For Philips their process of internationalization began in 1899 when they hired eight to ten export managers who devoted their time to exploring the world for new markets appropriate for Philips’ goods. Then through the early decades of the next century, in hopes of gaining acceptance into local markets, joint ventures in the United States, Canada, France, and other countries, were established. It was at this time that relations with General Electric (GE) were grounded in what was called the “Principle Agreement”. This allowed for an exchange of technology between the two companies and divided the world market into three parts: North America (controlled by GE), Holland (controlled by Philips) and the rest of the world (where both competed).
In order to gain local advantage, National Organizations (NOs) were allowed to be very self-sufficient while Product Division (PD) was a function of the local market. However, Eindhoven still had 14 Product Divisions to develop, produce and globally distribute Philips’ products. So while allowing for products to be in the final stages tailored to the local markets yet using economies of scale associated with only eight research centers around the globe, Philips was able to achieve the feel of local suppliers while simultaneously being most cost effective.
In recent times there have been four leaders in Philips, all with short terms of control, and with different ideas of the best method for Philips to becoming a global leader. First, was Hendrik van Reimsdijk who saw a vision with few International Production Centers (IPCs) each supplying several NOs. His motivation was to take power from the NOs by giving more to the PD managers. He believed that “joint responsibility...can also lead to operational inefficiencies” (Lightfoot, 1992). After him was Dr. Rodenburg, who for the most part followed what van Reimsdijk had started, but with even more emphasis on simplifying control by combining the management at the NO and corporate levels.
After five years, Cor van de Klugt came into control with the intent to strengthen strategic planning even more. His focus was to become more efficient. He divided Philips into four core businesses: Elcoma, Consumer Electronics, Telecommunications and Data Systems, and Lighting; and two non-core businesses: domestic appliances and medical systems. The first three core businesses were linked strategically, while lighting was seen as very profitable and developed independently of the others. The two non-core businesses were aligned with Whirlpool (domestic appliances) and GE Company UK (medical systems).
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