Philips vs. Matsushita Case

Greg Tensa

1. How did Philips become the leading consumer electronics company in the world post war era? What distinctive competencies did they build? What incompetancies did they build? Prior to World War II, Philips had created a culture of embracing technical innovation. On the production side, Philips was a leader in industrial research, and scrapped old plants in favor of new machines or factories whenever advances were made. On the product side, strong research enabled the company to broaden its product line, starting with light bulbs but growing into vacuum tubes, radios and X-ray tubes by the 1930s. Because Holland was such a small country, Philips was forced to start exporting in the early 1900s in order to have enough sales volume for its mass-production facilities. Philips evolved into a highly centralized company with decentralized sales and autonomous marketing in 17 countries. Political events in the world during the 1930s forced Philips to change into a truly multi-national company. First, the depression caused countries to erect trade barriers and enact high tariffs, forcing Philips to build local production facilities in the foreign markets they served. Second, in anticipation of World War II, Philips transferred its overseas assets into trusts in Great Britain and the U.S. They moved the bulk of their research staffs to England, and their top managers to the United States. With these assets, the national organizations (NOs) became selfsufficient during the war, skilled at responding to conditions in country-specific markets. In the post-war environment, the NOs had a great advantage in being able to sense and respond to differences in their local countries, and eventually product development became a function of local market conditions. Philips was able to exploit their competencies in research and localization