Corporate Strategy of TCL Multimedia - Assignment Example

Corporate strategy of TCL Multimedia Table of Content Introduction 2. Environment Analysis 2 PEST analysis 2.2 SWOT analysis 2.3 Resource Capabilities 2.4 Core competence 3. Current strategy option - market development strategy 3.1 TCL's current market selection 3.2 TCL's branding strategy 4. Evaluation of the strategy 5. Success Criteria - Suitability, Acceptability and Feasibility 6. Future strategy options and Recommendation 6.1 The Future Strategy options for TCL 6.2 Recommendation 7. Conclusion 8. Reference 1. Introduction China 's economy is one of the fast growing economies of the world. Foreign direct investment (FDI) into China increased and touched the level $53 billion in 2002 beating America into second place for the first time. It is truly called the workshop of the world. Another attractive aspect of Chinese economy is the investment of Chinese companies outside their own borders. A report says that almost 75% of Chinese firms surveyed already have foreign expansion plans under way. TCL is also one of the fast growing and rapidly expanding companies of China. This company was founded in 1982. It started its business as an audiotape manufacturing company. Its co- founders, Li Dongsheng gradually moved this company forward in the business of consumer electronics product. TCL got good reputation by the production of handsets for fixed-line telephones. This product established a trust in consumers. In the next decade TCL started producing audio equipment made in a joint venture. TCL also invested in the research and development (R&D) and focused on new product development and efficient production. TCL also developed a distribution and marketing network across China. The management was quite progressive and they were not satisfied with the performance of the state owned distributors and private marketing organizations. 2. Environment Analysis The dynamic and rapidly growing Chinese economy greatly owe its rapid growth to the Chinese companies. These companies not only come in contact with foreigners as a source of technology or assets, but also as a market for there own products. They are quite ambitious also, many companies aim to build global brands. The leading Chinese electrical appliance company Haier has 13 sites overseas, including factories. TCL is considered China's second biggest television maker has also invested in television manufacture outside China. Various model and methods have been evolved by scholars of management and corporate field for analyzing the external and internal environment of the company. It seems quite appropriate to use the PEST and SWOT models for analyzing TCL external and internal environment. 2.1 PEST Analysis PEST Analysis is used for analyzing macro environment of company. Four factors Political , Economic , Social , Technological is considered during this type of analysis. Assessment of the impact of all these factors plays an important role in evaluating the environment of a company. Political Factors World is virtually being ruled by multi-nationals. These multi-nationals are powerful enough to influence the decision making process of world's leading powers directly or indirectly. These multi-nationals are getting bigger and bigger by mergers and acquisitions. In such scenario Chinese companies are also playing very effective role. They are very successfully competing with European companies and US. In past it Chinese economy was considered closed and state owned economy. But now it is gradually opening and private companies are playing their role in the changed political atmosphere. TCL is one of such companies that is expanding and has been successful in getting good market share in TV market. Economic Factors TCL 's results of 2004-2005 show that its position in the market is continuously improving. TCL is a leading consumer electronics manufacturer within China. The company has begun to enter in international television markets by using majority-owned joint ventures techniques. The association with France's Thomson S.A has also given a great boost to the name and performance of the company. It gave TCL access to European and North American markets. This deal also helped TCL to consider its weaknesses in technological status. The company management took right steps to convert it into its strength. Social Factor Trends in societies are continuously changing. The new emerging technologies are influencing consumer mind set. Just 30 to 40 years ago American companies with CRT technology dominated Television market. But now the situation is quite different many companies from Japan, Korea and China have taken the market share with new technologies like flat screen, plasma screen and LCD. Changing technologies and social attitude of consumers have shortened the life cycle of a product in consumer electronics market. The product penetration has quickened but the life cycle has shortened. TCL is also striving hard to go along with changing market trends. It started the business as audiotape manufacturing company. But now the company has covered longer distance in shorter period. It is now producing the latest models of Television sets along to the changing social environment. Technological Factor As discussed earlier that life cycle of electronic products have shortened. It is not only because of changing social trends but also because of rapid development of new and user friendly technologies. Introduction of digital technology revolutionized the electronics industry. These revolutionary changes sped up with the availability of standardized flat-panel. As the bulky CRTs were replace by flat panels, it also lowered shipping costs. The place vacated by Japanese consumer electronics companies because of certain restraints was efficiently filled by Chinese companies. Chinese television manufacturers increased their products for export and also for domestic market. 2.2 SWOT analysis PEST analysis helps in evaluating limited areas. It is important to employ SWOT analysis model for comprehensive evaluation. SWOT stands for Strengths, Weaknesses, Opportunities and Threats. It broadens the perspective and gives the complete picture. Like all other organizations TCL has also: some strengths to depend upon . certain weaknesses to overcome. Certain opportunities to be utilized Certain threats to be careful of. Strengths Association with of France's Thomson S.A. then made TCL the world's largest television manufacturer. Despite a joint venture with a Hong Kong manufacturer, Luk's Industrial, TCL gained profits and built building a new Shenzhen factory. TCL established a distribution network throughout China. TCL has one of the best marketing system in Chinese companies. TCL continued to invest in research and development that proved very rewarding. Weaknesses Net profit for 2004 were down 51% from the previous year despite a 69% annual increase in turnover. The managers at TCL were not very shrewd and innovative, they adopted faulty policies because of the lack of international experience. Corporate structure of TCL was quite complicated. TCL operated with eight different units ranging from Home appliances to electronic components. It proved a disadvantage for the company as a whole. Opportunities The association with Thomson Enterprise joint venture, gave TCL access to European and North American markets in ways its previous overseas. The deal with Thompson also forced TCL to strengthen its technical and competitive position. Investment in R&D provided opportunities to appeal changing consumer mindset. Threats Various multi-national and well reputed companies moved into China because of China's opening in 1979, and also to get advantage of China's lower labour costs. It increased competition for TCL and affected its market share. Integrations and mergers of smaller competitors in 1990s converted them to highly competitive manufacturers. Mobile Handset unit one of the eight units of the company was negatively performing. 2.3 Resource Capabilities One of the managers of TCL thinks that organization is working six basic foundations resource capabilities is the most important of them. TCL by no means a insignificant new power. It actually represents a small scale the Chinese enterprise that can realize their dream of becoming world-class enterprise. Senior management of TCL realized the necessity of systematic understanding and command over the knowledge and skills for corporate operations. They started the Global Leadership Programme (GLP) to give a complete insight of international corporate environment to the management of the company. The emphasis was the understanding of the cultural differences between. The GLP proved a great success and other programs were started as well to enhance the capabilities of the middle management of the company. In the beginning TCL was concerned about survival than growth. But later on things changed dramatically. TCL employed foreign corporate strategic investors, including Sumitomo. All these positive and innovative strategies of the management of TCL has started emerging as modern innovative and sophisticated consumer electronics manufacturer. TCL management also took many steps for lobbying with government for policies regarding tax and other amenities. 2.4 Core competence In the beginning TCL had only one distributor per province but the management was not satisfied with performance of distributors. The distributors were least interested in the follow-up and enhancement in sales with their own efforts. Their philosophy and thinking was not according to the philosophy and thinking of the company. Company decided to launch its own sales network. For this purpose they conducted thorough research on the demands and requirements of all the sections and provinces of the mainland. Company chosen appropriate distributors in accordance with their own strategies. The company and distributors worked together to understand the requirements and strategies of each other. It helped TCL very much. The sales were improved, customers got the follow-up. TCL also worked on acquisitions and mergers. It helped in the growth of the company. They acquired factories in various parts of the country. These locations were also used as logistic centers. TCL not only targeted the wealthier parts of the country but they also went on to get the market share from each and every part of the mainland. Another core competence of company was to make investments in research and development. The company realized that old technologies were rapidly replaced by new technologies. If any company lags behind in acquiring and adopting modern technologies then they may also loose the market share and consumer confidence. Investment in R&D proved very helpful. The company also had a close look on latest development in the market and they were quick to modify their policies in accordance to new developments. For example they dealt very well the new phenomenon of price reduction in the Chinese market in 2001. Another great advantage TCL had was its immigrant culture in management. There was not rigidity in the policies of the company like other government owned and military dominated companies. All manager were free to formulate the strategies in their own area of influence according to the parameters described by the senior management. 3. Current strategy option - market development strategy The continuous and rigorous working on R&D helped company not only to acquire new technologies and launch new products but it also helped formulate most effective strategies to cope with changing environment of local and international market. They moved to the production of big screen TV to compete with other manufacturers and to get advantage of changing demands of consumers. They never stopped at on place but they moved and moved on continuously. From TV manufacturing they went to computers, cellular phones and explored many other avenues of consumer electronics manufacturing. Thus it became the far-reaching Chinese manufacturer. 3.1 TLC's current market selection TCL not only excelled in technological field but they also explored and mastered marketing techniques according to the requirements of local market. They launched monitor sales in all leading cities and provinces. The company made arrangements with the sales offices on the basis of Profit and Loss method. As discussed earlier TCL management was continuously working on improving the sales of the company. They not only set a comprehensive network of the distributors but also worked hard to bring their policies in accordance with strategies of the company. They did not end their efforts here they also launched effective marketing campaigns. The aggressive and effective marketing strategies and advertisement campaigns helped company to penetrate to far off areas of the country. 3.2 TLC's branding strategy TCL started business with audio cassette players and portable audio devices. But because of their continuous research and development in field of technology and marketing compelled the company to launch newer and newer brands and products. The product range kept on increasing and spreading. With the advent of digital technologies company rapidly grasped and mastered this new and emerging technology. Another major shift in branding strategy came with the arrival of LCD & PDP. Company closely monitored the demand and supply of the these displays world over. Company never looked back and moved on and on by launching new and state of the art brands according to modern technologies and users requirements. Flat screens and big screens were the name another revolution in display industry. Consumers were quickly diverted to these new products with aggressive marketing campaigns. TCL was quick to catch up with the new and emerging trends and launched its own version of Flat Screens and big screens. These new brands were also helpful easy shipment and transportation because of their smaller volume. 4. Evaluation of the strategy Although TCL is not big name in international market but its strategies and policies are very innovative and progressive. Company had progressive policies that keep on changing according to requirement of market environment locally and internationally as well. Company has always tried to pursue the path of modernization, novelty. Company always amended its strategically goals. The chairman and management never believed in policy of rigidity and stagnation. They started as mediocre Chinese audio recorder manufacturer but because of their novel strategies and urge to progress they have transformed their company into tiny giant in Chinese market. The merger with Thompson also helped their ambitions of reaching prosperous western markets. There are many positive and enviable aspects of their strategies only some of them are highlighted here: 1. Continuous search for new avenues and markets. 2. Investment in research and development both in technology and marketing. 3. Pursuit of state of the art technologies by mergers, acquisitions and contracts. 4. Expansion to all the important corners of the country thus acquiring logistic facilities to all the areas of country. 5. Discouraging traditional Chinese corporate culture, selection and training of staff on modern lines. 6. Expansion in manufacturing facilities by acquisitions and mergers. All these strategic highlights indicate that strategies were progressive, adaptive and technology oriented. 5. Success Criteria - Suitability, Acceptability and Feasibility It is the responsibility of planners to identify success criteria that may be used to develop goals, objectives. It is acknowledged that there are many fundamental types of commercial success standards that may be used to set goals and objectives: financial and competitive. A method using suitability, acceptability and feasibility as criteria is used here for assessing the success of TCL. Suitability According to this criteria TCL strategy seems to address circumstances in which organisation is functioning. The strategy of TCL is also seems to be linked to strategic position and its new strategies also fit the competitive environment of the company. This statement can be rationalized with the help of many facts stated above. For example TCL looked to survive in the beginning and their strategies never looked over ambitious. They operated within the laws and regulations of Chinese market. They always tried to be adaptive with changing conditions in the field of technology, marketing and mergers. Acceptability The strategies of company were quite acceptable to all stakeholders. The major stakeholders were government, employees, major shareholders and customers. It has been observed that most of the strategies were quite acceptable for all stakeholders. Company was successful in enhancing its market share locally and abroad. Company strategies provided satisfactory expansion and growth. Company was also able to improve its technological knowledge and achieved very fruitful merger with a Western company. Feasibility The strategy of the company proved quite feasible in every aspect. It provided all sort of success to the company. Company planner never got over-ambitious and obsessed. They worked hard and steadily keeping in view the solid facts and figures of the market environment. For example in foreign operations they were sure to lose the cost advantage of Chinese production. But they never made infeasible plans they believed that it will provide them better access to foreign markets and thus the disadvantage of cost of production could be reduced by other means. 6. Future strategy options and Recommendation 6.1 The Future Strategy options for TCL Consumer electronics industry is booming. Its growth rate is astonishing. Television is one of the most prospering sector of consumer electronics industry. TCL management is planning to achieve annual growth of 5% for next five years. They are not interested in volume of sales they are planning to occupy one of the top slots in world ranking. Company is pursing aggressive policy of internationalization. According to Dragon Tiger plan company is aiming to become among the world's top three TV and handset makers internationally. Company has different plans for China. In China they are planning to become, among the top three producers of computers and other home appliances. The company has decided to collaborate with Thomson to utilize the strengths of each company. Thomson will be quite helpful because of its technological know how and market access to US and European markets. The company is willing to share the losses of Thomson in some areas for sake of better working relationship and long term aims to be realized. 6.2 Recommendations Although company is performing quite well in local Chinese Market and striving hard to get successful access to international market. But still there is great room for improvement. Here are some recommendations for improving the performance of company in various fields. 1. Company is doing well in field of technology adaptation but in future it should make its important goal to improve the ability of the firm to achieve technological adaptation. 2. Technology transfer can be easy when there is absorption capacity needed. The skills needed to assemble electronic components can be learned quickly, while the design of new electronic devices takes much greater technological capability. For the receiver, technology transfer is a learning experience. The firm receiving the technology must learn how to use it effectively. It is important for TCL to create such capabilities in concerned workers or the company. 3. Since TCL is establishing manufacturing units outside China. This will reduce its low cost advantage. Company should remain careful and formulate comprehensive policies before venturing outside China. 4. Although company is quite innovative but yet the management should realize the necessity for the management team to get understanding of the knowledge and skills required for corporate operations while working internationally 5. The merger with Thomson may have some advantages but it also contains some risks as well. The company should work carefully safeguarding its own interests more diligently. 7. Conclusion Chinese companies consider foreigners not as a source of technology or assets, but as a market for their own products. They are very ambitious, to build their global brands. TCL is also a Chinese company the second biggest television maker. 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