Philips V. Matsushita
However, after the time, Philips started to decentralize their organizations and built their production facilities in different regions to protect its foreign sales from the trade barrier and high tariffs. They developed the national organizations (NOs) and allowed their NOs to create their own technical capabilities and develop products that can response to the change of demands in specific market. Japanese company, Matsushita, began their internationalization by exporting their core products, such as Color TV and VCRs, to the large-scale market.
To provide customers with the competitive price, they shifted their basic productions in the low-wage countries, such as Southeast Asia countries, but all advance and high value process remained in Japanese plants. Even though they continue to build their divisions in many regions, Matsushita still tried to keep their offshore operations under the parent company control in order to monitor quality and productivity level on their products. Situation Analysis
The case analysis will discuss about how firms differently optimize their global efficiency, national responsiveness, and worldwide learning to pursue the success in the emerging global market conditions. There are internal factors, including norms, cultures, communication style, and external factors, such as market demands and world economic situation, that reflect their transnational strategies and organizational structures. Philips built their overseas operations by allowing each business units to become more independent and to be able to response to each country-specific market.
Matsushita, on the other hand, adept their area structure to centralize their overseas operations and maintain direct links with the parent company. There are both advantage and disadvantage in each strategy and management style. To survive in the changing environment, these companies had to develop their plans, restructure their organization to response in the different economic circumstances, as well as enhance their capabilities to maintain their competitive advantage. Conclusion & Recommendations
Philips has developed their international operations by creating decentralized structure of national organizations (NOs) for their global expansion. With the independent management system, the company can benefit from the ability to sense and quickly respond to the differences in the local markets. Consequently, the product development has to be the function of the local market conditions. Philips had developed efficient, specialized, and multi-market production facilities that required each division to focus on specific business area.
The examples of their success in product development are the first color TV in Canada and the first stereo TV in Australia. However, the major issue of this organizational system is the lack of communication between each NO and headquarters, so the inventions were not shared with the rest of the NOs in Philips. Those emerging technology from NOs might have a larger production demands than most national plants justify, for example, the audiocassettes and microwave ovens.
Philips failed to bring those innovative products to make profits in the mass market and lose this opportunity to their competitors, Matsushita and Sony, who are able to capture the demand of those technologies. In order to prevent these strategic mistakes, the main role of the headquarters should be scanning of business activities across countries and identifying resources and capabilities that might be a source of competitive advantage for other regional divisions in the firm. In contrast, Matsushita has built their overseas organization based on their corporate culture and sprit.
They applied a division structure used in their Japanese organization to their global management system. To maintain a strong operating control over their offshore operations, every business unit in other countries has to be reported to the headquarters. They have developed the strong relationship between overseas subsidiaries and headquarter to maximize the collaboration across countries. Japanese veterans also have important roles in offshore plants. They have to translate Matsushita’s philosophy to foreign divisions, ransfer technology and process to local operations, and provide a parent company with the information from local managers for the company product development. With this organizational model, Matsushita can be in the cost competiveness position, maintain their product qualities, as well as adopt their mature products to reflect the different demand in the specific market. However, the main issue of this model is that overseas subsidiaries will have a limit outlook and an inferior attitude toward to their value in the organization because of the assumption that new ideas and development have to be come from the headquarters.
The emerging companies, for example, the Chinese and Korean competitors, could threaten the company by developing the better products with the cheaper price. The rise of new competition will cause price collapse and make Matsushita uncompetitive. Another import issue is the flexibility. Internal resistance prevents the company to change their strategies to deal with the different circumstance. To avoid these issues, the company should delegate power to their foreign business units that have potential to enhance the firm’s competitive advantage.
This will allow to them realize their value in the company and to be able to response to their local market more effective. To pursue the sustainable achievement, the companies should figure out what are the core competencies inside the organization and what are the future opportunities before shifting their focus to the different demand in global market. The expansion strategies should be able to enhance those competitive advantages, as well as reflect the need for multidimensional and flexible capabilities.
In this case, Philips might have to adopt the cross-learning philosophy into their organization structure to increase collaboration between NOs and headquarters. Matsushita also need to increase the ability to quickly response to the change of demands in the global market, and develop the organizational norms that can integrate different cultures into their business operations across countries. To survive in the complex and conflicting set of international demands, the new form of organization is required in order to optimize the global capabilities, national responsiveness, and cross-countries learning.