tcl multimedia

7/25/2019 Tcl Multimedia

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TCL MULTIMEDIA

The Case Study


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Prelude

This Case Study is about an Electronic EnterpriseTCL Multimedia

A Chinese distributor who ro! a Audiotape!anuacturer "ain pro!inence in the #orld by theirCultural $ierarchy and A""ressi%e approach& TCLbeca!e !ost do!inated Electronics and #hite

'oods brand in the #orld& #ith their a""ressi%eStrate"y they not only li!ited the! till South(EastAsia but also e)panded to Europe* A!erica+s and allo Asia&

In this process they not only o%erca!e se%eralproble! but also rise top o all& TCL partnered with

Tho!son Enterprise an ,rench Enterprise to or! TCLTho!son Enterprise -TTE. in a /oint 0enture ownin"123 !ar4et share o the co!pany& The dealstren"then TCL+s technical and co!petiti%e positionin the world !ar4et&

TCL* and si!ilarly pro!inent co!panies in

China* are in the oreront o China5s e!er"ence asone o the world5s ree!inent econo!ic owers&


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FACTS


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#orld Tele%ision Production In the 7819* U&S& Co!panies C:S* ;CA and


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Alon" with radio cassette players* portable audio de%ices and0C;s* o C;T tele%ision were the !ainstay o consu!erelectronics @r!s into the 7889s* when di"ital technolo"ies

be"an to e!er"e& In 7stCentury LCD and Plas!a Display panels had started to

replace C;T tele%ision sets and co!puter !onitor in U&S&*Europe and /apan

In the 7889s* the a%ailability o standardi6ed at(panel and0ideo(Inte"rated Circuit -ICs. opened the !ar4et beyond he

%ertically inte"rated @r!s that pre%iously do!inated 0ideoprocessin" technolo"y&

Many new !anuacturers relied on the ri"inal Desi"nManuacturin" -DM. orders to other* this shit ro! hea%yC;Ts to ,lat(Panels also lowered shippin" cots&

/apanese !anuacturers stopped producin" C;T* while

Chinese !anuacturers produced both C;T and LCD or e)portand to supply the "rowin" do!estic !ar4et&

Prior to the Tho!son acBuisition TCL ran4ed Third in the #orldby nu!bers o sets sold at 79&2 !illion units&

A!on" Do!estic !anuacturers* TCL co!peted intensely withChanhon"* ?on4a and S4yworth or Chinese sale& =one had asi"ni@cant !ar4et share ad%anta"e&


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TCL ;I'I= A=D ';#T$

TCL was ounded in 78> as an audiotape !anuacturer&ne o the ounder Li Don"shen" had led the @r! intoseries o consu!er electronics product lines re!ainedChair!an in 99&

TCL+s production o handsets or @)ed(line telephones

"a%e the co!pany a reputation or Buality& TCL also sold under the Ton"li brand audio eBuip!ent

!ade in a /oint 0enture with $on" ?on" @r!& An audio research and de%elop!ent -;FD.* depart!ent

was launched in 788* ocusin" on productde%elop!ent and product eGciencies&

TCL be"an to de%elop a national distribution syste!ater atte!pts to sell its audio eBuip!ent ounderedwhen lar"e distributors* state owned* pro%ed unwillin"or unable to support the co!pany products&


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The distributors pri!ary interest was in turno%er and cash inhand and they did little i any product pro!otion&

Distributors lost interest in the product as soon as retailerspurchased the in%entory&

TCL also launched its @rst ad%ertisin" and !ar4etin" eHorts in788(788J&

In788 under the #anpai -?in".* brand& TCL be"an to sellcolour Tele%ision that were produced by $on" ?on" based /oint0enture partner Chan"chen"& TCL continued to purchased T0s5ro! Chan"chen" on a EM basis or do!estic sale throu"h7881&

TCL+s T&0& Sale were not due to any strate"ic oresi"ht and the

business went into a slu!p& TCL chair!an Li had a "ood relationship with the head o

Chan"chen"& Chan"hen" lac4ed a license to produce T&0& In China * so Mr& Li

secured one and started to "et an order ro! Chan"chen" tosell the!&


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In 7881* the head o Chan"chen" died and his wie decidedto sell the business* at the ti!e TCL did not had resources to

buy so TCL EM relationship with Chan"chen" ended andhad to build their own production acilities&

In 7881 TCL paid $? K 79 !illion to or! a /oint 0enturewith $on" ?on" !anuacturer LU?+s Industrial to produceT&0& In Shen6en&

TCL !aintain a controllin" interest in the 0enture*

e%entually buildin" a new Shen6en actory and !o%in" its ;F D operations into the old one& The deal also includedLU?+s tele%ision actory in 0ietna!&

TCL was a!on" the ew !aor Chinese @r!s to establishdistribution beore !anuacturin"&

TCL chose two pro!isin" distributors in e%ery county whose

culture and !ission were close to TCL and wor4ed closelywith the! to crat a !ar4etin" and sales plan&

Unli4e orei"n !ultinational who tar"eted custo!ers inChina+s wealthier coastal pro%inces * TCL built nationalco%era"e&

,ro! 7888* TCL be"an to inte"rate what had pre%iouslybeen isolated capabilities in production ; F D and


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In 999* TCL ran4ed Third in China* but were way behindleaders Chan"hon"&

In 99* TCL ca!e atop partly throu"h inte"ration* partly

by increased ; FD spendin" and partly i!pro%edproduction eGciencies&

Accordin" to


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;'A=I


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P;EATI=SI& ,inancial Mana"e!ent

TCL+s centrali6ed @nancial !ana"e!ent was Conser#ati#e and Stale&

Centrali6ed borrowin" "a%e TCL access to better

rates& All re%enues were orwarded to the centre* thou"h a

ne"otiated percenta"e o local sales was retained to@nance local sales operations&

TCL reached a"ree!ent with :an4 o China and theCo!!ercial and Industrial :an4 o China to pro%ide

real(ti!e settle!ent and trans!ission o unds ro!local oGces to headBuarters&

Speed was also o the essence or recei%able& TCL !a)i!i6ed pro@ts throu"h hi"h sales %olu!e

and ti"ht recei%able !ana"e!ent&


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TCL outstandin" recei%ables a!ounted to ;M: 79!illions on ;M: 79 :illions o sales& This was the bestin China e%en toppin" Sony and Sa!sun"& It was

TCL+s two pri!ary bench!ar4s& In 99J* Multi!edia paid ;M: 19*999 in @nancial ees

on ;M: J&1 billion in re%enues&

II& Supply(Chain and Production

Mana"e!ent

In 99* Multi!edia e!ployed so!e >9 people insourcin" includin" J inco!in" Buality control in!ana"es in $ui6hou&

:ecause Supply(Chain Mana"e!ent TCL !ade ;M:99 !illion while others lost their !oney& TCL in%entory turns e)ceeded those at its Chinese

peers reachin" J& ti!es in 99 and &J ti!es in99&


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:etter orecastin" also allowed TCL to carry proportionatelyless in%entory than Chan"hon"&

TCL were astest in the business at 7 days betweenpurchasin" and production& Losses ro! !aterials were less and were caused by

chan"in" product speci@cations and eatures ater partswere already bou"ht&

III ;FD and Product Inno%ation

TCL prided itsel on rapid product and process

inno%ation& TCL cost structure was lower than those o its bench!ar4*

Sony and Sa!sun"& TCL !ade pro@table use o older technolo"y they don+t do

collaborati%e research&


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TCL e)celled at !a4in" cabinets and =on(at(paneldisplays* and ;FD "oals included increasin"

production throu"hput and !atchin" desi"ns toconsu!er taste&

TCL %alued speed did easibility* sourcin"* desi"n* ;FDand production all in one !onth&

I0 Mar4etin"

TCL ca!e late to !ar4etin" * the distinction between

sales and !ar4etin" was not clear& TCL !ar4eters had de%eloped stron" database on

consu!er purchasin" beha%iour&


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TCL di%ided China into our cate"ories 7. The lar"e

auent cities( :eiin"* Shan"hai* 'uan"6hou*Shen6hen& . Cities such as Chen"du* =aniin" andQian& .The less de%eloped cities& J. counties&

Most product !ar4etin" initiati%es were local*appealin" to local taste&

TCL !ana"ers de%oted little ti!e to the

de%elop!ent and o a corporate brand& Insteadthey acted opportunistically to capitali6e on!ar4et trends&


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I=TE;=ATI=AL EQPA=SI=

TCL+s international e)perience be"an in 788>* when ittoo4 o%er the LU?+s actory in 0ietna!&

Then production in the Philippines* Indonesia andThailand&

TCL also had J93 share o the Pa4istan* South Aricaand Sri Lan4a T&0& Mar4ets& Success in 0ietna! "a%e TCL con@dence to "o on to

South East Asia& They were so busy they did not worryabout enterin" U&S& F Europe&

The run up to China #T entry !eant that TCL had to

be ready or international co!petition& ,irst TCL were a 'uan"don" co!pany and aware o

International opportunity second do!estic and TCLwere top @%e* but that was not already had a certaindo!estic oundation to build upon&


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The /uly 788>* ,orei"n e)chan"e crisis in South EastAsia reduced TCL e)ports throu"h $on" ?on"& That

led TCL to "o direct to understand local de!and andreduce %olatility&

TCL chose or International sales products with the!ost ho!o"enous consu!er purchasin"characteristics across countriesN Mobile Phone andTele%ision* #hite 'oods and consu!er electronics

sales* se"!ents in which international taste were!ore %aried were let or sale within China only&

Usually TCL too4 !aority sta4e in local /oint0entures & TCL also preerred niche and local !ar4etsto national co%era"e&

TCL too4 its ti!e to understand the local culture

beore enterin" the !ar4et& It also !o%ed !oredeliberately&

TCL initially wor4ed with partners in Moscow and the;ussian ar East to be sure that TCL product eatureswould suit local tastes&

$al o TCL+s ;ussian sales were !ade under its own

brand and $al were sold on EM basis&


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:eyond South(East Asia

In 997* TCL+s !ana"ers be"an tal4in" to potentialpartners in ?orea* the United States and /apan aboutways to !ount a !aor push into western !ar4ets&

TCL hired so!e retired !ana"ers ro! Toshiba*Matsushita and L' to ad%ise us* to help plan our

"lobali6ation& TCL produced and sold 78*999 colour T&0+s to

e!er"in" !ar4ets outside China accountin" or 73 othe "roups total sales&

In U&S& Distribution channels were !ore sophisticated& In Europe low(cost !anuacturers such as TCL ra! up

a"ainst antidu!pin" laws& TCL tried to enter the European !ar4et in 78>8* but

antidu!pin" policies basically 4ept TCL out&


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In =orth A!erica also* TCL sales throu"h distributors were

disappointin"& TCL chose to "o around these barriers throu"h!er"ers and acBuisitions& In 99* TCL acBuired Schneider* 'er!any+s se%enth lar"est

T&0& Producer or Euros >& !illion& TCL !ana"ers had correctly percei%ed that the EU T&0& Sector

would consolidateN older !anuacturers were loo4in" to

escape the constraints o hi"h operatin" costs andpartnerin" with Chinese !anuacturers loo4ed attracti%e&

TCL underline its uniBueness* custo!er ocus* careule)pansion and no co!petin" direct sales presence in the EU&

TCL planned to rehire 799 Scheider e!ployees to operatetwo o the @r!s three production lines&


20/30

End o Septe!ber sales within Europe reached Euros

9 !illion but at the ti!e Li was still hopin" or Euros799 !illion or 99* on the basis o upco!in"contracts despite Scheinder+s declinin" share&

TCL had not yet turned around Scheinder+s loss!a4in" operations&

In late Septe!ber 99J* TCL did not renew the lease

on Scheinder+s production acilities& In 99* TCL spent K !illion to buy ' 0ideo in the

U&S&* a 799( person *K 99 !illion co!pany that soldaudio and portable audio eBuip!ent to retailers suchas ;adioShac4&

TCL sold CD players to ' 0ideo on an EM basis*

Mainly they ha#e a good 0no(ledge o- saleschannels/%


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T$E D;A'= TI'E; PLA=

Tele%ision beca!e TCL+s bi""est business in 7888 andro! 999 TCL e)ecuti%es tar"eted annual "rowth o 3to 979&

TCL in 99* e!bar4ed on a conscious policy ointernationali6ation encapsulated by the Dra"on Ti"erPlan& The plan stipulated that by 979* TCL would bea!on" the world+s top Three T0 and handset !a4ersand within China* a!on" the Top three producers oInor!ation Technolo"y* #hite 'oods and Dryers* Li"htSwitches and ,i)tures* Electronic Co!ponents* and thedistribution o CD and D0D dis4s&

In99 TCL was already China+s lar"est distributor oCDs and D0Ds* includin" Sony and #arner Musicproducts&


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I Tho!son 0enture

In /anuary 99J* TCL and Tho!son si"ned ana"ree!ent creatin" TTE a /oint 0enture -/&0&. thatco!bined tele%ision assets o each&

TTE would sell Tho!son brand sets in Europe* ;CAsets in =orth A!erica* and TCL and Tho!son T0se%erywhereelse&

TTE oGcially started operations in Au"ust 99J* andLi Don"shen" was an oGcer De La LegionD*Honneur in septe!ber* the hi"hest honour,rance had yet bestowed upon a Chineseentrepreneur&

TCL owned 123 o TTE throu"h TCL International*The $on" ?on" listed subsidiary o TCL 'roup&

The TCL brand do!inated* another J3 ro!Tho!son Rs73 ro! !ar4et share or its ;CA brandin the A!ericas* and >3 ro! Tho!son+s >3!ar4et share in Europe&

TCL would also pay Tho!son royalties or its use oTho!son(patented technolo"y&


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In 7887(788 TCL were procurin" a lot o parts andtechnolo"y ro! Tho!son so Tho!son understood TCLRsand the "rowth o TCL&

There was so!e di%isi%eness between TCL and Tho!sonbecause Tho!son wanted 73 o TCL+s o a new /0 thatwould include TCL sales channels&

Ater suspendin" tal4s with Tho!son* TCL+s CE de%oted hisattention to @ndin" another 'lobal Partner&

Philips at one point oHered ;M: billion or TCL salesnetwor4& Thou"h TCL reected the oHer& :ut still Philipswanted to DM or the! because their !anuacturin" costin China were too hi"h&

Philips DM reBuire!ents were %ery strin"ent& TCL learned a lot ro! Philips about Plannin"*

Co!!unication* Production* uality Mana"e!ent* andperations& #hile TCL was wor4in" with Philips* Tho!son !ana"ers held

with Chan"hon" and ?on4a that "a%e the! a !ore realistic%iew o their own bar"ainin" position with respect to theChinese @r!s&

Tho!son was pri%ati6ed in 788> and in 99 its consu!erelectronics di%ision lost Euros 7J !illion on re%enue o


24/30

TCL thereore returned to TCL and a"reed to its ter!s& TCL+s deal with Tho!son in so!e ways rese!ble Leno%o+s

K 7& billion purchase o I:M+s PC di%ision in Dece!ber

99J& Leno%o PCs would be !ar4eted throu"h I:Ms worldwide

distribution and sales networ4& Leno%o also recei%ed the ri"ht to use the I:M na!e on its

PCs or @%e years& The deal !ade Leno%o the world+s third lar"est PC !a4er

behind DELL and $P* with re%enues o about K 7 billionon 7J !illion units& This a!ounted to about a third o theChina PC !ar4et and 23 o the "lobal PC !ar4et&

The "oal was to double pro@ts in three years and displaceDell and $P as nu!ber two by 979&

/ust as Leno%o anticipated with I:M PCs* or the short ter!at least TTE would ocus on sales o the predo!inantproduct* the C;T set&

TCL want to create %alue in consu!er products* sell hi"h!ar"in products at the hi"h end* reduce costs byincreasin" unit sales %olu!e* and run an eGcient supplychain&


25/30

II Loo4in" ,orward

TCL !ana"ers distin"uished both co!petiti%e andinte"ration challen"es ahead o the!& They percei%ed theirstron"est co!petitors as L' and Sa!sun" not @r!s ro!Taiwan or /apan&

Chinese co!panies are still behind in technolo"y* but theirbi""est ad%anta"e is e)ibility and ,inesse&

Proble!s in India* ;ussia* Sin"apore* Me)ico and LatinA!erica* where TCL operations o%erlapped with Tho!son+s&

TCL ai!ed to eli!inate unnecessary costs* beco!e !orea""ressi%e and pra"!atic and i!pro%e supply chaineGciency&

TCL hired ?&S& Cho* a South ?orean e)ecuti%e* to head up the

inte"ration eHort& Cho had pre%iously o%erseen theinte"ration o Sa!sun"+s purchase o the assets o ASTco!puter* a US @r!&

TCL+s cost ad%anta"e were clear& TCL are lar"e but notstron"&

To support TCL+s o%erseas operation* China+s E)port(I!portban4 !ade the co!pany two loans* includin" one ;M: 1


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SWOT

ANALYSIS


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I Stren"ths

Prior to the Tho!son acBuisition * TCL ran4ed rdin the#orld by nu!ber o sets sold at 79&2 !illion units&

TCL was China+s leadin" producer o LCD displays

TCL+s production o handsets or @)ed(line telephones"a%e the! a reputation or Buality& TCL was a!on" the ew !aor Chinese @r!s to

etablishbeore !anuacturin"& TCL+s T0 sales e)ceeded ;M: 799 !illion in 788 and

"rew Buic4ly in 7881 to ;M: 7 billion once TCL did its

own !anuacturin"& TCL "rew throu"h acBuisition and also unctioned as

lo"istics and distribution centres & TCL built national co%era"e&


28/30

TCL+s success actors were ,irst anticipatin" !aor chan"es inT0 production& Second inno%ati%e learnin" and Third was astron" sales networ4&

TCL or"ani6ed sales into 2pro%incial le%el co!panies thato%ersaw 712 sales oGces in leadin" cities&

TCL has an i!!i"rant culture& TCL chair!an LI re%ealed TCL !ana"ers as Ti"ers & TCL !ana"ers listed the co!pany li!ited scale and

technolo"ical capabilities relati%e to "lobal co!petitors* a

hi"her liabilities(to assets ratio than its peers* and a relati%edearth o e!ployees with international e)pertise&

TCL corporate structure was co!ple)& TCL operated ei"ht business unitsN Multi!edia* %erseas

:usiness* Teleco!!unications* $o!e Appliances PersonalCo!puters* Consu!er Electronics Co!ponents and CDOD0D

distribution& TCL or"ani6ed broadly as si) unctions as !anuacturin"*

;FD* sourcin"* Supply* Product Plannin" and @nance and ouroperatin" plator!s Inor!ation Technolo"y* $u!an;esources* Strate"ic Plannin"* and si) Si"!a&


29/30

TCL Centralised ,inancial !ana"e!ent was Conser%ati%eand Stable&

Speed was essential or TCL or recei%able& Due to Supply(chain !ana"e!ent TCL !ade ;M: 99

!illion were their co!petitors lost their !oney& TCL pride itsel on rapid product and process inno%ation& TCL cost structure was lower than those o its bench!ar4s*

Sony and Sa!sun"& TCL %alued Speed& TCL were ,irst to produce #eb T0* sur"e(protected T0* and

ener"y(sa%in" T0s& TCL did easibility* sourcin"* desi"n* ;FD* and production

all in one !onth& It was pro@table& TCL !ana"ers de%oted little ti!e to the de%elop!ent and

use o a corporate brand& Instead* they actedopportunistically to capitali6e on !ar4et trends&


30/30

TCL also preerred =iche and Local !ar4ets to =ationalco%era"e&

TCL !ana"ers were clear that they were learnin" ro!the ailed internationali6ation strate"ies o otherChinese @r!s* which in their %iew had been tooa""ressi%e&

TCL hired so!e retired !ana"ers ro! Toshiba*Matsushita* and L' to ad%ise TCL to help the!"lobali6ation&

TCL produced and sold 78999 colour T0s to e!er"in"!ar4ets outside China* accountin" or 73 o the"roups total sales&

In Septe!ber 99* TCL acBuired Schneider* 'er!any+sse%enth lar"est T0 producer* or Euro s >& !illion&

TCL underlined its uniBueness* costu!er ocus* careul

e)pansion* and no co!petin" direct(sales presence inthe EU&

TCL spent K !illion to buy 'o 0ideo in the UnitedStates&

Tele%ision beca!e TCL+s bi""est business* TCLe)ecuti%es tar"eted annual "rowth o 3&

TCL strate"y was to create %alue in consu!er

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