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1.0 INTRODUCTION Philips and Matsushita are both organization that entitles with consumer electric based industry.

Both of the industry were from two different part of the world where Philips from the Netherlands and Matsushita from Japan. Throughout all the years both organizations had engaged in a different strategy and emerged with different capabilities of the organizations, this is because CEO of each company has to be up to date and change from time to time in order to sustain with the change of the business environment. This report will be discussing about the motivations, means and mentalities of both company when expanding, the conflicting environmental faced by the organization, the strategic objectives and building of competitive advantage of the organizations, innovation models adopted by them and also the organizational models they adopted. 2.0 Methodology In this report the data has been taken from the Case Study of Philips & Matsushita (Transnational Management 5th edition by Mc GRAW), Assumption and analysis result based on the lecture notes, and lastly discussion with lecturer and also course mates. Some extra information were searched online as well. 3.0 The Motivation, means and mentality Philips was founded by Gerard Philips 1892 in Eindhoven, Holland and Matsushita was founded by Konosuke Matsushita in Osaka, Japan. Both of the organization started off with a small business scale and throughout the years Philips and Matsushita had been involving in International Expansion, the motivation for the organization to engaged in the international expansion are market and resource seeking, increasing economies of scale and scope and etc.

These are the factors that motivate Philips to engage in international expansion. The tables below show that different time frame Philips and Matsushita was motivated by different factors;
PHILIPS Marketing seeking & Increasing the Economic of Scale Marketing Seeking & Competitive positioning Resource seeking Market Seeking & Research and Development Learning Capabilities Resource Seeking

1899 1912


1919 1918-1930 1982 1966-1997

1960 1970 1982 1990 1991

Matsushita Research and Development, Market seeking & Increasing the economies of scale Resource Seeking & Market Seeking Competitive positioning Competitive Positioning Resource Seeking Learning Capabilities

Table 1

Table 2

In order for an organization to keep up with the change of the business environment, they must always be updated with the latest news and situation of the business environment and what are the facts that would benefit the organization to act as the motive of international expansion of the business. For each company they will have different views and needs based on the organizations situation and will be motivated by different factors. For Philips, it started off as a small scale economic producing only light bulbs and this created a kind of technology competence for Philips. In the year of 1899 Philips were forced to go abroad for a larger volume to the mass production due to the small size of Holland, Anton was the first export manager that Philips hired to diversify the market such as Australia, Japan Canada Brazil and etc in order to achieve and economic of scale. In 1912, Philips is aware that the industry of electric lamp was getting saturated and moving into Canada, United States and France to build new sales organizations. Philips had begun to broaden its production line in 1918, such as addition of producing electronic vacuum tubes, radio and X-ray tubes. Due to the depression that brought trade barriers; Philips has no choice but forced to build local production facilities to protect their foreign sales of those

products. Generally we see throughout the year Philips has always been motivated by seeking for resources. Matsushita- In the early years of Matsushita has similar strategy with Philips; the company grew rapidly with extremely fast expansion of product line. However, Matsushita had look beyond expanding its product line and the excellent distributions system for the growth of the company and they decided to move towards and focusing on exporting after trying different tactics to boost their sales. In1960s, Matsushita done an expansion through the Colour TV, but due to the increment of the manufacturing cost in Japan Matsushita has no choice but to move to some lower wage countries for production. Matsushita had engaged a change or structure of the operations of the organization to continue improve the business. When applying the motives that both of the companies intended to internationalize, Philips and Matsushita face the means when they are expanding abroad, the organization and the foreign country will have to complement each another. Only by doing this organization can achieve the best situations that benefit the organization either in ownership advantage, location-specific advantage or strategic competencies and also a better understanding of local culture of the country. Every company that went abroad for internationalization have their own level of national responsiveness and global integration and the organization must also bare in mind that they must have organizational capabilities before they decided to internationalize. Philips had engaged in a Joint Venture mode with a local partnering company in year 1912, this is one of the strategy that helps organization to gain local acceptance. Whereas, Matsushita was focusing on the export market that led them towards the systematic distribution system. Besides, in1960s Matsushita shifted their production to low wage countries for resource seeking. When an organization engaged in internationalization and by considering both the internal and external factors of business the

organization would soon led to a shift to transnational, especially when the organization has high global integration and also high national responsiveness. From the case study, Philips was holding on to the Multinational perspective and Matsushita hold on to the Global perspective. Multinational simply means that the condition of a company that develops their strategies according to the different location in different places and the production is expanded into several parts of the world. But the products were produced according to the preference of the consumer and also the spending ability condition of the local. In Philips case, the TV that they supplied to various countries was varied one from another and due to the reason that Philips was only focusing on their production only it has a low global integration. Where on the other hand we can clearly see that Matsushita has engaged in a wide and global production line and it had high global integration but low national responsiveness, they also have several headquarters in different countries; that led them towards having a Global perspective. Figure 1.0 The Process of Internationalization

4.0 The conflicting environment for Philips and Matsushita When organization engaged in internationalization, it is important that organization is clear with the situation of the environment either internal or external. There are three conflicting sets of external demands which are as follow; Forces for global/cross-border integration and coordination, Forces for local/national differentiation and responsiveness and lastly the forces for worldwide innovation and learning. Philips and Matsushita had engaged in these forces at different time, and it also led to some changes of the company structural context in order to keep up to the change and deal with the forces that are changing over the time. It is also important for both organization to identify their core competence in order to capture the value and stand of their business. However, organization needs to recognize the external forces which are within the organization these external forces give a huge impact to the business system function. The forces that an organization would normally face would be customers, competitors, government, political, technological, creditors and etc all these would affect the business directly or indirectly. Besides, it is also very important that the firm can successfully operate in the global market integration and considering implementing the economies of scope and scale. It is one of the very important factors for both of the organization because this could be used to determine the position of their business in the market and it also act as a motivation for global coordination. Philips had engaged and tried to maximize the economies of scale by ensuring all production and manufacturing were done locally, this is just to protect its foreign sales. Philips had also engaged with other forces which are interrelated to the business such as the consumer behavior and preferences, cost and products and also the technological advances in expansion of their company in other countries. The decision for Philips to first expand business to Holland had based on the consideration of to ensure the increment in trade. Philips can manage their

companies independently and it also seems to have a strong force on the global integration dealing with the other global competitors. After Philips switch from centralized to decentralized it had also broaden its product line and at the mean time also expending the market by internationalizing. The other force that affects the firm is the responsiveness of the consumer. The forces of local differentiation and responsiveness were not only caused by the differences in culture among the nations but also about the government demands towards these new firms. For each organization that decided to enter to a new foreign market, they will first need to identify their consumers preference and buying behavior so that they would be able to understand and strategize their products or production to match the local market which is known as the local responsiveness. Besides each country has a different level of laws and regulation that organization have to bind with when they decided to engaged in expansion in the specific country and these companies would have to implement certain strategies in order to gain acceptance of local consumer. For Philips case the organization was cleaver because they had enter to a new country by using the mode of local joint ventures with one of the local players this had made life easier for Philips in order for them to penetrate into the local market, they was also able to determine their competitions around the globe. Whereas Matsushita had engaged in a different way of approach they had a very wide range of products and they have a very low rate in national responsiveness and they did not diversify their products according to the countries that they had supplied. Matsushita had however shifted some of its production to some lower wage countries in order to cut down the cost. Last but not least the third force that will affect both the organization and as well as the others that engaged in internationalization will be the force of worldwide innovation and learning. Due to globalization theres always improvement in the technological advancement, this is one of the

reason that led to a change of structure and business production, in order to sustain and keep up with the environment change. As the technological advancement will cause impacts on the product life cycle for the organizations, since that the technology has kept improving which helps to shorten of product life cycle of a product. Furthermore the cost of Research and Development were increased because of the increasing of innovation to ensure quality and creation of new products. Philips and Matsushita were both fast moving multinational corporations; they had to deal with a lot of innovations after the World War II. Matsushita was faced a bigger challenge as they had a wide range of products and development compared with Philips, this fast learning and technological advancement will force Matsushita and Philips to restructure their organization in order for them to survive from the change of the business environment. When both Matsushita and Philips had responded to restructure their production and organization it also automatically led them towards a higher level of responsiveness of national preference to increase their demand. This eventually led to a shift of both organizations mentalities to transnational. These are the respond of both Philips and Matsushita responded towards the conflicting environments. 5.0 The Strategic of Organization and means of building competitive advantage. For each organization that operating in the world, every one of them will have their own goals and objective to achieve, same goes to both Philips and Matsushita. Both of these companies would probably have a common goal to achieve which is to be the world leading electronic industry in innovation and productions. In order to achieve the goal, Philips and Matsushita will have to attain their strategic objectives which is needed in every company that providing specific detail and plans on how to operate the companys business in order to reach the goal. The three strategic objectives that are well known are as follow;

a) Global Scale Efficiency It is very important for a company to adopt the right strategies and also an effective decision making in the management to improve the standardization and productivity of products. Based on the case study Matsushita had engaged with this Strategy, this is because they had standardized their production to increase the efficiency of producing. By standardizing the production of the company, it is also to increase the efficiency of producing as it does not need to respond to changes. It is also clearly seen that during the 1960s Matsushita had shifted some of basic production to low wage countries to lower the cost of input. Besides, Matsushita are known to have strong Research and Development team that help them obtain better technology to achieve efficiency and also lowering cost of input. b) Multinational Flexibility This strategy is basically to see the ability of an organization to adapt to the new environment, risk managing and also exploiting the possible opportunity. Philips had obtained this strategy, as we can clearly see that they had used an easier way to adapt to a new environment which is through joint venture. By using this strategy Philips can gain a local acceptance by getting a local partner in their business. Besides, Philips can easily manage the risk and spot opportunities when they have a local player that understands the market well to help them out. Matsushita engaged in more wholly own subsidiaries but engaging with local worker that could help them with the local experiences but it is very limited knowledge they can adopt. c) Building World-wide Learning This strategy shows the need for an organization to develop a world-wide learning system, it is important for an organization to learn from its international exposure and opportunities and

exploit learning. Both Philips and Matsushita had engaged in international expansion and both had learn from it exposure by seeing how they keep changing time to time and expanding the product range that they have.

Figure 3- The strategy Positioning of Philips and Matsushita

The means for both of the company to build their competitive advantage are as follow; National Differences, Exploiting scale and scope of economies. For each different countries theres different element being offered thats where national differences came in as the organization would need to exploit the differences in different resources and also market potential. For Philips and Matsushita chooses to shift production to low wage countries and also penetrate the country with the market that obtain possible opportunities. Besides, both of the companies also exploit scale of economic as we can see that they tried the best way to obtain low cost production by producing a large volume or getting a low wage country to produce for them. Philips was engaged in mass production in Holland to reduce cost whereas Matsushita shifted certain basic production to low wage countries. The table below shows the engagement of strategic for Philips and Matsushita.

Philips Global Scale Efficiency Multinational Flexibility Building World-wide Learning Engaged Fairly 6.0 The innovation model adopted and challenges faced.


Limited of Engagement

Both Philips and Matsushita obtain different innovation models, due to the competition that each of them faced it will lead them to obtain different innovation model to compete with the competitor in the market. The three key capabilities that are required to compete in the innovation area are The Sensing capability, responding capability and lastly implementing capability. For Matsushita, it had adopted the center for global model as the a structure as we can see the centralized hub will be the one undergo R&D of product and the idea will then be implemented to the globe via subsidiaries to the local market. This model faced problems such as it is insensitive to the market and also the subsidiaries might not be committing to the centralized hub. On the other hand, Philips adopted the locally leveraged innovation model as a structure for the business, as we can see that Philips engaged with a lot of expansion through joint venture and they have high local responsiveness, which they clearly see that each subsidiary have their unique capabilities and are shared on worldwide basis. This model would often threatened by a reason not invented here; this is a problem that Philips would face.

7.0 The Organizational models adopted by Philips and Matsushita. Each organization adopted different model as they are influenced by its organization history, production and also the management, this could be one of the core competencies of the organization if the model can operate successfully and achieve the objective of the organization Philips and Matsushita both adopt different organizational models in the case, Philips adopted decentralized federation and Matsushita adopted centralized hub. Philips has dispersed resources as they had engaged in expansion with a joint venture mode it is clearly seen that the decision making are no longer centralized and they allow each nation subsidiaries to make decision to respond to the local needs, but all these flexibility would let to inefficiency. On the other hand Matsushita adopted the centralized hub model, this is clearly seen that because, the centralized hub in Japan would be the hub that undergo all R&D and also new product development and all the other subsidiaries will only be implementing to the market.
Figure 4 Central Innovations in Centralized Hub Model

Figure 5 Local innovation in Decentralized Federation Model

8.0 Did Philips and Matsushita successfully achieve transnational? Based on the case study, Philips and Matsushita has yet to develop into a transnational organization, this is simply because to become a transnational organization the company must fulfill the characteristics as follow, Global efficiency, national responsiveness and also worldwide innovation and learning. In order to achieve the goal to be Transnational, organization should first attempt to solve the limitation of the three organization archetypes by building and legitimizing multiple internal perspectives which simply means to develop strong management group such as strong nation subsidiary management that can manage it own without depending the main company, capable global business management and also worldwide functional management. Besides it is also important for an organization to have dispersed and interdependent capabilities and physical asset this is because the national units can achieve global scale by specializing their activities and they are able to tap into important developments of market and also technology advancement. Last but not least the robust and flexible integrative process, it is important for organization develop the ability of management to differentiate its operating relationship and also the ability of decision making in different perspective. For Philips

and also Matsushita they had yet to reach the transnational stage as Philips could use to work on the global efficiency whereas Matsushita should improve on their National Responsiveness. 9.0 Conclusion In conclusion, both organizations had done a good job through the time frame of the case study especially Philips. Philips had undergo a smart choice of business strategy and management as they know it is better to focus on lesser product where Matsushita was in a different situation that they have too much to focus on from product range to business operation. Philips had sustained through WWI and WWII and yet they are still standing as compare to Matsushita with a wide range of products.

10.0 References 1- Barlett, C. and Beamish, P.W. (2011) Transnational Management: Text, Case and Readings in Cross- Border Management, (6th Ed) Mc Graw- Hill International Edition. 2- Dr. Ngat Chin Lim Eunice (2012) International Business Strategy 2 , Session 1 : Expanding Abroad- Motivations, means, and mentalities. 3- Dr. Ngat Chin Lim Eunice (2012) International Business Strategy 2 , Session 2 : Understanding International Context- Responding to Conflicting Environmental Forces 4- Dr. Ngat Chin Lim Eunice (2012) International Business Strategy 2 , Session 3 : Developing Transnational Strategies Building- Layers of Competencies 5- Dr. Ngat Chin Lim Eunice (2012) International Business Strategy 2 , Session 5 : Creating Worldwide Innovation and Learning Exploiting Cross- Border Knowledge Management 6-Dr. Ngat Chin Lim Eunice (2012) International Business Strategy 2 , Session 6 : Developing a Transnational Organization- Managing Integration, Responsiveness and Flexibility 7- Rekha S., Aeron Lai. (2010). Philips versus Matsushita. Available: Last Accessed 4th April 2012

8-Scott C., Christina C., Maureen S. (2009) Philips Vs Matsishita, Available: Last Accessed 4th April 2012

Table of Content 1.0 2.0 3.0 Introduction Methodology The Motivation, means and mentality 1 1 1,2,3,4

4.0 5.0

The conflicting environment for Philips and Matsushita The Strategic of Organization and means of building competitive advantage.

5,6,7 7,8,9,10


The innovation model adopted and challenges faced.



The Organizational models adopted by Philips and Matsushita.



Did Philips and Matsushita successfully achieve transnational?


9.0 10.0

Conclusion References

13 14

Executive Summary In this report the case of Philips and Matsushita will be studied based on the text and lecture notes. The motivation means and the mentality of each company will be discussed and also conflicting environment that they faced. There will also be discussion of strategies, innovation models and also organization model that both Philips and Matsushita adopted and lastly the conclusion. All these findings are based on the textbook, lecture notes and also discussion between lecturers and course mates and also some extra information from the internet.

Analysis Report Of Philips & Matsushita.