Entrepreneurship ManagementFailed business venture-

TCL & TTE

Presented by- Antara PaulDrishti SaraswatShreeti Mishra

TCL CORPORATION

• Publicly traded, Chinese electronics manufacturer

headquartered in Huizhou, Guangdong Province, southern

China

• The three listed companies of the TCL groups are :-

TCL Corporation (SZ.000100) on the Shenzhen Stock Exchange

TCL Multimedia Technology Holdings, Ltd. (HK.1070)

TCL Communication Technology Holdings, Ltd. (HK.2618) on

the Hong Kong Exchange

TCL CORPORATION …

• TCL's corporate slogan is "The Creative Life"

• Founded in 1981 and Incorporated in 1985 as TCL

Telecommunication Equipment Co Ltd

• it started to manufacture consumer electronics for the Chinese

market during the eighties, and began to sell overseas in the

2000s

TCL CORPORATION …

• Though a state‐owned enterprise, it was set up as a joint

venture with several Hong Kong investors. Today it sells

products throughout the world under four brand names

THOMSON SA

• Technicolor SA, formerly Thomson SA (NYSE: TCH , Euronext:

TCH) and Thomson Multimedia

• French international provider of solutions for the creation,

management, post‐production, delivery and access of video,

for the Communication, Media and Entertainment industries

• Technicolor’s headquarters are located in Issy les Moulineaux,

near Paris

THOMSON SA …

• Other main office locations :-

Rennes (France)

Indianapolis (Indiana, USA)

Burbank (California, USA)

Princeton (New Jersey, USA)

London (England, UK)

Rome (Italy)

Madrid(Spain)

Hilversum (Netherlands),

Bangalore (India)

Beijing (China)

THE CLIENTS INCLUDE

• Studios

• Broadcasters

• cinema/television production and

• post‐production companies

• network operators (telcos, broadband, satellite and cable

operators)

• a range of professional users of videos

JOINT VENTURE

• In late 2003, China based TCL Corporation (TCL) and

France‐based Thomson SA formed a joint venture under the

name TCL‐Thomson Electronics Corporation (TTE)

• TTE's core product was television sets which were sold

globally

• It also produced computers which were sold only in China

JOINT VENTURE …

• The case discusses the rationale for the formation of this joint

venture. It highlights the problems faced by TTE and details

the reasons why it failed to achieve its objectives

ABOUT THE VENTURE

• March 2006, China based TCL Multimedia Technology Holdings

Limited (TMTHL) had posted a loss before tax of HK$ 98 million

on the total sales of HK$ 8 billion

• TMTHL's core product was television, which accounted for

nearly 88% of its revenues. It also manufactured computers and

audio‐video products

• TMTHL's television business was operated under its

wholly‐owned subsidiary, TCL‐Thomson Electronics Corporation

(TTE)

ABOUT THE VENTURE…

• TTE was the world's largest manufacturer of television sets in terms of volumes

• TTE sold television sets under the brand names TCL (in China), Thomson (in Europe) and RCA (in Asia)

• TTE attributed the loss primarily to falling market demand for televisions, greater competition from other brands and a substantial fall in prices of high‐end television sets in the US and Europe.

ABOUT THE VENTURE…

• The company was not strong in the liquid crystal displays

(LCD) segment and this affected its sales particularly hard

in Europe, where the LCD television market was growing

rapidly

• Though TMTHL tried to improve its flat television business

in 2005 by investing more money, it failed to turn around

this business

ABOUT THE VENTURE…

• The combined loss for North American and European markets in

the first quarter of 2006 was HK$ 210 million on revenues of

HK$ 3.3 billion while the loss was HK$ 779 million on revenues

of HK$ 14.5 billion in the financial year 2005

• TMTHL expected that TTE would break even in 2005 as it was

planning to promote its flat‐panel televisions aggressively.

• TCL's Chairman Dongsheng Li (Li) expressed confidence that TTE

would turn things around by aggressively promoting its flat

televisions in Europe and US

ABOUT THE VENTURE…

• He said, "Flat panel TV is gaining popularity in major TV markets.

Being the leader in the cathode ray tube (CRT) TV segment, TTE

would capitalize on its advantages in the CRT TV segment and try its

utmost best to improve its position in flat panel TV market.“

• However, analysts felt that the path would not be easy for TTE

which was still investing heavily in popularizing the RCA brand and

was in direct competition with big players like Sony and Samsung

RATIONALE FOR THE JOINT VENTURE

• In 1999, Li announced TCL's aim: "Our goal is to create a

world‐class Chinese enterprise"

• TCL's first step in this direction was to enter the US and the EU, two

of the world's premier markets

• TCL had to rely on acquiring companies operating in the EU to

avoid the heavy import tariffs due to the protectionist measures

and heavy anti‐dumping duties levied on Chinese television

manufacturers

RATIONALE FOR THE JOINT VENTURE…

• It realised that it was easy to expand using an already existing

brand rather than introducing and establishing a new brand,

especially in markets like the US and the EU

• Explaining this strategy, Vincent Yan (Yan), CFO of TTE, said,

"It's not just realistic to build a new brand in a mature market

like North America. You just don't have the kind of profit

margin for that..."

TTE’s PLAN

• After mutual consultations, TCL and Thomson established TTE

directorate and appointed Li and Dehelly as Chairman and

Vice‐chairman respectively

• On July 28, 2004, production started under TTE

• TTE planned to turn around its North American and European

operations by the end of 2005 and increase the worldwide sales

to 30 million units by 2006

TTE’s PLAN…

• TCL aimed to be among the world's 500 largest companies by

2010 with annual revenues of around US$ 18 billion

• Some industry experts commented that TCL would have to

increase its sales significantly, if the company was to reach its

goal which was difficult as there were many competitors with

larger market shares

TTE RUNS INTO TROUBLE

• Other than focusing on TTE, in August 2004, TCL's TCTH formed a

joint venture with the loss‐making mobile phone division of the

Paris‐based Alcatel SA

• Alcatel posted a net loss of 74.4 million euros in the fiscal 2003

and 34.8 million euros in the first half of 2004. The joint venture

was called TCL Alcatel Mobile Phones Limited (TAMP).

TTE RUNS INTO TROUBLE …

• TCL paid 55 million euros to get a 55% equity stake in the joint

venture while Alcatel contributed cash and its loss making mobile

phone business worth 45 million euros for a 45% equity stake

• some analysts praised TCL for taking this bold step, others feared

that TCL was overburdening itself as it already had TTE which

required considerable attention

• They felt that TAMP would further affect the company's overall

profitability if not revived quickly.

THE ROAD AHEAD• Analysts said that TTE was one of the examples that Chinese

enterprises were not well‐equipped to manage joint ventures.

Some analysts feared the 'desperation' of some Chinese

companies like TCL that were raring to go global without proper

evaluation of partners

• Industry analysts said that TCL expected the purchase of Schneider

and the joint venture with Thomson to help in expanding its

business in the West

THE ROAD AHEAD…

• In regard to TTE's attempts to shake off the losses in Europe

and the US as soon as possible, some analysts said that

though the company was taking steps to reduce losses by

focusing on the fast growing flat television segment, the low

margins in this segment were affecting its revenues. Others

felt that it would take at least five years for TCL to get global

recognition like Sony or Samsung.

SWOT ANALYSIS

STRENGTH

• Availability of cheap and skilled man power

• Part of a matured industry

• Home to R&D and design centers to global

major

• Good after sales service and wide

distribution network

WEAKNESS (REASONS FOR ITS DOWNFALL)

• Error in Sales and Marketing

• Not well‐equipped to manage joint ventures

• Go global without proper evaluation of partners

• Old‐fashioned and unwieldy

• High Competition

WEAKNESS….

• Lack of Innovative Customer Preferences

• Lack of proper Advertising

• Lack of Communication

• Brand has limited market share compared to

market leaders

• Impact of Home Country

OPPORTUNITIES

• Write Down Your Business Plan

• Focus on your Branding

• Create a Web Presence

• Create an Advertising Strategy

• Create an Advertising Strategy

OPPORTUNITIES….

• Publicity as Key

• Measure, Analyze and Decide

THREATS

• falling market demand for televisions

• greater competition from other brands

• fall in prices of high‐end television sets in the US and

Europe

• not strong enough in the liquid crystal displays (LCD)

segment

• Rising manpower and infrastructure cost

SUGGESTIONS

• Correct Sales and Marketing Policy

• Well equipped to manage joint venture

• Latest fashion and Market

• Sustain Competition

• Innovation

SUGGESTIONS….

• Customer Preferences

• Management Culture

• Impact of home country could have been

reversed

• Better advertising

• Better communication

CONCLUSION

TCL and Thomson SA ended up as a failed venture, due to the following major points-

• greater competition from other brands

• fall in prices of high‐end TV sets in US and Europe

• Weak liquid crystal displays (LCD) technology

• Failure of entrepreneurs to analyze the actual

demand of market

THANK YOU