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Second opinions?

Posted by on Oct. 16, 2013 at 3:51 PM
  • 8 Replies

Anyone want to volunteer to proofread/edit my paper for class?  I think I have the kinks worked out, but a second (third, fourth, etc.) set of eyes is always helpful.

by on Oct. 16, 2013 at 3:51 PM
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Replies (1-8):
leahbeah143
by Leah on Oct. 16, 2013 at 3:53 PM

 sure! when do you need it by?

deccaf
by Platinum Member on Oct. 16, 2013 at 3:57 PM

Sunday?  I can add it as a reply and everyone can tear into it if that works for everyone.

the3Rs
by Platinum Member on Oct. 16, 2013 at 4:04 PM

Me!


deccaf
by Platinum Member on Oct. 16, 2013 at 4:05 PM

Philips versus Masushita: The Competitive Battle Continues

Summary

 

Philips, once a leader in the consumer electronics division, saw itself usurped by Matsushita with VCR technology.  Though Philips had a superior product, Matsushita capitalized on the demand of a product that was not originally its own.  Several missteps by both companies led to the need to restructure and the economic collapse of 2008 increased losses for both companies.  Philips reacted too slowly in restructuring the organization, creating duplicate processes in its NOs, and inefficient production.  Matsushita retained employees that should have been laid off due to a lifetime employment commitment and failed to successfully innovate in overseas divisions.  

Both companies can get back on track, but it will require making tough choices, reducing the workforce, and dissolving product segments and closing plants that are operating inefficiently.  Following is a brief analysis of the problems each company faces, the strategies they have pursued, and recommendations for improved performance.

Analysis

Philips became a leader in the postwar era due to prewar activities.  Transferring its overseas asset to two trusts, moving research labs to England, and moving the top management to the United States all strengthened the diversification strategy.  After the war, Philips leveraged the strengths of the National Organizations it had created, which had moved the company from a focused strategy at the beginning to a multidomestic strategy during and after the war.  These NOs were quick to respond to the needs of the specific regions they serviced.  Varying transmission standards, preferences and postwar economic conditions required a more local approach to sales and marketing, as well as research and development.

While the NOs were great for the local adaptations necessary, they did create other problems.  Although the product divisions were formally responsible for development, production, and distribution, the NOs actually held control of the assets and had the real power.  The ambiguous nature of the product divisions and NOs made it impossible to discover which party was responsible for what actions.  The NOs were also too small to create economies of scale required to produce the new technologies efficiently.  Philips had placed the NOs in locations where wages in the postwar era were high, compared to many other companies that were utilizing lower-wage countries for production.  Finally, the structure of the NOs prevented an effective global strategy from taking hold.  In allowing the NOs to exercise control over production and assets, Philips saw a superior technology collapse when North American Phillips began outsourcing VHS products it manufactured under license from Matsushita.

Matsushita displaced Philips on the basis of the VCR and VHS formats.  Matsushita gave up its own version of VCR format and began producing VHS.  Matsushita also increased capacity for manufacturing VCRs to accommodate not only its own demand, but also for other companies.

Matsushita's global strategy enabled its overseas divisions to choose what would be sold and what features would be required.  Other competencies Mastushita developed are the employee loyalty due to lifetime employment commitments and the cultural buffer employed.  Japanese managers would travel to the various divisions to make sure others understood the Matsushita philosophy.  These managers would also evaluate performance and report back to headquarters.

There were incompetencies as well.  The biggest one is the lifetime employment commitments.  While this increases employee loyalty, it becomes very difficult to streamline the company and increase profit when weighed down by employees that may no longer be necessary.  Matsushita also had no desire to close plants that were inefficient.  The overseas divisions lacked innovation, causing the company to buy innovative companies.

Philips has a long way to go to become a profitable, competitive company again.  Matsushita is on track and until the economic collapse, looks to have been on the verge of a comeback.

Philips main objective is to actually develop a strategy.  The first priority was to stop the bleeding from the "tech wreck", and begin generating profit rather than simply stopping losses.  It began this process by outsourcing some production, like mobile phones, VCRs, TVs, and CD players.  It has also moved its production to low-cost countries.  Further cost reductions were made by selling companies and reducing the number of employees.  Philips has created a less volatile portfolio of product offerings, focusing primarily on health and well-being products and going after emerging markets with basic products available in may low-end stores.

The changes Philips has made are not quite enough.  Even before the economic crisis, the company was showing signs of needing a more aggressive cost-cutting strategy.  My recommendations would be to begin exiting the consumer electronics arena.  While there are still companies innovating in this area, Philips has moved away from innovations in consumer electronics, making its offerings more commoditized.  A strategy of focus, on one segment, healthcare, especially in emerging markets could increase profitability.  Philips' healthcare division already has a foot in India.  Leveraging what is known from that venture, it could bring its products and services to people in other emerging markets as well as bringing new products into these markets.  I would also suggest establishing connections with major medical providers, such as equipment manufacturers, in order to increase market share for the healthcare division.  Collaborating with medical providers in the emerging markets could give a competitive advantage by having the name recognition as the first company coming into the market.  Finally, increasing marketing and brand recognition for the Consumer Lifestyle segment, which includes shaving products and household appliances, is essential.  This segment is one of the profitable areas for Philips and more investment needs to be made to keep it profitable.

Matsushita wants to be able to able to develop, manufacture, and launch superior new products twice a year.  It would also like to grow overseas revenues significantly.  The first step was to change the name of the company to the most recognized brand within the company, Panasonic.  Unfortunately, Matsushita, now Panasonic, did not foresee the impending global economic crisis and with the restructuring costs, posted a loss instead of any gain in the first year of this new plan.  Following this crisis, Ohtsubo then shut down plants with an operating profit of less than 3% or declining sales over a three year period.  This resulted in 27 plants closing and 15,000 employees laid off.

I would recommend Panasonic continue cutting costs and closing inefficient plants.  There needs to be a revision of what level of operating profit is acceptable based on the current economic conditions, but plants that are not producing desired results should be phased out.  Unlike the reaction following the start of the crisis, closing one or two plants per year not only spreads the closing and restructuring costs over time, it gives failing plants time to recover into profitability.  A review of personnel should also be done.  Are there any jobs that are nonessential, can be streamlined, mechanized, or otherwise made more efficient?  If the answer is yes, then a cost benefit analysis needs to be performed.

Philips and Matsushita both find change hard.  Philips is mired in tradition.  This company has been around for so long that employees and managers expect things to stay the same.  There is a reluctance to upset the status quo.  Matsushita had a 250 year plan set up in 25 year increments.  Leaders were reluctant to break from this plan, even though many changes in the economy and technologies could not have been anticipated when this plan was set.  This unwillingness to move away from the plan made the divisional structure into a hindrance as technology advanced and inefficiencies plagued divisions as well as the plants.  Another hindrance to change was the lifetime employment commitment.  It took Matsushita too long to break these commitments.

In conclusion, if Philips were to expand business in emerging markets, focusing on the healthcare segment, and purge the consumer electronics segment, it could begin returning to a profitable state.  On the other hand, Matsushita began on the right track prior to the economic crisis.  Had it started implementing the changes earlier, it would have been less affected by the crisis.  A reduction in the number of employees and closing inefficient plants would further increase the company's profitability.

the3Rs
by Platinum Member on Oct. 18, 2013 at 5:46 AM
Looks really good! I see only a couple of very nit-picky things...

1) the first time we're introduced to the term "NO's" there is no context...had no clue what it was until a later paragraph when you spelled it out once. Though I know your instructor will know what it is, the rule of thumb is if you're going to use acronyms or abbreviations, the 'first' time, you spell it out (& maybe put the abbreviation in parentheses after it) so readers fully understand.

2). This sentence felt awkward to me -
" Matsushita also increased capacity for manufacturing VCRs to accommodate not only its own demand, but also for other companies"

3). "available in may low-end stores." - should that say 'many' low-end stores?

4). "Philips main objective is..." - I believe in this case Philips should show possession


deccaf
by Platinum Member on Oct. 18, 2013 at 9:34 AM
All very good suggestions. I will change them.


Quoting the3Rs:

Looks really good! I see only a couple of very nit-picky things...



1) the first time we're introduced to the term "NO's" there is no context...had no clue what it was until a later paragraph when you spelled it out once. Though I know your instructor will know what it is, the rule of thumb is if you're going to use acronyms or abbreviations, the 'first' time, you spell it out (& maybe put the abbreviation in parentheses after it) so readers fully understand.



2). This sentence felt awkward to me -

" Matsushita also increased capacity for manufacturing VCRs to accommodate not only its own demand, but also for other companies"



3). "available in may low-end stores." - should that say 'many' low-end stores?



4). "Philips main objective is..." - I believe in this case Philips should show possession






cjsmom1
by Platinum Member on Oct. 19, 2013 at 2:32 PM

I'm always will to help.

cjsmom1
by Platinum Member on Oct. 19, 2013 at 2:35 PM

I didn't see anything other than what 3rs pointed out. Although I found this fact a little crazy "Matsushita retained employees that should have been laid off due to a lifetime employment commitment and failed to successfully innovate in overseas divisions." How could they think that even made sense?

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