preview

Cooperation vs. Control

Powerful Essays
In the post-war era, Philips employed a NO (National Organization) structure. The idea was to increase the self-sufficiency of each individual country organization to operate independently from the headquarters and to become adaptive to country-specific market conditions. Philips’ NO structure had great advantages in responding to various country-specific consumer preferences, economic conditions, and different standards. Philips’ NO structure evolved to worldwide geographic structure by encompassing technical capabilities and product development.

Philips’ success during the post-war era is mainly attributed to the NO’s autonomy, the culture, and the corporate accommodation. NOs had an autonomous capability to develop product specific to the local demand. Because Philips employed a worldwide geographic structure, each NO unit acted as an independent company. Because of its autonomy, NOs had the majority control over the product development, the sales, and the operating budget. This enabled NOs to respond quickly to meet the specific changes in local demands and to develop their own products.

Philips brothers set a precedent for the cross-functional coordination. NO’s management structure mimicked the leadership of Philips brothers. A technical manager and a commercial manager led an organization and they had a cross-divisional coordination. The culture permeated the organization and at each level of management. In effect, the culture promoted functional neo-matrix structures within NOs.

The company accommodated NOs to promote autonomy with minimum intervention. The company did not implement an effective control mechanism. Instead, it promoted coordination efforts by providing NOs with supports from management board and ICC (...

... middle of paper ...

...deas in global scale as the chairman of Samsung did since the 2000s.

Philips faced numerous contenders in the consumer electronics market throughout its history and lost its lead in mid ‘80s. One of the strongest contenders of its time was Matsushita. Today, Matsushita faces a formidable contender in its key LCD market. How the story will fan out is remained to be seen. A strong company culture can lead a company to a success. However, as the market conditions change, the company culture must deal with the change. A strong company culture does not change overnight and often takes years to change. It is important for an organization to stay nimble, flexible, and lean. At the same time, the company must foster innovation and creativity. As we witnessed in Matsushita case, an organization can foster innovation through cultural and structural organization changes.
Get Access