1

Chinese Enterprises Overseas Development

A case study of Haier and TCL

Wang, YuLan
Hiroshima Shudo University


Recently, the electric appliance industry of China has made remarkable progress.
Since the reform and opening-up system in China in the late 1970s, the demands for
electrical appliances are rapidly increased, and productions also, are correspondingly
increased. Today, this industry is the most competitive and vigorous of China industries.
Since 1978s, because of emerging industry, the relationships between China and the
other countries are become more deepened through reforms and opening-up system.
Furthermore, exportation also is increasing since the beginning of 1990s. Recently,
foreign direct investments of Chinese company have held the spotlight of the world.
Through this international meeting, many ideas, perspectives, and recommendations
are emerged; more and more Chinese companies are improving their skill levels and
are more competiveness in the global market; especially in the electrical appliance area,
Competition is became stronger through the skill support, and cooperation merger
with foreign companies, such as Japan.
The investment abroad of Chinese company has taken the strategy of go out, which
was posed as one of the important pillars of the reform and opening up system with
the introduction of foreign capital. To support this strategy, all the government
departments took new steps in many fields, such as the tax system, foreign exchange,
insurance and information. In such situation, many Chinese companies started to take
in advance into foreign markets.
In this paper, we will consider the current situations and the issues of Haier and TCL
which are two typical Chinese household appliance manufacturers, when they have
begun their advance into the foreign markets. The purpose is to get the strategy
features of Chinese companys advance into foreign markets by comparison.
Concretely, in the first chapter, I will research about the overseas development of
Haier, the largest household appliance manufactures in China. First, I will review the
current state of Haier. Then, I will consider about the overseas development of Haier,
including America, the first market in developed country and India, Thailand, the
emerging country. Last I will review the current situation and the problem about Japan,
the most difficult market for Haier.
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The second chapter will research about the overseas development of TCL, the largest
TV manufactures in China. Concretely, First, I will review the current state about TCL.
Then, I will consider about the overseas development of TCL, including Vietnam, India
Etc. emerging country. And French, German, Japan Etc. developed country. Also I will
analyze the current situation and problem about each country of TCLS expansion. At
last, I will try to a comparison overseas expansion of Haier and TCL.

Chapter one: The overseas development of Haier
Haier is the largest comprehensive consumer electronics manufacturer in China with a
high brand power in Chinese companies. In the domestic market, advance the national
expansion by acquisition of Chinese companies and diversification of products. Haier
was successful with extensive sales networks, excellent product quality and excellent
after-sale service. The domestic market was saturated as a background. Haier began
the internationalization strategy at the end of the 1990s as a new source of growth in
overseas market Haiers overseas expansion strategy called first difficulty, then easy.
Firstly, it built a successful case in the niche market in developed countries, and then
heightened the brand value.
1-1 Haiers development overview
Haier was founded in 1984. It headquartered in Qingdao city of China. Currently, it
is the largest consumer electronics manufacturer in China. Haier introduced the
production technology and equipment from company [Liebherr-Haushaltsgerate] of
Germany and started production and sales of refrigerators. At first, it was only the
production of refrigerators, currently, it grew up to deal with the production of product
total of 86 type and 13000 items, including refrigerators, air conditioners, washing
machine, video, TV, audio mobile phone, personal computer, robot.
Haier developed a unique strict quality control system. Since the mid-1990s, Haier
enhanced after-sales service network and sales network, established image by
aggressive advertising, in addition, acquisition aggressive domestic companies. Haier
grow rapidly by expand the scale, and became the largest Chinese household electrical
appliance enterprises.
Haier reduced cost and increased production efficiency by large factory and conducted
a thorough quality control. In addition, it created in-depth service network. Its network
has about 30000 stores, after-sales service center for about 20000 locations
throughout China.
1-2 overseas expansion of Hair
Haiers relationships with foreign companies were a focus on technology introduction
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until the mid-1990s. The first overseas business operation of Haier was the
production of refrigerators in Indonesia in 1996. After that, focusing on joint ventures
and OEM, it expanded its overseas production. In October 2000, in the background
that Chinese government advocated the policies of go out, Haier became a worldwide
brand company and entranced into the overseas actively.
For overseas expansion strategy, Haier has taken three the first of three marketing
strategy from the early 1990s. The first one is domestic production and domestic sales,
the second is domestic production and overseas sales and the third is local production
and sales overseas. Currently, productions of Haier occupy 30% in the domestic market
and exports also occupy the first of three. By 2014, the overseas sales plan to occupy
70% of the gross sales. However, thought the priority in domestic is the cheap labor
force, the cost of export begins to increase recently. Furthermore, after jointed in the
WTO, overseas production and overseas sales become more necessary in order to
escape the non-tariff barriers.
Overseas expansion of Haier was first to enter the market with its product export
method. When the export volume exceeded certain of production, it started to invest
and produce locally. The case of investment, in most countries and regions, has taken
the way of joint venture and cooperation. It is a wholly-owned factory in America and
Italy market, but the sales company is a joint venture company.
The designs of Haiers product are almost by merger and cooperation methods.
From the late 1990s, Haier tried to seek planning company of consumer electronics
products that could cooperate in many parts of the world, and then obtained the share
of the company, and established a design center that could share benefit in joint
system. Currently, there are nearly 20 companies of this kind of design center in the
world, widely distributed in America, English, France, and Japan, Etc.

Table 1-1Overseas investment situation of Haier
Period
Investment
destination
Business
Form of
investment
August 1996 Indonesia
Production and sales of
refrigerators
Joint-stock
June 1997 Philippines
Production and sales of
refrigerators
Joint-stock
August 1997 Malaysia
Production and sales of
washing machine
Joint-stock
November Yugoslavia Production and sales of air Joint-stock
4

1997 conditioning
April 1999 America Consumer electronics sales Joint-stock
April 1999 America Production of refrigerators Wholly-owned
September
1999
Iran
Production and sales of
washing machine
Joint-stock
1999 Tunisia
Production and sales of
consumer electronics
Joint-stock
2000 Vietnam
Production and sales of
refrigerators
Joint-stock
2000 Bangladesh
Production and sales of
consumer electronics
Joint-stock
November
2000
Ukraine
Production and sales of air
conditioning
Joint-stock
January 2001 Italy Consumer electronics sales Joint-stock
March 2001 Pakistan
Production and sales of
washing machine
Joint-stock
May 2001 Nigeria
Production and sales of
refrigerators
Joint-stock
June 2001 Italy Production Wholly-owned
2003 Jordan
Production and sales of
washing machine
Joint-stock
2004 India
Production and sales of air
conditioning
Wholly-owned
2007 India
Production and sales of
refrigerators

April 2007 Thailand
Production and sales of
refrigerators

SourceCompiled from Haier important chronicle, Takahashi Goro, 141 page.

The internationalization strategy of Haier is trinity strategic, including planning,
production, and sale. When product was put into the market, it has the feature from
single to diversification. During its entry overseas, Haier always analyzes the
consumption demand of countries or regions and introduces the products that will fit
that countries or regions. A single product which was estimated to be welcome firstly
was introduced into the local market. If the single product is successful, then it will
introduce the other products. For example, in the U.S. market, refrigerator was firstly
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entered, but in Europe, it was from the air conditioner. In Southeast Asia, the
consumption level is still low, Haier entered from washing machine. By doing so, it is
possible to reduce the loss to a minimum, even it failed.
1) America market
In the U.S. market, Haier entered a niche market as a strategic first. It exports
refrigerator target to the student dormitory in 1995. For entry into America market,
because Haier has taken the strategy to focus on own brand from the beginning, the
case of export the product of the OEM partner of corporate brand was low. However,
due to shoulder the cost of transporting exports from China, Haier established a factory
in south Carolina Green site in 1999. That is the local state government is active in
attracting for foreign investment. There were preferential measures, such as exempted
corporate tax for 3-years. In addition, it is willing to bear the costs of education and
training in company. Currently, the special refrigerator and full-sized refrigerators are
production in South Carolina; compact refrigerator has export from China. Furthermore,
Haier acquired the building in New York in March 2002, as the American headquarters.
In America market, Haier is taking niche market strategy by local strategy,
segmentation strategy, and low-price strategy. The promotional strategy is not direct
sales for the consumer, it is to distributor aggressively.
Haiers strategy of localization is localization product development, localization
production, localization sales. In the U.S. market, before building the factory, Haier only
had $ 3,000 to sales, but sales reached $250 million of 8 doubled in three years later.
All the employees of the factory of 300 were American for local hiring. 10,000
refrigerators were produced every month, and sold in the United States. From this
localization strategy, Haier has made great achievements in the United States market.
The localization strategy can understand the situation quickly on the local situation:
such as what kind of product is being demanded, and understand the psychology of the
local consumer, then could make respond to the local market quickly. Also, to adopt the
local administrator with experience is one of Haiers international strategies.
The entry of the product to avoid competition with local leading companies was
targeting strategy niche markets at first. Local capacity manufacturer almost does not
advance small refrigerator, freezer below 180L. It is 20% shared in 2004, and it is
stretched 26% in 2005. In addition, as the sales performance grow from small freezer,
refrigerator. Haiers product areas expand gradually. Haier has won a share of Wine
cellar 50%, freezer 9%, and room air conditioners 6% in the U.S. market in 2005. It also
started production medium, large refrigerator from 2007.
Haiers price nearly half of other manufactures products in the same capacity in the
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U.S. market and taking a low-price strategy.
The promotional strategy in America, at first entered the U.S. market, Haiers visibility
was low. It adopted the method to market to distributors mainly aggressively. It
invested for 80% of sales promotion expenses for retailers. It put the label of Haier in
the baggage care of the major airports in the United States, and put the advertising Etc.
Haier put the outdoor advertising across the street from Wal-Mart (retail giant)
headquarters in 2000. Thus, after being recognized to some extent distributor, Haier
changed the strategy to aggressively attract customers.
Haier was carried out massive advertising campaign in advance to match the launch
of new products in 2004. In this campaign, it made a recording of air conditioning
7,000 that sold in 7 hours. In 2006, Haier has entered into a sponsorship agreement
with the (NBA) National Basketball Association of America.
On the sales channel, Haier did not build their own sales company, it uses the channel
of the existing total Commercial Agent of the United States. It is concentrating on the
development of mass retailers instead of development to focus on general retail store
in the retail stage. Haier used the existing retail channels of local and built a high
degree of concentration channel by mass retailers. Also, sell human resources is also a
thorough indigenization policy. Haier products are sold through sales network of major
retailers, including Wal-Mart, Sears, Home Depot, Best Buy, Costco, and Target. Sales
volume by major retailers of these accounted for more than 85% of Haier products.
Haier adopted the indigenization policy thorough in the U.S. market, by performing a
detailed market research, to create a product that matches the current situation of
local, Win the trust of Local consumer. It cannot be said that Haier was successful in the
U.S. market today, but Haiers accumulated knowledge in the U.S. market has a track
record steadily.
2) Emerging markets
Haier was established a production company of the refrigerator in Indonesia in 1996,
then, it began to produce air conditioning, washing machine, microwave, water heater,
Haier began to export to the target Southeast Asia. Haier started producing
refrigerators, freezers, air conditioners, washing machine in Philippine in 1997, It
produced washing machine in Malaysia. Market size of these countries is not very
large, competition with developed countries companies was lower. However, I
considered Haiers overseas expansion at that time were still experimental for Haier.
Haier established Industrial park of the second in Pakistan in April 2001, and began the
production of washing machine in May 2002. After that, Haier established
production plant in Indonesia, Malaysia, India, Bangladesh, and Vietnam, Haier
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achieved a local production. In Thailand, Haier was advanced in the export product of
the refrigerator at first. It acquired Thailand refrigerator factory of Sanyo Japan in
2007, Currently, Haier has become the second refrigerator manufacturing company
in Thailand.
China and ASEAN Free Trade Zone was built on January 1, 2010. The construction of
this free trade Zone will have a significant impact on the strategy for the ASEAN
economies of Haier. If you look at the strategy, which is said Trinity mainland of Haier,
that is production, development, sales strategy. As an example the Thai plant,
mainland of production, by using the zero tariff preferential policies, parts are procured
from China, it is possible to avoid the tariff.
In addition, because Thai-made consumer electronics are low tariff barriers to export
from Thailand than to export from China, Haiers product as a production base in
Thailand factory, was prepared to export of ASEAN other countries, to other
countries and regions in the world bring a big advantage. For example, fan refrigerators
are often used in the Thai market, but such this type of refrigerator is less in the
Chinese market. In fact, this is a popular type refrigerator in China. By the construction
of a free trade zone, duties in case that consumer electronics products made in
Thailand are exported to China is zero, in inverse export to China Haier fan is a type of
refrigerator that was manufactured in Thailand factory, the superiority of the product
between to supplement each other, It can realized to share the resources of the
market.
In the Indian market, Haier established a joint venture company in the sale and
production in India in 1999, and Haier established the Haier India Haier factory by
Haiers owned 100% in 2004, It started local production of air conditioning for the
Indian market. Then, Haier was aim to Virtuous and whirlpool work together, and
started the local production of air conditioning for the Indian market. The current
operation of India, has been deployed around this HaierIndia. Both handling
products that are produced locally and the products that have been exported to India
from China, Haier established a development center in India with a purpose to
promote the localization of Haier products in July 2005. Haiers sales in India were 30
billion rupees in 2005, Haiers sales in India were 35 billion rupees in 2009. Haiers
share in the Indian market is 3.5%. Although, Nokia has accounted for more than 50
percent of the mobile phone market share in India, because the growth of the market
is high, Haier established a factory of mobile phone products joint venture company
with Scope of India in 2006.To enhance the consumer electronics production system in
India, Haier is running a line to assemble the air conditioning and washing machine
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factory in the western Maharashuto state in 2010.
Currently, in the Indian market, Haier has been developed to establish sales offices in
3000, the Haier exhibition room of 14. Haiers product is expanding to refrigerators, air
conditioners, washing machine, dishwasher, and microwave, TV, DVD, and mobile
phone. Haier has established itself as a local brand.
Haier entry into India is slower than the manufacturers of South Korea and Japan,
name recognition is low, right now, Haier has infiltrated the brand in advertising and
advertising strategy aggressive. Development of system sales companies, the
development of local sales channels, promotion of human resources with the local
market experience and to enhance of the after-sales service system.

3) Japanese market
Looking at the overview of the Japanese market, first, in circa 1998, exports to Japan
have been initiated. Haier was going by the OEM brand of Japanese companies initially.
It started to export the 30,000 own-brand products air conditioning to some
commission consumer electronics distributor in Tokyo in January 2001, after that, It
also started export of washing machine of its own brand. In January 2002, established
Haier Japan sales Co., Ltd., in February the same year, also founded the Sanyo Haier Co.,
Ltd. in partnership with Sanyo Electric, In addition, established Haier Japan Holding at
100% owned by Haier in June, business management of Haier product sales company,
and as for the Japanese market window, product research in the consumer electronics
market, the market development, advertising, professional recruitment, planning and
development which in charge of the related services. In March 2007, it founded the
Haier soft Japan.
Product which was charged to the first Japanese market was small-and
medium-sized product both. Initially, sales of Haier sluggish, but General awareness is
low because it does not shed and large CM on TV, It is seen as the biggest factor the
number of stores to handle the goods is not increasing, and It ended a partnership with
Sanyo in 2007. After that, the sales in the Japanese market continue through the Haier
Japan Sales Co.
Presently, the product sales in Japan of Haier, it is made through Haier Japan Sales.
Sales channels of Haier Japan Sales is through electronics stores that mainly of GMS of
Aeon group, Itoyoka Hall, and Seiyu, Arc Land Sakamoto, Cain, Keiyo, Konan, Komeri,
Joyful Honda,, DCMJapan Holding, home center of Tostem Viva, and K's Holdings,
Kojima, Bic Camera, Best Denki, Yodobashi Camera. Because the company is focused on
the small product market the product areas in the Japanese market, Haier consider
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selling route fortunately rather is appropriate.
In addition, the pricing was unlike the U.S. market, and not taking a low cost strategy.
It was about 15% cheaper than equivalent Japanese brand in the washing machine, but
not as much as the United States, Over-the-counter price of refrigerator is set to almost
the same as the Japanese brand. Small in the refrigerator, in the two-chamber in the
washing machine for products is either with a focus on young people living alone is
also aimed at a niche market in capacity.
However, It found several problems in the Japanese market. First, in the production
cost, there is not much advantage to the Japanese manufacturers that have been
producing same in China. It has to change the product design to Japan in the cost of
development, and for at a voltage of 220V in China, it has to all modify the voltage of
100V, corresponding to 50/60Hz to Japan. It is also common knowledge to put washing
machine in the kitchen in Europe and the United States, but because in Japan put
washing machine close to the humid bathroom. They have changed the ground wire of
the power cord to match the moisture resistance of Japan. Further, for the size of the
bottle is different in China and Japan, it must be redesigned and storage. Initially in
2002, Haier had been exported to Japan to adjust the product minimum that has been
made for Europe and the U.S. and China, but are increasing their Japanese specification
things from 2005. It is difficult to demonstrate the economies of scale by mass
production to make the products of Japanese specifications. In addition, shipping costs
to Japan from China factory, such as rebates to dealers in Japan, distribution costs will
be borne by Haier is same as Japanese companies. It is a fact in the technical
capabilities, Haier products have not so conspicuous. Haier has a proprietary
technology development, but because commercial in Japan is small, little is known. The
service centers across the country and many call centers are opened 24th. They have a
good after-sales service in China, and to build on its own this network because the very
expensive in Japan, advantage in this respect also does not appear.
However, experience of marketing strategy in the Japanese market of Haier will be
helpful when it want to deploy to other countries. Partnership with Sanyo in 2002,
advance of the Japanese market, that due to the use of sales channels of Sanyo, It
considered that to be goodness of Strategic original of Haier, which took place at China
was not out, also one cause of failure. In order to continue to stay in the Japanese
market, Haier developed a product to more suit Japanese consumers from now, the
advertising aggressively the merit of the product, Haier take advantage of sales
channels, it set price is low in Japanese consumer low-end today, To be successful in
the Japanese market if you can demonstrate success after-sales service in China is also
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possible. We would like to focus now on the expansion of the Japanese market.

Chapter 2: overseas expansion of TCL
TCL is the largest manufacturer of color TV in China, aiming to explore overseas
markets from 1998, TCL group began to internationalize and expand its markets.
Currently, TCL has made investments to each region of the world, and by the end of
2011, it has a R & D center in China, America, France, Singaporeand has a production
base of 20 locations in China, Poland, Mexico, Thailand, Vietnam etc. Recently, by the
impact of reduction of purchase subsidy policy of government and the economic
slowdown in the overseas markets, it has been expanding and diversifying its sales
channels around the markets, such as rural and small urban which were used to be
weak in the traditional market activities, and it has also accelerated the development
of overseas markets
1
.
2-1 Development Overviews of TCL
TCL had ever been interpreted as "The China lion," but has deployed a new
corporate image strategy in 2007 redefined as "The Creative Life". Its forerunner, "TTK
Home Appliances Co., Ltd.", got the loan of 5000 Yuan from the local government in
1981, and was established as a cassette tape manufacturer by the entrepreneurs of
Hong Kong and seven former government officials of Huiyang district Machinery
Industry Bureau., It had been counted as one of the earliest 12 Sino-foreign joint
venture companies founded in the nation at that time.
2
In 1985, "TCL Communication
Equipment Co., Ltd." was established to product magnetic tape and phone, and
continuing to expanding its products lines one after another: color TV since 1992; PC
since 1993; the mobile terminal since 1999. Currently, the national market share of
fixed phones listed at the first place, color television at the first place, home personal
computer at the third place, and mobile phone terminal at the third place. TCL
entranced into a lot of new business at this time, and the company has also grown fast.
TCL has three listed companies: TCL Group, TCL Multimedia, and TCL Communication
Technology, and was composed of six fields of business: consumer electronics,
information, communication, multimedia, electronic and electric works, and parts. TCL
began its internationalization management from 1999. With the development of the
emerging markets, TCL combined and acquired mature brands in Europe and the
United States markets, and promoted the diversification of management. Under the
diversification policy, repeated the mergers and acquisitions of domestic companies

1
May4 2012 Nikkei Business Daily
2
Inoue Ryuichiro(2004) [ability of China's top 70 company-breakthrough]p74
11

along with the expansion of existing business, TCL entered to new types of industry
aggressively.
3
TCL was demutualized in April 2002, and had undergone a
transformation to a state substantially controlled corporation. At present, focusing on
both the business of mobile phone production and color TV, TCL has grown to become
one of the large state-owned enterprises which have established their own pillar
industries. In 2002, TCL acquired the television department of Schneider of Germany.
In January 2004, TCL founded the TTE and Thomson of France. TCL acquired the mobile
division of Alcatel of France in 2004, established the TCL Alcatel mobile phone company.
TCL had expanded the types of product widely in the field of consumer electronics,
such as TV, Audio Visual machine, refrigerator, air conditioner and washing machine;
and in the field of communication, such as the fixed phone, cell phone, communication
system equipment. Currently, it has also expanded to the fields of real estate, finance
business, physical distribution and service.
Since the 1990s, it has continued the high growth on average of 42.7% yearly for 13
years in a row. In 2004, though TCL carried out two large-scale joint ventures, because
the management integration effect of the jointed venture couldnt be fully displayed
(see Figure 2-1), it fell to the red for the first time. On the other hand, compared with
other consumer electronics manufacturers in China, its overseas revenue was 37.54%
high in 2011, and in this sense, it can be say that TCL has already been a member of
the truly global companies.

TCL Figure2-1 Trends in sales of Unit: one hundred million Yuan

3
Tomofumi AmanoHiroyuki Oki (2007)[Internationalization of Chinese
enterprises]p137
12


Source: Compiled from the home page of TCL

2-2 overseas strategy of TCL
From mid-2000, the foreign M & A (mergers and acquisitions) of Chinese companies
have become more and more. In general, it is common that a flow of development to
overseas markets starts from export and then change to local production due to
revaluation of the currency and trade friction, such as tariff barriers, but in the case of
China, most companies expanded their oversea markets by the method of M & A from
the export stage.
In the late of 90s in the 20th century, TCL has reached sales increase on an average
of 42.66% yearly, but in the Chinese market, because price competition is intense and
profit rate becomes low, the development of new markets has become a common
issue to all the Chinese household electrical appliance enterprises. In addition, since
China became a member of WTO, there is not any barrier in the domestic market,
foreign companies can easily enter into the China market, and competition has become
more severe. Overseas expansion is a necessary way to go in their internationalization
of Chinese enterprises. It was in such a situation, overseas expansion of TCL was
started.
Firstly, overseas expansion of the TCL established the superiority to lead other
companies in the field of industries in the domestic market, and then followed by the
direction of advance to overseas markets gradually. Overseas expansion of TCL was
13

started from 1998. First to the Southeast Asian countries, and then into other
developing countries, at last TCL began to advance in the market of advanced Western
countries step by step. In its advance method, depending on the characteristics of the
investment destination, it is mainly the product of its own export brand in developing
countries in Asia such as India and Vietnam; it mainly takes the methods of ODM and
OEM (Original Design Manufacturing and Original Equipment Manufacturing) in Europe
and the United States mature markets
4
. In this way, TCL has pioneered the local market
while leveraging the local name-brand.
Currently, TCL has established a sales base of 40,000 locations in 40 countries and
regions around the world, and about 20 institutions such as local branch of the
companies, and about 25 companies like factories of their own company and strategic
cooperation. Development Department have been set up in America, France, and
Singapore, and 17 production bases have been set up in China, Poland, Mexico,
Thailand, and Vietnam.
5



Table 2-1 Internationalization of TCL
1981 The joint venture TTK Home Appliances and Hong Kong capital
1985 Established a joint venture TCL Communication Equipment Co., Ltd. and
Hong Kong capital
1993 Established (Hong Kong) TCL electronic
1996 TCL group acquired the color TV sector, Lu Ltd. of Hong Kong
1998 Established a joint venture ZhiFu Cyber Co., Ltd. and Taiwan ZhiFu
population
1999 Listed on the Hong Kong stock market, and established a TV factory in
Vietnam, established a color TV factory in India
2001 Established a joint venture, Ltd. TCL Ruizhi made cold Equipment Co., Ltd.
and Taiwan Ruizhi precision CORP. capital
2002 Acquisition of German companies Stineider companies, and local
production color TV
Strategic alliance with Matsushita Electric Industrial Co., Ltd., strategic
alliance with Philips
2003 Acquisition of TV division of Thomson of France
2004 Acquisition of the mobile phone division of France's Alcatel, and Toshiba

4
Ibid Amano Oki p40
5
www.cps.com.cn
14

alliance refrigerator, a washing machine sector
2005 The acquisition of the French company's part Rorangu
Source: Created from the home page evolution history of TCL

2-2 Asian emerging markets
The emerging market is most important in overseas markets of TCL.
Processing trade of China was hit hard by the Asian economic crisis of 1997. Because
only processing trade have to rely on the brand partner, channel, market and customer.
If they couldnt ensure the overseas sales channels and their own brand, they wouldnt
keep stable growth, and in this reason, TCL began to expand overseas.
From 1999, TCL entries into the emerging markets of developing countries in
Southeast Asia, the Middle East, Eastern Europe, and South Africa, and began to have a
sales network of its own to deal primarily the TCL brand.
1) Vietnam
Areas that TCL has advanced earliest, was Southeast Asia. Investment partner
country was Vietnam. Result of market research, it was based on the thinking that
there exists mass high-quality workforce, and there is a future in the TV market with 81
million population in Vietnam. In addition, Vietnam is close to the economic
development level of the inland of China, and Social structure that a large number of
the population live in rural areas is also similar, so there is a possibility that can utilize
the successful experience in China. TCL started the development of the Vietnam
market in February 1999. TCL acquired Lu electronic, Ltd (a color TV enterprises
established in 1990 by Mr. Lu QingTian from Hong Kong, 500,000 color TVs were
produced annually in Vietnam). Though the most Foreign TV manufacturers are taking
form of a joint venture with state-owned enterprises in Vietnam, TCL is a wholly-owned
foreign capital alone.
While facing to the difficulties in Vietnam such as the development of new markets,
the communication, the policy of local government, and the low popularity of the
brand, TCL has infiltrated the brand certainly in rural market at a low price. In Vietnam,
for the image of Chinese products was not good, TCL was called a company in Hong
Kong for a long time and had called latently a company with technology of the United
States and parts of Japan
6
.
It is strength to develop a niche market for many Chinese enterprises when they
entered the foreign markets. In Vietnam, because Japanese, Korean companies did not
have an interest in rural thin-margin market, TCL began to develop the rural television

6
Lan Shizi Wu XiaoBo (2012)[ reincarnation of the hawk] p199
15

market by local factory in Vietnam. TCL got enough know-how and experience through
the development of rural TV market in China; it is strengthening lightning in response
to Vietnam climate which has a lot of thunder. TCL is characterized by the things that
the rural areas were wide covered by the TV transmitting station, and it has higher
reception sensitivity. In addition, TCL is focusing on after-sales service in each city,
provided with its 24-hour hotline, and repaired the house of the customer in one
phone call, and accept the three-year guarantee against two years guarantee of other
manufacturers.
TCL is taking a low-price strategy in the Vietnam market. The price was set about as
same with the cheapest local manufacturers of Vietnam. On the other hand, for the
reason that LG and Samsung had already gained the trust of local consumers, the price
of was set more than 10% high than the local manufacturer price, but still took the
largest share. Prices of Japan brand is still 10% higher than Korean manufacturers.

After 18 months consecutive deficit from its entry into Vietnam from 1999, TCLs
sales volume rose from September 2001, and became the second in the Vietnam
market today.
Other than Vietnam, TCL has have a local production brand in Philippines, Indonesia
from 2000, and Thailand from 2004, and established a sales office in Singapore, and
has been selling in Malaysia, Brunei, and Myanmar.
2) India
With a population of 1.2 billion, India is attracting attentions from companies in the
world as second emerging markets following China. TCL was advanced once to the
Indian market from1999 to 2002. In the Joint venture with the Baron of India, TCL
Baron Holdings, the Chinese side provided the parts, and the Indian side took the
charge of domestic sales, assembly, and sales of the color TV of TCL brand. It was said
that the sales was more than $ 50 million in August 2001 in about one year after the
advance, and also beyond the border line of the profit or loss as a sales scale. However,
because of the fact that the management of Baron got worse, the discrepancy of
management and disagreement of philosophy between the two sides, quality problems,
and recovery of accounts receivable problem, TCL was forced to withdraw from the
Indian market
7
.
In 2004, TCL was decided to acquire Thomson which has a factory in India, and
penetrated the Indian market again. In the Indian market, due to religion, hierarchy,
region, and economic conditions, the purchasing power is different. In addition,

7
Ibid Amano Oki p 146
16

consumption characteristics are also different. Indias country gap is large and the
disparity is clear than China.
Focus on hierarchy and consumption habits of Indian consumers, marketing
strategies of the TCL in the Indian market are targeting the middle class of 200 million.
The Chinese have a big role in such fields as sales and marketing in such countries as
Indonesia, whereas in the Indian market, unlike other Southeast Asian countries, there
is no network of Chinese. In addition, as the same as Vietnam, because consumers do
not have a good impression on Chinese products, TCL are struggling to get sales
on-site.
For the reason that Korean manufacturers, such as LG, Samson, occupy a leading
position in the first and second class markets of India, TCL are targeting the rural
market and the second and third class market to avoid the direct conflict. In addition,
because Korean manufacturers and local manufacturer still stay a strong situation in
the local market, the re-challenging TCL appeals its brand to consumers while it actively
participates in social contribution activities, and adopted a strategy to increase the
sales performance certainly by using the local know-how principle gained in the vast
rural markets of China.
Currently, TCL has built a sales network with 20 branch offices, 100 locations
after-sales service center, and 2,700 local agencies in India, and also has established a
40-people Research and Development (R & D) department.
As the promotion in the emerging markets such as India and Vietnam, TCL invites
the distributors of each market regularly to China, and appeals the actual business
status in the tour to the domestic factories and the dealers, then concludes with a
contract; participates in the exhibition to launch its products; with the product
development tailored to the needs of the developing countries market, has
implemented the strategy in the U.S. and European markets by taking advantage of the
distribution network and the introduction of high-profile brands through the
acquisition business, through these promotional activities it aims such as improving the
image of the company in developing country markets of TCL.
2-3 Western markets
1) Overview
Because the Europe and the United States market has a role of "show room" in the
world market, it can be said that Once you have established the status in this market,
your brand power will extend to the whole world market, including the emerging
markets. Therefore, every country company puts it as the most important market.
TCL is taking a multi-brand strategy in the overseas markets. For example, Thomson
17

brand is used in the European market, and RCA brand is used in the U.S. market, and
Schneider brand is used in Germany. There are two divisions in TCL overseas: one takes
charge of production and export of TCL brand and another takes charge of the
production and export of the OEM. In addition, with the establishment of production
bases overseas, it contemplates to avoid duty and dumping. The internationalization of
TCL is the basic rule that TCL brands occupy more than 50%.
Since 2001, to the dumping of China-made color TV, EU has applied the high tariff
rate of 44.6%. Despite the region overall demands was rising to 20 million units a year,
it was only 400,000 units imported from China. The establishment of overseas
production base through acquisitions enables local production, and trade barriers can
be avoided. In addition, though color TV and mobile phone are the update fast
business, because the poor accumulated power of innovative technology, Chinese
enterprises can increase faster technical capabilities with the acquisition. This business
strategic background is also present in the deployment of TCL in the Europe and the
United States market.
2) Germany
In October 2002, TCL acquired Snyder, an electronics company with a history of over
100 years in Germany, at 8.25 million Euros. The contents include the well-known
brand "Schneider" and "Dual", production equipment, inventory, and sales network R
& D and lineup as well. The biggest Harvest for TCL was that it got a sales network
across Europe and the acquisition of the R & D department of the company
8
. With the
entry into the European market, the acquisition of Snyder enable local production, and
even the absorption of innovative technology gave large significance to the
management of TCL.
3) France
Thomson
In November 2003, TCL joint the TV sector and the largest electronics manufacturer
Thomson in France, and established TTE (TCL Thomson Electronics Co., Ltd.) which
mainly takes charge of development, production and sales of DVD products and color
TV. The investment rate is 67% by TCL Multimedia, 33% by Thomson. For brand
strategy that is one part of the internationalization, TCL is supposed to use Thomson
brand in Thomsons strong areas, and basically uses "Thomson" brands in the European
market mainly. While in the emerging markets and developing countries in Asias other
markets, TCL uses "TCL" brand. With multiple brands, TCL has entered different
markets. In August 2005, TTE became a wholly owned subsidiary of TCL by the

8
October 3 2002 Nikkei Business Daily
18

acquisition of the shares of Thomson side because of non-profitability.
For the motivation of the acquisition of Thomson in TCL, the first is to strengthen
internationalization and brand power. Thomson acquired the electronic sector GE in
1988, and held the famous color TV brand RCA of the United States. Thomson
accounted 8% in the European market and 12% in the U.S. market at that time. The
second is a response to trade barriers. Anti-dumping (AD) is an issue for Chinese
companies to enter the European and American companies. In addition, the tariff rate
is high, since TTE had a production base in France, Mexico, Poland, Thailand, and
Vietnam, exports of the products produced in those production bases can avoid trade
barriers, thus TCL can enter the Western markets easier. The third is to avoid the risk of
intellectual property rights. For Chinese companies is poor at core technology, after the
joint with Thomson, TCL can make use of color TV patent of 34,000 section of Thomson.
The fourth is the brand effect of Thomson in the United States and Europe market. TCL
could promote its internationalization in less time than other companies by using
Thompson brand.
However, there was also a problem in the joint with Thomson. TCL has a ratio of 67%,
so TCL had to bear most of the cost of TTE. Except its tangible assets, such as the
facilities of the plant, the assets of Thomson are mostly intangible assets patent, such
as intellectual property rights. In addition, because TV department of Thomson was
unprofitable, it could not make a profit in a short period. And in the technical hand,
because the technology of Thomson is primarily a CRT traditional television technology,
TCL only could use the old technology, and the State-of-the-art technology of Thomson
was not entered into the joint venture. Moreover, the most valuable overseas sales net
was also not included; the relationship with TCL was cooperative in one side, and
competitive in the other side. Therefore, the development of core technology becomes
necessary to TCL itself
9
.
Alcatel
In April 2004, TCL joined with Alcatel in the mobile sector in France. The investment
ratio was 55% by TCL communication and 45% by Alcatel. In May 2005, the joint was
relieved because of unprofitable in mobile sector, and then, by the acquisition of the
shares of Alcatel, Alcatel became a wholly subsidiary of TCL.
In November 2004, sales in the fourth quarter of Alcatel fell sharply. At the same
time, China's domestic mobile phone market of TCL was also caught in situations of

9
WuLi The purpose and risk of TCL acquired Thomson
1994-2010China Academic Journal Electronic Publishing House All rights
reserved.Http / / www.cnki.net
19

upheaval. In 2003, By China was subscripted to the worldwide commodities trade
association(ITA), the import tariffs on mobile phone became to be zero, foreign
manufacturers, has entered the low-end market from the competition only in the
high-end market. Advantage of the low prices in China domestic mobile companies is
eliminated; foreign manufacturers began to change production volume, style, and price
by brand power, and began to spread to the entire Chinese market rapidly. In addition,
flooding of fake brand was a major blow to the mobile business of TCL
10
.
TCL is in the form that it has acquired long-term brand use rights with over 20 years
of Thomson TV sector and the mobile phone division of Alcatel. TCL was aimed to
develop overseas markets by taking the advantage of the brand of French companies
("RCA" in the TV and "Alcatel" in the mobile phone).
for the acquisition, Li Dongsheng, CEO of TCL, said that "The acquisition of
Thomson took the cost than expected, thats because of 20 years of surplus before the
acquisition, and because we were too self-confidence for companies. However, it can
be considered a success generally. In the TV business, by the acquisition, it becomes
the first brand of Chinese color TV, and the production capacity of the liquid crystal
panel is improved. There is still a difference from the other international companies,
but in the future, Chinese companies will lead the world's TV industry on behalf of the
Japanese companies". As for the mobile phone, the acquisition of Alcatel enabled the
development in Europe and the United States market. It has sold 44 million units in the
U.S. and European markets in 2011. It is a result that cannot be obtained without the
acquisition of Alcatel
11
.
24 Cooperation with Japanese companies
In the Japanese market, TCL entries mainly by partnered with some companies such
as OEM. In 2002, under the agreement on comprehensive alliance in the consumer
electronics field with Matsushita Electric Industrial Co., Ltd., Matsushita Sold in rural
areas in China with a sales network of TCL, and TCL produced OEM color TV of
Matsushita Electric.
12
.
In 2006, Toshiba and Toshiba TCL Consumer Products (Nanhai)" was established in
Foshan, Guangdong. The investment ratio is 90% by Toshiba Consumer Products of
Toshiba subsidiary, and 10% by TCL. At the new plant, OEM supplies some products to
TCL, and produces product of Toshiba brand. In August 2008, they break the joint,
Toshiba purchased the holding of TCL side by approximately 200 million Yen, it became

10
Ibid Lan Shizi Wu XiaoBo (2012)[ reincarnation of the hawk] p223
11
[LiDongSheng fan xing shi nian guo ji hua] China Electrical Industry No. 2
2012p26-27
12
April 25 2002 Japan Business Daily
20

a wholly owned subsidiary.
In July 2010, TCL established a joint venture "Toshiba and Toshiba Visual Products
(China) Co., Ltd." (Guangdong) to sell LCD TV, whose capital were 50 million Yuan
(about 600 million Yen): 51% by Toshiba and 49% by TCL, but TCL which was familiar
with the Chinese market is the center of business. Utilizing the sales network of TCL,
Toshiba advanced to small and medium-sized cities in inland, and the current store
locations plans to increase from10 000 to 2200 stores in the end of 2012, and increase
to 15 000 stores in fiscal year ended March 31, 2014.
13
TCL has produced 70% of
Toshiba TV which were sold in China currently.
In addition, currently, TCL produces Blue-ray Disc products for Sony, and are buying
LCD panels from Sharp. Furthermore, it is contracted to produce the Panasonic
products. In 2013, TCL is planning to separate as an independent company with
contract manufacturing business. If the contract manufacturing business can be
independent as EMS (contract manufacturing services of electronic equipment), it is
easy to contract a large amount of products from several companies, including Europe
and the United States.
14
Mobile phone as one of the core business, along with TV, can
enter the Japan market under the brand name of Japanese companies. TCL is showing
willingness to enter actively into the Japanese market.
25 Problems of overseas acquisitions in TCL
15

The problem with overseas acquisitions in TCL, viewed from the acquisition of the
French company, the first is the difficulty of tissue integration. The second is a difficulty
in the fusion of business culture. Scale of the acquired France businesses is larger than
TCL, but it was difficult for employees to accept the corporate culture of the TCL. The
third is the impossibility to share the resources of the two companies. It is common for
the joint venture to introduce the channel of each other's strengths in its intended, but
TCL and the acquired France businesses, could not share in the sales channel, and TCL
brand was not able to sell to overseas markets through that channel. The fourth is that
foreign labor cost is high. Labor costs are cheaper was also one of the competitiveness
of Chinese enterprises for a long time, but in overseas acquisitions of TCL, labor costs in
France, much higher than China. In addition, because the union of France is very strong,
it is difficult to lay off employees. The fifth is that technological superiority cannot be
exhibited. Technical capabilities that TCL expected with the acquisition of Alcatel
cannot be exhibited, Aggressiveness of employees is low, the development rate of new

13
July 6,December 16 2010 Japan Business Daily
14
July 7, 2012 Nihon Keizai Shimbun
15
Ibid Lan Shizi Wu XiaoBo (2012)[ reincarnation of the hawk]p222
21

products is also low, and the communications between each other is also a difficult
situation. To the end of 2005, losses amounted to 900 million Yuan.
TCL is expanding at a stretch in the business acquisition of the two companies in
France. It was the forerunner of the M & A to the European and U.S. companies by
Chinese companies, but it is the wrong reading of the changes in the market. At that
time, TV was a turning point from cathode-ray tube to the liquid crystal, but the
accumulation of liquid crystal technology was poor in Thomson. Nokia (Finland), the
largest phone business strengthens the price offensively, and hit the business of Alcatel
in high-cost. Both mobile phone and TV is intense price competition product. TCL was
delay in taking action, fall in the final deficit in 2005 and in 2006, and was forced to
delisting.
Competition of mass overseas acquisition of TCL became intense in China domestic
market, so the development of overseas markets is required, but the acquisition at the
time of 2004, from the experience of China's domestic market, TCL decided to acquire
two companies by its own judgment, and did not investigate the status of the other
Partner in detail. And the fact is that TCL, as many other Chinese enterprises, did not
studied the market situation of the partner country, the culture of investing country,
and political situation in detail in overseas acquisitions at the time. In addition, because
TCL's acquisition was unprofitable sector, it brought a huge loss to the TCL. In that
regard, for the acquisition of foreign companies of Chinese enterprises and TCL, this
will be a big lesson. However, in the long run for the TCL, it can be said that the
acquisition of foreign companies in its overseas expansion is a valuable experience in
the sense that they can get a sales network in Europe and North America.

Chapter 4 : Strategic comparison of Haier and TCL in overseas expansion
First, as a common point of Haier and TCL in internationalization strategy, both
companies took low-price strategy from the beginning, and had entered the overseas
market as a target niche market. It can be called the common point for Chinese
companies to expand overseas.
In addition, the differences in overseas expansions of Chinese companies listed into
two big patterns. One is a model called "destination flame after easy". The typical
company of this model is the overseas expansion of Haier. Overseas expansion of Haier,
firstly began to enter into Western developed countries market, which are strict in
demand such as specifications and standards, and got trust and brand power in some
degree in these countries, then continued to expand into developing markets such as
Southeast Asia which are low in demand, such as a relatively standard.
22

TCL represent the other overseas deployment model, "destination easy devil to pay
model. Firstly TCL began to advance from the Southeast Asian countries such as
Vietnam and the Philippines, which have resembling culture and custom with China,
and then, got multiple brands of Western companies by M & A when advance to the
Western developed countries markets. It is the feature that multiple brands are used
in TCL currently.
Conclusions
In the domestic market of, unlike other China consumer electronics companies,
Haier increased the value of their brand quickly by high quality and careful after-sales
service, and has infiltrated the value to the customer which is in the commercial
distribution end. Expansion into developed markets was important from the means of
obtaining an international recognition brand. It is believed that this market knowledge
will become properties for the future business development. In developed markets
such as Japan and the United States, products have been developed from the first small
products to the recent medium-sized and large products. It was believed that the
awareness of consumers will be gradually increased from now that. On the other hand,
in emerging countries, they tried to enrich the sales network equipments,
development of local market, promotion of human resources with local market
experience, and after-sales service system. Haier utilized the know-how experience in
management that cultivated in China and applied to those countries, thus a very large
development room in emerging markets can be considered.
Currently, China consumer electronics manufacturers on behalf of the TCL are
enhancing technical capabilities and the sales force, not only in China but also have in
overseas markets. It can be considered that overseas expansion of Chinese consumer
electronics manufacturers will continue to be more active in the future. However, to
the foray into the international market, competitions in terms of price will convert to
competitions in terms of quality, and Chinese companies must make their original
brand and high-tech products with original intellectual property rights. The technical
capabilities and the high quality must be ensured not only in the emerging markets but
also in developed markets. The trend of how to deal with this situation in the future is
noted.
Because Japanese consumer electronics manufacturers take a strategy by pursuing
high quality and make a good impression on their products by high quality in emerging
countries, including China and East Asia, as a result, they lost that market. On the
contrary, consumer electronics manufacturers in China and South Korea take a strategy
of low-cost as their competitive power, and then robbed emerging markets, including
23

East Asia which Japanese consumer electronics manufacturers had. But from now on,
China consumer electronics manufacturers must have a gradually development in the
core technology. For international expansion of china appliance manufacturers from
now on, it will be necessary to not only keep the price force but also continue to
ensure the global market share by technical force and the product power. In the global
TV market in the future, It is expected that Chinese manufacturers ensure with the
ability to compete with Korean manufacturers, such as LG, and Samsung. It will be a
subject in the future that how China consumer electronics manufacturers compete
with other consumer electronics companies, such as South Korea by weapons of low
price, and the development of value-added products with a core technology.