The head Chinese television manufacturing giant TCL has vowed to continue the company's global expansion despite the failure of its first major international foray into two major European companies.
"I hope corporate China's global aspirations will not be dampened by a couple of failures," TCL chairman Li Dongsheng said. TCL's move into Europe in 2004 helped win Li that year's China Businessperson of the Year Award, when he won acclaim for leading one of the first companies to go global.
TCL took on the television and DVD manufacturing branch of France's Thomson group as a joint venture, followed by Alcatel's mobile phone arm within six months. However, it has been forced to wind down its Thomson venture after losing 260 million U.S dollars, selling a factory in Poland and closing five of its seven European offices.
TAMP, its joint-venture with Alcatel, also fell apart in May last year due to snowballing losses. "We underestimated the cost of rescuing Thomson," Li said. "We could no longer afford the escalating losses".
TCL's troubles exemplify the difficulties facing Chinese companies in making international acquisitions as a shortcut into the global market.
When TCL was considering the acquisition three years ago, BCG warned the aspiring firm that the risks may be bigger than gains without a proper understanding of the European market. Li said he was aware of the challenges ahead. Chinese enterprises are not rich enough to acquire overseas brands, like a little pony pulling a big cart," he admitted.
Until this year, TTE remained focused on traditional cathode-ray-tube (CRT) TVs, a lethargic response to demand for flat-panel screens, which was "our big mistake", Li admitted. "The market share of traditional CRT sets in Europe shrank from80 to 20 percent, a sudden change that no one could foresee," he claimed.
TCL's market approach was also slow in grasping the necessity for more efficient research and development and inventory management to deal with swift price fluctuations. That echoed the BCG report saying Chinese firms lacked a deep understanding of customers, competitors, distribution structures, and the regulatory environment across diverse markets. "Our product, technology and management lagged behind the changing European market," Li said.
However, while products and technology can transcend national boundaries, distinct cultures can not easily be integrated or merged, a problem for a burgeoning multinational.
The BCG report noted that a post-merger integration must navigate often subtle differences in the merged entities, but the differences between how Western and Chinese companies operate are extensive.
Despite the setbacks, Li insists that global expansion is a necessity and that the European restructuring has taught a valuable lesson, he said. His confidence in the European market was restored when the TCL-designed flat-panel set racked up three awards in Europe, and its market share doubled and began to profit in September.
U.S. market losses show signs of abating, down from 120 million U.S. dollars in 2004 to 45 million last year. This year's deficit could be within 10 million dollars, Li predicted.
Source:佚名