Picture-perfect vision

In Africa, home electronics group sees scope for growth

The Chinese company TCL Group has always had an eye for the big picture. Now it is looking to Africa to drive up sales of its TV sets and other consumer electronics goods.

"Our group attaches great importance to Africa as a market, regarding it as one of the most important and significant new growth points for the group," says Li Dongsheng, chairman of the company, one of China's largest consumer electronics companies.

The company had turnover of 69.6 billion yuan ($11.3 billion; 8.8 billion euros) last year, 14.5 percent higher than in 2011, and international sales accounted for 38 percent of the latest figure.

"We expect international activities will account for half of our business by 2015," Li says.

Increasing cooperation between the Chinese and African governments recently has given the continent even greater market potential, he says.

"There's no doubt Africa is one of the fastest growing economies, and we plan to set up manufacturing plants there to increase our sales."

TCL has none of its own factories in Africa yet, relying on partners in the southern and northern regions of Africa for manufacturing and sales.

The company, which apart from TVs makes white goods, air conditioners, small appliances and mobile phones, entered Africa in the 1990s by selling cathode ray tube TV sets.It is now shifting to sell LCD and LED flat tablet sets, says Wang Ning, director of the group's African business.

Last year the group had revenue of $104 million from selling TVs in Africa, 38 percent more than in the previous year and accounting for about 6 percent of the group's overseas business revenue, Wang says.

The company forecasts that its sales of flat tablet TVs will grow 45 percent this year, and that sales revenue will grow 20 percent.

Wang says Africa, with its many countries and a population of more than 1 billion, constitutes one of the group's most important markets in the future.

"For a long time Africa grew relatively slowly, but as the population has grown rapidly the region has made great strides economically. Just look at South Africa's GDP, which has grown more quickly than that of Asia and Latin America in recent years."

Population and economic growth have in turn stimulated consumption, she says, offering the group great potential.

Foreign investment has also grown in manufacturing, retailing and telecommunications in recent years, underlining the business opportunities, Wang says.

The advantages for Chinese companies in Africa are numerous, she says.

"Chinese companies are generally well endowed in production and management talent, and they have well-developed capabilities in logistics and in the supply chain.

"Our group has a manufacturing base for the largest 8.5-generation crystal LED, and we no longer have to rely on crystal LED suppliers from Japan and South Korea.

"Based on our complete and mature global supplying network we can provide Africa with a good product mix, from high-end to low-end, to meet all kinds of consumer demand."

But Wang says the group faces challenges in expanding in Africa.

"TCL still lacks product recognition in Africa, and many consumers are familiar only with the big brands. We're going to work on that by doing promotions with some of the internationally famous companies."

Some analysts say that based on rapid economic growth in Africa and less demand for big brands in the country compared with elsewhere, the continent offers particularly fertile ground for Chinese companies to fare well against their international competitors.

Liu Buchen, an observer of the household electrical appliances industry, says that while Chinese companies such as TCL and Haier have made great strides in expanding overseas, their share in Western markets are still small.

"Western consumers have strong purchasing power and attach great importance to brands, but they are less familiar with Chinese brands compared with big brands from Japan or Korea."

But in Africa, things could be different, he says.

"Customers' purchasing power in Africa is relatively weaker than in Western markets. So Chinese brands may attract African customers much more readily. Moreover, the relatively lower prices could be an attraction to them.

"When Chinese companies enter the African market it is critical that they not make locals think they are just here to make quick money, but try to integrate with the local culture and be a part of it.

"They should also be patient and not expect a very quick return. They should learn more about the market, the customers and regulations, and gradually build their reputation in the region to gain a long-term and sustainable growth."

Wang of TCL says the group has yet to enter all African countries, which leaves the door open for many more opportunities.

"We can cultivate more customers by taking part in international fairs such as the American Consumer Electronics Show," she says.

In China, some companies, intent on increasing market share, are undercutting their rivals with unsustainable price cuts that hurt every one, she says.

"Faced with that, we are making technological changes that give our customers more innovative products at reasonable prices."

Li of TCL Group says that as the cost of labor and materials increasingly puts pressure on profit margins, companies need to make the most of their innovative strengths to stay ahead.

Contact the writers at huhaiyan@chinadaily.com.cn and

chenyingqun@chinadaily.com.cn

(China Daily 05/24/2013 page15)