TCL-Thomson Electronics Corporation: A Failed Joint Venture?

            
 
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Case Details:

Case Code : BSTR198
Case Length : 14 Pages
Pages Period : 1999-2005
Organization : TCL-Thomson Electronics Corporation, TCL Multimedia Technology Holdings Limited and Thomson SA
Pub Date : 2006
Teaching Note :Not Available
Countries : China, France
Industry : Consumer Electronics

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.



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EXCERPTS Contd...

TTE Runs Into Trouble

Instead of 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).

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. All of Alcatel's 600 R&D, sales and marketing staff became employees of TAMP.

TAMP distributed Alcatel brand mobile phones in Europe and Latin America and TCL brand phones in China and Asia. Though 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...

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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. Commenting on the purchase of Schneider, Stefan Baron, editor-in-chief of German weekly, Wirtschafts Woche, said, "To many German consumers, Schneider had the image of being old-fashioned and unwieldy." 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...

Exhibits

Exhibit I: Profile of TTE'S Competitors in the US
Exhibit II: A Note on Thomson SA


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