Philips China

CHINA

Towards One Philips Program

Norwegian School of Management: Management Control Lecturer: Hanno Roberts

Authors:

Aqsa Butt Assad Hafeez Elisabeth Harvei Eric Osei Torje Fjotland

Philips China

1/

Executive Summary

Philips China Group has witnessed increased growth through Merges & Acquisitions (M&A) and Joint Ventures (JV) since it was founded as a lamp factory in 1891. The company is organized into a matrix structure around its five product divisions, with one corporate division supporting the functions. This growth has effected the organization; profit margins have derailed in 2001 and 2002, there is lack of synergies among the units and a general loss of control and high administration costs. Double line reporting, ineffective governance (or control) structure, lack of responsibility accounting, goal incongruence, lack of communication, personnel and cultural controls problems are some of the control problems that exist in Philips China Group. The main causes of these control problems, we believe, are cultural misfit resulting out of the increasing growth of Philips China, lack of any reporting structure, disparate systems and processes and enforcement of policies and/or strategies making the business units pursue their own opportunistic goals.

Mr. Pratt Hsu, the HR VP has been mandated to implement the corporate actions to deal with the challenges and handle the issues at hand: the TOP program to capture synergies and align business processes, HR challenges to improve cost efficiencies of HR services, motivate employees and make the HR competitive, and lastly corporate culture problems. The need for different organizational set up of the Chinese subsidiaries is therefore imminent for Philips Groups of Companies to capture real value. The following proposed solutions in line with the tasks given to Prat Hsu: TOP Program: Define a vision of a shared service in line with business goals, create a relevant governance model for the...