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Philips vs. Matsushita Assignment . 2008 MBA/ENG 290G International Competition in Technology. Team 1. Value Chain: Philips vs. Matsushita. Team 1 Franck Formis, Robert Kong, Vincent Ng, Jameson Slattery, Chuohao Yeo. Porter’s diamond. Philips. Matsushita. Factor Conditions

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Philips vs matsushita assignment

Philips vs. Matsushita Assignment

2008 MBA/ENG 290G

International Competition in Technology

Value chain philips vs matsushita

Value Chain: Philips vs. Matsushita

Team 1

Franck Formis, Robert Kong, Vincent Ng, Jameson Slattery, Chuohao Yeo

Porter s diamond
Porter’s diamond



  • 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

  • Domestic throughout 20th century

  • Since 1998, investing in R&D partnerships and technical exchanges abroad

  • Need to broader sources of innovation

  • Growth through post-war boom

  • Shift to export markets

  • Earlier picture of emerging foreign demand

Porter s diamond cont d
Porter’s diamond (cont’d)



  • Related and supporting industries

    • Principal agreement with GE in 1919 > World split into 3 spheres of influence

    • By 1998, JV with Lucent to target “digital revolution”

    • Improved performance

  • Strategy, Structure, and Rivalry

    • Early local production facilities

    • Autonomous NOs

    • Uncoordinated decisions

  • 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

Philips value chain
Philips value chain

  • Philips Research has labs around the globe

  • 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

  • Sales in more than 60 countries

  • Do their own marketing

  • Uses wholesales, retail stores to distribute products

  • Also support limited direct shipments and plannings

Red – heavy presence by Philips

Blue – no or light presence by Philips

Matsushita value chain
Matsushita value chain

  • Mainly in-house and centralized, PDCC as an initiative to “outsourced” R&D

  • Depend on third-party to acquire raw materials and components, e.g. steel, plastic, semiconductors etc.

  • Maintain huge amount of manufacturing plants in Japan, Asia and China

  • Mainly carry out by subsidiaries located in various countries

  • Cooperation with domestic and overseas mass-scale retailers.

Red – heavy presence by Matsushita

Blue – no or light presence by Matsushita

Value chain comparison
Value chain comparison

  • Centralized versus Decentralized

    • Philips: Decentralized

      • Depend on National organizations to respond to local market.

      • Moving towards more centralized decision to cut cost and enjoy economies of scale

    • Matsushita: Centralized

      • 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.

  • Outsourcing versus in-house

    • Philips: Outsourced

      • Most manufacturing are outsourced or offshored to low-cost regions. Mostly retain R&D and sales and marketing only.

    • Matsushita: In-house

      • Directly control most manufacturing operations located in Japan, Asia and China

Challenges faced
Challenges faced

Philips – Too decentralized

Matsushita – Too centralized

  • Powerful and autonomous national organizations (NOs)

    • Lack of company-wide strategic cooperation among NOs

    • Lack of accountability in NO/PD matrix

  • Management by technical & commercial consensus

    • Slow to respond

  • Inefficient production due to local production centers

  • Product divisional structure

  • Highly centralized services

    • Centralized product development

    • Subsidiaries too dependent on parent company

  • Communications between overseas subsidiaries and parent company

Key restructuring steps
Key restructuring steps



  • Rein in NOs

  • Centralize production

  • Focus on core businesses

  • Empower global product development

  • Combine product divisions

  • Remove historical organizational structure

  • Empower regional operations

  • Local customization of production

  • Combine single product divisions

  • Tap overseas/external innovation

  • Remove historical organizational structure

  • Name change to Panasonic

Outcome and difficulties faced
Outcome and difficulties faced



  • Outcome

    • Continuing low profit margins

    • Competitiveness impacted

  • Difficulties

    • Conflicted local loyalties

    • Restructuring for tomorrow using today’s parameters

    • Cost-cutting in key aspects, e.g. R&D

  • Outcome

    • Low profit margins

    • Competitiveness impacted

  • Difficulties

    • Culture of lifetime employment

    • Organizational resistance

    • Difficult Japanese economic conditions in 1990s

Philips becoming the leading consumer electronics company
Philips becoming the leading consumer electronics company

  • Focused on one product rather than diversifying in early days

    • Became leader in industrial research

  • Competence

    • Independent National organizations.

      • 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

  • Incompetence

    • Product division had no real power

      • NO ignores main company’s 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

Matsushita displacing philips
Matsushita displacing Philips

  • Focused on VCR production

    • High volume allowed them to slash price quickly

    • License VHS format to other manufacturer

  • Highly centralized system

  • Competence

    • Huge number of retail outlets

      • 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”

Matsushita displacing philips cont
Matsushita displacing Philips (cont)

  • Competence

    • Under fund the central research laboratory

      • 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
New US CE Companies:Apple, Chumby, Kindle, Microsoft, Roku & Tivo

Apple in the mp3 market
Apple in the MP3 Market

  • Apple designs and controls the major consumer touch points in the MP3 market

    • Device HW and SW, PC SW, and distribution

  • 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

Philips matsushita in the mp3 market
Philips & Matsushita in the MP3 Market

  • Any competitor is unlikely to unseat Apple by doing 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 Apple’s current business model

Philips vs matshuita

Philips Vs Matshuita

Team 2:

Jon Wiesner, Rachel Simon, David ExpositoCossio, Yanpei Chen, EmrehanKirimli

Porter s diamond consumer electronics industry
Porter’s Diamond: consumer electronics industry

Japan: highly demanding and sophisticated internal buyers. Huge market.

Netherlands: small internal market. Internationalization needed to survive.

Japan: Centralized companies. Reluctance to delegate activities. Process innovation rooted in culture. Huge local rivalry

Netherlands: Decentralized companies. Low local rivalry

Structure, Strategy, Rivalry

Factor Conditions

Demand 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

Related and Supporting Industries

Japan: Large number of supporting industries: transportation, copiers, cameras, audio, appliances, musical instruments…

Netherlands: medium/high number of supporting companies: canon, HP, TomTom, …

Value chain comparison1
Value Chain Comparison







Raw materials





Medical Sys






Medical Sys

One Philips brand






Medical Sys

Medical Sys


Raw materials


Home App



Home App




Home App


OEM & Self Use


Merge brands into Panasonic




Home App



Philips actively consolidating supplies

Both are mainly retail with some enterprise

Both do brand consolidation

Matsushita heavy focus on manufacturing

Philips trying to move in this direction

Philip s success
Philip’s Success

How they became leader: developed national organizations (NOs) that were independent, and specialized in local market demand for specific and diverse technologies.




  • /

  • /

  • /

Fragmented product line (no economies of scale)

Technologies lost in market flooded by competitors

  • /

Loss of market shares to low wage outsourcing competitors

  • /

  • Strong R&D funding

  • Strong National Organizations

Slow to market

Poor global strategy

  • Adaptive to diverse markets

  • Commitment to employees

  • Reputation for quality

Matsushita s success
Matsushita’s Success

How they became leader: global scale approach of rapidly bringing a emerging technologies to saturate the market

1989 crash


  • /

  • /

Resistance by employees to structural change

  • Strong distribution system,

  • high retail presence

  • /

  • /

  • /

Dependant on center; loss of talent due to perceived overbearing top

  • Broad product line

  • Fast [follower] to market

Weak on innovation

Excess capacity

  • Strong culture, visionary leader

High overhead

  • Centralized Japanese structure

Change and its challenges
Change and its Challenges

Both Philips and Matsushita have faced enormous challenges and multiple reorganizations in trying to manage global operations. Both have tried multiple organizational structures, but have encountered some of the following barriers

  • Philips

  • Historical: legacy of WWII and decentralization of operations

  • Cultural: strong cultural ties to Eindhoven

  • Organization: matrix organizational structure constantly between PD and NO reorganized

  • Manufacturing: late to outsource manufacturing

  • Profitability: low margin business leaves little room for error

  • Technological: big bets on losing technologies and standards

  • Structural and Macroeconomic: high cost of layoffs of European workers

  • 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

What has allowed Apple to succeed?

relaxed, casual, collegial environment with high-work ethic

emphasize on innovation and design (teams all over the world)

User Experience Architect’s Office was established to make Apple products easier to use

What should Philips and Matsushita do to compete?

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 )

Mp3 Player Market


or Zune by Microsoft

or Samsung and Adidas

Philips vs matsushita
Philips vs. Matsushita

Team 3: Gonzalo Baez Silvio Filho Brian Gawalt Ryan Stanley

MBA290G, Oct 8, 2008

Comparison of porter s diamond factors
Comparison of Porter’s Diamond Factors

Factor Conditions

  • Both countries have access to a highly skilled workforce due to local availability of specialized research and high extent to staff training in each country.

  • High cooperation yet highly regulated labor relations. Tradition of lifelong employment in Japan has reduced the risk of brain drain.

  • Limited natural resources (esp. Japan) induces constant attention to value-add services.

  • Institutions in the Netherlands are considered highly efficient, ethical, and transparent compared to other countries: corporate boards are effective, government policymaking is transparent, intellectual property protection strong, and firm behavior ethical.

  • The Netherlands has highly developed ports and is considered “the gateway to Europe.”

    Demand Conditions

  • Japan has a high national demand that includes sophisticated technical users, whereas Philips had to export early on due to low national demand in the Netherlands.

    Related and Supporting Industries

  • Both countries have national access to companies to suppliers in chemical and other equipment or machinery industries for production.

  • The Netherlands includes robust research institutions

  • Cluster development in Japan related to consumer electronics and semiconductors.

    Firm Strategy, Structure, and Rivalry

  • Cluster development in Japan indicates fierce domestic rivalry. 8 of the top 10 companies in the field are Japanese.

  • Government stability and context has been a major help to Philips as the Netherlands benefits from its central waterways, advanced neighboring economies, and political stability.

Value chain contrast
Value Chain Contrast





Ware-house and direct sales

Direct and online Sales

Distribution centers, retailers

Distribution centers, retailers

Customer service

Customer service

End customer

End customer





  • Philips had a decentralized approach for manufacturing and sales.

  • Matsushita had nearly everything centralized in Japan. Marketing

  • competitive advantage over manufacturing.

Changes in market leadership
Changes in Market Leadership

Post-war Philips rose to dominance through strong R&D, technical development, and ability of national organizations to independently structure market offering

  • Small national market instigated robust export function and global sales and marketing force

  • Vital research facilities and top management transferred overseas as WWII approached

  • WWII destroyed factories, so chose to rebuild on strengths of National Organizations

    • Independence of management to act

    • Ability to sense and respond to differences in national demands of countries of operations related to marketing

    • Take advantage of surrounding talent and cultures for independent technical capabilities as well

  • 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 Panasonic’s lagging innovation by supporting start-ups without difficult cultivation of in-house expertise.

Apple s keys to success in mp3 market
Apple’s keys to success in MP3 market

Corporate culture

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" .

  • Intense work ethic and casual/informal structures.

  • Combines Design and Marketing in one department.

2008 philips vs matsushita

2008 Philips vs. Matsushita

Christian Huth

Lakshmi Jagannathan

Christopher Quek

Daisuke Tanaka

John Michael Wyrwas

Philips challenged with independent national organization focusing on r d
Philips challenged with independent national organization focusing on R&D

Factor Conditions

  • Dutch legislation prevents hostile raids

  • Bureaucracy leads to slow-moving transformation of company

  • CEO succession hinders continuous development of strategy

Supporting Industry

Firm Strategy, Structure & Rivalry

  • Technology-sharing agreements and offshore manufacturing shall lead to reduced costs

  • Original competitive leadership by commercial and technical functions (PD/NO matrix) was succeeded simpler and structured marketing and manufacturing organization

  • Original worldwide portfolio of responsive national organizations increases manufacturing costs (start of outsourcing)

  • Strong industrial research

Demand Conditions

  • Adoption to local markets by independent national organizations in marketing as well as in product development

Matsushita with centralized organization and strong manufacturing capabilities
Matsushita with centralized organization and strong manufacturing capabilities

Factor Conditions

  • High value-add per hour in manufacturing

  • Low labor costs in developing countries where parts of manufacturing is outsourced

  • Early trade-liberalization enabled Matsushita to start export business

Supporting Industry

Firm Strategy, Structure & Rivalry

  • 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

  • Worldwide business based on centralized, highly efficient organizations in Japan

  • Shift to local sourcing over time, but still in control of output (quality, productivity etc.)

  • Expats spreading company culture and technologies

  • “Operation Localization” - Internationalization including manufacturing abroad and increasing independence from Japan (but still dependent)

Demand Conditions

  • Japan as home market as early technology adopter

  • Worldwide information of local demand provided by expats

Philips value chain1
Philips Value Chain manufacturing capabilities

  • 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.

    • The‘Partners 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

Philips value chain2
Philips Value Chain manufacturing capabilities

  • Research and Development

    • $2.2 Billion spent on R&D (2007)

    • Some Areas of Research: Drug Delivery Potential of Microbubbles, Contrast Agents for Medical Applications, and OLEDs as the future of indoor lighting

  • Marketing and Sales

    • 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

Matsushita value chain1
Matsushita Value Chain manufacturing capabilities

  • 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.

    • Matsushita’s international business operations is risky because of political instability as well as cultural and religious difference.

Matsushita value chain2
Matsushita Value Chain manufacturing capabilities

  • Research and Development

    • $5.6 billion spent in R&D Costs (in 2007)

    • Develops unique technologies via a high level of cooperation, not only through in-house 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

  • Marketing and Sales

    • 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

  • Service

    • Customer Support is very specialized since Matsushita’s 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

Philips in the post war era
Philips in the post-war era manufacturing capabilities



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

  • Protected company resources through war by transferring abroad

  • Strong, self-sufficient national organizations

  • Product development and industrial design responds to regional customer preferences

  • Decentralized marketing and sales

  • Innovative R&D

Matsushita competitive analysis
Matsushita – Competitive Analysis manufacturing capabilities

  • Matsushita was able to displace Phillips as the leader in Consumer Electronics by:

    • 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 Panasonic’s Global Strategy.

Matsushita core strengths
Matsushita – Core Strengths manufacturing capabilities

  • Core Strengths:

    • 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.

    • 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.

    • Localized (Regional) Autonomy:

      • 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.

Matsushita core weaknesses
Matsushita – Core Weaknesses manufacturing capabilities

  • Core Weaknesses:

    • Power of the Central Organization:

      • The power exerted by the central organization limits regional innovations.

    • R&D

      • The R&D structure is good at making marketable products but not good at creating new technologies.

      • It is a culture of fast follower R&D.

Organizational changes philips
Organizational Changes: Philips manufacturing capabilities

  • 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

Organizational changes philips1
Organizational Changes: Philips manufacturing capabilities

  • 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 shareholder’s 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

Organizational changes philips2
Organizational Changes: Philips manufacturing capabilities

  • 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?

Organizational changes matsushita
Organizational Changes: Matsushita manufacturing capabilities

  • Yamashita (Operation Localization)

    • 4 localizations: personnel, technology, material, and capital

    • Increased number of local nationals in key positions

    • Overseas sales subsidiaries given more choice over products they sold

    • Expressed displeasure with lack of initiative of TV plant in Cardiff

    • 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

Organizational changes matsushita1
Organizational Changes: Matsushita manufacturing capabilities

  • 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

The apple slide
The Apple Slide manufacturing capabilities

  • 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
Team 5 manufacturing capabilities

Group 5 varun boriah sonia fereres dilip joseph brendan quinn ada zheng

Philips vs manufacturing capabilities


Group 5:

Varun Boriah

Sonia Fereres

Dilip Joseph

Brendan Quinn

Ada Zheng

Porter s diamond for philips vs matsushita factor conditions

Porter’s Diamond for Philips vs Matsushita manufacturing capabilitiesFactor Conditions


  • Geographic location: small country situated in central Europe

  • Initial workforce deeply involved in technological development in appreciation for firm’s strategy of investing in education, housing, improvement of workers conditions locally.

  • Expensive local labor


  • Geographic location: immersed in Asian market

  • Skilled, relatively low cost resources

Porter s diamond for philips vs matsushita demand conditions

Porter’s Diamond for Philips vs Matsushita manufacturing capabilitiesDemand Conditions


  • Limited domestic market  pushes international growth

  • Close to local market needs & opportunities due to decentralization (NOs)


  • Large & highly demanding Asian market for consumer electronics

Porter s diamond for philips vs matsushita related supporting industries

Porter’s Diamond for Philips vs Matsushita manufacturing capabilitiesRelated & Supporting Industries


  • No cluster effect

  • Lack of domestic competitors


  • Cluster effect: development of Japanese consumer electronic industry & competition

Porter s diamond for philips vs matsushita firm strategy structure rivalry

Porter’s Diamond for Philips vs Matsushita manufacturing capabilitiesFirm Strategy, Structure & Rivalry


  • Decentralization, local management & diversification

  • Product specialization (light bulbs)  extend technological advantage to other products

  • Dual management system: National Organizations (NOs) and Product Divisions(PDs)


  • 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)

Internal product value chain
Internal Product Value Chain manufacturing capabilities



Product Development

Sales & Marketing




Centralized initial research & innovation

Multinational / Decentralized management, product development, manufacturing, sales and customer services through PDs, NOs within national/local markets.

Product Development

Sales & Marketing




Centralized operations: research, innovation & product development. Expat management

Local subsidiaries

Philips: Decentralized Organization + 1 Product Specialization

Matsushita: Centralized Hub Organization + Mass Production

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?

How did Matsushita success in displacing Philips as No. 1? What were its distinctive competencies and incompetencies?

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?

Corporate culture and organizational structure at apple
Corporate culture and organizational structure at Apple date: the objectives, the implementation, the impact? Why is the change so hard for both of them?

  • Apple originally outsourced :

    • iPod idea (Tony Fadell)

    • iPod hardware development (PortalPlayer)

  • Windows compatible through MusicMatch and later iTunes

  • Ecosystem created

  • Product Marketing and Product Management executed by the same team

  • Apple is vertically integrated: OS, SW/HW, retail stores

  • Put Silicon Valley on the map

  • Hard-working yet corporate-casual environment.

  • Apple’s success based on how they add value to a “cool & simple” design, whole ecosystem around it and easy-to-use interface.

What should philips and matsushita do to compete
What should Philips and Matsushita do to compete date: the objectives, the implementation, the impact? Why is the change so hard for both of them?

  • new features price erosion

    • Reduce retailer and manufacturer inventory

  • channel management shifts from classic distribution to retailers, to broadband providers, to online, to direct to consumer.

  • digital content will shape their hardware demand

  • both companies should exploit their competitive advantages instead of matching each other:

    • Philips should invest more in R&D and marketing as a way to compete with Japanese low cost efficiency. Decide on one structure/strategy instead of changing it frequently.

    • Matsushita: try to implement change in a more effective way, communicating more with employees/subsidiaries to improve innovation. Partner more, think ecosystems, think of the “experience” rather than just the product

Team 6
Team 6 date: the objectives, the implementation, the impact? Why is the change so hard for both of them?

Philips versus matsushita

Philips Versus Matsushita date: the objectives, the implementation, the impact? Why is the change so hard for both of them?

Team 6

Wan-Lin Tseng

Toru Yamagishi

Nuttapong Chentanez

Jim Miller

Ankit Gupta

Philips porter s diamond
Philips Porter’s Diamond date: the objectives, the implementation, the impact? Why is the change so hard for both of them?

Matsushita porter s diamond
Matsushita Porter’s Diamond date: the objectives, the implementation, the impact? Why is the change so hard for both of them?

Philip s internal product value chain

Late 19 date: the objectives, the implementation, the impact? Why is the change so hard for both of them?th century, early to mid 20th century, mid to late 20th century

Philip’s Internal Product Value Chain

Matsushita s internal product value chain

Early to mid 20 date: the objectives, the implementation, the impact? Why is the change so hard for both of them?th century, mid to late 20th century

Matsushita’s Internal Product Value Chain

With corporate treasury as a commercial bank

Phillips in post war era

Phillips built post war era organization with date: the objectives, the implementation, the impact? Why is the change so hard for both of them?

National Organizations (NOs) oversea

Product Divisions (PDs) at head quarter


Local knowledge of market NOs - Can response quickly to local demand

In house R&D - Leader in industrial labs, both Physics and Chemistry


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

Phillips in post war era


Matsushita s competencies and incompetencies

Competencies date: the objectives, the implementation, the impact? Why is the change so hard for both of them?

Cost advantages

Enhanced Productivity

Cost advantage of Japanese after WW2

Shifting basic manufacturing to Asia

Caught up with foregoing companies

Learn the strengths of others

Adopted the divisional structure

Giving each division clearly defined profit responsibility for its product

Foster internal competition

Adoptedg VHS of JVC instead of Betamax

Increased capacity and reduced price: accounted of 30% of total sale


Laying off employees is relatively difficult in Japan

Strong influence of the founder, Konosuke Matsushita

Matsushita’s competencies and incompetencies


Changes of philips and matsushita

Objectives: date: the objectives, the implementation, the impact? Why is the change so hard for both of them?

Phillips – Establishing effective system and organization to compete in the global markets, especially with Japanese rivals

Matsushita- Effective internationalization with global expansion of the businesses


Phillips -focused on core business by selling some businesses but made lots of bad decisions, Turmoil at top level

Matsushita – Localization was fostered but the system centralized to the Japanese headquarter was remained


Phillips – Small positive effects on performance

Matsushita – Localization effort supported the global business expansion

Changes of Philips and Matsushita


Why hard to change

Long history date: the objectives, the implementation, the impact? Why is the change so hard for both of them?

Established corporate culture and tradition (e.g. Seven Splits of Matsushita)

Bureaucracy (esp. Philips)

Strong influences on the founder (esp. Matsushita)

Why hard to change?


  • 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.

  • What should Philips and Matsushita do to compete? share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

    • Innovative product design, and branding very essential.

    • More emphasis on marketing.

    • Partner with content providers, for easy access to music and video.

    • Aggressive product launching and distribution.

Team 7
Team 7 share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

Philips vs matsushita1

Philips vs. Matsushita share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

KC Chen (Team 7)

Anthony Goodrow

Andrew Liao

Piyapat Tantiwong

Sha Tao

October 8th, 2008

Philips porter s diamond1

FS share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 




Philips: Porter’s Diamond

  • Decentralized  Centralized (tilting from NOs to PDs )

  • Single product Diversified  Divest non-core businesses

  • R&D driven  Localized manufacturing  Outsourcing

  • Caring of workers founded highly skilled labor forces and strong technological base

  • Holland’s small size forced the company to be international

  • Lowered trade barrier prompted to local, single site production

  • Rich R&D resources in UK and US helped the company to diversify its assets (research labs) and resources

Matsushita porter s diamond1

FS share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 




Matsushita: Porter’s Diamond

  • Centralized  Decentralized (tilting from PDs to balanced NO/PD matrix)

  • Many products, good distribution  Localized MFG and R&D

  • Very good at time-to-market, not always a pioneer

  • Hierarchy weakened organizational transformation

  • Lowered domestic post-war growth and saturated distribution channels forced company to export

  • Strong yen prompted overseas production

  • Lack of English capability required more staff (expatriate managers)

  • High value electronic components

Philips internal value chain
Philips: Internal Value Chain share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

Tried to strike a balance between product divisions (PD) and national organizations (NO)

Some PDs merged to form international production centers (IPC)





Power Struggle

Communication link broken




Matsushita internal value chain
Matsushita: Internal Value Chain share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

Parent company in Japan has tight control over all divisions (DIV)

Basic technology at central research laboratory (CRL)




No information exchange

R&D underfunded, divisions compete for funding





Comparison of internal product value chain
Comparison of Internal Product Value Chain share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

  • 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

  • Matsushita’s 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

Philips as ce leader in the post world war ii era
Philips as CE leader In the post World War II era share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

  • 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 country-specific 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.

Matsushita displaces philips as ce leader
Matsushita displaces Philips as CE leader share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

  • 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.

Competencies incompetencies
Competencies & Incompetencies share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 




National responsiveness

Technology-driven innovation

Entrepreneurial NOs

Central research and funding

IncompetenciesSlow technology to market

Poor global strategy

CompetenciesGlobal scale efficiency

Market-driven rapid innovation

Innovative PDs

Linkages in the value chain

IncompetenciesOverseas subs not innovative

Philips company changes implementation and impact
Philips: Company Changes, Implementation, and Impact share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

Matsushita company changes implementation and impact
Matsushita: Company Changes, Implementation, and Impact share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

New u s ce companies
New U.S. CE Companies share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

  • Apple

  • TiVo

  • Roku

  • Chumby

  • Kindle

  • Microsoft

Position in value chain
Position in Value Chain share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

  • Tivo, Roku, and Chumby

    • 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.

  • Apple, Kindle

    • 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 Amazon’s online services.

  • 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).

How can philips and matsushita compete with apple
How can Philips and Matsushita compete with Apple? share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

  • Target niche markets

    • Tech-savvy users who desire more features

  • Change the game

    • Combine technologies (iTune & HDTV)

Team 8
Team 8 share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

Philips vs matsushita mba 290g prof charles wu team 8

Philips vs. Matsushita share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? MBA 290GProf. Charles WuTeam 8

Fuat E. Celik

Gopal Chaudhoory

Ignacio Contreras

Francois Gallet

Camilo Mendez

Porter s diamond1
Porter’s Diamond share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

  • Matsushita

  • Centralized focus – dependency on headquarters

  • Business line division

  • Copycat / follower culture

  • Government encourages competitiveness

  • Philips

  • Regionalized focus – independent management

  • Functional division (Biz vs Engineering)

  • Not-invented-here culture

  • Government protectionism

Firm Strategy,

Structure and Rivalry





  • Philips

  • Heterogeneous European cultures leads to differences in demand

  • High income fosters desire for differentiated / tailored products

  • Philips

  • European countries’ heterogeneity encourages customization to local markets (distributed approach)

  • Expensive labor focuses companies in product differentiation strategies

Related and

Supporting Industries

  • Philips

  • Underdeveloped ecosystem derived from lack of competition (world divided between GE and Philips)

  • Matsushita

  • Big but isolated domestic market drives focus in local market

  • Low income in Japan (per-70’s) cultivates low-cost strategies

  • Population eager to adopt new tech

  • Matsushita

  • Japanese geographical isolation promotes focus in domestic market (centralized approach)

  • Cheap labor (pre-70’s) focuses companies in cost-cutting strategies

  • Matsushita

  • Developed ecosystem derived from intense competition (Sony, JVC, Sanyo, etc)

Porter s diamond analysis
Porter’s Diamond Analysis share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

Matsushita’s strategy

Centralized approach with focus in cost advantage and “copied but better” products

Philips’ strategy

In-house innovation and market differentiation

  • Worldwide consumer electronics demand ended being:

    • Homogeneous

    • Price conscious

  • Matsushita was far more prepared for this scenario:

    • Follower takes advantage of cost benefits

    • Centralization builds economies of scale

Internal product value chain1
Internal Product Value Chain share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 




(Market A)


(Market A)


(Market A)


(Market B)


(Market B)


(Market B)


(Market C)


(Market C)


(Market C)


(Market D)


(Market D)


(Market D)

Matsushita – Cost advantage based on EOS








(Market A)


(Market B)


(Market C)


(Market D)

Philips – Market differentiation

Philips emerged as a world leader
Philips Emerged as a World Leader share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

Forced by the War, Philips divided operations into several quasi-independent

National Organizations (NOs)

Highly decentralized NOs were efficient and competitive within the market they served

Autonomous corporate subdivisions had too high a stake in self-preservation and prevented real restructuring reform

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

The Good

The Bad

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

Matsushita overtook philips
Matsushita Overtook Philips share. Other major CE manufacturers have failed to date. With regards to corporate culture and organizational structure, what has allowed Apple to succeed? 

Matsushita dominated its home market by offering thousands of products at its tens of thousands of retail locations

Corporate culture valued low cost and high profit operations and held each division accountable for meeting goals

High degree of centralization stifled innovation

Centralization led to cost-competitiveness, which led to exports reaching a world market

Manufacture needed to relocate to cheaper labor markets to stay competitive, while devotion to domestic employment weakened restructuring efforts

The Good

The Bad

Matsushita was quick to adopt standards, allowing it to achieve high sales volumes on products it would otherwise struggle with

Weak R&D efforts and expenditure led to undifferentiated products and commoditization, which led to shrinking margins

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

Philips reorganizes its activities focusing on its core competencies
Philips reorganizes its activities, focusing on its core competencies

  • Objectives

    • Increase profitability

    • Drive costs down to get back in the competition

  • 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

Matsushita is moving up the value chain
Matsushita is moving up the value chain competencies

  • Objectives

    • Become a leader in technology development

    • Mitigate the R&D risks

  • Implementation

    • Increase of the investments in internal R&D

    • Creation of the PDCC: investment in external R&D (open innovation leader)

  • Impact

    • External growth or “Spinning-in”

    • Increased dependency on external factors

Copying apple s strategy making the best of an existing technology
Copying Apple’s Strategy: making the best of an existing technology

  • Vertically integrated structure

    • Control of the value chain

    • Few high-quality appealing and trendy products based on existing technologies

  • Casual corporate culture

    • Pretty flat organization

    • Fostering individual excellence

Team 9
Team 9 technology

Philips vs matsushita2

Philips vs. Matsushita technology

Team 9

James An

Zishan Khan

James Su

Boaz Ur

Porter s diamond2

Porter’s Diamond technology

  • 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 it’s 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.

Porter s diamond3

Porter’s Diamond technology

  • 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)

Porter s diamond4

Porter’s Diamond technology

  • Related and supporting industries

  • Philips

    • Depend on the country the NO is located in. Not related to specific industries in particular countries.

    • Complete decentralization. Each NO totally responsible for its results.

  • Firm strategy structure and Rivalry

  • Philips

    • Being an innovator.

    • Complete decentralization. Each NO totally responsible for its results.

    • Diversification of products.

    • Philips is a multinational company it is even hard to define it as Dutch.

  • 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

The value chains

The Value Chains technology

  • 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 it’s 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.

How did philips lead

How did Philips Lead? technology

  • 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

How did philips lead1

How did Philips Lead? technology

  • 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 (Philip’s V2000 videocassette, superior to Matsushita’s VHS, but was outsourced, branded, and sold by North American Philips under license from Matsushita)

    • The history of strong individualized NOs resisted reorganization

How did matsushita overtake

How did Matsushita overtake? technology


  • 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. Motorola’s TV business. Philips’ product development differed between national organizations.

  • Matsushita was faster at getting products to market than Philips.


  • In the 1990’s, Matsushita’s management was unwilling to restructure some of its inefficient production facilities in Japan. This was due to the company’s deeply-rooted commitment to lifetime employment.

Change is difficult

Change is difficult technology


  • 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.


  • 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.

Apple s success

Apple’s Success technology

  • Great Marketing Firm

    • Distribution Channels include Apple Store’s

    • 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
Team 10 technology

Philips versus matsushita1

Philips versus Matsushita technology

Team 10

Anirban Sen

Raluca Scarlat

Elihu Luna-Thomas


Porter s diamond philips
Porter’s Diamond technology-Philips

  • Factor Conditions

    • Among largest producer of light-bulb

    • Geographically diversified research facilities and local tech talents, managers

    • Trade barriers and tariffs—forced to build local production facilities

  • Demand Conditions

    • Expansion to Europe, Asia, US, etc., capture world market share

    • Diversification of product range

  • Supporting Industries

    • Globalizing product development and production

  • Strategy, Structure, & Rivalry

    • 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

Porter s diamond matsushita
Porter’s Diamond technology-Matsushita

  • Factor Conditions

    • Highly skilled work force

    • Post war rebuilt, pro-business

    • Cost rise in 1960s in Japan

  • Demand Conditions

    • Post war boom

    • Export --> global leadership through VCRs

    • Domestic market demand collapsed(1999)

  • Supporting Industries

    • Fast “copycat”

    • Offshore innovations

  • Strategy, Structure, & Rivalry

    • First to adopt divisional structure, internal competition(spin off hungry spirit)

    • Strong centralization gradually weakened (Operation Localization)

    • Rivalry: GE, Sony, Philips, etc. China, Korea

Value chain
Value Chain technology


Capture Demand

Solution & Delivery


Global Suppliers

Tech Support

Domestic, Asia, US, Europe

Individual, Business, Government


Global Assembly


Global Logistics



Sales & Marketing


Philips success after the war
Philips success after the war technology

  • Operation based on National Organizations (nearly autonomous subsidiaries around the world)

  • Responsive to country-specific market necessities

  • Geographically diversified research facilities brought several technological breakthroughs

  • NO’s keep the Phillips traditional internal competence (Production vs. Sales)

  • Effective in a world of close frontiers

Phillips 60 s 90 s struggles
Phillips 60’s-90’s struggles technology

  • Competitors relocating production in low cost of labor regions (South Asia and Central and South America)

  • Inability to align the interests of powerful NO’s, where each manager represented the particular interest of his region

  • Several failed endeavors to globalize production and R&D

  • A bureaucratic organization that could not follow the pace of its Japanese counterparts

  • Painful process of shutting down plants, get rid of some business units, outsource some manufacturing, re-orient company’s main focus

  • Phillips becoming a research, developer and marketer. A lost battle to be an efficient manufacturer.

Matsushita s success1
Matsushita’s Success technology

  • 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.

Matsushita s strengths
Matsushita’s strengths technology

  • Diverse offerings from early in the company’s 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.

Matsushita s weaknesses
Matsushita’s weaknesses technology

  • 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.

Philips changes made and impacts
Philips: Changes made and impacts technology

  • Started out with one product instead of attempting to diversify. As a result, they had significant innovations in the light-bulb industry.

  • Started with a centralized structure, but was forced to create autonomous subsidiaries in US and UK during WW2. This resulted in some loss of control and power by the central organization.

  • Did not move as quickly into low wage labor markets and as a result lost some competitiveness to companies such as Matsushita.

  • Power struggle between product divisions and national organizations. Led to divisive strategies as leadership changed. This in turn led to poor productivity.

Matsushita changes made and impacts
Matsushita: Changes made and impacts technology

  • Started with one product, but quickly diversified and gained domestic market penetration by the sheer number of product offerings and retail outlets.

  • Adopted the “product division” structure. This organized the company based on the product lines that were being developed regardless of location.

  • Developed and established presence in television market. Expanded production to low wage countries in Asia and South America and thus drove prices lower and volume higher.

  • Adopted VHS standard and began manufacturing and marketing of VCRs for themselves as well as OEM customers who were their competitors.

  • Began de-centralizing their leadership in response to backlash from local division workforce.