Description of the failed venture of TCL and Thomson joint venture of television sets. The description of factors of failure

1. Entrepreneurship Management
Failed business venture-
TCL & TTE
Presented by- Antara Paul
Drishti Saraswat
Shreeti Mishra

3. 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

4. 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

5. 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

6. 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

7. 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)

8. 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

9. 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

10. 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

11. 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)

12. 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.

13. 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

14. 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

15. 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

16. 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

17. 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..."

18. 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

19. 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

20. 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).

21. 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.

22. 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

23. 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.

24. SWOT ANALYSIS

25. 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

26. 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

27. 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

28. OPPORTUNITIES
• Write Down Your Business Plan
• Focus on your Branding
• Create a Web Presence
• Create an Advertising Strategy
• Create an Advertising Strategy

29. OPPORTUNITIES….
• Publicity as Key
• Measure, Analyze and Decide

30. 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

31. SUGGESTIONS
• Correct Sales and Marketing Policy
• Well equipped to manage joint venture
• Latest fashion and Market
• Sustain Competition
• Innovation

32. SUGGESTIONS….
• Customer Preferences
• Management Culture
• Impact of home country could have been
reversed
• Better advertising
• Better communication

33. 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

34. THANK YOU