Analysis of TCL Multimedia Company - Case Study Example

Introduction The business world is an ever changing stratosphere in which the rules of the game are constantly changing. China is country whose economy has been rising since it began to open up its borders in 1979 (Chan, 2006). As the people became wealthier companies targeted the domestic marketplace. Television and other electronics products became popular consumer goods in the region. A Chinese company that was born in this era which became one of the most powerful players in the electronics industry is TLC. This paper analyses the company in order to find solutions to its underline problems. Sypnosis TLC is a company that during its trajectory has accomplished amazing things. The firm utilized western business principles such as running an adaptive firm that reacts fast to market changes, marketing emphasis, and eliminating wastage from its supply chain activities. The company performed very well in its domestic Chinese marketplace. As the end of 20th century came around the company realized it needed to expand beyond its domestic marketplace due to the imminent acceptance of China into the World Trade Organization which meant full blown competition would from foreign companies was imminent. In order to be able to stay competitive in the marketplace of the 21st century the company decided to enter into a joint venture agreement with the European firm Thompson. A joint venture is a strategic alliance in which two or more partners to share markets, intellectual property, assets, knowledge, and profits (Allen, 2009). There numerous issues that can hold back this Chinese firm. Issues One of the primary internal issues of TLC Corporation is a problem that is common among Chinese firm which is the lack of brand name. A branding strategy allows corporation to build up a reputation in the marketplace that creates customer loyalty, increases the retention rate, and generates income streams over time (Kotler, 2002). The company is quite adept in its marketing function, but suffers from a de-facto constraint that limits the ability of the company to market itself beyond its domestic marketplace. Since the firm is forced to operate in the low-end OEM market. Despite the high volume of sales the company achieved the downside is that the firm is not able to charge a premium in any of its product line due to lack of brand identity. Another problem the company faced is its lack of experience operating in the international scene. The firm hoped that its joint venture alliance with Thompson was the solution to its current dilemma, but as they join forces with this global player the he integration of both companies required planning and adjustments to the business strategy for the new business entity being formed. Problem Definition Thompson Corporation brought a lot the table as far as its ability to distribute electronic merchandise in developed marketplaces. The company had the sales channels in place to quickly penetrate marketplaces TLC was having difficulty achieving access. A problem that TLC faced in Germany was that the operation costs were extremely high. Also its partner Thompson was running into major financial problems to the magnitude of a $790 million loss in 2004 (Barltett, Ghoshal,.Bedamish, 2008). A problem statement that summarizes the situation TLC is facing is: TLC needs to find an effective strategy in order to integrate itself with Thompson in a manner that optimizes the resources in order to maximize profitability. Alternative Solutions A1 TLC has just noticed that Thompson Corporation is running some major financial troubles. Obviously there ways to remedy the situation and turn things around, but sometimes in life and in the business the best alternative is realizing that an investment was bad and cutting your losses prior to get into deep of a hole. A potential solution is to dissolve the joint venture alliance with Thompson. The process of doing so would take at least six months to dissolve the partnership. The reason for this decision is to ensure the company stays liquid and operating a profitable operation. The importance in liquidity lies in the facts that if a company runs out of cash it turns insolvent and immediately seizes to operate (Besley & Brigham, 2000). This alternative would open up new doors as far as finding a more suitable business partner that allows the company to achieve its long term vision of become China’s market leader and achieving international recognition in the electronics industry. A2 A second potential alternative is for TLC to open its doors to third partner that could come in and help the companies integrate in a more accelerated manner. The third partner could be possibly an exporting firm with knowledge in the international scene with prior experience doing consulting on large projects of global scope. Integrating a third partner implies a renegotiation of the terms and agreement of the original joint venture. A third partner would dilute the earnings as far as percentages, but if the volumes increase the total profits each firm receives could be much higher. The solution might be difficult to integrate because both firms would have to agree on the third company. The process of implementation of the solution is lengthy and Thompson is facing a fiscal dilemma that needs immediate attention. A3 A third alternative for the company is to create a better infrastructural platform that will allow the joint venture to prospects. The roots of the problem lie in the fact that the operation cost of the firm are too high. The company could set up a new facility in the United States. The US represents the biggest marketplace in the world for consumer goods. The new strategic plan would allow the joint venture a chance to prosper eliminating past constraints that inhibited its progress. The costs of implementing this alternative are high, but its potential returns are high as well especially if the new firm is able to penetrate the US market and achieve a 5% to 10% market share. Optimal Solution The optimal solution for TLC Corporation is the third alternative. The joint venture with Thompson started only a few years ago. The company must give it chance for the investment to pay off. The US plan should be supplement with importation of prime materials from China as well as outsourcing of some assembly operation in order to reduce the manufacturing costs. TLC showed to be capable marketer, a trait that will pay off great dividends in the US. Thompson image can solidified in order to create a new image of quality and value in the firm’s products. Conclusion In the ever changing business environment of the 21st century in order for businesses to succeed they must operate in flexible and adaptive manner. TLC made the correct decision of seeking a partner in order to further expand its operations beyond its domestic marketplace. A lot of times in business things don’t exactly come out as plan, the key in these situations is to be creative and seek out alternative solutions. In this case the solution lied in starting over and aggressively establishing a new operation in the largest marketplace in the world. References Allen, S. (2009). Joint Venture 101. Retrieved May 2, 2009 from http://entrepreneurs.about.com/od/beyondstartup/a/jointventures.htm Bartlett, C., Ghoshal, S., Bedamish, P. (2008). Transitional Management (5th ed.). New York: McGraw Hill. Besley, S., Brigham, E. (2000). Essential of Managerial Finance (12th ed.). Fort Forth: The Dryden Press. Chan, L. (2006). China’s Rise and Peace and Development in Asia. Retrieved May 1, 2009 from http://old.npf.org.tw/Symposium/s95/951102-3.htm Kotler, P. (2000). Marketing Management (11th ed.). New Jersey: Prentice Hall. Read More