disney-pixar merger a case study analysis
Post on 15-Jan-2016
96 Views
Preview:
DESCRIPTION
TRANSCRIPT
Nottingham University Business School
Undergraduate Programmes
INTERNATIONAL BUSINESS STRATEGY 2[N13KL2]
Case Analysis Report- “Philips vs. Matsushita: Competing Strategic and Organisational Choice.”
Radia SYED
Student ID: 008093
COPY [1]
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Table of Contents
Table of Contents...................................................................................................................2
Executive Summary...............................................................................................................3
Introduction...........................................................................................................................4
Motivations in overseas expansion.......................................................................................6
Means of internationalisation...............................................................................................7
Mentalities.............................................................................................................................7
External forces of conflicts faced, and corresponding responses........................................10Philips: Forces for Local Responsiveness...................................................................................................................10Matsushita: Forces for Global integration & Forces for Worldwide learning..........................................11
Strategic objectives and means of building competitive advantage...................................13Philips: seeking multinational flexibility.....................................................................................................................13Matsushita: seeking global efficiency............................................................................................................................14
Innovation models and corresponding challenges faced....................................................17Philips: Local-for-local...........................................................................................................................................................17Matsushita: center-for-global model.............................................................................................................................18
Organisational-models adopted & means of managing the changes..................................19
The road to developing transnational organisations...........................................................20
Conclusion............................................................................................................................ 22
2
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Executive Summary
This report aims to examine the different strategic and restructuring approaches adopted by
two of the biggest competitors in the global consumer-electronics (CE) industry- Dutch firm
Philips and Japan’s Matsushita- as they evolved from the pre-World War 2 era to afterwards,
with both forced to constantly enhance their products through building the appropriate
strategies that stem from their internal corporate structures and internal linkages.
Additionally, main findings illustrate how both firms evolved their organisational structures
and strategies that allowed them to create distinctive competences, and their simultaneous
responses to the external environments; how global competitiveness depends on the
organizational-capability, and the limitations of classic multinational and global models that
Philips and Matsushita respectively implemented are also illustrated.
While it’s been concluded that Philips and Matsushita have successfully developed their
competencies and reformed their structures into transnational organisations’ style, key
recommendations include: aligning product-divisions with each other to allow mutual
understanding and coherence of the firm’s goals, and configuring their value-chains such
that it leads to cost savings yet maximum efficiency, by adopting globally-efficient tactics like
their competitors since lowering costs are a priority given the current economic-climate.
It should be noted that due to the limited word-count, only relevant, selected points have
been discussed.
3
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Introduction
Two of the biggest giants in the fast-paced industry of consumer-electronics (CE)1, Holland’s
Philips and Japan’s Matsushita are no strangers to state-of-the-art innovation. Known for
their fierce rivalry that dates decades back, both have emerged with distinctive
organisational-capabilities and competencies, formed from their individual cultural-
backgrounds and various strategies adopted throughout the years.
Striving to be leaders in the competitive CE-segment through maximising different parts of
their value-chains, both firms aim to offer the best consumer experience with top-class
innovation and high-quality in their offerings. Yet despite their far-reaching presence and
success, they’ve also encountered several challenges in their paths to becoming
international leaders in the CE-segment, as a result of their organisational structures,
external threats, and other external conflicting objectives that may have hindered their
growth.
This report thus will address the various strategies they adopted, their motivations for
internationalisation and organisational structures, and the internal and external challenges
they experienced.
1 The global CE-industry is forecasted to reach US $932 billion by 2017, with a CAGR of 5.37% over the next five years. (Fritz. J, Lucintel, 2012)
4
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Motivations for overseas expansion
Figure-1Motivations to
internationalisePre-war Post-war
Philips
Matsushita
Philips Matsushita
‘Traditional’ motivations
Market Expansion ✔ ✔ ✔ ✔Resource seeking ✔ ✔ ✔ ✔
Strategic-asset seeking ✔ ✔ ✔ ✔‘Emerging’
motivationsSeek Scale economies ✔ ✔ ✔ ✔
Increasing R&D investments
✔ ✔ ✔ ✔
Global scanning & Building Learning capabilities
✔ ✔ ✔ ✔
Holland’s small market-size made Philip explore new markets abroad. Here, being exposed
to new technologies or market-needs in the individual countries stimulated and required
more innovative product-development via R&D, as seen by its product-portfolios’ expansion
(radios, X-ray tubes) that prompted Philip’s expansion further into larger international
markets, to meet consumers’ demand for fresh inventions.
Conversely, ever-falling prices due to increased manufacturing efficiency that characterises
the CE-industry- whereby competitors’ manufacturing continues to shift to lower-wage
countries, propelled Matsushita to reduce and move its electronics’ production-costs to the
Americas/Europe, enabling it to achieve long-term economies-of-scale via resource-seeking
factors.
✔: of less importance ✔: of high (er) importance ✔: very important
5
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
But pre-war objectives differed from post-war objectives. Therefore, as strategic resources
are intangible-resources involving the firm’s technology and core-competencies like
knowledge/employees’ skills etc. (Dunning, 1993), Matsushita was also motivated by
strategic-asset seeking objectives because to beat the competition, manufacturers were
forced to constantly enhance their products or support emerging technologies. Being “fast
to market”, it did so via technology-exchanges, R&D-partnerships and licensing agreements
with rival Philips. These alliances allowed it to benefit from other firms’ technical-knowledge
bases given its ‘copycat’ reputation, to strengthen their competitive-edge in the CE-market.
Means of internationalisation
Figure-2Pre-requisites/reasons for means of internationalisation
Regions the firms expanded into & year of entry
Location-specific
advantages
Ownership-specific
advantages
Organisational capabilities
Philips
Japan, Australia, Brazil, Canada, Russia (1899) ✔ ✔ ✔
USA, France (1912) ✔UK ✔
China, Poland, Mexico (2002) ✔
Japan/home market (1950-1960s) ✔ ✔
Matsushita
Southeast-Asia, Central & South America (1960s) ✔Canada, USA, UK (Mid
1970s)✔
North America, Europe, Southeast-Asia (1986) ✔
Internationalisation is a process by which firms increase their involvement in international
✔: of less (or no) importance ✔: of high importance: ✔: very important
6
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
business activities (Johanson et.al, 1993).
Thus Philips began ‘internationalising’ by exporting to diverse markets (Japan, Canada) first
that possessed the above advantages, then entered joint-ventures in other countries to gain
market acceptance because the focus/objectives were different at different time points. It
then entered a contractual agreement with GE to exchange technology between them.
Similarly, while Matsushita also relied on a licensing-agreement and technology-exchange
with rivals Philips at first to improve its R&D, the 1950s saw it begin exporting its black-and-
white TV-sets, to eventually setting up an overseas branch office- MECA, in USA.
Mentalities
Mentalities evolve over time. Initially internationalising with a multidomestic strategic
mindset, Philips wished to exploit inter-country differences, like differing TV-transmission
standards. Viewing their market as multidomestic reinforced their objective to localise their
products in response to varied customer needs/buying preferences, in country-specific
markets. As this would later see decentralised-control occurring through establishing
sales/production subsidiaries worldwide and consequently foster close interaction with
local-markets, Philips could later customise both its product-offerings and
marketing/distribution strategies accordingly for each market. Despite being cost-intensive,
being locally-responsive could ensure steady future revenue.
7
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Figure 3. (Own construction.)
8
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Matsushita initially seeked a global outlook/strategy, intending to gain global market-share
leadership (post-war), and viewing markets as having common needs, underlining its goal to
globally-standardise by having world products to build volume. Exploiting low-cost
production locations in its value-chain led to lower cost-structures, whilst maintaining
centralised-control over its overseas production-units to oversee quality improvements.
Therefore, achieving global economies-of-scale in purchasing/manufacturing and product-
development were amongst Matsushita’s goals.
Figure 4. (Own construction)
9
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
External forces of conflicts faced, and corresponding responses
Figure 5
3 sets of Conflicting Environmental Forces (Bartlett, 2011)
OrganisationForces for:
global integration & coordination
Forces for: local/national
differentiation & responsiveness
Forces for: worldwide innovation & learning
Philips
Matsushita
Philips: Forces for Local Responsiveness
Figure-5 suggests this maybe Philips’ most challenging force due to consumers’ high
switching-costs, reinforcing the need for rapidly-evolving innovation to satisfy their
demands. Moreover, given European countries’ differing technical-standards and assuming
that certain consumer-groups rejected standardised global products’ homogenized product
design and performance because of the countries’ diversity that Philips’ major markets were
in, e.g. India and China, these growing pressures for localisation encouraged Philips to
provide globally-innovative yet locally-relevant products (matching their decentralised
model) to satisfy various emerging, country-specific consumer-needs in the CE-segment for
healthcare, lighting- Philips Australia created the first stereo-TV, and Philips of UK created
the first teletext-TV.
: of less importance : of high importance : very important
10
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Japanese competitors who were shifting electronics’ production to low-wage areas like
Asia/South-America and simultaneously capturing the audiocassette mass-market, were
threats too, pressurising Philips to abandon its V2000 videocassette format in 1970, due to
Philips North-America deciding to outsource VHS-products being manufactured under
license from Matsushita. This minimised the risk of future financial losses for Philips.
Technological-innovations’ convergences also made Philips dispatch numerous product line-
managers to its most competitive markets, to link product-divisions more directly to markets
abroad and brainstorm new ideas: domestic-appliance and electric-shaver lines moved to
USA and Japan respectively to getting closer to the customers/market-segments. Assuming
this would facilitate interaction amongst them, this would both make: identifying
consumers’ needs easier by being accordingly updated with them, and managers more
globally aware of new competition and evolving technologies and skillsets that they could
acquire later to sustain Philips’ innovative edge.
Matsushita: Forces for Global integration & Forces for Worldwide learning
Global-integration is defined as “business operations’ coordination and control, across
national borders” (Cray, 1984). As increasing post-war globalisation brought convergence in
technological-innovation, Matsushita sought globally-integrated operations to take
maximum advantage of economies-of-scale, by standardising products instead of localising,
which enhanced customer preferences through its now global products/brands offered.
As Kogut (1984) suggests that integrated MNCs gain competitive-advantages from exploiting
differences in national resource-endowments, Matsushita accordingly responded to Japan’s
11
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
rising labour-costs by shifting basic production and assembly-operations to South-America
and Europe’s low-wage countries. With a tightly coordinated network of its standardised
TVs, VCRs, and DVD-plants now in high-cost end markets and low-cost manufacturing-
centers, global-integration rewarded Matsushita with new “cost-savings and global-
efficiencies” (Chen, 2006).
Continued cost-cutting by closing inefficient plants, as part of Matsushita’s VC-21 plan that
included changing old mass-production assembly-lines to flexible manufacturing systems in
Japan and 170 international plants. The systems’ ability of quick, low-cost switching of one
product-line to another created economies-of-scope, improving Matsushita’s cost-conscious
image in the competitive post-war era.
Moreover, Matsushita’s international subsidiaries’ innovative thinking was faltering. So
Matsushita integrated domestic and overseas operations by shifting operational control
nearer to local markets: Japanese headquarter functions relocated to North-America and
Southeast-Asia by fostering R&D partnerships & technical exchanges with other firms to
collaborate on new innovations. Although this required transferring Matsushita’s
manufacturing practices/know-how and process technologies across countries through its
expatriate Japanese technical-managers, this would at least ensure creative ideas and
consistency in product-design/manufacturing, that’s essential in CE. (Figure-6)
However, ‘forces for worldwide learning/innovation’ gained more importance for Matsushita
towards the end 90s, again due to its international subsidiaries’ lack of innovation (Figure-5).
Rising convergences in digital-technologies and high product-development costs pushed
12
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Matsushita to a: licensing agreement with Microsoft in 1998 to use the Microsoft-Windows
CE operating-system in Matsushita's future audio-visual products and personal-computer
devices, “as a means to fill the technology gap” (BB, 2011), and additionally, a strategic-
alliance to innovatively collaborate on projects combining digital audio-visual and personal-
computer technologies. This promised to bring consumers closer to converging digital
technologies’ benefits.
Figure-6.
Own construction. Taken from McKinsey Consumer & Shopping Insight Report, 2012
13
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Strategic objectives and means of building competitive advantage
Both firms’ strategic-objectives were designed according to what the conflicting forces were.
Although multinational-flexibility, innovation and learning, and global-efficiency are all
necessary to help obtain competitive-advantage, not all were equally important to Philips
and Matsushita.
Although Philips’ objectives differed at various different points due to circumstances like
WW2, different CEOs and economic-conditions which led it to renew its strategic intent, its
initially aimed to seek multinational-flexibility by hedging macroeconomic risks against the
forthcoming war and its aftereffects by shifting its research-laboratories that were the core
of its technological innovations to England. Despite this relocation’s high-costs, time/effort,
Philips ensured that its most vital assets were at least protected in a politically-neutral
country against further external threats, temporarily. This would maintain consistency; not
disruptions- in product-development’s planning. Yet the 1930s Depression also caused
countries to impose trade barriers, causing Philips to build local production-facilities in its
foreign markets to ensure its flow of products.
Considering the above, Philips shifted more towards achieving global-efficiency over time,
due to increasing globalisation that saw Japanese competitors capturing the audiocassette
and microwave-ovens’ mass market. As sustainable competitive-advantage is the ability to
offer superior customer value on an enduring or consistent basis, where competitors are
unable to easily imitate the firm’s capacity for value creation (Collis et.al, 1995), to build this,
Philips diversified its portfolio from CE to data-systems and telecommunications, to spread
14
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
risks and widen choice for various consumer types in different markets. Since this
diversification required product-standardisation and thus low-cost production to minimise
these high investments/costs, Philips set up production-facilities in low-cost regions like Asia,
and Eastern-Europe, thus resulting in scale-economies and accordingly, “major cost savings”
(Chen, 2006).
So Prahalad’s Integration-Responsiveness (IR) framework (Figure-7) suggests that Philips lies
here due to its multidomestic strategy, where focusing on external flexibility through
national-responsiveness dominates with strategic decisions decentralized to each country, to
enable adaptation of products, services, and/or products to local/country-specific customer
demands (Ghoshal, 1987). This happened through Philips’ widely dispersed physical and
human-resources (Figure-8), resulting in decentralised control of its sales organisations in
fourteen European countries, China and Brazil.
Matsushita
Philips
Figure-7
15
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
After post-war growth made its own Japanese market’s growth saturated, Matsushita began
seeking global-efficiency in new markets, because “beating their Western counterparts in
operational-effectiveness, they could simultaneously offer: lower costs and superior quality”
(Porter, 1996). Employing these, since global-efficiency involves lowering inputs’ value/costs
or increasing outputs’ values, put Matsushita’s position in Figure-7 under a global strategy
which “views the world as a single marketplace and thus, offers standardized products
(Kedia, 2002)”.
Although in practice, this strategy is employed by firms serving multiple host country
markets with internationally branded goods being produced from a single location- in
Matsushita’s case, Osaka, Japan- nevertheless, Matsushita gained a competitive-advantage
over others by exploiting national differences in labour costs: shifting basic production to
Figure-8
16
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
low-wage regions like Asia/South-America generated major cost-savings and scale-
economies.
As cost-advantages arise from performing particular activities more efficiently than
competitors, activities then are the basic units of competitive-advantage (Porter, 1996). Thus
Matsushita achieved new economies-of-scope upon upgrading its mass-production
techniques to more flexible manufacturing-systems worldwide, because this allowed quick,
low-cost switching of one product-line to another. This flexibility could parallel market-
demands in CE as they change, now allowing Matsushita to enlarge its
product-portfolio/product-lines.
As “most Japanese companies imitate and emulate one another” (Porter, 1996), eventually
Matsushita’s inability to develop innovation overseas started faltering in the 90s, resulting in
purchasing US-based media-entertainment giant MCA Inc., for $6.6 billion, to dominate
technological hardware and entertainment industries’ growing alliance. Thus given software
and hardware technologies’ simultaneous developments, Matsushita obtained movie,
recording and broadcasting industries through diversifying from hardware to software
17
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
through MCA’s acquisition. Obtaining scope-economies from shared investments/costs
across markets, Matsushita’s now possession of high-profile movie and TV-programming to
use for its HD-TV would give it a competitive-advantage over Western rivals Sony (whom
they had lagged behind in audio-visual and entertainment fields).
So here, unlike their European competitors who kept rationalising manufacturing, through
building global brands and then “de-skilling competitors through alliances” (Prahalad, 1996),
Matsushita established that an organisation’s capacity to improve existing skills and learn
new ones may be the most defensible competitive-advantage of all.
18
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Innovation models and corresponding challenges faced
Using local-for-local model based on subsidiary-based knowledge development, Philips leant
on competitive-innovation rather than competitive-imitation (Matsushita), and a culture
that facilitates innovation builds a sustainable, long-term competitive-advantage.
In this model’s context, it required three key capabilities of sensing, responding, and
implementing (BB, 2011) where Philips’ decentralised and independent NOs promptly
sensed and responded to the local consumer preferences/differences- thus positioning them
close to the markets to sense/respond to the differences made it easier to capture the local
target-market after closely identifying their needs. By accordingly adjusting to significant
local-pressures, Philips could customise its product-offerings and marketing/distribution
strategies fittingly for each market through decentralised sales and production-subsidiaries
and implement by collaborating with other subsidiaries to exploit the resulting new products
worldwide.
However, the decentralized-approach caused weak coordination between the independent
product-divisions and NOs, given Philips’ failure to persuade NACP to sell the V200
videocassette-format, who rebelled and sold the VHS. This caused Philips difficulties in
innovating and launching new products for local-markets, when it started lagging behind its
more globally-efficient competitors who captured the audiocassette-market first. Thus only
until integration and knowledge-sharing among units exist, will firms benefit from their
collaborative experiences.
19
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Philips also risked duplicating products, due to lack of communication between subsidiaries.
And inter-subsidiary communication is vital in R&D, to ensure consistency and unnecessary
repetition of ideas. This could have generated unnecessary costs for Philips: due to this
dispersed approach, coordination on different ideas/projects became demanding and
decentralisation made it difficult to create synergies across the organisation and capture the
innovation, given the autonomous business-units.
Matsushita’s center-for-global model suggested that Japan’s already renowned reputation
as one of the world’s best innovators in CE influenced Matsushita to put its headquarters as
worldwide opportunities’ sensors at home-country level itself. Matsushita’s centralised
resources and capabilities were used to create new products and technology in the main
R&D-center to respond, and were implemented globally via subsidiaries to the local markets.
Product-divisions maintained strong operating-control over their offshore operations too.
Unfortunately, Matsushita’s highly-centralised R&D operations and tall structure suggested
inflexibility given its numerous hierarchical levels- this resulted in slow processes to manage
fast-moving change in CE trends and innovation. So when the Japanese economy collapsed
in 2001’s ‘tech-wreck recession’, Matsushita suffered its first quarterly financial losses due to
its lack of speed and efficacy in responding to the external-environment’s technological
changes, and thus failing to sustain its competitive edge.
Although their strategy of depending on other competitors for innovation is risky yet
effective given their strength in imitating competitors’ products, here Matsushita’s
headquarters risked market insensitivity by not being as aware of local happenings in
20
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
consumer-trends -that’s essentially their main role. Basically, centralised control stifled
creativity/innovation at the foreign subsidiaries instead of stimulating it like Philips did, when
this was highly desired for their CE developments overseas.
This reduced their speed of responses to market changes, when Matsushita was forced to
adopt JVC’s own 1975 VHS format, instead of creating its own in the first place. This
concludes that without the right processes to foster the right innovative and adaptive
culture, neither creativity nor innovation can surface.
21
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Organisational-models adopted & means of managing the changes
Philips initially followed a decentralized-federation organisational-model, based on a
multidomestic-strategy whose focus was national-responsiveness. In anticipation of the war,
transferring top managers and research staff to USA and England respectively, and thereby
distributing/decentralising its key assets overseas made subsidiaries more autonomous and
self-sufficient, as this model requires. Having own local plants, Philips’ subsidiaries could
independently modify their products/marketing-tactics to meet widely differing consumers’
needs, e.g. national TV-transmission standards. As this fostered more personal relationships
instead of formal structures, management-style accordingly encouraged more delegation to
occur, eventually creating a “loose federation of Philips’ national subsidiaries; each focused
on its local market” (BB, 2011).
But In 1987, CEO Klugt restructured Philips to globalise both product-development and its
currently decentralised and product-matrix structure into increased control over domestic
subsidiaries, aiming for more efficient scale-of-production. He rationalised Philips’ operations
around the four global divisions instead of the fourteen PDs, assigning a single top manager
over PDs, NOs and an IPC, thereby eliminating dual leadership. This, eliminating inefficient
plants and converting some into International Production-Centers (IPCs) that each served
numerous NOs, consequently increased PD-managers’ control over NO’s and production.
Thus more coordination and growing interdependence between plants and NOs resulted,
Figure 8. Decentralised federation model
22
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
creating higher production-quality and greater innovation (Holt, 1998).
Conversely, Matsushita developed a centralised-hub organisational-model in the 70s to 80s,
underlining its global strategy to capture global scale-economies. Its divisional-structure let
headquarters enforce tight cost/operational control on its foreign-subsidiaries through cross-
border and quality-assurance technology-transfer by expatriating their Japanese technical-
managers, making Matsushita more prompt and effective in reacting to the fluctuating
market-conditions then. This model also concentrated its main assets and manufacturing to
product-development activities at the center, thus Matsushita retained its “culturally and
people-dependent, and communications-intensive management system” (BB, 2011) by also
using its headquarters’ power to control their foreign subsidiaries, given the short
communication channels because of on-the-go, expatriate managers.
Although Matsushita had formed its global-competitiveness based on its centralized
operations, it restructured from centralised to a decentralised organisation during mid-80s,
now focusing on developing innovation in overseas subsidiaries. Thus “Operation
Localisation” was launched to heighten creativity and flexibility in overseas branches’
entrepreneurial undertakings through localising technology/materials to improve
subsidiaries’ expertise, increasing local nationals in key positions overseas, and distributing
capital by shifting production-facilities to low-wage countries. Matsushita also relocated
Figure 9. Centralised-hub model
23
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
regional-headquarter functions from Japan to North-America and Southeast-Asian markets,
consequently enhancing autonomy to subsidiaries and their ability to respond faster to local-
market changes and preferences, because of their now locally-controlled, own market
strategy. Yet what’s interesting is that Matsushita’s management’s started
adapting/responding to local needs only after forty years of international operations.
The road to developing transnational organisations
Simply put, a transnational organisation operates across the world, simultaneously pursuing
a combination of local-responsiveness through customisation, cost-reduction through
standardization and optimum value-chain configuration” (Gupta et.al, 2003). 1990s was
experiencing major changes in the form of new emerging competitors, thus propelling firms
towards adopting this structure.
Flexible, integrative/multidimensional approaches embody transnationals, and this capability
is typically constructed over time as the organisation evolves and learns to deal with various
types of business problems in different overseas locations. Thus through pre/post-war
portfolio-diversification and shifting production-facilities- at specific times, Philips and
Matsushita respectively paralleled transnationals, who retain what works and eliminate
what doesn’t by emphasising scale-efficiencies, whilst sometimes pursuing local-
responsiveness. Judging which factors needed to be prioritised and sacrificed e.g. money,
physical-resources etc. made this difficult.
24
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Both firms also possessed distributed yet interdependent capabilities that characterise
transationals, with internationally-located plants and national-subsidiaries achieving global-
scale through specialising activities. E.g. Philips’ efficient plants were converted into IPCs
whereby management regarded each worldwide unit as a source of skills, capabilities and
knowledge that could be harnessed for the whole organisation’s benefit, that ensured
flexible responses to changing worldwide demand-and-supply in CE-industry.
So although Philips and Matsushita successfully developed transnationals in their own way
by pursuing different strategic actions at different times, ‘‘in reality, it’s difficult to achieve a
pure transnational strategy/organisation because of the conflicting goals’’ (Hill, 2006) and
risks that they still had to consider in their internal and external-environment.
25
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Conclusion
While Philips and Matsushita may be sustainable in today’s CE-industry (Appendix-1) by
competitive standards (e.g. revenue), what strategies worked for them then may not work
now due to ever-changing circumstances like increased globalisation, and more brand-
conscious consumers today etc. Although both firms made errors in their restructuring
whereby certain objectives were not met, more importantly- the transition would have been
smoother had both firms’ employees been given more time to adapt to their new structure,
as is always the case with radical change. Furthermore, while Philips’ post-war attempt to
become global leaders wasn’t too successful- unlike Matsushita- it still had capabilities that
Matsushita lacked to an extent (and vice-versa), e.g. its innovative ability to develop new
technologies, which made Philips successful in the first place. However, as environments
change, Matsushita overtook Philips, who accordingly reacted by implementing a global
model. This highlights that strategy shouldn’t be static, and evolve according to external
factors.
Strategic-fit is key to competitive-advantage because it ensures consistency among
activities, and creates pressures and incentives to enhance operational-efficiency,
consequently making competitive-imitation more difficult. Basically, the main underlying
challenge that both organisations needed to tackle to strengthen their position in CE, was
the creation of coherence and fit between their (internal structure of) headquarters and
subsidiaries. Based on this, both firms’ ‘success’ depends on whether they achieved a right
26
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
fit at the right time by effectively utilising the right resources/capabilities, aligned with their
end goals/objectives too.
Thus long-term visions may exist, but only with the appropriate coordinating and integrating
mechanisms, from top-management to bottom-level employees, can objectives be fully
achieved for long-term success, in both firms.
(Word count: 3298)
27
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Appendix-1
28
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
Matsushita: Updated Sales and Profitability
Source: http://www.slideshare.net/jessekedy/matsushita3-presentation
29
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
References
BB: Bartlett and Beamish (2011)
Chen, R. and Cannice, M. (2006), ‘‘Global integration and the performance of multinationals’ subsidiaries in emerging markets’’. IVEY Business Journal Online.
Collis, D. J., and Montgomery, B. (1995). Competing on Resources strategy in 1990’s. Harvard Business Review, July-August: 118-128.
Cray, D. (1984) ‘Control and coordination in multinational corporations’, Journal of International Business Studies (15): 85–98.
Fritz, J. (2012). Lucintel Performs Competitive Analysis on Top Five Global Consumer Electronic Companies. Available: http://www.prweb.com/releases/2012/12/prweb10214635.htm. Last accessed 12th April 2013.
Ghoshal, S. (1987). Global Strategy: An Organizing Framework. Strategic Management Journal. 8 (5), 425-440.
Gupta, A. and Govindarajan, V. (2003). Global Strategy and the Organization. Boston: Wiley. 156-157.
Hill, C.W.L (2007). Global Business Today. USA: McGraw-Hill. 624.
Holt, D (1998). International Management: Text and Cases. USA: Harcourt College Pub. 844.
Johanson, J., & Vahlne, J. (1993). Management of internationalization. In Z. L. Zambou, & A. M. Pettigrew, Perspectives on strategic change. Boston: Kluwer Academic Publishers. 43–78
Kedia, B.L., Nordtvedt, R. and Perez, L.M. (2002), ‘‘International business strategies, decision- making theories, and leadership styles: an integrated framework’’, Competitiveness Review. 12 (1), 38-52.
Kogut, B. (1984). ‘‘Normative observations on the value added chain and strategic groups’’, Journal of International Business Studies. 15 (2), 151-68.
Porter, M. (1996). What is strategy?. Harvard Business Review. 1 (1), 62-65.
Bartlett, C.A., Beamish, P.W., 2011, Transnational Management: Text, Readings, and Cases in Cross-Border Management , 6th edition, Burr Ridge, IL: Irwin McGraw-Hill.
30
Radia Syed: 008093 International Business Strategy 2 (N13KL2)
31
top related