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Case 4-1: Philip vs. Matsushita: A New Century, a New RoundPhilips (Netherlands) built its success on a worldwide portfolio of responsive national organizations while Matsushita (Japan) based its global competitiveness on its centralized, highly efficient operations in Japan. Philips Background •Technological Competence and Geographic Expansion-While other companies were racing to diversify Philips made only light-bulbs which enable the company to create significant innovations. -Company policy was to scrap old plants and to use new machines or factories whenever advances were made in new production technology. -Philips also became a leader in industrial research, creating physics and chemistry labs to address production problems as well as more abstract scientific ones. -Holland’s small size soon forced Philips to look beyond is Dutch borders. In 1912 they started building sales organizations in U.S., Canada and France. All other functions remained in Eindhoven. -In many foreign countries Philips created local joint ventures (General Electric in North America). -Philips began evolving from a highly centralized company to a decentralized sales organization. (broader production line) •Philips: Organizational Development-The management board decided to build the postwar organization in the strength of the national organizations (NO). Their greatly increased self-sufficiency during the war had allowed most to become adapted to responding to specific market conditions.→they were highly independent in decision making. -In this environment the NOs had a great advantage. -While NOs took major responsibility for financial, legal and administrative matters, 14 product divisions were formally responsible for development, production, and global distribution. The research function remained independent. -While the formal corporate-level structure was represented as a type of geographic/product matrix, it was clear that NOs had the real power. -Each NO regularly sent envoys to the Netherlands to represent its interests. -Within the NOs, the management structure mimicked the one of the Philips brothers. -The elite group of managers identified strongly with each other and with the NOs as a group and had no difficulties in representing their strong, country-oriented views to corporate management. •Philips: Attempts at Reorganization-New technologies etc. demanded larger production runs than most national plans could justify, and many competitors were moving production to low-cost countries.