1. Read the case on Philips NV. 2. Why did Philips’ organizational structure mak
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Question
1. Read the case on Philips NV.
2. Why did Philips’ organizational structure make sense in the 1950s and 1970s? Why did this structure start to create problems for the company in the 1980s?
3. What was Philips trying to achieve by tilting the balance of power in its structure away from national organizations and toward the product divisions? Why was this hard to achieve?
4. What were the points of the organizational changes made by Cor Boonstra? What was he trying to achieve?
5. In 2008, Philips reorganized yet again. Why do you think it did this? What is it trying to achieve?
6. Write three pages comparing the Hyundai and Kia experience and the Avon experience including what you assess are the negatives or positives to each of their strategies.
Explanation / Answer
Why did Philips’ organizational structure make sense in the 1950s and 1970s? Why did this structure start to create problems for the company in the 1980s?
The start of War World II, Holland’s Philips Electronics already had a global presence. This happened because Holland was occupied by Germany doing the war, its national organizations in countries such as Britain, Australia, and the United States gained considerable independence in their operations during this time. Although after the war, each national organization was in essence became its on self-contained entity that was responsible for much of its own manufacturing, marketing and sales. This was particularly interesting because during this time most of the R&D activities were still conducted at Philips’ Holland headquarters. By the 1970s came into play, this organizational structure started to show flaws mainly because it involved major duplication of activities around the world, particularly in manufacturing, which basically created a high-cost structure (Hill).
What was Philips trying to achieve by tilting the balance of power in its structure away from national organizations and toward the product divisions? Why was this hard to achieve?
Philips was trying to achieve greater scale economies and thus lower costs by establishing international production centers, which were under the direction of the product divisions. The problem Philips faced in trying to change its structure at this time was that most senior managers had come up through the national organizations.
Therefore, the company was loyal to these managers and tended to protect their independence (Hill).
What were the points of the organizational changes made by Cor Boonstra? What was he trying to achieve?
When Boonstra became CEO in the mid-1990s, he tried to streamline and reorganize the organization’s structure replacing the company’s 21 product divisions with just 7 global business divisions, making them responsible for global product development, production, and marketing. The division heads reported directly to Boonstra, while the national organizations reported to the divisions (Hill).
In 2008, Philips reorganized yet again. Why do you think it did this? What is it trying to achieve?
The new CEO at the time believed that Philips was still not sufficiently focused on global markets and that the company continued to underperform its global rivals. So he reorganized the company into three global divisions: healthcare, lighting, and consumer lifestyle (which included the company’s electronics businesses). The three divisions were responsible for product strategy, global marketing, and shifting production to low-cost locations as means of gaining scale economies and lowering costs (Hill).
Reference
Hill, C. (2014). International business: Competing in the global marketplace (10th ed.). Boston: McGraw-Hill/Irwin.
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