Philips vs Matsushita
Susan Cumpton
PHL-3100 International Management
April 11, 2015
Professor Ismail

Throughout History Philips and Matsushita have charted different strategies as well as different organizational structures, and the outcome has been the same; success. With success comes adversity and both companies’ experienced major challenges in the beginning of the 21st century. Both CEO’s were forced to implement organizational restructurings as well as new strategies. How they would come out of was unknown as well as if their competitive nature with each other would continue. In 1892 Gerard Philips and his father founded a small light bulb company in Eindhoven Holland, at firs the ventured failed and they were forced to recruit Gerard’s brother Anton an excellent salesman. Philips focused on a singled product while larger electrical production companies raced to diversify. Innovation was a priority and Philips company policy was to keep up with modern technology and advancement in research. Philips labs developed a tungsten metal filament bulb that gave them finical strength to compete against it rivals..
In 1899 Anton hired the companies first export manager and the company was sell into markets in Japan, Australia, Canada, Brazil, and Russia. By 1900 Philips was the third largest light-bulb producer in Europe. By 1912 the lamp industry stated showing an overcapacity of companies so Philips started building sales organizations in the United States, Canada and France, while all other function remained centralized in Eindhoven. In many foreign countries Philips created joint venture with local to gain market acceptance. In 1919 Phillips entered into partnership with General Electric giving each company use of the others patents as well as divining the world into three spheres of influence. Philips had also broaden its production into vacuum tubes, x-ray tubes and radios.
Before they war they had transferred its assets into tow trust, British Phillips and North American Phillips, as well as moving its vital research to Surrey England. Philips was hit hard during World War II with most of their production plants bombed or destroyed management decided to build the post war organization on the strengths of the national organizations. By the 1960’s Philips ability to bring new products was starting to fail. Phillips headed into reorganization. Over the next four decades, seven chairman worked different ways to reorganize the company with little to now success. By 2009 Phillips financial performance was poor there were still questions to its global competiveness. Phillips was forced to license Funai to make and market all of its electronics under the Phillips name in the North America.
In 1918 Konosuke Matsushita invested to start production of double ended sprockets in his modes home. The investment expanded rapidly moving into battery-powered lamps, electric irons and radios. In 1932 Matsushita announces to his employees a 250 year corporate plan, broken down into 25 year segments that were to be carried out by successive generations. They plan was codified in the company creed and in the “Seven Spirts of Matsushita” and all new employees were trained on it. Post war boom, Matsushita flooded the market with new products, from television sets in 1952, transistor radios in 1958, color televisions, dishwashers and electric stoves in 1960, with over 5000 products the company opened 25,000 domestic retail outlets covering 40% of the market in Japan by the late 1960’. With slowing of the Japanese market the company look to export their products. Matsushita was forced into manufacturing plants in Southeast Asia as well as Central and South American to cut cost. By 1970 he was pressured to open plants in Canada in 1972 and in 1974 he bought Motorola’s Television business in the United States and in 1976 He built a plant in Wales to supply European Common Market.
With the growth of the VCR market Matsushita adopted the VHS standard and during the next 20 years of development Matsushita’s development team lived the VCR product cycle. Between 1977 and 1985 Matsushita’s increase VCR capacity by 33-fold to 6.8 million units, besides meeting their needs they were also meeting the needs of GE, RCA, Phillips and Zenith. With the increase in volume Matsushita was able to slash pre by 50% within five years of launch. With a growing number of overseas companies, Matsushita was forced to move local nationals into key positions, for example in America, Americans because president in three of the six local companies. This was done to strengthen ties within the local companies as well as the host governments. But by 1986 all foreign subsidiaries were brought under control of METC, which was then merged into the parent company. Unable to develop innovated overseas companies, top managers decided to buy them instead. Matsushita purchased MCA, the U.S. entertainment giant for $6.1 Billion, however within a year the Japan’s bubble economy had burst and Matsushita was forced to focus on cost containment. In 2001 the CEO announced emergency measure to reverse the situation and offered early retirement to 18,000 employees of which 13,000 took advantage of it, which allowed new managers to emerge. Despite these measure Matsushita announced in March 2002 an operating loss of 199 billion Yen, as well as a 428 billion Yen loss which included restructuring charges. It only took one year for the company to turn around but the CEO was still not happy and launched an initiative of management improvement. He wanted managers to move past Matsushita’s reputation for slow innovation and imitation. Matsushita moved into the flat screen television market and in 2008 changed the company name to Panasonic, reflecting the name of the company’s best known brand. It was part of the CEO’s effort to increase overseas revenues. Panasonic was not a well-known name and talk of foreign sales growth evaporated when the global financial crisis hit in 2008. Panasonic was forced to close 27 plants and laid off 15,000 employees, by 2010 the company’s profit plans were just a dream.
Two completely different roads seem to have led to the same point. It did not matter how they went about it, the roller coaster we call economics can make or break a company. Being able to see when you need to change your strategy is very difficult and costly. Expanding to fast or into a market that may not be as stable seem to be the down fall of both of these companies. Panasonic’s initial 250 year plan was a good idea, but with the changing of the market so much your plans adapt to it. Waiting too long to take cost effective measure out of loyalty to your employees was one of the biggest mistakes Matsushita took. Philips expanded into to many markets at one time and lost many battles for new technology and cheapened the name. Being in a market place with the names of Apple, Sony and LG cannot be easy. Today it seem that you must focus on one product if you want to be successful. You must always know when to chang your strategies with the times and know that sometimes downsizing might be hard at first, but in the long run will lead to success.
References
Bartlett, C. A., & Beamish, P. W. (2014). Developing a Transnational Organization. In Transnational management: Text, cases, and readings in cross-border management (7th ed., pp. 311-327). New York, NY: McGraw-Hill Irwin.