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4-1 Philips versus Matsushita: The Competitive Battle Continues1.How did Philips become the leading consumer electronics company in the world in the postwar era? What distinctive competence did they build? What distinctive incompetencies?Because of small domestic market, Philips was forced to go abroad early on. This made them explore international business much earlier than other companies. With World War II in sight, Philips had shifted a large part of their company abroad. National Organizations learned to understand their customers and adapt their business locally (local responsiveness) to country-specific market conditions. During the post war era, Philips gained success, and the company was able to adapt to country-specific market conditions. It helped Philips to expand to other countries, and it also generated wide volume of sales. Philips also developed National Organizations(NO’s) in different countries, which helped to serve other markets easily. NO’s were built after the Second World War. They were helpful to distribute products to the customer while taking care of specific customers’ needs as well as country and market needs. They greatly increased self-sufficiency. The company’s change to a multinational company in the 1930s was also a specific point when Philips was the leading electronics company. The way that Philips became the leading consumer electronics company is thanks to focusing on one product rather than diversifying in early days. Therefore, it became the leader in industrial research. And it had independent national organizations. It is because theyfit the country-specific market conditions. Also, they built their own technical capabilities to address local market conditions. Related with prior efforts, it enforced specific research to markets by enhancing the R&D budget. To recap, their competencies were the ability to adaptin Local market conditions, strong national organizations, employee centric values, 14 product divisions(PDs), and NOs built their technical capabilities and product development Philips.But Philips had incompetencies, too. Its product division had no real power. NO ignored main company’s welfare and focused on local profit only. Also, too many factories over the world caused the problem. Because of that, the cost became higher, such as outsourcing. There were also no economy of scale in manufacturing. Although its many technological innovations, the ability to bring products to market was weak.In conclusion, Philips became the leading company due to their early internationalization, local responsiveness, protection of assets abroad during World War II, strong capabilities in manufacturing, and innovation. However, the case shows that Philips’ business environment was changing and needed to be addressed through organizational and strategical changes. After the postwar-boom, Philips lost their lead as they struggled to keep up with the changes.