Philips versus Matsushita: Competitive Battle Case Study Analysis

This case study examines the competitive battle between Philips and Matsushita, two prominent companies in the consumer electronics industry. It analyzes how Philips became a leading company in the post-war era, highlighting its distinctive competencies in innovation, technological advancements, and global expansion through joint ventures. The study also explores how Matsushita (Panasonic) surpassed Philips, focusing on its diverse product range, divisional organizational structure, and strategic internationalization, particularly with VCRs. The assignment investigates the factors contributing to each company's success, including their technological capabilities, market strategies, and operational approaches. It also touches on the role of leadership, innovation, and adaptation to market changes in shaping their competitive positions. The analysis provides valuable insights into the dynamics of the consumer electronics market and the strategies employed by these companies to gain and maintain market dominance.

Running head: PHILIPS VERSUS MATSUSHITA
Assessment 1 - Case Study: (Philips versus Matsushita:
The Competitive Battle Continues)
Name of the student:
Name of the university:
Author note:

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Transnational management is a very broad topic that covers the discussions on the
transnational organisations. Such organisations are very big in reputation, which gets evident
in the local and the global economy. It affects the economy of the country that it represents. It
also affects the labour payment as such companies may also exploit the workers by dealing
with them unethically (Boussebaa, Morgan and Sturdy 2012). This particular assignment is
one of the two most reputed companies Philips and Matsushita and the rivalries between
them. Philips has conquered the world post the war era. On the other hand, Matsushita has
displaced Philips from the top position. The assignment checks the reasons behind the
dominion of Philips whereas it also checks the strategies that helped Matsushita in displacing
Philips from its position. Moreover, this assignment recommends some solutions as well to
both the companies.
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?
Philips is a big name in the consumer electronic industry, which they have attained with their
sheer innovativeness and curiosity to conquer the world. In 1892, Gerard Philips and his
father founded a small company in Holland. However, they had very less success with the
venture. The venture actually failed to capitalise the market probably they had no solid
marketing strategies that caused them stuck with their thoughts. However, they did not stay
back and decided to reintroduce the concept in the market. Moreover, they had a completely
different approach now. The idea to recruit Gerard’s brother Anton proved things worth
for the company. Anton was excellent in sales skills and managing the operations. The sheer
selling and managerial skills of Anton had then helped the company in becoming the third

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largest producer for light bulbs in Europe. The selection of Anton after a initial set back just
reveal the competitiveness of the company and its capability to learn from their mistakes. It is
nothing less than a miracle that had happened with the company. The initial decision that
could have gone the wrong side has produced fruitful results to the company (McCloy 2015).
The technological competency in Gerard constructed the future success for the
company. The technological supremacy of Gerard and the thought to stick with the
production of one product have collectively produced the champion quality in the company.
They remain attached to the production of one product; however, other companies were
moving towards diversity by producing a wide range of products. However, Philips had
moved differently, which has probably helped the company in focussing on a particular
product. The technological prowess of Gerard has helped the company in following a
different way to present a more quality product. The one innovative move that they used was
to get rid of the old plants and to use new system and machines to enhance the production
capability of the company. Such decision can never be possible if an organisation does not
have enough innovation in it to realise the necessity of the change required (Johnston and
Marshall 2016).
The other innovation that they had was to quickly understand the requirement to
replace the outdated machines and bring a new one. They had relied not only on adopting
innovative machines but they had also advanced in research practices. They were expertise
in doing research on the ongoing happenings and the current position of the organisation.
Additionally, they had their own physics and chemistry lab where they used to research the
reliability of the equipment in use. They also tried to find their organisational related
problems in a more scientific way. The filament made up of tungsten, which revolutionised
the global world was produced in their laboratories. The metal was a great commercial

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success (Ropp 2013). Moreover, the invention had then helped the company in conquering to
a new height.
The gained success has encouraged the company in widening their vision for the
global market, which is why they decided to have some global branches as well. For
fulfilling the purpose, the company hired an export manager with the help of whom the
company had started to touch the various international markets. Very soon, after they made
the decision, the company was able to establish its recognition in many other countries like
Japan, Brazil, Canada, Australia and Russia. They carried on expanding with respect to the
surrounding circumstances. They even opened up sales organisations in various centres like
the United States, France and Canada. One of their strategies was to run a joint venture in
their global operation. This is indeed a very effective move, which reduces the chances to fell
down with the plans and enhances the chances of grabbing an attention in the global market
(Killing 2012).
One of the most significant changes that the company has produced had happened in
the year 1918 when it decided to enter into a diverse market. The plan was to produce some
new products. They began producing electronic vacuum tubes in the year 1918. Later on after
approximately eight years, it captured a world market share of 20% by producing its first
radios. They continued on producing many different products, which only presented a fact
that how innovative they are. They next came up with X-ray tubes in the year 1930.
However, one of the biggest challenges that it faced was the trade barrier and high tariffs,
which restricted the set ups of their production centres in the other parts of world (Francois et
al. 2015). To fight with the challenge they had to restrict themselves with the production
houses in the local market.

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The biggest turnaround was the union of Gerard and Anton (Baltzan 2012). Gerard
was an engineer while Anton was a businessperson. The leadership quality in them had
helped to unite the technology with the business strategies. The sheer knowledge of
technology and the effective business management strategies have both knocked at the door
of Philips. The innovativeness that has helped the company in expanding to a more diverse
market with a wide range of products was never possible if Gerard and Anton were not there
(Drnevich and Croson 2013). Both have them shared their expertise with inbuilt leadership
quality in them and produced one of the most profitable ventures in the history (Hoch 2013).
They had competition in them as well as if Gerard wished to produce more than what Anton
could sell. There such tendency has proved worthy things for the company.
How did Matsushita succeed in displacing Philips as No. 1? What were its distinctive
competencies and incompetencies?
A small company had grown to become such a giant name in the consumer electronics
industry. It actually displaced Philips from the supreme position. The verdict is much simpler
than what has happened before it. A small company with high desires to touch the global
market with diverse range of products have fetched the company numerous success. The
introduction of number of new products was the one strategy that redefined the industry
and started turning things in favour of KM (Falbe 2012). In few years till 1958, the company
was able to bring approximately 5,000 products in the market. The company was able to open
25,000 retail outlets in the domestic circuits. In the late 1960s, the company had
approximately 40% of its appliance stores in Japan. The expansion into the global market
with the diverse range of products not only helped the company in increasing their sales
volume but has also helped in establishing a direct access to a global market. They have

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smartly managed their operation, which is quite evident in their decision to switch to export
market when they were low in performance in the post war era. They had high range of
products production capabilities, which in joint effect of their excellent distribution system
had collectively done the things, required for the company. Switch over quality in between
different options of strategic management has remained a key to their success (Keupp, Palmié
and Gassmann 2012).
The organisational structure related strategy was the other thing that has helped the
company in succeeding in big numbers. It became the first Japanese company in the year
1933 to have a divisional organisational structure (Bao and Wang 2012). It did wonder to
the company because the divisional structure had started an inner competition in between the
different business domain of the company. Henceforth, every single business of the company
had started to meet their own target, which has benefitted the company in overall terms. This
is the difference in between the operational style of Philips and the Matsushita. Philips has
later produced some different products; however, they did not have any such divisional
strategy as Matsushita had adopted. Such divisional strategy has helped the company in
distributing the work pressure to different business as well as it has also enhanced the
capability of each of the business. Sufficient funds have been provided to each of the business
in order to encourage the self-driven sales and other strategies. The strategy was adopted to
unify the success across every business. Those business that had failed in performing for two
consecutive years and performed below than their expected level, they were replaced. They
were aggressive with their business strategies, which is why they never relied on single
business unit. They rather gave importance to such business, which has continued its worthy
production (Antonioli, Mancinelli and Mazzanti 2013).
Another operational related difference in between Philips and Matsushita is in their
approach towards research excellence and technology betterment. Their basic technology

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related developments were largely developed in the central research laboratory (CRL).
However, the use of engineering in developing a product was assigned only to the specific
product division. Interestingly, the company had underfunded the CRL to encourage it for the
competition with the separated division of different products. Furthermore, the company had
to produce innovative technologies and thoughts in order to get funding from the different
divisional business. The desire to capitalise the market at a roaring speed had encouraged the
company in going such way. Following are the different internationalisation strategies, which
has helped Matsushita Company in attaining a global recognition and displacing Philips from
the top position:
 Global leadership with the VCRs: It actually changed the picture for the company at
the global level. It was the innovative thoughts that had helped the company in
identifying the potentiality hidden in the VCRs. They first developed the VCRs in the
year 1964; however, they launched it for their consumers in the year 1966. In the
rising competition from different companies such as Sony and JVC, they have
realised the requirement to be flexible in order to be profitable with the venture. The
company eventually gave up its own format for the VCRs and started adapting to the
standard versions with changing time. In between 1977 and 1985, Matsushita had
increased the production of VCRs not only to meet its requirements but also the
requirements of other companies such as Philips. Such companies had decided that
they would outsource a major part of their production into Japan. The move was to cut
down on the production cost. Matsushita capitalised on the produced opportunities,
which is evident in their success in the mid-1980s. VCR proved to be a big boom for
the company as it eventually provided 30% of the company’s sales and 45% of its
profits. The benefit of being a Japanese company has also helped the company in
surpassing the reputation of Philips. The low cost materials have helped its production

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at a comparatively cheaper rate. On the other hand, it has attracted the likes of Philips
for outsourcing of VCR production. This has also provided an option to capitalise on
the created opportunity by gaining more on profit and sales (Browne and Johnson
2014).
 Relations between Headquarters-Subsidiary: It was a unique approach as well. All
the subsidiary centres of the company had the responsibilities on them to take care of
their operations at their own. They had to manage it according to their capability;
however, they had assigned with set targets because of divisional structure, which has
helped its different subsidiaries in attaining a profitable venture. Additionally, the
resources available at the subsidiary locations would fill up all the managerial
positions. Such strategy has not only reduced the pressure from the parent company
but it has also ensured a success for the different subsidiaries companies. The
company had numerous general managers at its different subsidiary locations from
Japan only. It was common for all the subsidiary offices across the globe. This was to
keep all the subsidiary offices attached to the cultural values of the Japan. They have
used it diligently to promote the Japanese values across the globe. A unique collection
of the local culture and the international operation has provided ample of success to
the company (Guang and Trotter 2012).
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?
Philips: With the inception of new CEO, Gerard Kleisterlee, things have started to change in
for the Philips Company. The concentration had now shifted much to the developing
countries like India. They began with the light bulbs for a long time until they thought to

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introduce the various other products. However, the new CEO has laid the foundation for
restructuring, which included the shifting focus to healthcare sector and the technology such
as digital TVs. The widened competition in the light bulbs sector and a consequent rising
opportunities in the other consumer segment has drawn the attraction of CEO towards various
other things in specific the high-end technological televisions (Chalaby 2012). They entered
into the mobile phone market; however, they have outsourced its manufacturing to China.
They have also outsourced the manufacturing of VCRs to Japan. Both the moves were to
yield a cost effective manufacturing. The move was taken to get maximised benefits.
Additionally, in doing so, they actually released some pressure and put their focus on the
television industry. It started using innovative ideas for different television format such as
high-definition plasma and LCD sets with Pixel Plus 2. The move was to invest a high time in
doing research and development works (R&D). It also cut down its retail outlets in the local
country from 600 to 200. They actually were more focussed on developing market with
potential products (Vogel 2014).
They have diversified the company’s expertise in many domains such as plasma TV,
LCD, DVDs, Blue-Ray, and Home Theater etc. The new strategy could have helped the
company in successfully restructuring their business in a new segment of the market.
However, that segment is now absolutely filled up with numerous other biggies like
Samsung, Sony, LG, Toshiba, Panasonic and many like that. The competition is very high.
There is a war to influence the buying behaviour of customers with cheaper pricing and high
specs. This is why it is very difficult to sustain into the competition. It is indeed much
difficult for Philips because of expensive raw materials, which is cheaper in Japan and China.
Moreover, this would be much easier for Sony television indeed. Being a local company of
Japan it would relatively require a less investment in manufacturing. The television industry
has now been largely dominated by Samsung while many biggies are struggling in this

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industry such as Sony, LG, Sharp etc. Time would only tell whether the new CEO of the
Philips Company has selected the potential segment of the business industry (Bharadwaj et al.
2013).
Matsushita: With the inception of new CEO Ohtsubo, it was believed that the company
would jump to a new height. Matsushita was at once the leading Plasma TV maker in the
world. The new CEO had long plans on the Research & Development (R&D) program to
provide the company every opportunity to click in the targeted segment of the market. The
new CEO has also planned a huge investment on the R&D plan; however, it failed in
displaying the same. They had thought of producing new products twice a year to crack the
market with plasma TV and Flat TV. However, they could not sustain the success as they fell
considerably in the TV industry. The foreign sales growth dipped to a new height with the
arrival of financial crisis in the year 2008. They need to shut down their many plants in the
overseas locations. They also need to cut down the jobs of 15,000 workers. The restructuring
charges cost them much because of global recession and their consequent low performance
(Ruigrok and Van Tulder 2013).
The inception of new CEO did not bring much fruitful results to the company. It was
indeed a wiser decision to enter into the TV industry, as it is a local company of Japan,
therefore, manufacturing costs would be much cheaper. Availability of low cost materials
was expected to yield benefits to the company; however, the same facts have benefitted Sony
largely. The product has performed better than Matsushita in Flat TVs, LCD and Plasma
TVs. The resources were there and so the investments; however, Ohtsubo could not provide
the same success as provided by the ex-CEO Nakamura. The billion dreams do not look
feasible at this moment. Matsushita needs some significant recovery from the losses that has
happened due to increased competition in particular. They should come up with innovative
ideas to re-establish their name in the market (Sadriev and Pratchenko 2014).

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What recommendations would you make to Gerald Kleisterlee? To Eumio Ohtsubo?
Recommendations to Gerald Kleisterlee:
Philips has restructured into the mobile phone and the TV industries. However, they
did not get the utmost benefits of the restructuring. This is because of some simpler reasons
such as inadaptability to the changing market competition, poor improvisation of the
opportunities and many other things like that. The current CEO of the company needs to
adopt competitive strategies in order to get the benefits of the opportunities that are there in
both the TV and the mobile phone industry. The current trend in the TV industry is more
towards the pricing wars as well as the ample of specs in it. The one, which offers
comparatively more in such parameters are well received by the masses. Furthermore, the
pricing strategy is a concern for customers in some parts of world; however, in few other
parts of world, customers do not compromise on the service quality such as in the United
States of America. Hiring a marketing consultant is the other recommendation, which
looks feasible to the company. This would help the company in knowing the consumer
behaviour in the different market. This is much important because they have fallen short with
the organisational restructuring probably because of poor market understanding. This has led
them down in big deal. Use of enhanced technology would also add values to the products,
which is very important keeping in mind that different technologies are entering the market
with passage of time such as the introduction of 2K technology followed by the introduction
of 4K technology in the television industry. Hiring graduate professionals is another need
for the company; as they would add values to the workforce that currently exist. The CEO of
the company needs the cooperating hands of innovative workforce that are high in terms of
new ideas. This is indeed much important as this would provide creativity in the workforce

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and would deliver creative works, which is has high regards in the contemporary world.
Making huge investments in Research & Development (R&D) process is indeed
necessary, as this would open up ways to technology advancements, which would keep the
company as per the current trend. To be in competition, it is important that the company have
progressive trends for research and development process.
Recommendations to Eumio Ohtsubo:
Both Philips and Matsushita have more or less represented the same market segment;
however, Matsushita penetrated into the market with extensive range of different products.
Since the inception of Eumio Ohtsubo, it underwent restructuring. However, the restructuring
did not prove worthy for the company as it eventually experienced a downgrading trend in
revenues. The global recession has also hampered the business. It is indeed need some
significant changes, which could provide a resurrection to the company. The first and
foremost thing would be to decide on the product’s line. They have observed downgrading
trend in TV and mobile phone sales. If they have to stick with the same industry, they need to
bring some necessary changes in the existing business system. Use of technology is the first
recommendation for both the TV and the mobile phone manufacturing. Technology would
bring the inception of necessary changes in the manufacturing process and the overall
performance as well. Both the mobile phone and the TV segments are sensitive to price and
quality of service. Customers prefer those products, which are both cheaper and best in
quality. However, consumer behaviour differs with the different geographical locations.
Making huge investments in the R&D process is highly required to prove the
worthiness of the products. The loss that has been occurred to the company could also be
compensated with the inception of a new product, which can be produced locally. This is
because of cheaper costs of raw materials in Japan. This would establish its values in the