Strategic analysis of the changes in dominant logic, parenting approach for Matsushita and Philips up until 2011.

1. Philips Vs Matsushita
CORPORATE STRATEGY ANALYSIS
Batool Al-Nimri

2. Content
Change in each company’s :
 Competitive Advantage
 Dominant Logic
 Parenting Approach

3. Competitive Advantage
Philips
 Philips grew and developed a strategic competitive capabilities, which was well suited for
the circumstances and environment during the 1930s.
 Capability is electronics and technology innovation, and market focus.
 Gerard Philips’s influence, ensured that the increase in earnings was due to the research
programme dedicated to developing a continuing flow of innovative products, which
was reflected in the 20% global market share Philips had in its early start. However, when
Philips went through some financial problems the focus on building these strengths was
shifted to cutting cost, which almost lead to the destruction of these competitive
advantages especially after the 37% cut in R&D personnel CEO Timmer did to try to cut
cost. At that period, Philips lost its innovative capability, due to the loss of capable and
well experienced staff.

4. Competitive Advantage
Matsushita
 Matsushita’s core capability was in low cost production and fast to market
products. Unlike Philips, the expansion Matsushita had was in a period
when barriers between markets were lower. This means that they were not
forced to setup decentralised organisations. Their strategy revolved
around building a substantial centralised manufacturing organisation,
which gave them the ability to benefit from the economies of scale, and
enabled them to offer lower process for products, which led to it to have a
bigger market share than Philips.

5. Dominant Logic
Philips
 From the early starts of Philips, the main focus was
innovation and expansion. Each CEO that came
to the company, tried to restructure the
organisation based on their own knowledge and
background. The objective of these restructuring
processes, was trying to cut cost. Hoping to gain
back control from national organization, Philips
established a centralised R&D and
manufacturing product divisions.

6. Matsushita
 Matsushita’s dominant logic came from the Japanese culture, and the
Japanese way of doing business. They focused on keeping employees by
ensuring a long term employment, which is a part of the Japanese culture.
Moreover, in the Japanese culture the concept of having a mentor and
going back to consult with that mentor was a dominant concept amongst
Japanese. These concepts reflected on the way Matsushita was run by
CEOs. Appendix II shows each CEO’s main actions and results.
Dominant Logic

7. Parenting Approach
Philips
 The Philips management (Gerard and Anton) made a decision of building on the strengths of
the national organisations after the war. This strategic move by the parent company showed
a deep understanding of the situation in the market. Which reflected in an increase in market
responsiveness (adaptive marketing, national specific technical capabilities). Later on
making it a valuable asset for Philips. With this approach the parent brought value by acting
as a portfolio manager.
 However, when the dominant logic changed, the parenting approach also changed. By
trying to cut down the cost, the parenting style shifted to ‘the developer parent’. After
decades of building Philips’s competitive advantage and having an autonomic structure the
parenting style changed, changing the organisation structure with it, to a centralised one.
The Philips’s core technologies were sold off, R&D personnel cut off by 37% by Timmer, and an
international production centres were established by Rodenberg. At the end, these vital
decisions taken by the parent resulted in a 2.5$ loss in the late 1980s. With this style instead of
bringing value to the businesses, the parent company was destroying value. The core
competency of having a real feel for the market was stripped away by the idea of cutting
costs and having centralised operations.

8. Matsushita
 Through all the changes Matsushita went through from having a centralised operations,
to shifting the manufacturing processes to lower wage countries, to trying to mimic
Philips’s decentralised structure, and changing the name of the company. The
parenting style changed from being ‘the parent developer’ to the ‘portfolio manager’.
Which was evident when Nakamura replaced the compartmentalised structure with a
flat one, by separating plants from product divisions, and stripping the sales and
marketing from product divisions into two main global organisations. This shift in
parenting approach was reflected in the company decentralised structure, and was
considered as a “cultural revolution”, but this revolution was unsuccessful due to the
Tech Wreck in 2001.
Parenting Approach

9. Conclusion
In this case, there were many other aspects to be considered, like portfolio
decisions, organizational structure, culture, and so on. But the main focus of
this analysis was the effect of change in the dominant logic and the
parenting approach. Results of the analysis showed that the main reason
behind the failure of most of the changes both companies went through was
culture; while trying to build organisational capability, the most common
downfall managers make, is the focus on structural changes, ignoring what is
required to bring about the consensus for change like culture and process.

10. Thank You
Batool Al-Nimri