southwest airlines
...ilips established PolyGram in 1972, and acquired Magnavox (1974) and Signetics (1975) in the United States. Acquisitions in the 1980s included the television business of GTE Sylvania (1981) and the lamps business of Westinghouse (1983). The 1990s was a decade of significant change for Philips. The company carried out a major restructuring program to return it to a healthy footing. And more recently it has been concentrating on its core activities. Today, Philips is at the leading edge of the digital revolution, introducing world-class products that are helping to improve people's lives as we continue into the new millennium. Management Structure Board of Management The executive management of Philips is entrusted to its Board of Management under the chairmanship of the President/CEO and consists of at least three members (currently four). The members of the Board of Management have collective powers and responsibilities. They share responsibility for the management of the Company, the deployment of its strategy and policies, and the achievement of its objectives and results. Group Management Committee The Group Management Committee consists of the members of the Board of Management, Chairmen of product divisions and certain key officers. Members other than members of the Board of Management are appointed by the Supervisory Board. The task of the Group Management Committee, the highest consultative body within Philips, is to ensure that business issues and practices are shared across Philips and to implement common policies. Supervisory Board The Supervisory Board supervises the policies of the executive management (the Board of Management) and the general course of affairs of the Company and its affiliates and advises the executive management thereon. The Supervisory Board, in the two-tier structure prescribed by Dutch law, is a separate and independent body from the Board of Management. Philips’ strategy Philips will increase profitability through re-allocation of capital towards opportunities offering higher returns leverage the Philips brand and our core competencies in healthcare, lifestyle and technology to grow in selected categories and geographies build partnerships with key customers, both in the business-to-business and business-to-consumer areas continue to invest in maintaining world-class R&D and leverage our strong intellectual property portfolio strengthen our leadership competencies drive productivity through business transformation and operational excellence CASE PROBLEMS To trace the roots of Philips’ current troubles, one has to go back to World War II. Until then, the foreign activities of Philips had been run out of its head office in Eindhoven. However, during World War II the Netherlands was occupied by Germany. Cut off from their home base, Philips’ various national organizations began to operate independently. In essence, each major national organization developed into a self-contained company with its own manufacturing, marketing, and R&D functions. Another major feature of Philips’ organization was the duumvirate form of management. In most national organizations, top-management responsibilities and authority were shared by two managers – one responsible for “commercial affairs” and another responsible for “technical activities.” Throughout the company there seemed to be a vigorous, informal competition between technical and sales managers, with each attempting to outperform the other. All above problems were not affecting the company, not until 1960s. Due to the efforts of the General Agreement on Tariffs and Trade (GATT), trade barriers fell worldwide. In addition in Philips’ home base, Europe, the emergence of the European Economic Community, of which the Netherlands was an early member, led to a further reduction in trade barriers between the countries of Western Europe. Also, around the same time a number of new competitors emerged in Japan. Taking advantage of the success of GATT in lowering trade barriers, the Japanese companies produced most of their output at home and then exported to the rest of the world. The resulting economies of scale allowed them to drive down unit costs below those achieved by Western competitor such as Philips that manufactured in multiple locations. This significantly increased competitive pressures in most of the business areas where Philips competed. Furthermore, due to technological changes, the cost of R&D and manufacturing increased rapidly. Moreover, the pace of technological change was declining and product life cycles were shortening. This gave companies in the electronics industry less time to recoup their capital investment before new-generation products came along. Finally, as the world moved from a series of fragmented national markets toward a single global market, uniform global standards for electronic equipment were beginning to emerge. This standardization showed itself most clearly in the video-cassette recorder business, where three standards initially battled for dominance – the Betamax standard produced by Sony, the VHS standard produced by Matsushita, and the V2000 standard produced by Philips. The VHS standard was the one most widely accepted by consumers, and the other eventually abandoned. This significant defeat was partially caused by the decision of its own North American national organization, over the objections of Eindhoven, to manufacture according to the VHS standard. ALTERNATIVE SOLUTIONS If Philips wanted to survive, it would have to restructure its business radically. It cost structure was high due to the amount of duplication across national organizations, particularly in the area of manufacturing. We would suggest several strategies to solve their problem. Those are Multidomestic Strategy, International Strate...