Deinternationalization －－TCL's failure

Foundation The Creative Life

The First Pot of Gold Audio Tape (60% of the Domestic Market Share)

Color TV Market TOP 3 Brand Initial Public Offering (000100) in Shenzhen Stock Exchange

Overseas Expansion Merger Schneider in October Alliance with Thomson

Failure of the Titan *ST TCL

1981

1986 2002

2004 1993

TCL Group

Reach Agreement with Schneider

TCL set up a new company ,TAMP, along with Mobile

Giant Alcatel

Joint Venture with Alcatel

In 2004 January, TCL merged its TV and DVD Strategic Business Units with Thomson Inc. as a

new firm, TCL--Thomson

Merged duplicate business

Extension of TCL’s operation overseas

In September of 2002, TCL acquired insolvent

German company Schneider Electric at

€ 8.2 million

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TCL’s performance between 2005 and 2006

2005

2006 19.32

Operating Profit Sales Revenue

Drop Down From 2005 to 2006, the sales revenue had dropped 9.33% while its operating profit severely declined 503% with the main reason being TCL multimedia had suffered great loss f rom European Marke t . Therefore, TCL’s earning per share is -0.7471, the last six among all the publicly listed company from Shanghai and Shenzhen Stock Exchange.

Severe Decline

Issues of Internationalization

516 468

97.19

l TCL-Thomson announced bankruptcy liquidation procedures request, in order to improve the overall financial level of TCL

Reduction of Stake in a foreign venture

Decision of De-internalization

Causes of the Deinternationalization

1. Fail to integrate businesses

2. Strategic Decisions-making error

3. Fail to integrate human resource 4. Fail to integrate culture difference

Fail to integrate businesses

Continued to use the brand of the merged enterprises wrongly, this brand strategy was not conducive to the development of enterprises

Did not have enough market surveys, failed to integrate the core technology, the RCT was behind the times.

Strategic Decision-making error

Facing the fierce competition in domestic market, TCL was in a sluggish state and the profits was reduced greatly, which forced it into blind-expansion.

For sales department, employees from Alcatel were used to constant compensations but TCL paid them only base pay plus sales commissions l e a d i n g t o i n c o m e reduction.

Reduced Compensation

package Local nationals were replaced and adjusted, some managers were demoted and even replaced by PCNs from TCL leading to mass resignation.

Resignation of Local Nationals

PCNs were short of international experience and local knowledge. Some PCNs could not even speak English and communicate with local colleagues.

Lack of Experienced

PCNs

01 02 03

Fail to integrate human resource

TCL

Falling in Europe

TCL tried to carry out TCL`s own rigid collectivistic corporate culture which was not appropriate for a individualistic corporate culture for most European companies.

Ethnocentric approach

Fail to integrate culture difference

De-Internationalization of TCL

Enlightenment from the falling of TCL in Europe

Avoiding undesirable de-internationalization

1. Focus on localization and disperse internationalization into several steps.

3. Make long-term investment in R&D to exploit technology comparative advantage

4. Address cultural difference and human resources carefully.

2.Draw up comprehensive plans and strategies.

Thank you