Philips versus Matsushita A New Century, a New Round

Throughout their long histories, N.V. Philips (Netherlands) and Matsushita Electric (Japan) had followed very different strategies and emerged with very different organizational capabilities. Philips built its success on a worldwide portfolio of responsive national organizations while Matsushita based its global competitiveness on its centralized, highly efficient operations in Japan. During the 1990s, both companies experienced major challenges to their historic competitive positions and organizational models, and at the end of the decade, both companies were struggling to reestablish their competitiveness. At the start of the new millennium, new CEOs at both companies were implementing yet another round of strategic initiatives and organizational restructurings. Observers wondered how the changes would affect their long running competitive battle. Philips: Background In 1892, Gerard Philips and his father opened a small light-bulb factory in Eindhoven, Holland. When their venture almost failed, they recruited Gerard’s brother, Anton, an excellent salesman and manager. By 1900, Philips was the third largest light-bulb producer in Europe. From its founding, Philips developed a tradition of caring for workers. In Eindhoven it built company houses, bolstered education, and paid its employees so well that other local employers complained. When Philips incorporated in 1912, it set aside 10% of profits for employees. Technological Competence and Geographic Expansion While larger electrical products companies were racing to diversify, Philips made only light-bulbs. This one-product focus and Gerard’s technological prowess enabled the company to create significant innovations. Company policy was to scrap old plants and use new machines or factories whenever advances were made in new production technology. Anton wrote down assets rapidly and set aside substantial reserves for replacing outdated equipment. Philips also became a leader in industrial research, creating physics and chemistry labs to address production problems as well as more abstract scientific ones. The labs developed a tungsten metal filament bulb that was a great commercial success and gave Philips the financial strength to compete against its giant rivals.