Case Study on "Business Policy Analysis"

Case Study 10 pages (2837 words) Sources: 4 Style: APA

[EXCERPT] . . . .

Business Policy Case Study Analysis

Key events Matsu*****a

The first key event for Matsu*****a was its breakthrough in the Japanese market in the early 1960s with a broad product line and 25,000 shopping points.

One other key event around the same period was the trade liberalization that translated into the company's first internationalization attempts. This process was particularly hard for Matsu*****a because the company didn't succeed in collaborating with local retailers to sell its products, which is why it had to open its own selling point. However, its brands were not known in the American and European markets.

The company's decision to shift part of its production to low wage countries in the mid 1960s was a major step that helped the company avoid the high labor costs in Japan.

In the mid 1980s, overseas subsidiaries that reported to the parent company in Japan started to gain more and more independence, while the headquarters was losing control over those. It was then that Matsu*****a took measures to intensify contact with local managers, by sending Japanese expatriates to overseas subsidiaries for prolonged period of time and by arranging 3 or 4 trips per year to Japan for all foreign managers. These local business units continued to increase their independence over the years.

In the mid 1990s, the company is committing to a general decentralization of local and overseas operations.

In the late 1990s, the company becomes concerned with its overseas R&D activity and starts strategic research partnerships with Chinese Academy of Sciences and located one of its research centers in Silicon Valley.

In early 2000 the company announces the reorganization of its production facilities from individual product control to multi-product production centers.

Key events Phillips

The first major key event for Phillips was the creation of Common Market in 1960. The event led to the erosion of trade barriers. The internal organization as a geographic/product matrix wasn't fit for the new market conditions. At the same time, many of Phillips' competitors relocated production in low wage regions, such as East Asia, which gave those a strong competitive edge.

The following major event was in the late 1980s, when the company decided to focus on core business and leave behind the low return business. The company started to focus more on product divisions, rather than geographic markets. Moreover, Klugt the CEO at that time relocated its most capable managers to the most competitive markets to link products to markets better. Later on, he transferred a large part of the research responsibility to core businesses.

In the early 1990s, Phillips turned its local production facilities in multi-market ones to help the company deal more efficiently with the globalization process.

In 1994, Phillips bets on its innovative capability to boost the company's activity. The corporate strategy pretends to have 40% of its revenue from software, services and multimedia.

The next major key event was switch of interest for East Asia in late 1990s. The company did massive firing in Europe and massive hiring in East Asia. The financial key figures registered positive results for 5 years in a row after several year of "profitless progress."

Finally, Phillips' financial results slow down in 2001 due to economic recession.

Comparison key events

Both companies were affected by the trade liberalization, but in different ways.

While Matsu*****a had a lot to gain from it because the liberalization made Japanese products relatively more attractive compared to the European and American ones, Phillips was faced with a big challenge, due to a loss of efficiency.

Off-shoring production to low wage countries took place faster for Matsu*****a than for Phillips because of its market proximity to countries like Taiwan and because the Japanese government created incentives towards this.

Value Chain Matsu*****a

Inbound logistics and operations. The basic product operations were performed in East Asia where the labor costs were lower than Japan. The final assembly took place in Japan where the complex operations were performed as well, because these operations needed high skills and technology that was missing in the low wage countries. After a while, the company built individual product centers in Europe to serve the region.

Outbound logistics. The distribution abroad was handled by Matsu*****a as it found it hard to cooperate with retailers from overseas markets.

Marketing and sales. The company resorted to aggressive marketing campaign to create brand awareness. Even though the products were manufactured in a few locations to serve many locations, the packaging was adapted to the local content. Matsu*****a managed often to price its product below its European and American competitors, because the labor cost advantages.

Support activities. Basically, accounting planning and general administration were functions centralized in the headquarters. The company struggled a long time to decentralize, however, most of these activities maintained centralized. The human resource-related activities were handled locally, except for top management. Here the headquarters always had a word to say. The technology development was localized in Asia until 2000, when the company started to feel the necessity of local R&D centers.

Value Chain Phillips

Inbound logistics and operations. The initial geographic/product matrix organization implied that business units in each region had independence to organize themselves, because each regional manager had a lot of knowledge about the market he/she was in charge of. Later, the control was switched to product units, as the number of geographic units was reduced to increase efficiency and the managers' expertise lost from its importance. Finally, after reducing further the number of manufacturing units, those were organized to serve multiple markets instead of individual regions.

Outbound logistics. The distribution was made through major retailers and the warehousing was made locally as production units were regional.

Marketing and sales. The marketing activity was quite intense, as Phillips is a major innovator in its industry. The packaging wasn't adapted to the local content and the pricing policy was not very flexible. The Asian competition was roughly based on pricing and Phillips couldn't win such a battle, so its strength was always its innovative power.

Support activities. Accounting, control and general administration were localized in Amsterdam, but the control over business units wasn't a strong one. These last ones had a lot of independence that came with increased accountability. The human resource-related activities were dealt with locally.

Porter 5 forces analysis for Matsu*****a

Entry barriers. Initially, Matsu*****a had trade barriers imposed by WTO, but once trade liberalization occurred, those were removed and Asian firms found it easier to serve the American and European markets. Proprietary product differences were created fast after industry innovators, such as Phillips released an innovation. The distribution activity posed problems and exerted negative pressure on the Japanese company that had to sell its products through own shops. After reaching a considerable size, Matsu*****a operated its production activity with large economies of scale and there were not many the Asian companies that achieved that.

Buyers. On the Asian market, the buyer power was low because firm concentration of the same size as Matsu*****a was low, but on the European and American markets, the situation was different. However, the number of buyers was large enough for those not to have considerable bargaining power. On the Western market, products were sold with a touch of personalization for each product type, namely the package that was adapted to local requirement. Also, on this market, because the customer was more sophisticated, the product quality and post-buy service had to be at higher standards.

Substitutes. The only pressure here was that it was possible for the more sophisticated European or American customer to switch for more expensive products, such as Phillips.

Supplier power. The low wage workers did not have high bargaining power because their number was very large. All other input suppliers did not have high bargaining power either, as the high tech industry was quite developed in Asia and their number was large enough to allow Matsu*****a to switch them easily.

Rivalry determinants. The high tech industry grew exponentially since the 1960s and the consumer had an appetite for high tech products, which increased a lot high tech industry turnover. Product differentiation was one of the strategic approached that companies used to develop competitive advantages over competitors, so the pressure to innovate was big.

Porter 5 forces analysis for Phillips

Entry barriers. Before the Common Market creation, Phillips took advantage of the well established borders to organize its activity regionally and the trade restrictions prevented its Asian competitors from having profitable business in the European and American markets. After those events, Phillips had to face the pressure of Asian competition. Its competitive advantages were: its well-known brand name, good distribution network, proprietary product differences, economies of scale and access to necessary inputs. The pressure came from: high capital requirements to innovate constantly and maintain its products competitive, the incapacity of reducing costs (the activities were run from Europe, which was more expensive than Asia) and the incapacity to reach maturity on the learning curve due to Asian copycat-ing.

Buyer. The number of buyers in Europe and U.S.… READ MORE

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