Chapter 9 Reflect on the reasons for TCL's troubles

Review background: When Jack Welch visited China in 2005, TCL Chairman Li Dongsheng asked him seven questions in one breath, one of which was as detailed as "How can we turn Thomson's business in Beiguan into profit?" Heart of urgency.And Welch's answer has the bluntness of a Yankee, "Sell it if you don't make money. As for how you do it, I don't have any suggestions, because I really don't know how to make it make money." It was Welch who sold GE's loss-making television business to Thomson 17 years ago. The urgent Li Dongsheng seemed to be short of heroic breath. TCL's business in Europe has become the weak point of the entire TCL Group.When he acquired Thomson's color TV business in Europe, Li Dongsheng might not have imagined the result today.After going through complicated and not long-term M&A negotiations, while TCL completed what seemed to be its most important M&A case at the time, it also embarked on a painful internationalization path.

After the acquisition of Thomson Europe, the team led by Li Dongsheng not only failed to realize the profit target of ITE (a joint venture between TCL and Thomson) 18 months later, what was worse, a series of problems brought about by this merger brought about a series of problems. This dragged down the entire TCL listed company.Because of continuous losses, TCL is even facing the danger of delisting. In the first half of 2007, Li Dongsheng finally had a chance to breathe. The financial report for the first half of the year showed that TCL Group finally started to make overall profits. If you look back at this article "Reflection on the Causes of TCL's Trouble", Li Dongsheng may feel that all hardships are rewarded.We don't know the effect of the introspection, because TCL, which has started to get out of the predicament, may not be considered as out of danger, and the market has always been changing in a flash.In the process of TCL's internationalization, Li Dongsheng also used the banner of nationalism, and was also passionate about expanding the company.However, in the actual operation process, cross-border cooperation and mergers and acquisitions are not just a matter of signing some agreements to generate benefits.Li Dongsheng also realized through introspection that the integration of strategies and resources is not a simple concept. The real difficulty of internationalization may lie in how to achieve real and effective integration.

The period from August 2004 to January 2006 was the most difficult period since I became president for more than 10 years.The performance of the group went backwards in the second year after listing, and it is hard for me to accept such a result.Because, the losses in the first and second quarters of 2005 were expected, although the amount of losses was larger than our expectation.It turned out that our idea was to start making money in the second half of the year, but we didn't make money in the third quarter, which made me feel very stressed. Is TCL's internationalization too hasty?I admit that I and the entire TCL management team have made many mistakes, being influenced by non-commercial passion, and working on two projects at the same time, there are decision-making conflicts.In addition, insufficient capital preparation, underestimation of the difficulty of mergers and acquisitions, insufficient international talent pool, failure of the domestic market, and slow pace of integration.The most fundamental thing is that from the beginning we were a little blindly optimistic and eager for quick success.

In a sense, internationalization is like a mirror, like a ruler, magnifying and highlighting the gap between top Chinese companies and global players one by one.Some things are difficult for you to make an accurate judgment in advance, and you will only find out after jumping into it and doing it. The results of TCL's actual operation are much different from our expectations.Looking at it now, this gap is inevitable. Our understanding of the long-term and difficult nature of internationalization is not sufficient, and our mentality is relatively impetuous.It took only 4 months to discuss cooperation with Thomson, and the negotiation time with Alcatel was even shorter.Although Thomson’s color TV business lost 130 million euros a year at that time, Alcatel’s mobile phone business lost 80 million euros a year; and the net profit of the entire TCL group in 2003 was only more than 400 million yuan.

In 1991, I went to Las Vegas, USA for the first time to participate in the International Electronics Show on behalf of TCL. When I saw the huge booths and advertisements of SONY, Philips, Thomson, Panasonic and other brands, I was a little confused. I thought that these companies were unattainable. When can we surpass them? In August 2004, when the five-star red flag was hoisted at Thomson's European headquarters and the world's largest color TV company TTE (a joint venture between TCL and Thomson) was finally established, I couldn't help crying: "That kind of inner impulse, that kind of National pride is inevitable." The whole TCL was excited by a "Great Leap Forward" atmosphere from top to bottom.The key performance indicators of the management team, including managers from Europe, the United States, and China, are much higher than the actual results. If this indicator was achieved last year, the integration will be considered a success.

However, since TTE did not obtain Thomson's TV sales channel at the time of the acquisition, this brought a lot of inconvenience to the new company when expanding the market.In the European and American markets, the listing rate of TTE products has always been problematic.After the Spring Festival, TCL and Thomson renegotiated on this matter. It was not until July 2005 that TTE took over the entire sales network of Thomson in Europe and North America. There is also the problem of people, layoffs cannot be cut, and recruitment cannot be recruited.The color TV industry is a sunset industry in Europe and the United States, and young people are reluctant to enter it.In Europe, a manager's annual salary is more than 100,000 euros. If a person in his 50s is laid off, his annual salary will be paid in one lump sum for nine years, which is simply unaffordable. TCL's own managers have to rush to the front line of internationalization without even practicing their English.

T&A (a joint venture between TCL and Alcatel) is also a story of "out of control".At that time, I thought that compared with the previous transaction of TCL, which took over 4 factories, 4 R&D centers around the world, a business of more than 2 billion US dollars, and 17 legal entities from Thomson, there were only a few hundred employees, no The factory Alcatel is much smaller and less complex.We were too optimistic, and we did not conduct due diligence on every piece as we did with Thomson. Although we saved several million euros in consulting fees, the problems in our operations were unexpected. More than the cost saved.

Working on two projects at the same time seems a bit hasty in retrospect. If it is a project, the pressure will be less, not only the problem of operating losses, but also the problem of management, which is indeed beyond the capabilities of Chinese companies.However, TCL Mobile, which has a "guerrilla" style of play, did not show strong enough integration capabilities at all.In order to carry out a merger ceremony between the two parties, TCL Mobile sent more than 30 people from Huizhou to do it for a whole month.This made a former Alcatel China marketing manager feel incomprehensible.Even, Alcatel's operations remained almost the same.From the operation in September 2004 to before the adjustment, we not only did not reduce the number of people in Europe, but also increased a few people, which is incredible. Seven months later, the joint venture company lost 660 million yuan, and the 90 million euros jointly invested by both parties have already consumed most of it.

When I was under the most mental stress last year, I almost lost control and lost my temper. Seeing subordinates and customers with drooping faces, I couldn't get out, and the company couldn't get out. People inside were panicked and almost lost confidence in decision-making. In his diary, Zeng Guofan talked about self-analysis and self-criticism very thoroughly.He also has many shortcomings and faults, but he has the ability of continuous self-examination and learning, which inspires me a lot. I think that only by continuous learning can people improve continuously.Many of the problems that Zeng Guofan faced and dealt with in the past are similar to the problems we encounter in business operations today, so I can also learn some experience from him.

We put forward the concept of "the one who remains is king" in order to enable our main industries to survive and maintain a good competitive state in the competition, so that there will be opportunities in the future.In the trough period of development, the strategy should change from a simple opportunity-driven type to a clear strategy-driven type, and rationally allocate resources in the process.This is a global enterprise, which needs to be done step by step, and should not be eager for quick success. It should consider the company's plan from a longer-term development strategy, and focus more on establishing the company's long-term competitiveness.