Philips vs Panasonic: Facing the 2008 Economic Crisis Essay

1. intromission Panasonic and Philips are two of the main consumer electronics companies in the world with opposite origins and similar international path. Several hurdles were faced by slightly(a)(prenominal) companies in their evolution. This paper will analysis how the administrative heritage of Philips and Panasonic caused task in the changing of their outline, causing problem in the passation of the single strategic decisions. Moreover it tries to explain how time contingences and the external environs had influenced the strategy of the two MNEs and shape the organizational social organization sometimes terzettoing to success, sometimes losing ground in the market field. Nowadays the main tasks of the two companies are conflictual for Panasonic defending its leadership position, for Philips challenging the global leader. How to reach these goals? The last separate will address these objectives providing to the CEOs of the respective companies further steps to co nsider in order to last out competitive in the market field, from 2008 looking for struggled.2. How the environment and culture shape companies strategy and organization 2.1 Philips evolution from responsive to integrated Philipss strategy, right after WWII, led the community to its success. The economic web site during the 30s, forced the family to transfer part of its assets and laboratories abroad. This led to a sprinkle of responsibilities. Countries protectionism, high tariffs and trade barriers required local issue facilities. These problems led to the betrothal of a decentralized federation with self-sustaining and self sufficient units and autonomous marketing. The contingent environment spurred the management to rebuild their buildings upon National Operations (NOs). Philips strengthened its success on a worldwide portfolio of responsive national organizations. scotch conditions, tastes and preferences, at that time, differed across countries corporate managemen t treated subsidiaries as independent national businesses with the aim to satisfy local needs. National Organizations were so sentinel that they manage to preempt crossings required by customers, launching products such as the first color TV, the first stereo TV and the first TV with teletext. Innovation and R&D were the core strength of the telephoner. They were flexible, responsive and agile in the approach to market. Entrepreneurial initiatives derived, non from top d let imposition, nevertheless(prenominal) from every single division. The company succeeded in managing its innovation and to bring it to the near level, making innovation and customers needs the purpose of their business.The center on national responsiveness was appropriate since the 50-60s, when it started to be get along the self-coloreds limitation. The great focus given to tailor solution to compriseumers tastes increased the speak to of production and led to a dispersion of subsidiaries across too u mteen countries. Problems of efficiencies and coordination arose. The company took several(prenominal) years to get rid of its matrix structure. Attempts to substitution the companies to a slimmer organization in order to become more efficacious in its production were s busted and cumbersome. The National Operations preserved to vital major responsibilities. The company was captive of its past. Contrarily to management prevision, the matrix structure gaind more problems that it solved. It was more complex than either the worldwide area structure or the worldwide product structure, and it fixd conflicts of responsibilities. Market signals warned the company to implement changes in the way business was conducted.However, in the 1990s, the company was, quench, going with major losses. The structure was too monetary valuely and value added higher, compared to Japanese production facilities. hitherto if a good objective were settled in the strategic planning, however, as histor y showed, the further step of re-organization failed collect to difficulties encountered in reconstruct the organization. It was non a zero-base reconfiguration. For more than 35 years, from 1971 onwards, different CEOs seek to allot action in order to reduce the power of NO and create an agile and simple divisional organization that could create efficiencies, however act not to neglects their tooth roots of innovation respond to country specific markets. 2.2 Matsushita evolution from integrating to responsiveness Matsushita point of departure instead was complete different from the wizard undertaken by Philips. Matsushita employed a divisional structure with a heavy centralized decision making.The adoption of the divisional organization was well-thought due to the mountainous and highly differentiated product range manufactured by the companies, aimed to different target clients. This al belittleded the company to reduce the organizational complexity and reducing operat ion costs at heart the company. Matsushita exploited the favorable characteristic of the post war era, such as a convergence of tastes across borders and the uncontrollable globalization. In the 60s, the planetary house managed to expand its product range. It created self-funded research laboratories to develop impudently product solution. At the time, Matsushita detained a strong distribution channel directly own by the company with more than 25.000 domestic retail store. However, when the subscribe in the domestic marketed slowed strike down, what was a competitive advantage domestically was not replicable abroad. The company made a lot of effort in expanding its international presence, without world demoralized. However as times passed by, the highly centralized control structure, create problems in their offshore operations.By the 1980s, the company, mainly concentrated on global integration instead of localization, decided to re-tailored its strategy . Decentralization o f responsibilities was more than a necessity. Matsushitas strategy was too focused on global efficiencies neglecting innovation, and breeding and flexibility. R&D was vital in this industry. Actions of several CEO tried to address these issues, changing the companys strategy from copycat to booster station of invention. However, as Philips encountered problem in its transformation, so did Mastushita. The firm had difficulties in promoting self initiatives among different divisions. The former centralized hub organizational structure was still present in the employees mentality. The initiatives, such as the introduction of local managers with stronger responsibilities in key positions and locations, did not give the expected outcome in the in brief run. It took several years and a lot of effort to see some results.Again the company was captive of its past. Today, Mitsushitas configuration is mainly strengthened around 3 main divisions Digital networks, Home appliance and Componen ts reduce from the 36 product divisions used in the 1980s. The simplification was clear and so its advantages. The reaction of such a structure led the company to be more flexible to local need, reduce costs of duplication and happen upon economies of scope. The products developed within each division were highly linked. However the company was not safe from competition. With the crisis approaching, the economical point of the company does not take a breather untouched. What else is left to do? 2 Core issues today in the consumer electronic industryThe current economic situation differs drastically from the one encountered in 10 or 20 years ago. Phenomena like globalization cede given companies such as Philips and Panasonic the chance to provide their product to an all-embracing market, raising however new challenges. The global economic receding has created new needs. Consumers are more price sensitive and less willing to render high prices for low quality products. Compani es need to be aware of their cost structure and be ready to take respond to rapid scientific changes and changing consumer preferences with timely and cost-effective introductions of new products in markets that are highly competitive in terms of both(prenominal) price and technology. The access to low factor cost, such as low labor force in emergent country as become crucial. Moreover, developing markets, such as India and China, are not only location where firms provoke manufacture products at lower costs, but also new opportunities where companies can market their own products. In the consumer electronic industry, competition has become extremely high and innovation, instantly more than ever has become crucial as new source of r til nowues.3. Recommendation for Philips Exploit contingencies of the time you are in The 2008 situation of Philips is not flourishing. In 2008, the company scored a net loss of 260 million. This was probably due to the financial crisis that affected the company drastically. However, companys loss can not only be attributed to external factors. The company has made some mistakes, in the recent years, and should take action and correct its own strategy, call up it origins. Coherence with past is crucial to tailor an effective strategy that could lead to innovative solutions for the future. Thats why Philips should continue to develop consumer-centric solutions. Research laboratories should remain independent but linked across one another. Philips should tackle the recession without sacrificing its long term strategic ambition Improving people live through meaningful innovation1. That why now, more than ever, the company should be able to forecast market trends. Philips should continue more efficiently to re-allocate resources to increment opportunities and emerging markets. To do so it should transfer part of its qualified military force to target markets, such as from India and China, building a strong teams of both local an d expatriates managers and engineers.The combination of foreign and local figures could help the firm to continue the strategy of local responsiveness. To do so, it is necessary to include in the company agenda selective mergers and acquisitions. M&A, however, should not be out of focus. Philips has lessen its current division to 3 main domains healthcare, lighting and customers lifestyle. My recommendation would be to stay true to these three core segments, acquiring key strategic companies in foreign markets. How to finance these new objectives? Disinvestments in peripheral activities and less profitable plans are still needed in order to carry liquidity to reinvest in developing countries.This tactic would not repay within short term but long term profits would stir up the high level of investments. Moreover leveraging of local subsidiaries in emerging markets can a springboard, to target back developed markets selling low cost products. 4. Recommendation for Mastushita defend ing worldwide dominance The economic situation of Panasonic is different from the once faced by Philips. Panasonic is the worlds take plasma maker in the industry and has to defend its worldwide dominance. Matsushita has establish its competitive advantage ion low cost production. However, particular during financial crisis period, several other initiatives are to be implemented. First the company has to reduce its cost structure in order to face the deep decrease in demand in order to continue to make profits. Panasonic its already leader in this activities, however, there are always margins of improvements. To achieve cost reduction, it has to downsize its workforce.The firm should prioritized certain businesses over less profitable ones. Moreover adopt a lean management in order to reduce at the nominal the wastes in the value chain. Secondly it should restructure its organization to make it as clear and simple as possible in order to distract cost duplication, slow process an d cost of bureaucracy. In addition, The shift of demand and the focus on emerging market, in particular Asian markets, should be the highest priority. The market signaled opportunities in untapped market. The firm should be upfront in order to gain advantages over competition. These is a necessity to shut down plants in Japan and oversea and transfer workforce and capital to new sites. This initiative can also overcome exchange currency risk. in any case distribution channels in these countries should be enhanced.However, the company should not occlude its heritage leverage on efficiency. The company should achieve a international strategy incrementing its local responsiveness and innovation and learning, at the same time. Even during times of recession in essential to continue to invest in R&D, with the objective to grow faster than competitors when the market recovers. The main revenues for the companies come from distinct technologies. Local responsiveness could be achieved th rough the delegation of, even more, profit responsibilities to the three main divisions. This could enhance the company performance and to financial backing it on the podium. 6. Conclusions The structural variety is function of the environmental characteristics, Organization has to align to the external environment. both(prenominal) companies has gone through several changes in their evolution.environmental factors pushed companies to rethink their strategy and consequently their organizational structures. In some cases the difficulties encountered in the transition, for instance from an highly integrated company to more responsive, was slow and cumbersome. Both companies has been proved to be reluctant to change. . It is true that the set of strategies a firm is limited by the decisions the company has made in the past, however, these limitation should not be considered as insurmountable. Change can occur and rapidly. Philips and Panasonic lacked the ambition to programme solut ion at 360. Firms should learn from their past and continue to leverage on their own competitive advantages, building on existing infrastructure. Do not be captive of your own past, but use your past arrest to create a strong advantage, compensating your deficiencies.5