Philips Versus Matsushita: Competing Strategic and Organizational Choices

Philips versus Matsushita: Competing Strategic and Organizational Choices

Philips major issues:

Philips’ competitors were moving their production of electronics to low-wage areas in Asia and America, making them to offer their products at low costs. Also Japanese competitors capture the mass market as a consequence of the slow ability to bring new products to the market. These factors contribute on diminishing the global competitiveness of Philips and a poor financial performance by 2009.

In order to respond and make Philips more profitable, there were a series of projects form different CEO’s that try to solve but instead of helping, things got worse. To get things clear, we explain the CEO’s projects in order as follows:

Hendrick van Reimsdijk  His report the “Yellow Booklet” in which described the disadvantages of the Philips’ matrix organization in 1971.

 He proposed to close the least efficient local plantas of their plants letting the best ones being International Production Centers (IPC) and function as suppliers for the National Organizations (NO).

 The process was too slow due to the complexity of the organization.

Dr. Rodenburg  He continued with Reimsdijk’s project of developing the IPC’s.

 On the process of developing these IPC’s he noticed that the NO’s hasn’t have the effect desired and seem to be as powerful and independent as ever.

 In order to solve this situation, he decided to simplify the dual commercial and technical leadership with a single management at the corporate and national organizational levels.

 Despite the efforts of Dr. Rodenburg, sales and profits continued to decline.

Van der Klug  By 1987 Philips has lost its consumer electronics leadership position.

 Klug improved the idea by restructuring Philips into four core global division instead of 14 PD’s.

 By doing such moves on the organization, Klug gained control over the NO’s, especially over the north American Philips Corp.

 Unanticipated loses provoked a law suit by angy American investors.

Jan Timmer  Although Timmer strategy was to sold various Philips’ business, the profitability still below of the 4% on sales.

 After cutting off cost, Timmer presented a new strategy that focused on the software, services and multimedia market in order to obtain revenues.

 By focusing on the cost cutting and the standardizations, he ignored the new market demands, which could help Philips.