Philips and Matsushita Essay

1. Which factors account for differences in strategies and structures of Philips and Matsushita? What are their distinctive competencies and incompetencies? 2. What are the key organizational challenges that each company is facing at the end of the case? What recommendations would you give to the respective CEOs? 1.The two companies, each from different regions of the world, have an extensive history that have caused for different cultures, strategies and structures to be implemented (Bartlett & Beamish, 2010: 301). Philips, as an European company with the â€Å"old boys network† originally had a structure that Bartlett and Beamish (2010) classify as the Decentralized Federation. It was a structure that was based on internal relationships. The National Organizations (NO) that were in place had informal power over their product divisions. However this structure led to great distance between the corporate management and its subsidiaries with information and knowledge not spreading fluently from one NO to the next. This fragmentation, which Bartlett and Beamish (2010) state as a limitation of this form of structure, increased costs and promotes inefficiency. The learning capacity of the organization was harmed. Philips therefore tried to stay afloat by making drastic cuts, reorganizing an d implementing a Matrix structure, a popular phenomenon is the 1980s (Bartlett & Beamish, 2010: 300). However this lead to adjustment only in structure and not in culture, making it fail. When this was realized the company began to alter its structure again towards a Transnational Structure (Bartlett & Beamish, 2010) with a more integrated structure and where a vision that appeared to be lost was clearly reinforced, communicated and lived throughout the organization. Matsushita had a different heritage which lead them â€Å"to adopt very different strategic and organizational models.†(Bartlett & Beamish, 2010: 301) This Japanese company was set up with a non-typically Japanese divisional structure which would comply more to Bartlett and Beamish’s (2010) Coordinated Federation structure. It had an international mindset to achieve worldwide presence whether this was in the form of own image or by producing products for competitors and did this by providing divisions with development, production and marketing abilities whilst providing centralized parent technology all thr oughout the organization. In the 1960s the company was pushed abroad by pressure imposed on them by increasing manufacturing costs and national governments. The expansion led for the company to localize more intensely and aimed to move towards a more decentralized structure with less dependency on the center. When the domestic market collapsed end 1980s the company began to focus more on R&D as they lacked behind in technology advances. This was a result of the inability for knowledge to spread and the inefficiency of the development not being centralized. The company tried to move away from the imitator image they carried and aimed to do this by removing internal competition that was stimulated by the divisional structure and promoting a customer based innovative culture. Because of their different structures and strategies the companies both experience different (in)competencies. Competencies exist when resources are put to good use so that they create a competitive advantage for the business opposed to its competitors (Volberda et al., 2011). Both competencies and incompetencies are portrayed in the table below. From looking at this table one can see that some competencies of one company is the incompetency of the other as a result of the different implemented strategies. Where Philips, that is more centralized, is innovative, Matsushita lacks innovation. However, Matsushita experiences a rich company culture with a clear vision which is exactly what Philips lacks. | Philips| Matsushita| Competencies| * Innovative, strong R&D department * Can respond to local differences due to set up of NOs * The delegation of responsibility causes for strategic freedom| * Cheap production as a result of economies of scale. * Fast response to market * Rich culture and clear vision integrated throughout company by the implementation of Seven Spirits| Incompetencies| * Inefficiency in global aspect * Unclear responsibilities due to decentralization * Too much informal power granted to NOs * Fragmentation and restructuring leads to unclear vision and values throughout the company| * Lack of innovation at the level of the subsidiaries * Too much reliance of the subsidiaries on the domestic country * Centralized parent company lacks understanding and knowledge of market needs and production realities| 2. Because of their different strategies and competencies, both companies face different challenges. However, both face a phase of restructuring. Philips is currently going towards a Transnational organization where their approach of marketing is changing, being different in each country, and where they aim to outsource more. Also, they try to communicate a shared vision. According to Bartlett & Beamish (2010) they should focus on communicating a clear (simple, relevant, and reinforced) continuous and consistent vision. This will allow for; managers to look further than their scope of responsibilities and for the company to work more functionally as a whole. Matsushita is experiencing a recent restructuring in which they decentralize further, communicate a new culture of innovation and R&D and try to remove internal competition. Matsushita should be aware of the threat of strategic isolation, where each subsidiary is too focused on their own operations and it is therefore advisory for Matsushita to refocus their executive attention to get the most out of their subsidiary components. Bartlett & Beamish (2010) give various ways to do this; by â€Å"creat[ing] channels for attention, seek[ing] out the hidden gems and give them a platform, measure[ing] returns on executive attention and giv[ing] subsidiaries a chance to contribute.† An advice to both companies is to properly manage the process of change by following â€Å"the emerging change process† starting at changing individual attitudes and mentalities and then the interpersonal relationships and processes before changing the formal structure. Philip’s experience proves that doing this in reverse order won’t work, only this way can the organizational psychology be adapted. References: Bartlett, C. A., & Beamish, P. W. (2010). Transnational management. New York: McGraw-Hill. (Bartlett & Beamish, 2010). Volberda, H. W., Morgan, R.E., Reinmoeller, P., Hitt, M.A., Ireland, R.D., & Hoskisson, R.E. (2011). Strategic Management. Hampshire: Cengage Learning EMEA.