Why Were the Changes So Hard for Both Philips and Matsushita?

Philips and Matsushita

Why were the changes so hard for both Philips and Matsushita?

Both Philips and Matsushita have encountered obstacles in trying to re-align their organizations to where they wanted it to be. For Philips, the historical legacy of World War Two and the decentralization of its operation, prove to be a challenge. Philips organizational matrix created a conflict and had to be constantly re-shaped to properly function. Philips started out with one product instead of attempting to develop newly and innovative products. This approach was successful at that time but failed to see the advantages to produce other products to remain competitive. The company did not move as quickly as did Matsushita in entering a lower wage market. As a result of this slower integration into the low wage market, Philips lost its competitiveness. Furthermore, Philips was late at outsourcing its manufacturing. It also had a low profitability which created little room for errors. Another reason, for the change being difficult for Philips was due the shuffling within the organization to become more client focus.

The strategy was to increase administrative centralization, to reduce product costs, to build an economy of scale in production and to augment operational efficiency. To implement those changes, it would entail numerous complications for Philips despite repeated attempts at closing factories, consolidating departments and concentrating on its production. Despite its efforts, the expected result for the company was not reached and remains with less profit margins and facing possible bankruptcy in the 90's. The later effect from this change was to re -structure the organization by implementing layoffs, re-sizing the plants, to focus on the sale of uneconomical units and to focus on marketing. Overall, Philips was a great organization but lacked the ability to deal with the change in competiveness and the international environment. Their cost to produce the products was relatively higher than Matsushita.

The issues that Matsushita had to deal with were similar to Philips. Matsushita was dependent on the thinking process of its subsidiaries. The tradition at Matsushita was keen on the thought process of lifetime employment. The managerial style was highly centralized. Another reason for the struggle of Matsushita was a lack of innovation. There focus was on previous technology. The core weakness for the company was the power of central organization. The power was exerted by the central organization; thus, lowering the innovation from the regional innovation. The research and development