Philips and Matsushita

In order to gain local advantage, National Organizations (NOs) were allowed to be very self-sufficient while Product Division (PD) was a function of the local market. However, Eindhoven still had 14 Product Divisions to develop, produce and globally distribute Philips’ products. So while allowing for products to be in the final stages tailored to the local markets yet using economies of scale associated with only eight research centers around the globe, Philips was able to achieve the feel of local suppliers while simultaneously being most cost effective.

In recent times there have been four leaders in Philips, all with short terms of control, and with different ideas of the best method for Philips to becoming a global leader. First, was Hendrik van Reimsdijk who saw a vision with few International Production Centers (IPCs) each supplying several NOs. His motivation was to take power from the NOs by giving more to the PD managers. He believed that “joint responsibility...can also lead to operational inefficiencies” (Lightfoot, 1992). After him was Dr. Rodenburg, who for the most part followed what van Reimsdijk had started, but with even more emphasis on simplifying control by combining the management at the NO and corporate levels.

In 1982 Wisse Dekker created even more IPOs with the purpose of becoming even more efficient by closing more smaller plants. Also, he saw the benefit of alliances to share more technology knowledge. He therefore strengthened relationships via joint venture, cooperation agreements or alliances with Control Data Corporation, RCA, Intel, AT&T, Toppan, Kyocera, and BRF. He returned control to the NOs and PDs and intensified joint strategies by creating the Corporate Council made up of the heads of the NOs and PDs. This Council annually met to evaluate four-year strategic product plans developed locally by each NO.

After five years, Cor van de Klugt came into control with the intent to strengthen strategic planning even more. His focus was to become more efficient. He divided Philips into four core businesses: Elcoma, Consumer Electronics, Telecommunications and Data Systems, and Lighting; and two non-core businesses: domestic appliances and medical systems. The first three core businesses were linked strategically, while lighting was seen as very profitable and developed independently of the others. The two non-core businesses were aligned with Whirlpool (domestic appliances) and GE Company UK (medical systems).

Van de Klugt also created the Group Management Committee to develop company policy and greatly restructured the global production divisions to focus on the four core competencies. He believed that the best managers should be located in the most competitive markets in order to inspire new technologies and innovative developments. This action resulted in a firmer control being set on the NOs because decisions were once again being made from the center of the organization.
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