Essay About N.V. Philips And Market Acceptance

Philips
Philips
Philips versus Matsushita:
The Competitive Battle Continues
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 first decade of the 21st century, however, both companies experienced major
challenges to their historic competitive positions and organizational models. Implementing yet
another round of strategic initiatives and organizational restructurings, the CEOs at both companies
were taking their respective organizations in very different directions. At the end of the decade,
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 Gerards brother, Anton, an excellent salesman and
manager. By 1900, Philips was the third largest light-bulb producer in Europe.
Technological Competence and Geographic Expansion
While larger electrical products companies were racing to diversify, Philips made only light-bulbs.
This one-product focus and Gerards 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substantial reserves for replacing outdated equipment.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.
Hollands small size soon forced Philips to look aboard for enough volume to mass produce. In
1899, Anton hired the companys first export manager, and soon the company was selling into such
diverse markets as Japan, Australia, Canada, Brazil, and Russia. In 1912, as the electric lamp industry
began to show signs of overcapacity, Philips started building sales organizations in the United States,
Canada, and France. All other functions remained highly centralized in Eindhoven. In many foreign
countries Philips created local joint ventures to gain market acceptance.
910-410 Philips versus Matsushita: The Competitive Battle Continues
In 1919, Philips entered into the Principal Agreement with General Electric, giving each company
the use of the others patents, while simultaneously dividing the world into “three spheres of
influence.” After this time, Philips began evolving from a highly centralized company, whose sales
were conducted through third parties, to a decentralized sales organization with autonomous
marketing companies in 14 European countries, China, Brazil, and Australia.
During this period, the company also broadened its product line significantly. In 1918, it began
producing electronic vacuum tubes; eight years later its first radios appeared, capturing a 20% world
market share within a decade; and during the 1930s, Philips began producing X-ray tubes. The Great
Depression brought with