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Introduction
In the beginning, when Philips went worldwide, there arose congestion in the electric lamp industry and the company had to reposition itself for competition. The strategy entailed the establishment of sales organizations in overseas markets through joint ventures with the locals for easier market penetration. Later Philips entered into an agreement with General Electric over bilateral sharing of patents and the company changed from a highly centralized entity to a decentralized sales organization with independent marketing companies. In anticipation of the Second World War, the company had to strategize for business continuity.
It transferred all its overseas assets to British and US-based trusts. This enabled the individual country organizations to operate more independently during the war. The organizations were independent in financial, legal, administrative matters and the research function but product development, production and global distribution were handled by fourteen product divisions at Eindhoven, the headquarters. The organizations reported to a reported to the 10 member board at Eindhoven (Bartlett, 2009).
There came a time when the profitability of the company dipped and a committee was formed to draft a policy paper on the division of accountability between the organizations and the product division. The company’s strategy was to balance the managerial relationships between the PDs and National organizations with a bias towards the product divisions. Another strategy was to reduce product lines marketed by the product department and benefit from economies of scale by maximizing production. Other strategies included the Closure of inefficient scale driven plants and concentration on manufacturing centres, transformation of an old mass production line to modern flexible manufacturing cells and trimming the workforce (Bartlett, 2009).
On the other hand, Matsushita sold mostly through mass merchandisers and discounters under their private brands. However, yielding to the pressure of the national governments in the developing nations, Matsushita opened plants in foreign countries. The manufacturing costs rose in the home country of Japan, the company shifted the more basic production to low wage countries. Almost all high-value components and subassemblies remained in the scale intensive Japanese plants (Bartlett, 2009). Another strategy was issuing the local managers with discretions on how to achieve the targets set by the parent company. This allowed for innovation as a response to the local market conditions. Local nationals held key positions but remained supported by Japanese advisors with strong links to the parent company (Bartlett, 2009).
The Differences in Strategy
Phillips focused on establishing a global portfolio of organizations that were responsive while Matsushita tried to achieve its global competitive edge by centralizing and ensuring efficient operations (Bartlett, 2009).
Strategies Implemented By Matsushita and Philips
Philips has generally shifted to relocating production to low wage areas to maximize the returns. There is also the closure of inefficient scale driven plants and concentration on manufacturing centres. The focus is also on the transformation of old mass production lines to modern flexible manufacturing cells. Market strategy through expansion into software, services and multimedia. To cut costs, the company has carried out layoffs (Bartlett, 2009).
At Matsushita, the strategy coined as operation localization was carried out to boost the offshore production in terms of personnel, technology, material and capital. Local nationals held key positions but remained supported by Japanese advisors with strong links to the parent company. This ensures the protection of the company products. Another strategy is the dropping the lifetime employment practice and workforce occasionally trimmed through early retirements this is known for cost containment (Bartlett, 2009).
Challenges Faced By Managers at Matsushita and Philips in Implementing Changes
The global financial meltdown affects companies trading internationally through increased trade barriers and high tariffs. The industry is very competitive and product innovation has to continually be in evolution. The costs incurred for payment for layoffs in an attempt to trim the human labour cost are also very high.
Reference
Bartlett, C. (2009). Social Science Research Network: Philips versus Matsushita: Competing Strategic and Organizational Choices. MA, Harvard Business School. Web.
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