Distinctive Competencies Incompetency ChangePhillips A long track record of

innovations at local subsidiaries, which have developed strong research capabilities in different areas

Self-sufficiency of NOs allowed them to become adept at responding to country-specific market condition

Creation of common market, eroded trade barriers and made NOs less important

Ability to bring products to market began to falter

Company fragmentation presented by the miscommunication between on product introduction and research

Unnecessary overlapping R&D projects were being conducted

Phillips was once force to abandon its superior technical product

Close down least efficient plants and concerting the best into International Production Centers to take advantage of the economy of scale

Replace dual leadership by single management to simplify company structure

Identify company’s core business and sell off the rest

Cut cost in labor and R&D

Matsushita Adaptive operational culture Flood of market driven new

products and outlets Low cost as a result of global

scale efficiency

Highly centralize operations heavily relying on domestic technical support

Lack of leading technological edge and global learning makes it vulnerable to rapidly-changing market conditions and demand in the future

Adopting “operation localization” to help overseas company develop the innovative capability and entrepreneurial initiative as Phillips

Relocate major regional headquarter from Japan to other continent to decentralize operation control nearer to local market

Invest in innovative and high-potential business with its huge capital reserve

Move production to low-cost countries