Emerging Market MNC Analysis
Some of these firms were very successful and some had to withdraw back to their country of origin. In tot scenarios, those companies adopted to different business models, strategies analyze two different Mac’s, TCL and Acre, which fall in the category of electronic firms from emerging markets, in order to come out with a better understanding of their globalization process. TCL Overview TCL is one of the largest consumer electronics NC in the world. It was founded by Mr.. IL Donnishness, the Current CEO, in 1981 in China.
The company produces a wide diverse of electronic products such as TV, mobile phone and Internet access devices; in addition, it is one of the leading companies and was ranked sixth in the global TV raked in terms of market share (TCL Annual Report, 2011), which is the main business for TCL. See figure 2. The company has a worldwide presence; it has more than 40 sales offices, 18 R centers, and 20 manufacturing bases (TCL Introduction, 2011). Many critics attribute the company’s success to focusing on innovation as well as quality; as a result, TCL suppressed many leading companies such as Samsung and Sony.
Acre Overview Originally known as Multitude, the Taiwanese company
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Remarkably, in its globalization process, Acre took more flexible approach which differs from the control based American, European or Japanese models. Acre has a long term mission which is “breaking barriers between people and technology’ (Acre Brands, 2013). Also, the company targets many different customer segments by having multi-brand strategy; it has 4 different brands which are: Acre, Gateway, machines, and Packard Bell (Acre Brands, 2013). 2 Market Presence (Question 1) TCL Market Presence TCL has a worldwide presence in terms of sales, manufacturing and operations.
The company was able to have a big presence in all six continents through Joint venture and acquisitions (Donnishness, IL, 2011). It distributes its products through more than 40 sales offices and agencies worldwide. Moreover, the company has 18 R centers in China, USA, France, Germany and Singapore. The company also owns 20 manufacturing bases globally, in China, Poland, Mexico, Thailand and Vietnam. (Donnishness, IL, 2011). See figure 3. The geographic growing patterns will be discussed in the following topic. Acre Market Presence Acre also has a worldwide presence in terms of sales, manufacturing and operations.
Through its acquisitions, Greenfield investments, and multi-brand strategy, Acre was able to penetrate in all six continents and excel. It has four regional business units (Rabbi’s) in US, Europe, Singapore, and Taiwan. The main functions of those business units to sell, market and provide after sale services. Each one of those units has branches in many countries. See figure 5. 3 Patterns of Growing (Question 2) TCL Growing We can divide the company growth into four main phases. First phase (1981-1997), order to expand its business in the PRE market (Sandra Bell, 2010).
Second Phase(1998-1999), expanding to neighboring country, which was having a Joint venture with Taiwan C.V. base, TCL-C.V. Computer Co. Was established (CB, 1998). Third phase (2000-2004), expanding to the developed countries mainly in Europe; TCL had many international investment such as acquiring Schneider Electronics GAG in Germany (TCL Annual Report, 2002), a JP with Locate (Murals, D. , 2011), and a JP with Thomson (Elaine Quarterback, 2009), in this phase TCL focused on loss companies, hopefully they can turnaround those losses.
However, almost all investments faced huge losses due to several reasons such as management style and the misjudged of its power to turnaround a loss company (Sandra Bell, 2010). Fourth phase (2005- present), in this phase TCL acquired partners’ shares in Jobs; for instance, TCL acquired Locate shares in the JP (Helen Yuan, 2005), as well as, Thomson shares in the JP (Sandra Bell, 2010). Further, they focused on building a global brand name through partnering with key distributes such KEA and Careful. See figure 6.
Acre Growing For Acre we can divide the company growth into four main phases. First phase (1976-1977), which includes the establishment of the company, and start selling to the local market (Milestones & Innovations, 2013). Second phase (1978-1984), in the beginning of this phase the company started to target small neighboring markets such as Indonesia, Thailand, Malaysia, and Singapore. Later on, it expanded its exporting to reach the US and some parts of Europe. This phase was remarkable in Acre’s life and considered to be the take-off (The Wall Street, 2007).
Third phase (1985-2000), in this phase Acre started to invest worldwide (Milestones & Innovations, 2013), they made a lot of acquisitions, Joint ventures, and green field investments such as the acquisition of Altos Computers Systems, a JP with Compute from Mexico to form Acre Compute Latin America (UCLA), and establishing Acre America Corporation in the US. This phase considered to be critical in the life of Acre, it went global, big losses were made, and the company was restructured more than three mimes. To summarize, the cost of learning in this period was high.
Fourth phase (2001- Present), which represents the changing from manufacturing company to a service company, in another words, the company outsource manufacturing, and the main activities became sales, marketing, and after sales services , which is similar to MIKE business model (The Wall Street, 2007). See figure 6. 4 Entry Modes (Question 3) TCL Entry Modes TCL had two types of foreign direct investments; Joint venture and acquisition. They had Jobs with Taiwan C.V. base, Thomson (French company), and Locate (French many).
However, the acquisitions were by acquiring Schneider Electronics GAG in Germany, Thomson shares in the JP, and Locate shares in the JP as well. Recently, they made some agreements and cooperation with Samsung (outsourcing agreement) (Marie Han, 2008), KEA (Anna Rainstorm, 2011) and Careful (Sandra Bell, 2010). See figure 1. The Joint venture with Thomson was remarkable in terms of amount, nature and outcome. Both companies put together ?¬450 million (cash and assets), where TCL and Thomson shares were 67% and 33% respectively (TCL Annual 20,000 sales outlets.
On the other hand, Thomson brought to the deal its factories in Poland, Thailand, and Mexico (Elaine Quarterback, 2009). The JP was not profitable and carried out losses for both companies. As a result, both companies came to an agreement, and TCL bought Thomson shares in the JP. Furthermore, the acquisition included Thomson TV plants in Mexico, Thailand and Poland, R&D centers in USA, Germany and Singapore, and worldwide sales networks (Sandra Bell, 2010). Acre Entry Modes Acre had three types of foreign direct investments; green field, Joint venture and acquisition.
The green field investments were mainly to establish regional operation units (in Europe, USA, Asia, etc… ) which have sub-branches in many countries. The main functions for these units to sell, market and provide after sale services (Ping IL Peter, 1998). The company also did some Jobs such as a JP with Texas Instruments to form TTL-Acre DRAM, as well as a JP with Compute to form Acre Compute Latin America (UCLA) (Ping IL Peter, 1998). See figure 1 . Acre’s acquisition goals were mainly to achieve multi-brand strategy.
The company acquired Gateway, machines, Packard Bell, E-ten and agree. These acquisitions enhanced Acre’s global presence, and made it able to target different customer segments (Acre Overview, 2013). 5 Factors for Investing Abroad (Question 4) TCL Factors for investing abroad In general, there are many factors that led Chinese companies to seek global market. For TCL there were 5 main factors: In 2000, competition inside the PRE electronics market was aggressive which led to a price war and industry margin was shrinking (Sandra Bell, 2010).
In 2001, China became a WTFO member which helped a lot of Chinese companies to partner with companies from developed countries, as TCL had any agreements and Jobs. IL Donnishness, CEO of the company, was thinking about going global since the Asian crisis in the late sass’s, taking advantage of the Chinese stable economy to build a brand which was the company competitive advantage in his vision. The company also did some international investments to overcome trade barriers, such as the “anti-dumping” European policy (The Financial Times Limited, 2003).
The company also overestimated its power to turnaround a loss company, which was a main drive for some acquisitions such as acquiring Schneider Electronics GAG in Germany (Sandra Bell, 2010). Acquiring Schneider Electronics GAG in Germany is a clear example for the last two factors. Acre Factors for investing abroad For Acre the main reason for expanding is that the market size at that time, early sass’s, was small. They targeted small neighboring countries, however, as Shih stated “the combination of many small markets is not small”, also there was a potential since those small markets were becoming bigger.
The following are some reasons for investing abroad and expanding operations to reach more regions: The industry became mature rapidly which led to an aggressive competition, price war, and giggling of the margin. As a result, all companies in the industry started to expand to less competitive regions (Acre Inc. History, 2008). The Taiwanese dollar became stronger, which made difficult to the company to make profit since its product became more expensive abroad (Acre Inc. History, 2008). Major Operational TCL Operational Difficulties It seems that all international investments made by TCL were unsuccessful and turned huge losses. This was due by many issues on the managerial and operational level, which will be discussed in the following paragraph. The main problem for TCL s that they underestimate the difficulties of managing global operation, and they also overestimate their ability to turn around a loss company, which represents a broader dilemma for Chinese companies Justine Luau, 2006).
As Vincent Yang, SCOFF of TEE and TCL stated “in the past three months of operations, we found out the challenges and difficulties are deeper than we thought. ” (Even Armadas, 2004). Furthermore, the desperate to go global and use acquisitions as a shortcut without evaluating partners and investments were a main drive for those wrongful investments, for instants, Schneider Electronics GAG, Thomson and Locate were cording losses, moreover, Schneider Electronics GAG were viewed as an old fashion brand in Europe (Sandra Bell, 2010).
Moreover, TCL was slow to react to the market changes Justine Luau, 2006) lack of market know-how, lack of transparency, and lack to culture adaptation when they changed the German manager of Schneider Electronics GAG with a Chinese noel (Sandra Bell, 2010). TCL has no brand positioning issues since it managed this aspect in a very professional way, for instants, they were able to position the brand TCL to a high end clientele very successfully by sponsoring Golf ornaments three years in a row in China(Sandra Bell, 2010) , which represent the target market.
The company also has many brand names such as TCL, ROW, and RCA, as well as some agreements to use other’s brand names such as Thomson and Locate, which serve different customer segments. Acre Operational Difficulties Acre started with 13 employees including Shih and his wife, and in ten years that number grew to reach 1000, and continued to grow. This fast growing led to create a big gap between available capabilities and capabilities needed, further, it also led to a shortage in qualified managers.
As a result, Acre started to recruit many top-level and mid-level managers, where some were not qualified enough, such as Leonard Ill, former senior IBM executive who led the company to a disastrous situations. Another problem caused by the fast growing is that the company was restructured more than three times which led to more failed operations (The Wall Street, 2007). Chris Foster, an analyst at Technology Business Research in Hampton, stated “The bottom line is Acre has a more volatile business model than HP or Dell” (The Wall Street, 2007).
Other difficulties such as changing the company name from Multitude o Acre after more than 10 years of building brand name (The Wall Street, 2007), aggressive competition which reduced the profit margin, and the shortening product life cycle, among other factors which led to more operational and managerial difficulties. However, the company in many scenarios managed those obstacles very well. The following are examples for successful managerial strategies and operations. Dependent innovation which made Acre beat IBM and offer 32-bit PC first.
Employee ownership, delegated accountability, and management frugality helped in the fast growing. Overcoming the shortening of the product life cycle by developing a strategy transit. They also developed the “2-3-1 System. Two months for product introduction, three months for selling, and one month for phase-out (Ping IL Peter, 1998). Multi- brand strategy which helped the company to target different customer segments, therefore, the company does not have any brand or positioning issues (Acre Brands, 2013). 7 Comparison & Conclusion Both companies have a lot in common.
Both of them started to invest in neighboring countries and later on expanded to other parts of the world. They also depend a lot n acquisitions and Jobs to penetrate international markets, which reflects their weaknesses to build an international brand and have a successful international operations. Last but not least, both of them have a worldwide presence and mainly targeted developed countries.