TCL makes headway overseas

Electronics maker overcomes missteps by rebuilding brand

While Chinese fans of Apple Inc's trendy devices eagerly await the mainland arrival of the 3G iPad 2, Li Dongsheng, CEO and chairman of electronics company TCL Corp, has quietly been prepping for a retail battle against the Silicon Valley giant.

In the coming months, TCL will release two 3G Android-based tablet PCs, the TCL Pad16 and the Open Pad. With its highly flexible customization features, the tablets provide a wide range of functions.

For Li, 54, the launch of the two tablets is just one of several recent steps forward for TCL as it attempts to gain more consumer exposure in the international market. Li was also responsible for lobbying Paramount Pictures to put TCL's flatscreen TV into a scene for the Hollywood blockbuster Transformers: The Dark Side of the Moon.

"Successful companies in the past few years are those which have stayed ahead of the curve," Li says. "As a global company, the Western market is a must. Without it our business system would be incomplete."

As the technological gap closes between South Korean, Japanese, European and American electronics companies, Li has worked to fashion a strategy that incorporates both marketing and research and development (R&D) for one of the largest consumer electronics manufacturers in China.

"Your product must fit the market development and demand, stay ahead of the curve of the trend of product," he says. "A two-year-old mobile phone has no market value at all. If you can push products at the rate on par with the international market, you will have a breakthrough in sales."

Its new products are a result of the company's own R&D center with 2,000 engineers working on communication electronic devices and another 1,000 working on developing flatscreen TVs. Li says the research arm of the company is vital for TCL's long-term future.

"(Success) requires more fundamental work, such as improvement in R&D. You have to raise your bar on par with your international competitors. You also need to continue to strive for quality, being able to bear up to the finest scrutiny even to the smallest details," he says.

Li has spent the majority of his career working at TCL. He joined TTK Electric Appliance Co Ltd, which eventually became TCL, in 1981 as an engineer. He was promoted to general manager of TCL in 1993 and took the helm as CEO in 1996. In 2004, he was named one of the Top 25 Global Business Leaders by Time magazine and CNN.

Based in Huizhou, Guangdong province, the company, which turns 30 this year, began as a telephone landline producer in China and expanded into producing television sets and other consumer appliances in the 1990s.

TCL expanded internationally in 2003 and 2004 when it acquired two French hardware manufacturers: Thomson (to produce televisions and DVD players worldwide) and Alcatel (in a mobile phone manufacturing joint venture). TCL and Li's plan was to build upon existing well-known brands in Europe. But critics at that time said TCL was expanding too rapidly in Europe and was putting itself in financial risk by acquiring two sinking companies. In 2007, TCL announced that its mobile phone division would cease using the Alcatel brand.

Li says he learned valuable lessons in his unsuccessful bets. It was at this time, he says, that he switched to a new branding strategy. He and his company marketers came up with new, consumer-friendly slogan: "The Creative Life".

Li says the new slogan emphasizes the company's core values of technological and marketing innovation.

According to TCL's 2011 first-half report released on Aug 8, the company gained a total operating revenue of 27.36 billion yuan ($4.28 billion) with a year-on-year increase of 18.1 percent during the first half of this year. Sales grew about 17 percent to 26.64 billion yuan while net profit increased by 241.6 percent to 539 million yuan.

Its communication devices division sold about 17 million units in overseas markets with a year-on-year growth of 37.7 percent and about 1.7 million units in the Chinese market, with an increase of 27.4 percent.

TCL's multimedia division made headway in overseas markets, with 4 million units of LCD TVs sold, a 25.6 percent increase.

Li believes that South Korean and Japanese manufactures have set examples for Chinese counterparts to follow. He says there are fundamental challenges ahead for Chinese companies as they try to push toward a business with higher profit margins.

"Producing products that are low in price but good in quality is a part of the gradual process (for manufacturers)," Li says. "Moving up the value chain has to be done step by step. If you look at Japanese or South Korean companies, you will find that they share a very similar path toward internationalization.

"In a way brand image can be simply defined as a brand's customer reputation - you have to earn your reputation, not just showing off with advertisements," Li says. "This goal cannot be reached in a year or two, but a long-term goal that takes time to accumulate. Chinese companies might take another 10 or 20 years of hard work to set up their own brand image, trust and added value."

(China Daily 09/09/2011 page17)