal Japanese reps in every company around the globe in senior positions. Matsushita is definitely a Japanese company
Philips value chain is mainly based on an aggregate of NO. They have decentralized R&D centers and had constantly tried to shift the balance back and forth between PDs and NO. Finally they decided to create business units responsible for profits. In essence, these business units hold the value chain for each product. However this business unit can probably leverage the sales organization that is spread around the globe.
Matsushita for the majority of its life span was highly focused on central management and Japan based product divisions. The central R&D got its resources from the product divisions. The international operations were traditionally just local manufacturing to overcome import / export obstacles. The main components and knowledge was always Japanese, most of the value stays in the headquarters.
Competencies
Self-sufficiency allowed ability to respond to country-specific market conditions Product development as a function of local market conditions - (Philips of Canada first color TV; of Australia first stereo TV; of United Kingdom first TV with teletext) Direct and frequent communications between NOs and top management Development of elite expatriate managers that can represent country-oriented views
Incompetency's
Inability to boost production levels to increasing global demand Production within the NOs nations, not the low-wage areas (East Asian, Central and South America in the 1960s) Lack of centralized marketing strategy (Philips continued to innovate, but unable to compete effectively to capture the mass market (e.g. audiocassette and microwave oven) Disagreements among the NOs and contradiction with the research arm of Philips (Philips V2000 videocassette, superior to Matsushitas VHS, but was outsourced, branded, and sold by North American Philips under license from Matsushita) The history of strong individualized NOs resisted reorganization
Competencies Matsushita was more successful in maintaining control over its national organizations. It did this by having expatriate Japanese managers, technicians, and advisors in overseas offices. Philips national organizations operated independently from the home base. Matsushita had more focused company-wide effort on products. Highly centralized R&D operations in Japan governed direction of research in overseas companies e.g. Motorolas TV business. Philips product development differed between national organizations. Matsushita was faster at getting products to market than Philips.
Incompetency's In the 1990s, Matsushitas management was unwilling to restructure some of its inefficient production facilities in Japan. This was due to the companys deeply-rooted commitment to lifetime employment.
Philips
Multiple organizational shuffles primarily aimed at becoming more profitable/efficient and client focused. Company culture orientated towards R&D rather than Marketing, difficult to shift focus of existing employees. Continual cost cutting measures and relocation of HQ affects the core culture of the firm.
Matsushita
Multiple policies implemented to attempt to decentralise organisation. Success in decentralisation difficult due to reluctance to remove roles from Japan. Lack of transferring roles resulted in competitors undercutting the firms pricing structure.
Great Marketing Firm Distribution Channels include Apple Stores Use of iTunes as a reverse razor and blade model Stylish product design
Ability to recognise opportunities to commoditise products Strong company culture and shared vision Central Product Designer and Leader (Steve Jobs)
Team 10
Porters Diamond-Philips
Factor Conditions
Among largest producer of light-bulb Geographically diversified research facilities and local tech talents, managers Trade barriers and tariffsforced to build local production facilities Expansion to Europe, Asia, US, etc., capture world market share Diversification of product range Globalizing product development and production Wrote down assets rapidly to use new production technology (1910s) Tradition of caring for workers (1912) Adapt to country specific market conditions National Organizations(1930s) Restructure(1987), core business vs. non-core business Outsource most of manufacturing and become technology developer(2001) Rivalry: GE, Japanese counterparts, and other local competitors
Demand Conditions
Porters Diamond-Matsushita
Factor Conditions
Highly skilled work force Post war rebuilt, pro-business Cost rise in 1960s in Japan
Post war boom Export --> global leadership through VCRs Domestic market demand collapsed(1999) Fast copycat Offshore innovations First to adopt divisional structure, internal competition(spin off hungry spirit) Strong centralization gradually weakened (Operation Localization) Rivalry: GE, Sony, Philips, etc. China, Korea
Demand Conditions
Supporting Industries
Value Chain
Invest Capture Demand Solution & Delivery Support
Global Suppliers
Tech Support
Global Assembly
Service
R&D Strategy
Global Logistics
Distribution
Matsushitas Success
Matsushita had a long term vision (250 year plan). This was very uncommon for most international companies. The plan was broken into 25-year stages. Philips decentralized operations and R&D during WW2 to US and UK. This gave those organizations autonomy, but also made it difficult to control them post-war. An example was the development of V2000 format, but North American Philips adopted VHS which was a Matsushita standard. Philips focused on cost cutting through layoffs and selling off various businesses and R&D units such as integrated circuits. With new leadership, and new strategies, some of these business units were needed and not available to Philips in the development of their strategy. Therefore, Philips was resigned to continue to outsource even more of their operations and become a technology developer and a global marketer.
Matsushitas strengths
Diverse offerings from early in the companys history. This leads to greater market penetration. Opened 25,000 domestic retail outlets to distribute the products. These provided sales volume and access to market trends. Shifted production earlier than other companies to low-wage countries in Asia and South and Central America. Agreed to give up its own standard and adopt the established VHS format. This prevented a costly standards war. Instead the company ramped up production to meet its own needs as well as those of OEM customers such as Philips. Increased sales volume allowed Matsushita to cut unit price 50% within 5 years of product launch while continuously improving quality. Close headquarters-subsidiary relations allowed greater control of the activities of globally dispersed subsidiaries. Gave overseas subsidiaries a greater choice on what products they sold.
Matsushitas weaknesses
Centralized control of foreign subsidiaries caused some negative backlash. Corporate culture of lifetime employment led to inefficient production facilities. There was resistance to cutting back on manpower and plant. Vertical hierarchy within organization. Front line employees were not empowered to respond to customer needs due to the centralized organizational structure.