It is important to state that company CEOs should prepare for the anticipated challenges in their organization to avoid making the loss and losing customers. Evidently, Philips became the leading consumer electronics after the post-war period because it utilized the strengths that existed in the national organizations (NOs). It is vital to indicate that the NOs had significantly increased self-sufficiency, which was critical to responding to the country market conditions as Bartlett (2009) notes. For example, in cases where there were global misunderstandings regarding which television transmission standards, each nation was expected to decide the one to use. Besides, there were variations in consumer preferences and economic conditions in different countries, making the use of NOs vital. For instance, some nations wanted rich furniture, other sleek, contemporary models, and some wanted the rental business to penetrate the market (Bartlett, 2009). In fact, the independence of the NOs gave the company a competitive edge because it was could sense and respond to differences in countries. Notably, the NOs developed their technical capabilities, and the function of the local market conditions was to develop products. Moreover, the NOs handled financial, legal, and administrative matters and the product divisions were expected to handle development, production as well as global distribution (Bartlett, 2009). There was independence concerning the research function and the NOs ensured that it was strongly funded. It is crucial to note that although there was a formal corporate-level structure in Philips, NOs had the real power. The top management board reported directly to the NOs. The representatives of NOs were sent to Eindhoven regularly to ensure that they represented their interests (Bartlett, 2009). To facilitate the work of NOs, the top management frequently visited the NOs. It is imperative to note that the use of NOs in the management reduced the technical and financial leadership of the two Philips brothers because many of them were led by a technical and a commercial manager. However, there were financial managers in some locations. Significantly, the three handled key decisions of the organization. This cross-functional coordination capability was evident down the NOs in many teams, such as front-line, product, product-group-level management teams, and senior management committee of the NOs top commercial technical and financial managers (Bartlett, 2009). The NOs teams demonstrated strong country-oriented views of corporate management. As a result, the company managed to lead the electronic sector.
It is important to state that Philips organizational capabilities became impediments in the 1970s. The structure of the organization lacked a clear definition of the relationship between national organizations and product divisions, implying that it is hard to know who handled what (Bartlett, 2009). In this context, the speed of reaction of Philips was lowered. The structure used by Philips lacked managerial relationship balance between PDs and NOs, which indicated that there was a need to rebalance. The utilization of the NOs did not give the company a global outlook and there was a need to close the least efficient local plants and convert the best into International Product Centers (IPCs), whereby each will be supplying many NOs. The dual commercial and technical leadership also became a hindrance to its success. This is the reason it was separated with the single management team at corporate and national organizational levels (Bartlett, 2009). However, the struggle for power continued, making Philips lose focus. It is important to underscore that NOs had inefficient operations, which yielded the little profit for the company. There were many plants, yet, its products were not attracting customers as before and sales, as well as profits, declined. This was despite the fact that the PDs were given the management responsibilities and NOs were expected to oversee local profits and included in product planning.
Thus, it is crucial to state that a company’s strategies might give it a competitive advantage at one time and as time progresses, it can hinder it from leading as is the case with Philips. This is because of the many developments that are emerging in the contemporary world. In this view, it is recommended that organizations should review their strategies and try to utilize the best that will enable them to thrive in the competitive environment.
- Bartlett, C. A. (2009). Philips versus Matsushita: The competitive battle continues. Retrieved from schallmag.net/wp-content/uploads/2013/01/7306_120705_Case_Philips-vs-Matsushita.pdf