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  • 28 December 2012

    Shereen Tong tells Alisha Haridasani how VTech – the world’s leading maker of electronic learning toys and cordless phones – stays competitive and relevant in the rapidly changing world of consumer technology

    TOY STORY

    Shereen Tong Group chief financial officer, VTech

    Success ingredient

    Photography by Samantha Sin

  • December 2012 29

  • 30 December 2012

    e have 10,000 workers here,” says Shereen Tong, group chief financial officer at VTech, as she sweeps her hand across a bird’s eye view mod- el of the company’s campus in Dongguan that would not be out of place in Silicon Valley.

    “And, here is our InnoTab,” she says, proudly pointing at the global bestselling electronic learning product for children dis- played in the company’s showroom.

    “And this is our most popular phone,” she explains, picking up a demonstration hand- set from the hundreds displayed on the other side of the room.

    As she continues to introduce the dif- ferent products that VTech specializes in, waltzing around the room with the proud

    confidence of an athlete, it’s clear that this company, this showroom and this job are Tong’s passions – it’s what she knows best and where she loves to be.

    “VTech is not just a manufacturing com- pany; we also have sales offices around the world – in the U.S., Canada and Europe – and we have our own brands. When I first joined, I realized VTech is an amazing company be- cause it covers the whole supply chain start- ing from producing the products to selling it to the end user,” explains Tong. “It’s chal- lenging and that’s what attracted me.”

    Prior to joining VTech and almost imme- diately after graduating from City University Hong Kong, Tong started her career in the accounts departments of Hang Seng Bank. A

    short while later, she switched to work with BNP, the French bank.

    In 1992, Tong landed a job at insurance and investment management giant Prudential, also in the accounts department where her love for the profession grew exponentially.

    “When I was working in the banks, I used to find accounting boring because I used to think it only involved preparing monthly re- ports,” she says. At Prudential, however, Tong was also preparing investment reports for each fund, which she found fascinating.

    At the same time, she studied part time to earn her certified public accountant qualifi- cation in 1994. That was the catalyst in her career, propelling her from accountant at Prudential to chief accountant at VTech. “It

    “VTech is not just a manufacturing company; we also have sales offices around the world – in the U.S., Canada and Europe – and we have our own brands.”

    Success ingredient

  • December 2012 31

    was a really huge step up and a completely different field compared to my previous plac- es,” Tong says.

    As chief accountant, her fresh perspec- tive helped her execute an idea that revolu- tionized the way VTech functioned. “When I joined VTech, everything was quite manual – we didn’t even have a cash flow or financial forecasting mechanism,” Tong explains. At the time, VTech would look at historical data such as the monthly profits and losses and cash flows without producing any forward- looking projections.

    Within three years Tong and her team had established a forecasting tool not just for Hong Kong but for the company’s global reach. “We also switched to using a single

    bank for all our overseas subsidiaries.” With these foundations in place, VTech

    has been able to grow aggressively. According to the firm’s 2012 annual report, profits grew by 4.2 percent year on year to US$1,784.5 million compared with US$1,334.9 million a decade earlier.

    Tong didn’t stop there. She continued studying part time while at VTech and earned a master of science degree in infor- mation technology from Hong Kong Poly- technic University in 1999. When Tong was promoted to group CFO in 2004, she was put in charge of IT and human resources as well as the financial aspects of the company.

    Behind the sharp, strong façade, Tong laughs or smiles when her achievements are

    played up. “A lot of people in my generation were studying part time,” she said, almost coyly. “It was very common back then.”

    Being better than good Today, almost three VTech products are sold every second in 90 different markets around the world. This year, the company shipped 45 million handsets and 38 million electronic learning products worldwide. It is in such a solid position, Tong says, that the strength in itself is its greatest challenge. “We are very good already,” says Tong.

    VTech’s InnoTab products have been featured on several top gift lists for 2012 in newspapers and websites in the United States, United Kingdom, Ireland, Australia

    A PLUS

  • 32 December 2012

    and Canada. But VTech doesn’t plan to rest on its lau-

    rels. “We need another breakthrough,” Tong acknowledges. The group has been produc- ing innovative electronic learning products for children since the 1980s, such as child- friendly laptops and, most recently, educa- tional tablets.

    In addition, its cordless residential phones arm has a 31 percent market share around the world, making it one of the leading firms in that field. The firm as a whole churns out more than 100 new products for the market every year thanks to vibrant research and development centres in Canada, Hong Kong and China.

    However, there are two intrinsically linked global trends that could thwart VTech’s boom in both areas: the increased

    use of mobile gadgets, including the Apple iPad, and the decrease of landline usage. Re- search from Strategy Analysis reveals that globally, there are almost 1 billion smart- phone users and, according to the Pew Re- search Center, nearly half of the adult popu- lation in the U.S., a crucial VTech market, own a smartphone.

    In terms of tablets, figures from the ma- jor player, Apple, are indicative of trends: 34 million iPad units have been sold in the U.S. since its launch in 2010.

    These trends raise the questions about why children would want an InnoTab above an iPad or why customers will go on buying VTech’s residential handsets. “The big dif- ference between the InnoTab products and iPads, for example, is the focus on the learn- ing features,” Tong responds.

    VTech, she adds, has a library of more than 200 downloadable learning games, e-books, music and videos specifically for children, which makes the product safe and thus attractive for children and parents alike. Furthermore, parents don’t have to spend as much money and can protect their own expensive gadgets from the clumsy hands of a child.

    VTech says it is getting around the issue of low landline usage by installing Bluetooth in selected products. This allows users to sync their mobile phones with their residential handsets and use them to answer calls to their mobiles. “I have one of those at home,” says Tong excitedly, as she explains the mechanisms of the handset. The user then doesn’t necessarily need a separate landline to use some of these products.

    Success ingredient

    VTech doesn’t plan to rest on its laurels. “We need another breakthrough,” Tong acknowledges.

    The worldwide market share of

    VTech in cordless residential phones

    31%

  • December 2012 33

    Future upgrades Despite such innovative solutions, the global financial crisis has inevitably affected VTech. “In the past two or three years, raw materials were the real cost drivers,” says Tong.

    On top of that, the labour supply in China is notoriously tight. “If you want to retain and hire good people, we need to raise salaries and provide a very good working environ- ment,” she adds. These factors have driven costs up.

    Fortunately, the electronic products in- dustry is not as labour intensive as other industries, such as garments, where many brands have had to move manufacturing from China to cheaper Southeast Asian countries.

    VTech isn’t planning to source outside China, however. “We need to consider where

    we are getting our supplies” with a view to im- proving operational effeciency, she says.

    In the future, VTech will continue to transform adult gadgets into child-friendly products, says Tong. “Children always want to use the products used by their parents so that’s the line we will be taking.”

    The company says new versions of the In- noTab, MobiGo and Storio product lines are in the pipeline, while the group is also aim- ing to expand its presence in China. Sales of its electronic learning products have grown steadily there already, although VTech start- ed selling AT&T-branded phones in China only in the fourth quarter of this year and sees potential for growth there.

    Like VTech, Tong herself has had a strat- egy in place. Since Tong was a young girl, she laid out a path and followed it stringently.

    Degree after degree allowed her to climb the ranks in a male-dominated technology industry. Today, she oversees a team of 680 people in the Hong Kong office alone.

    She has no plans to slow down and says if she was to go back and do it all again, she would follow the same path with the same attitude. “If you work without any continu- ous learning, you’re going to get stuck in the same posit