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Questions!
What
were
Philips
Interna8onaliza8on
strategies
over
the
decades
(especially
pre-
and
post-1960s)?
Examine
it's
development
over
,me
Examine
the
Interna,onaliza,on
strategy
and
organiza,onal
structure
Look
for
the
reasoning
and
side-eects
What
organiza,onal
structure
do
you
think
would
t
best
Philips'
strategy
and
product
por?olio
today?
Propose
one.
Corporate
Strategy
Philips
case
Todays Agenda
1. BACKGROUND
2. INTERNATIONALIZATION
STRATEGY
3. ORGANIZATIONAL
STRUCTURE
4. REASONS
AND
SIDE
EFFECTS
5. NEW
ORGANIZATIONAL
STRUCTURE
1. BACKGROUND
Corporate
Strategy
Philips
case
4
More decentralizing, par8ally due to impending war Build on strength of NOs because of bombings in Holland NO/PD-matrix structure
Closed inecient plants, around 38 layos, high compensa8on by law Focused more on core business PDs more decision power Reduced mgmt. board R&D concentra8on
1892-1930
1930-1960
1960-1982
1982-1990
1990-2001
Low-wage electronics manufacturing Lots of innova8on but low market shares Yellow Booklet; disadvantage of PD/NO- matrix Concentra8ng products
100
factories
closed,
68
layos
Target
to
increase
ROA
from
17
to
24
%
Elimina8ng
the
PD/NO-matrix
40
%
increase
in
adver8sing
Performance
goes
up!
6
2. INTERNALIZATION STRATEGY
Corporate
Strategy
Philips
case
7
Global
Transna8onal
Interna8onal
Low
Mul8na8onal
Low
High
Market Impera8ve;
Foreign ins8tu8ons give access to unique and valuable knowledge Access to key development people, enables research, development and innova8on Access to key patents abroad
Knowledge Impera8ve;
Managers take personal interest in foreign ac8vity Interna8onal rms amract talents Career opportuni8es abroad mo8vate the organiza8on
Management
impera8ve;
Corporate
Strategy
Philips
case
10
Ins8tu8onal
Performance
standards
Na8onal
priori8es,
economic
and
social
policies
Localiza8on
Localized
customer
needs
Customer
preferences
Local
knowledge
and
exper8se
Corporate
Strategy
Philips
case
11
3. ORGANIZATIONAL STRUCTURE
Corporate
Strategy
Philips
case
14
WW2 and decreased sales during the 60s, increased power of NOs
Loca8ons
NO
1
PD
1
Products
PD
2
PD
3
PD
4
REAL
POWER
.
.
.
NO
2
NO
3
NO
4
15
REAL POWER
17
During 1970s the responsibility tilting towards PD Dene
rela8onship
between
NO
&
PD,
and
pin
point
responsibility
Increase
PD
control
Decrease
#
of
products
and
introduce
scale
produc8on
Close
least
ecient
local
plants
Start
Interna8onal
Produc8on
Centers
(IPC)
Corporate
Strategy
Philips
case
18
Continued decrease in profit during the 80s force Philips to close even more plants, go offshore and reduce products even more
Loca8ons
NO
1
PD
1
Products
PD
2
PD
3
.
.
.
NO
2
NO
3
NO
4
REAL POWER
19
At 1982 the responsibility is given even more to PD Close 40 of 200 inecient plants in Europe Focus on some main businesses and acquire knowledge were needed Start oshore manufacturing PD was the nal decision makers S8ll declined sale and stagnated prot
20
Close to bankruptcy in 1992 forced Philips to focus the business even more, and increase their innovativeness
Loca8ons
NO
1
PD
1
Products
PD
2
PD
3
.
.
.
NO
2
NO
3
NO
4
REAL POWER
22
1990
Philips
was
almost
bankrupt
Addi8onal
68
000
employees
were
laid
o.
Every
NO
want
to
protect
their
unit
Focusing
resources,
by
selling
parts
of
the
businesses
Low
eciency
compared
to
Japanese
rms
Be
more
innova8ve
Cost-curng
and
standardiza8on
lead
to
ignoring
demands
(product
myopia)
Corporate
Strategy
Philips
case
23
In 1996 businesses were sold off, they increased their presence in Asia and changed their structure which resulted in positive ROA
Loca8ons
NO
1
NO
2
Philips
NO
3
NO
4
1
Division
1
PD
Division
2
Division
3
Division
4
Division
5
Division
6
Division
7
Products
REAL
POWER
Corporate
Strategy
Philips
case
24
PD 2 PD 3
1996
Sold
40
of
120
major
businesses
(focusing)
Need
of
more
simple
and
structured
marke8ng
and
manufacturing
organiza8on
to
compete
with
asia.
Produc8on
to
low
wage
countries,
more
concentrated
in
asia.
100
Bus
&
7
divisions
instead
of
21
PDs
and
NOs
Focusing
on
marke8ng
&
brand
Posi8ve
return
Corporate
Strategy
Philips
case
25
2001 -> Outsourcing produc8on with high costs First loss since 1996
26
Lower structural costs Increased protability Concentrated produc8on Investments where it mamers to fuel future growth
S O
Helpful
Internal
Layos are causing huge expenditures Problems with controlling opera8ons of dierent businesses in dierent countries Reluctance of NO managers
External
Opera8ng in elds where compe88veness is very concentrated Irreversible loss of some product divisions (sold o)
W T
Harmful
28
Reasoning
NO
had
too
much
power
Need
of
scale
Globaliza8on
Weak
global
compe8veness
Losing
market
shares
Poor
performance
Crea8on
of
the
Common
Market
and
eroded
trade
barriers
Corporate
Strategy
Philips
case
29
Reorganiza8on layos caused huge expenditures Unan8cipated loss $2.5 billion Replacement of the president and half of the management board
Side-eects
Irreversible loss of some product divisions Opera8ng in a fast changing environment, where new products are introduced within small space of 8me Reluctance of NO managers
30
Healthcare
Consumer
lifestyle
Sales
Manu-
facturing
R&D
Ligh8ng
Sales
Manu- facturing
R&D
Sales
Manu- facturing
Sales
Manu- facturing
R&D
LO 1
LO 1
LO 1
LO 1
STAFF
STAFF
STAFF
STAFF
STAFF
STAFF
STAFF
STAFF
STAFF
STAFF
STAFF
LO 2
LO 2
LO 2
LO 2
LO n
LO n
LO n
LO n
STAFF
Sales
R&D
LO 1
STAFF
STAFF
LO 2
STAFF
LO n
Growth
geographies
are
all
geographies
excluding
USA,
Canada,
Western
Europe,
Australia,
New
Zealand,
South
Korea
and
Japan
Corporate
Strategy
Philips
case
34
Product R&D
Marke8ng
Manufacturing
HR
Sales
Questions?
39
BACK UP SLIDES
Corporate
Strategy
Philips
case
40
Philips
1990
Ghoshal
Bartlem:
The
Mul8na8onal
Corpora8on
as
an
Interorganiza8onal
Network
(AMJ,
1990)
41
42