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A. The Mini Case “However beautiful the strategy, you should occasionally look at the results” - Winston Churchill
1. Thomson: A chaotic history…
Thomson is a French company1893- Créée sous l'impulsion du fondateur de General ElectrElihu Thomson fonde en 1879 une entreprise d'électricité qui deviendra plus tard General homsonh created with the advent of electricity at the end of the 19th century. From the beginning of the 1920's, the company kept diversifying its activities in the domestic electrical appliances and in electronics.
Thomson became quickly well-known but had to go through significant events. One of them is the implication of the French government in the capital, which saved the company from bankruptcy in 1982. The recent denationalization was decisive and implied many changes. Moreover, the French company suffered from successive errors. MoreMLe marketing n'est pas le point fort du groupe.For example, some difficulties in using marketing led to the end of a project that could be major: in 1998, three years before Apple, Thomson is one of the first in the market of the MP3 player with the Lyra, but sales remain sluggish and nAucun effort commercial n'est consenti et le projet est arrêtone effort is made trading.
“The company which was worth 1 franc” in 1996, referring to the sale of Thomson Multimedia to Daewoo by the French government, struggles again today with a financial health that shows some signs of weakness (Appendix 1). As a matter of fact, throughout its history, Thomson's strategy has often lacked of some clarity. Retour sur les errements successifs qui ont conduit Thomson au bord de la faillite.
Indeed, in 1999 the company, which value reaches 2.7 billion euro thanks to its In 199L'introduction en bourse de Thomson marque le début de l'embellie ; sa valeur atteint 2,7 milliards d'eflotation, acquires the American Technicolor, the world's leading manufacturer of DVD and Grass Valley, designer of TV studio video equipment. Cette stratégie s'avère difficile à justifier auprès des investisseurs. However, this strategy seems difficult to justify to the investors.
Ne pouvant faire jeu égal avec la concurrence asiatique qui tire les prix vers le bas, la direction décide d'abandonner l'électronique grand public et l'activité phare du groupe, la fabrication de téléviseurs.Unable to match with Asian competition which drives prices down, the administration decides in 2003 to abandon the flagship of the group: the manufacture of televisions.Mais sa stratégie est loin d'être limpide. But the strategy is again far from clear. Alors que Thomson cherche à vendre ses activités de fabrication de téléviseurs au chinois TCL , il achète la même année, le chinois Fortune, qui produit des tubes cathodiques.While Thomson is seeking to sell its manufacturing activities to the Chinese TCL, the decision to buy a Chinese company which produces cathode ray tubes is made the same year.
Sous la houlette de son nouveau PDG, Frank Dangeard , le groupe accélère sa mutation et clarifie sa stratégie.Led by its new CEO, Frank Dangeard, the group is accelerating its integration of change and clarifies its strategy.Thomson mise désormais sur les produits et services pour les industries des médias et de l'image. Thomson is repositioning on the linked activities to the “Broadcast” which are related to the products and services for the industries of media and image.Mais ce virage n'est pas payant, la société affiche des pertes en 2005 et 2007, son action dévisse et Frank Dangeard est remplacé en 2008 par Frédéric Rose.
2. A clear strategy for Thomson?
The strategy of Thomson named DMS: DIGITAL Media Solution is a project which aims to reach the position of leader on the markets of professional Broadcast but also to carry out 40% of its turnover on the “broad band” products. The DMS project becomes a new segment in Thomson's activities, which is concentrated on business-to-business solutions for journalists, suppliers, operators of network and advertisers, seeking to display complete basic solutions for the digital videos. As a matter of fact, the growth of the broadcasting market presents an unquestionable attraction for Thomson. It has sudden technological upheavals, dependent on numerical, which can become an interesting standpoint on the market at the convenient period. Thomson pursued its strategy with the acquisitions of Fats Valley Group and Philips Broadcast in February 2002 and becomes the world leader in the professional video host's market.
Thomson continue sa politique de recentrage dans l'audivisuel professionnel. Mais les résultats ne sont pas au rendez-vous .BBHowever this shift does not pay. The company displays losses in 2005 and 2007, which is followed by a meltdown. Frank Dangeard is replaced in 2008 by Frederick Rose. The La survie du groupe est entre les mains de ses créanciers.group's survival is in the hands of its creditors,Ils sont théoriquement en droit d'exiger le remboursement d'une ligne de crédit de 1,7 milliards d'e tLa dette explose encohe debt goes up to approximately 2.17 billion of euros. In December 2009, En juillet, Thomson est sauvé de la faillite grâce à un accord avec ces créanciers. Placé sous la protection d'une procédure de sauvegarde , le groupe va pouvoir poursuivre son activité et présenter un plan de sauvegarde à ses créanciers.Thomson was saved from bankruptcy through an agreement with the creditors and placed under the protection of a safeguard procedure; the group will be able to continue trading and present a restructuring plan to its creditors which was displayed the 9th of December (Appendix 5).
3. A failed strategy: The difficulty of integration
[ 01/12/2009 - 07h30 ] 1 commentaireThomson, qui ne parvient pas à sortir de ses difficultés financières, a demandé à bénéficier de la procédure de sauvegarde.Does this restructuring plan marksLa fin de la très longue agonie de ce qui était autrefois le grand fabricant français de téléviseurs? the end of the long agony of what was once the largest French manufacturer of TV? En fait, si le malade Thomson bouge encore, il vient d'entrer en salle de réanimation et ses chances de survie sont comptées. The reality shows that if the weak company is still active, it just entered in the recovery room and its chances of a survival are counted. La sauvegarde permet à une entreprise de se mettre à l'abri de ses créanciers pour se restructurer avant de repartir.
L'histoire donne l'impression de replonger vingt ans en arrière quand Thomson était déjà au bord de la faillite… A une différence près: à l'époque, le groupe était un fabricant de téléviseurs.The story gives the impression of going twenty years back when Thomson was already on the verge of bankruptcy... with one difference: at the time the group was a manufacturer of televisions. Indeed, the attempt to change its core activities in a decade is the failure of this strategy that we can see today. Changing entirely of job is a huge move and maybe what is the most difficult, Surtout dans le domaine très instable de la technologie.especially in the highly volatile technology.Pour corser la difficulté, le groupe a choisi un métier intéressant, mais à inventer totalement, les services aux médias, sur lequel il n'avait aucune légitimité. In addition, the group chose a new activity to reinvent totally and upon which it has no legitimacy. The center of gravity of this activity is naturally American, the reason why Alors il a acheté aux Etats-Unis des société de montage de film, de production de DVD et même un fabricant de caméraThomson bought U.S. companies of film editing, DVD production and even a camera manufacturer. Thus, Du coup, l'entreprise a passé son temps à vendre à tour de bras et à acheter aussi vite.the company kept selling and buying massivelyEn moyenne une nouvelle société tous les deux mois. with on average one new company every two months. This has displayed the incompetence of Thomson in Plus personne n'y comprenait rieMême plus les patrons de l'entreprise et le conseil d'administration qui n'ont pas fait leur boulotL'intégration d'entreprise que l'on achète est déjà tout un art, surtout si elle est étrangère, mais là c'était carrément mission impointegrating a new company, an action well known as being challenging, especially when it is made internationally.
Que restera-t-il de Thomson?What will it remain of Thomson? Nothing if no solution is found quickly. Rien si l'opérationLe tout sera dispersé d'autant plus facilement qu'il s'agit de filiales indépendantes et que 90% des employés sont à l'étranger.The company will be dispersed easily as it concerns independent subsidiaries and ninety percent of employees are abroad. Si le nouveau patron réussit, l'entreprise gardera ses brevets, peut être ses décodeurs et surtout une activité de services aux grands groupes de télévision ou de cinéma où tout restera à construire.
Thomson proposed one solution to this particular issue via its restructuring plan. However is it the only solution to solve Thomson's problem? There are some important points that definitely need to be under consideration.
B. The Briefing Note
As we have seen in the first part of this report, Thomson provides technology, services, and systems for media and entertainment industries (Appendix 2). But this activity was not Thomson's core activity looking back when the company was created in 1886. From being a TV manufacturer, Thomson tried to switch its whole line of work from one to another in ten years and kept buying and selling brands. As a reason of this Thomson changed several times of name, (Thomson-CTS, Thomson SA, Thomson Consumer Electronics, Thomson Multimedia) and of leaders (Alain Gomez, Alain Prestat, Thierry Breton, Charles Dehelly to date), implying strategic reversals systematically. The history of Thomson leads us to admit that its main problem is the change and integration of its core activity.
The second part of this report aims to give an understanding of Thomson's problem with the use of techniques in strategic management. The SWOT analysis and the BCG matrix are two techniques in strategic management that will help us in doing so.
1. Matching Thomson to its environment: the SWOT Analysis
It is important to know the strengths and weakness as well as the opportunities and threats of a company to be able to find the best strategy of recovery (Appendix 4). Concerning Thomson's issue, the SWOT analysis is an appropriate tool to initiate the work on the strategy of the company.
Increasing R&D investments
Here are some key facts and figures that show the importance of R&D for Thomson: 400 researchers, 3 key programs, 7 research centers and 50,000 patents. The group has been investing to adapt to changing technology, a market which is constantly in evolution.
Strong growth in Asia
In the last few years, Thomson has made a significant part of its revenues in Asia. This is due to its recent development and the partnership made with companies of Asian countries, especially India and China.
Thomson makes a majority of its revenue from very few customers. In fact, in 2007, 48% of the revenues were made by the group's ten largest customers. This is considerably increasing the risks for the group.
Decreasing cash flow
The group records adverse net income in the recent years (Appendix 1). One of the main reasons of this situation is the losses from their strategic operations.
Growing demand of DSL
The Digital Subscriber Line has an increasing market and Thomson is one of the leading providers of DSL modems in the world.
Good looking future for the IP TV
Today's consumers want access to media anywhere, anytime, on any device. That is why the worldwide market for IP TV (internet protocol television) is forecasted to grow. Thomson is a leading provider of IP TV based on group's SmartVision VOD server.
Economic crisis in Europe and the US
The two key markets of the group are affected by a slowdown and one of the consequences of this may be the reduction of spending by the customers. This will be damaging the group's financial results.
As a large majority of the group's production is based in Europe, it generates revenue primarily in Euro but 39% of this revenue comes from the US. The dollar is expected to continue to be weak in future and this would negatively affect the group revenue.
Intense price competition
First, even if Thomson has a position of leader in most of his market sectors, the competition stays intense because the competitors (Appendix 2) are much larger than Thomson in these segments. And second, Thomson has to innovate constantly in a market highly related to technology to differentiate its products and services from the others.
2. “Where should we expend?”: the BCG Matrix
Thomson activities are divided in three segments: systems, services and technology. As an overview of the importance of each, the revenue generated by segments is 47.7% (of the total revenues) for systems, 42.8% for services and 9.5% for technology.
Thanks to the BCG matrix, it is possible to situate the Strategic Business Units of the group, regarding to the market growth rate and the relative market share of each segments. After applying this tool on Thomson (Appendix 6), we can see that the system segment is a “cash cow”, the service segment a “star” and the technology segment a “question mark”.
The system segment, defined as being a “star”, is characterized by a high market growth rate and a high relative market share which is naturally the most promising activity of Thomson. In fact, Thomson is a leader in many of its system products (DSL and IP TV) and the markets concerned are expected to be increasing in the future. However, this segment requires high investments mostly in R&D to keep up with the evolution of technology, which is why the group has to reinvests the revenue generated by this activity to stay leader on the markets.
The service segment, defined as being a “cash cow”, is characterized by a low market growth rate and a high relative market share which is a profitable position on the short term. Thomson is well situated on this market with its brand Technicolor but the DVD market in particular is not doing well and the group is not present on the Blue Ray market.
Finally the technology segment is a “question mark” and has lower interest for the group. The high growth rate implies a very intensive price competition and the low market share suggests a reduction of the competition for Thomson.
3. Analysis of the problem
The SWOT analysis linked to the BCG matrix gave an insight to Thomson's wrong strategic decisions. Indeed, it is relevant that Thomson should extend, develop and invest in its system segment, as it is a “star”, and this can be even more possible if the group drops some of its other activities like the technology segment. Moreover, the opportunities of the group are fully related to the system segment (IP TV and DSL). However, we analyzed throughout this report that Thomson decided to focus its core activity on the professional broadcasting, which is the line of business of one of its brand Technicolor and which one generates activities mostly in the service segment. Technicolor might be the new name of Thomson very soon in the frameworks of the restructuring plan. As a matter of a fact, the executives of Thomson made decisions in the wrong direction, meaning that they put the service segment first in their development instead of the system segment, added to the multiple difficulties in integrating the acquisitions.
THOMSON'S FINANCIAL SITUATION
146 000 000 €
134 000 000 €
146 000 000 €
EARNINGS BEFORE INTEREST
-2 327 000 000 €
-409 000 000 €
-201 000 000 €
The group's cash flow has been declining in the recent years. Thomson recorded a compounded annual rate of change of -12% during 2005-2007 and reached to E613 million (approximately $840.3 million) in FY2007. Major reasons for the declining cash are increasing interest expenses and loss from discontinued operations.
MAJOR PRODUCTS AND SERVICES (2008)
Thomson is the provider of solutions for the creation, management, delivery and access of video, for the communication, media and entertainment industries. The group's key products and services include the following:
* Cable decoders
* Content security
* Digital cinema
* Digital news production
* DSL gateways
* Film distribution
* Film processing
* Film restoration
* IP solutions
* Master control
* Movie cameras
* Production control
* Remote controls
* Routers and controls satellite decoders
* Servers/media storage
* Softswitch solutions
* Media technologies
* Telephony solutions
* Terrestrial decoders
* Tuners TV cameras
TOP COMPETITORS (2008)
The following companies are the major competitors of Thomson S.A:
* Sony Corporation
* Avid Technology, Inc.
* Ascent Media Group, Inc.
* Pace Micro Technology PLC
* Cisco Systems, Inc.
* Deluxe Corporation
* Harmonic Inc
* Harris Corporation
* Huawei Technologies Co. Ltd.
* Motorola, Inc.
* Samsung Electronics Co., Ltd.
* Siemens Aktiengesellschaft
* ZyXel Communications Corp.
* Koninklijke Philips Electronics N.V.
Increasing R&D investments
Strong growth in Asia/Pacific region
Declining cash flow from operations
Growing demand for DSL
Positive outlook for IP TV
Slowdown in the US and Eurozone
Intense price competition
December 2009 - Thomson's restructuring plan
The 9th of December Thomson introduced a plan to restructure. Il vise notamment à réduire sa dette de 45% et qui sera soumis à ses créanciers les 21 et 22 décembre. It seeks to reduce its debt by 45%,Il vise une réduction de la dette «senior» de 1,29 milliard d'eur a debt reduction "senior" of 1.29 billion euros.Pour cela, le groupe va procéder à une augmentation de capital d'environ 348 millions d'euros par émission d'environ 527 millions d'actions nouvelles ordinaires au prix de souscription de 0,66 euros par action. In doing so, the group will carry out a capital increase of approximately 348 million by issuing about 527 million new ordinary shares at a subscription price of 0.66 euros per share. Cette augmentation de capital sera mise en œuvre sur la base d'une parité de 2 actions nouvelles pour une action ancienne, garantie dans sa totalité par les créanciers et ouverte à tous les actionnaires existants Une autre émission viendra compléter ce plan de restructuration.Le groupe demandera également à ses actionnaires le 27 janvier d'approuver le choix d'un nouveau nom pour l'entreprise afin de tourner la page. Il devrait s'agir de Technicolor , du nom de l'une des principales marques de la société.The group will also ask shareholders on January the 27th to approve the selection of a new name for the company to turn the page. It should be Technicolor, named one of the leading brands of the company.
Indeed, the French group of Media technologies announced this Monday December the 21st that the restructuring plan of its debt had obtained the green light from two of the three committees of creditors, including the suppliers and the banking creditors. Following this, the title leaps from 24% to 1.08 euro with the fence.
Market Growth Rate
Relative Market Share
2 976 000 €
2 400 000 €
535 000 €