Philips Vs Matsushita Scm

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Philips Vs Matsushita Scm

  1. 1. A New Century, a New Round <ul><ul><li>Scott Campbell - Christina Connolly - Maureen Stafford </li></ul></ul><ul><ul><li>MBAM 619.11 </li></ul></ul><ul><ul><li>March 30, 2009 </li></ul></ul>versus
  2. 2. Foundation <ul><li>Founded in 1892 by Gerard Philips in Eindhoven, Holland </li></ul><ul><li>Tradition of caring for its workers </li></ul><ul><li>Innovation as a core strength </li></ul><ul><ul><li>One product focus on light-bulbs (initially) + Gerard’s technological prowess enable significant innovations </li></ul></ul><ul><li>Strong research vital to company’s survival </li></ul><ul><li>Philips built its success on a worldwide portfolio of responsive national organizations </li></ul>
  3. 3. Foundation <ul><li>Founded in 1918 by Konosuke Matsushita in Osaka, Japan </li></ul><ul><li>“ Seven Spirits of Matushita” and cultural and spiritual training are key </li></ul><ul><li>First Japanese company to adopt the divisional structure </li></ul><ul><ul><li>“ One-product-one-division” </li></ul></ul><ul><ul><li>Internal competition fostered among divisions </li></ul></ul><ul><li>Matsushita built its success on its centralized, highly efficient operations in Japan </li></ul>
  4. 4. Tangible and Intangible Assets Physical Assets: new labs Regulators: Common Market erodes trade barriers External Assets Financial Assets Suppliers Customers Employees: competitive/loyal Owners Brand Capital, Relationship Capital, Knowledge Capital Individual Capital, Team Capital Human Capital: strong experts Intellectual Capital Society Competitors: Sony, Matsushita, General Electric Organizational Fiscal Responsibility Boundaries Market Boundaries Society Boundaries Intangible Assets Supply Chain Boundaries Organizational Boundaries Tangible Assets
  5. 5. Tangible and Intangible Assets Physical Assets External Assets Financial Assets Customers Employees Owners: Matsushita’s legacy <ul><li>Brand Capital *Relationship Capital: Hitachi, Sharp, Phillips, Mitsubishi, dist partners *Knowledge Capital: efficiency, low cost, VHS development </li></ul>*Individual Capital: Unique positions *Team Capital: Unique product divisions Human Capital: Unique positions with each division Intellectual Capital: Mastering of low-cost, fast production with premium VHS standards Society: Japan, Southeast Asia, Central and South America, Canada, United States, Wales Competitors: Phillips, Sony, JVS, Hitachi, Sharp, Mitsubishi Organizational Fiscal Responsibility Boundaries: Division’s ability to generate, 60% earnings to headquarters Market Boundaries: Production capacity, quality of product, new technological innovations Society Boundaries: fluctuation of the Yen Intangible Assets Supply Chain Boundaries: Output capacity, distribution partners, budgetary limitations Organizational Boundaries: Division limitations, 40% profit/ division Tangible Assets
  6. 6. McKinsey 7-S Framework Structure Systems Style Staff Skills Strategy Shared Values Structure: National Organizations (NOs) had informal power over Product Divisions (PDs). NOs consisted of two managers: technical and commercial, with some having a 3 rd , financial manger Systems: NOs allowed for customer specialization, this proved later to be a problem with NOs having so much informal power. Style: Strict accountability when company was unprofitable, drastic employee/manager cuts were made on a regular basis Staff: Originally training was important. Friendly competition turned into a loss of control with NOs Skills: Product innovation, thrived on simplicity of product line Strategy: Trying to stay afloat, drastic cuts were made over time, many systems/procedures were also adjusted Shared Values: Began as employee friendly/driven comp. Later with problems, lost that focus.
  7. 7. McKinsey 7-S Framework Structure Systems Style Staff Skills Strategy Shared Values Structure: Each product was made into its own unique division, to function independently and promote internal competition Systems : Competitive Divisions, MCA, METC, and MECA allowed Matsushita to develop innovative production and development systems in an efficient manner Style : 60% profit to headquarters and 40% back to the division provided an extremely profitable organization, while insuring its own future success Staff: Staff was unique in each division, and could expect lifetime employment Skills: Efficient, low-cost production Strategy : Achieve worldwide presence, whether by the Matsushita image, or producing for competitors
  8. 8. ARC to Align with Strategy Goals: Objectives: Tasks: Rewards: Strategy Work Culture Infrastructure Results Values, Beliefs & Assumptions Organizational Practices Behaviors Values, Beliefs & Assumptions Organizational Practices Behaviors Values, Beliefs & Assumptions Organizational Practices Strategy Results Strategy Results Strategy Culture Results Strategy Strategy Strategy Strategy Culture Culture
  9. 9. Attempts at Reorganization Goals/ Objectives: Actions Taken: Gerard Philips 1892 Van Reimsdijk & Rodenburg 1970s Results One-product focus Use new factories and machines for production efficiencies Transferring assets & labs overseas, reliance on national organization (NO)‏ Employee focused Tradition for caring Built emp. houses, promoted edu., paid employees well, Allowed NOs ability to make Autonomous decisions Gerard Philips 1892 Work Culture Yellow Booklet: est. Responsibilities btwn NOs and PDs International Product Centers (IPC) were built to increase the flow of goods among NOs. Sizing down dual comm & tech mangers to one Shift power away from Nos toward PDs Implementation was slow. Work Culture Work Culture Infrastructure NOs had individual pwr, managed by tech, commercial & finance heads, even though product divisions (PD) were formally responsible Ability to respond to country-specific mkt conditions Closed less efficient plants, introduced IPC, cut management to one person Power struggle continued btwn Nos & PDs
  10. 10. Attempts at Reorganization Goals/ Objectives: Actions Taken: Gerard Philips 1892 Van der Klugt 1987 Results Reduce financial problems Shut many European plants down, sold/acquired businesses Continue to shift pwr to PDs Gave PDs formal product mang. Responsibilities, NOs resp. for local profits Wisse Dekker 1982 Work Culture Beating the Japanese competition. Est. 4 core businesses. Closed significant amount of plants. Reduced R&D spending Shaking up “lifetime employment” myth by cutting jobs Thousands of jobs were slashed & shifted management from HQ Work Culture Work Culture Infrastructure Reduced Management board, giving final decisions to PDs Sales still declined, profits were stagnant Structured business around 4 core bus. & away from 14 PDs Unanticipated losses came with class-action suit & ½ management replaced
  11. 11. Attempts at Reorganization Goals/ Objectives: Actions Taken: Gerard Philips 1892 Cor Boonstra 1996 Infrastructure Drive to be more standardized Turn around the bankrupt company, expand software, services & multimedia Cut more jobs, committed managers to financial goals Accountability for losses Moral is low Jan Timmer 1990 Work Culture More structure, simpler manufacturing & marketing org. Sold 1/3 of the businesses, shift production to low-wage countries, replaced PDs with 7 div & 100 bus units, increased mkt efforts Employees shifted to other locations Na Work Culture Work Culture Results R&D personnel cuts left company with few who understood technology, thus no innovation Moved HQ to Amsterdam Performance improved, reaching 24% return on net assets
  12. 12. Attempts at Reorganization Goals/ Objectives: Actions Taken: Gerard Philips 1892 Results Increase sales, outsource activities where they can’t add value Closed European plants Na Trying to shift to core competencies of technology developer & global marketer Gerard Kleisterlee 2001 Work Culture Work Culture Infrastructure Eliminating more overhead/costly production plants Shareholder pressures rise, reported losses
  13. 13. Attempts at Reorganization Goals/ Objectives: Actions Taken: Gerard Philips 1892 Toshihoko Yamashita 1982 Results Konosuke Matsushita (KM)‏ 1918 Work Culture Work Culture Work Culture Infrastructure To build a successful company through fairness and giving back to the world around them Divisional structure led to a competitive environment Opening of “National Shops,” Various attempts at product line extension, Outsourced production, Licensing agreements, METC, Worldwide production Productive environment with lifetime employment One-product, one-division Successful development of efficient, superior VHS production and good relationships Operation Localization: personnel, technology, material and capital Increased number of local nationals in key positions, local division given choice over products sold, quantities, prices, and features Allow local division to have more control over their operations To “help overseas companies develop the innovative capability and entrepreneurial initiatives” Operation Localization Overseas productions remained too dependent on the central organization
  14. 14. Attempts at Reorganization Goals/ Objectives: Actions Taken: Gerard Philips 1892 Yoichi Morishita 1993 Results Akio Tanii 1986 Work Culture Work Culture Work Culture Infrastructure Relocated major regional headquarters functions to North America, Europe, and Southeast Asia Brought foreign subsidiaries under control of METC, then put METC under parent company Purchase of MCA Make each division contribute to initiative and innovation Fully integrate domestic and overseas operations More local operational control $17.5 billion in liquid financial assets until the bubble burst in 1992 Make the environment less expensive and more adaptable “ Simple, small, speedy and strategic” Sold 80% of MCI Shifted production to offshore companies Cut headquarter staff and decentralized responsibility Moved 6000 staff to operating positions- great resistance to the radical changes Streamlined, decentralized operations The driving down of prices and increased competition meant that Matsushita struggled
  15. 15. Attempts at Reorganization Goals/ Objectives: Actions Taken: Kunio Nakamura 2000 Infrastructure Work Culture Work Culture Results Raise profitability to 5% of sales “ Super manufacturer of products” “ Meet customer needs through systems and services” Flatten the hierarchy and empower employees All key headquarter functions that related to international operations were transferred to overseas regional offices Integrated one-product divisions into multi-product production centers Marketing centers for Panasonic brands and National branded products Empowered employees at multi-product centers Earnings estimates had to be adjusted downward and there with Matsushita looking like a good buyout opportunity
  16. 16. Resources Resources Tangible Assets Financial Resources Physical Resources Technological Reputation Human Intangible Assets -innovations produced successful financial strength -new plants & equipment -International presence -Experts for innovations & new product development -positive morale when company valued employees with benefits and training -Adapt to market needs
  17. 17. Resources Resources Tangible Assets Financial Resources Physical Resources Technological Reputation Human Intangible Assets <ul><li>VHS format distribution for multiple companies </li></ul><ul><li>Efficient, inexpensive processes </li></ul><ul><li>Motivate through competition </li></ul><ul><li>Superior VHS format and production </li></ul><ul><li>MCA media software </li></ul><ul><li>Multi-national locations </li></ul><ul><li>High quality, inexpensive product </li></ul><ul><li>Divisional, competing counterparts </li></ul><ul><li>Visionary CEOs </li></ul><ul><li>60% to headquarters/ 40% to division </li></ul><ul><li>Outsourced production </li></ul><ul><li>METC </li></ul><ul><li>10% ROS from Japan </li></ul>
  18. 18. Value Creation Process Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing and Sales MARGIN <ul><li>Financial Policy -Legal -Organizational Form </li></ul><ul><ul><ul><ul><ul><li>- Accounting - Incentive Systems </li></ul></ul></ul></ul></ul>-Bulked up efforts in mkt -Autonomy among NOs -Employee training - Worldwide customization, mkt demands -Outsourced non-value added tasks -R&D dev. one product focus -moved bus. to other countries during war -Alliances w/ other companies
  19. 19. Value Creation Process Firm Infrastructure Human Resource Management Technology Development Procurement Inbound Logistics Operations Outbound Logistics Marketing and Sales MARGIN <ul><li>-Outsourced VHS producer -Organizational Form </li></ul><ul><li>-Profit Distribution Policy - Competitive Environment </li></ul>- Pay less for a superior product - VHS Format <ul><li>Low cost materials </li></ul><ul><li>Divisional, competitive structure </li></ul><ul><li>Belief in lifetime employment </li></ul><ul><li>MCA media software </li></ul><ul><li>MECA </li></ul><ul><li>METC </li></ul>- Distribution partnerships - Performing outsourced VHS production - Superior product - Divisional competition
  20. 20. Architecture Formal Network Informal Network Product Division (PD)‏ National Organization (NO)‏ Technology Manager Finance Manger Commercial Manger National Organization (NO)‏ Technology Manager Commercial Manager Finance Manger Product Division (PD)‏
  21. 21. Architecture
  22. 22. Routines & Culture <ul><li>Routines </li></ul><ul><ul><li>Allowed NOs and PDs relationship to affect company’s success, a great deal of turnover and organizational changes in short period of time </li></ul></ul><ul><li>Culture </li></ul><ul><ul><li>Shared values were disjointed from founder’s ideals. As company saw more problems, the employees centric company no longer took precedence </li></ul></ul><ul><ul><li>Morale was low </li></ul></ul>
  23. 23. Routines & Culture <ul><li>Matsushita wanted his company to encompass independent product centers </li></ul><ul><li>Once a new product was established, it was spun off into its own operation </li></ul><ul><li>That operation could retain 40% of its profit, with the remaining 60% going to headquarters </li></ul><ul><li>Competitiveness between operations was encouraged </li></ul>
  24. 24. SWOT Analysis
  25. 25. SWOT Analysis
  26. 26. Sustainable Competitive Advantage through ARC Resources Competitive Advantage Capabilities Strategy Goals Objectives -New labs, good technicians, international presence - Innovations, product development & efficiencies - One focus on major product line, allowed for superior performance -return back to simplicity, few products, increase employee morale, reestablish innovations and efficiencies
  27. 27. Sustainable Competitive Advantage through ARC <ul><li>Resources: </li></ul><ul><li>- MECA </li></ul><ul><li>- METC </li></ul><ul><li>- MCA </li></ul><ul><li>Divisional Competition </li></ul><ul><li>Worldwide production and presence </li></ul><ul><li>Capabilities: </li></ul><ul><li>Advanced new product development </li></ul><ul><li>Outsourced producer </li></ul><ul><li>Geographical shifting </li></ul>Strategy: Use internal competition to achieve innovation and competitive advantage Goals: Achieve worldwide, superior market share Objectives: Sustain a profitable technology company Competitive Advantage: Ability to shift both geographies and resources to achieve the best product with efficient spending
  28. 28. The 21st Century <ul><li>By 2001, it becomes evident that Philips’ best chance of survival was to outsource even more of its basic manufacturing and become a technology developer and global marketer </li></ul><ul><li>In 2002, company HQ moved from Eindhoven to Amsterdam </li></ul><ul><ul><li>In a sense, the move to Amsterdam can be considered a return to the company's roots, because Gerard Philips lived in Amsterdam when he came up with the idea of building a light bulb factory and also conducted his first experiments in the field of mass production of light bulbs there </li></ul></ul><ul><li>Philips Lighting, Philips Research, Philips Semiconductors (spun off as NXP in September 2006) and Philips Design, are still based in Eindhoven </li></ul><ul><li>Philips Healthcare is headquartered in both Best, Netherlands (just outside Eindhoven) and Andover, Massachusetts (U.S.)‏ </li></ul>
  29. 29. The 21st Century <ul><li>In February 2001, the company’s first losses in 30 years continue to accelerate </li></ul><ul><ul><li>CEO Nakamura announces round of emergency measures designed to cut costs </li></ul></ul><ul><ul><li>Goal to move Matsushita beyond its roots as a “super manufacturer of products” and begin “to meet customer needs through systems and services” </li></ul></ul><ul><li>In May 2003, the company put &quot;Panasonic&quot; as its global brand, and set its global brand slogan as, &quot;Panasonic ideas for life” </li></ul><ul><li>In January 2008, name changed to “Panasonic Corporation” </li></ul>

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