TCL Li Dongsheng: From Blurred To Clear

Shenzhen, which is located in the subtropical zone, is in the hot summer. But when Li Dongsheng, chairman of TCL group, reviewed his past 27 years' history from his office to business week, the first thing to talk about is how to "spend the winter" in the future.

Global economic growth continues to decline, Chinese market exports slow down, the aftermath of the US subprime crisis, rising crude oil and raw material prices, all of which make Li Dongsheng feel cold in this year's global market environment.

Since the beginning of last year, domestic entrepreneurs such as Ma Yun and Liu Chuanzhi are beginning to call on everyone to prepare for the winter.

Li Dongsheng thinks that it will take at least a year for companies such as Lenovo and TCL to prepare.

Li Dongsheng said, "it's too late to grow cotton when it snows."

He said.

The arrival of winter in the color TV industry is beginning to show.

In the first half of this year, foreign brands adopted the strategy of ultra low price competition, gaining about 53% market share in China's flat-panel TV market, and the market share of domestic color TV enterprises was reduced to 47%.

TCL has been preparing for "winter" since the beginning of last year.

One of the options is to accelerate the contraction of the fronts and dispose of assets.

Li Dongsheng believes that the removal of computers and low-voltage electrical appliances can make TCL's asset and debt structure more reasonable and increase its liquidity.

"At this time, who has money on hand can not only survive the winter, but also develop."

After adjustment, the TCL's asset liability ratio has dropped from 78% at the beginning of last year to 69% in the first quarter of this year.

At the same time, Li Dongsheng said that three goals should be achieved this year: sales revenue has obviously increased, profits have been significantly improved, and business efficiency has improved significantly.

Li Dongsheng felt lucky that his cotton had been planted 4 years ago.

In August 21st, the TCL group released its interim results in 2008. During the reporting period, the company achieved operating income of 18 billion 540 million yuan, including sales revenue of 18 billion 211 million yuan, domestic sales revenue of 9 billion 554 million yuan, 52.46%, overseas sales of 8 billion 657 million yuan, accounting for 47.54%, and the whole group's annual net profit of 482 million yuan.

It can be seen that the sales volume of TCL at home and abroad has gradually been balanced since the sales volume of Europe and North America increased significantly last year.

Since 2004, TCL has been internationalized, and 4 years of struggle have finally enabled the company to establish its own business structure and sales channels worldwide. In the coming winter, this will help enhance TCL's ability to resist risks such as market fluctuations, industrial policy adjustments and trade barriers.

This is the 4 year of ups and downs.

In January 2004, TCL acquired the French Thomson color TV business and became the largest color TV producer in the world.

Thomson is the founder of the color TV industry. It is the world's largest company with the largest number of patents on color TV technology. It is second only to IBM in terms of the number of patents worldwide.

Li Dongsheng hopes that the acquisition will bring global brands, production lines and R & D capabilities.

However, Thomson's color TV business has been losing money for many years, and the total loss in the previous year was 1 billion 732 million yuan.

The net profit of TCL was only 700 million yuan.

In April of that year, TCL set up a joint venture with Al Carter to take over Al Carter's mobile phone business.

The two acquisitions brought heavy burden to TCL, and TCL, which has been profitable since its inception, lost its first profit in 2005 until 2007.

During the difficult years of consolidation in the past few years, Li Dongsheng has always believed in his initial judgement: in the consumer electronics industry, only the global business enterprise will succeed in the future.

Now, it seems that these two acquisitions have made TCL more cotton than winter clothes for other domestic consumer electronics companies.

In the thirty years of reform and opening up led by TCL, Mr. Li Dongsheng said that he only did one thing, that is, TCL should be made into an international enterprise.

"I haven't done it yet. I have to keep working hard.

But it doesn't matter. As long as I can walk in the right direction, even if I have not made it when I retire, I think the leaders in the rear can continue to do so.

In his view, China can become a powerful country in the economic power, and the symbol of this powerful country is that there are some world-class enterprises in every major industry. "My generation is not necessarily able to achieve this goal, but I believe that in another twenty or thirty years, Chinese enterprises will have the chance to achieve such a goal".

1982 graduated from the radio Department of Southern China Institute of technology in 28, and Li Dongsheng came to TCL for over two years. He has no regrets. "Think about it. When I graduated from University, I could save two years to buy a TV set. Now that I have a car and a house, I am satisfied. The country and society have given me a lot of returns. I just need to get things done well."

Business Week: from the recent release of the TCL group's interim results in 2008, TCL's overseas income has been close to domestic sales revenue. Is TCL's overseas business affected by the international recession?

Li Dongsheng: in the first half of this year, our overseas business sales growth is much higher than that of China. Overseas business is recovering this year, and sales efficiency has been greatly improved at the same time.

The efficiency improvement of international mergers and acquisitions in operation has been reflected this year, which is relative to the average level of the industry.

But this year's environment is rather harsh. The European and US markets are not very good. Therefore, the challenge of achieving growth and efficiency targets at the end of last year is relatively large.

Although sales in the first half of this year have not been greatly affected, the current global economic environment is much worse than we did at the end of last year.

Business Week: from the mid-term statements, we can see the positive impact of internationalization on TCL performance.

In 1997, the international target was set up by TCL.

Now, how far does this result deviate from the predictions of 10 years ago?

Li Dongsheng: in 1997, our slogan was "create famous brand in China and build world-class enterprises".

Of course, it was only a general goal at that time, that is, TCL must become an international enterprise in the future.

Later we introduced foreign investors, including PHILPS, Toshiba and other multinational companies.

In 2004, we made two major cross-border mergers and acquisitions.

It can be said that the target did not deviate greatly, but at that time, it did not want to be thinner.

The successful enterprises in our industry are global companies. The rapid rise of Samsung and LG is also going global. So I think Chinese enterprises must be internationalized in the future. The development of truly internationalized businesses can make the company develop enduring.

Business Week: mergers and acquisitions of Thomson's color TV business is a big adventure, which has made TCL debt for several years.

In fact, Thomson had a new generation of display technology DLP (digital display rear projection) that could rival LCD (LCD) and PDP (plasma) at that time. This technology was quickly lost to LCD in the market, and now there is basically no DLP color TV product on the market.

Is this technical choice mistake a price that Chinese enterprises can hardly avoid going to the international mainstream stage?

Li Dongsheng: in 2003, Thomson and Samsung have been pushing DLP technology, and there are also some supporters in the industry. TI is doing the chip.

At that time, we felt that DLP had a cost-effective advantage over PDP.

In addition, DLP's resolution at that time was also better than PDP, which appeared to be the case in 2003.

Because the prevailing view in the industry was that LCD could not become mainstream quickly on the big screen. The big screen was either PDP or DLP, and there was also a technology called OLED.

We think that DLP will be more competitive than PDP from the perspective of price performance and future technology. It is based on this judgment that we can acquire Thomson's core technology and patents from DLP.

We want to get three abilities: one is to improve the innovation ability of products, the two is to expand the European market and channels, and the three is to establish a global supply chain system.

We hope that the leading position of DLP can make up for the technical shortage of TCL. At that time, there were not many enterprises in the world that owned this technology.

But in the end, we decided to give up in 2006. In fact, there was basically no money invested in 2005.

Because late LCD technology development is too fast, and the development of DLP technology has not reached our expected effect and speed.

I think this failure is not a purely technical problem.

At that time, we had a problem with the estimation of LCD technology products, and we didn't predict that LCD would grow so fast. This has great influence on us.

But look at the forecast of the LCD industry in 2003. The most optimistic estimates in the whole industry did not reach the speed of 2005 to 2008, and the rate of development after that really exceeded that of everyone at that time.

Business Week: as you mentioned before, the reason for the huge loss in 2005 is that the speed of strategic adjustment is slower than that of the market.

Li Dongsheng: I think it is one thing to realize that it is necessary to adjust, and whether you have this kind of executive power, whether the whole system can be adjusted in time is the key.

Speaking frankly, the market is so commented by the less competent manager that you will not listen to it. Now many problems are not unrealized, but whether you have a very good feasible plan and very strong executive power, and can be carried out quickly, which is the most important thing.

We have been improving executive power. This is a problem that enterprise management will always face.

Now our overall capacity is improving, and the most important indicator is executive power.

The executive power of a company is related to its organizational structure. Generally speaking, a relatively stable organization will perform more effectively, because the whole system is clearer.

A changing organization is like a business organization that we want to restructure. Because the organization is constantly changing, the authorization and responsibility between the system and the responsible person are constantly being adjusted. In this case, it is not easy to improve execution.

Moreover, such mergers and acquisitions also bring about the integration of different management habits and organizations, and they have to adapt themselves to each other for a long time. This running in is inevitable.

I have no original sin, "business week": there are many joints in the development of TCL28 which are closely related to the pace of reform and opening up of China's economy. In addition to cross-border mergers and acquisitions, we review the shareholding system pformation of TCL.

There has been a lot of controversy over the reform of state-owned enterprises. In 2002 and 2003, TCL had many interpretations of the Apollo plan. What was the difficulty of the overall listing plan?

Li Dongsheng: Apollo plan is our overall listing plan. Why is it named Apollo?

Because listing itself is a very confidential matter, it is not a common practice to allow relevant words to appear in documents. This plan has been successful since 2002, and it has been listed as a whole in 2004 and January.

The Apollo plan also includes some internal reorganization, because the whole listing plan has to absorb the communication part which has already been listed, and introduced strategic investors in the process. PHILPS and Toshiba invest TCL at this stage.

Generally speaking, this is a plan for restructuring the corporate governance structure and shareholder structure, pforming our company from a state-controlled limited liability company to a diversified shareholding company.

The overall listing of TCL was the earliest among state-owned enterprises in China, and the plan lasted two years.

Because the SCC started to worry, the mode of our listing was completely innovative, and the time of applying for listing was just a very low period in China's stock market, and there were various criticisms on the stock market.

In that case, any new way of restructuring and listing means that there will be great risks, and the relevant regulatory bodies should bear certain responsibilities.

But because of this, after President Shang Fulin took office, he thought it might be a way for the state-owned enterprises to reform the system in the future, so they supported us as a pilot.

Our scale is not very large. If it can become a model for other enterprises, it will not have much impact, so we agree to absorb, merge, and go on the market as a whole.

Because there is no such precedent, there are some blank points in relevant policies and regulations. According to the laws and regulations at that time, the relevant management departments need supplementary documents.

For us, it will take a lot of time to persuade the departments to seal the bill, so that the management understands that this is good for the business, good for the whole capital market and good for China's economic reform.

In addition, we should let the management know that this is not contradictory to the existing rules and is legal.

At the beginning, there was a lot of blanks. To give you the seal is the judgment of the management department. The person who can make the judgement is at least the leader of the Department.

Business Week: TC