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The Transformation of Thomson.

Submitted by:
Group 1
MP12007
MP12039
MP12050
MP12057

Q1. What are the possible causes of poor performance of Thompson in the mid 1990s?
1. Lower cost of Asian Competitors.
2. Split of profitable defense business.
3. Poor performance of TV business resulting in overall dip in Profitability. Profit from
manufacturing Tubes and Set Top boxes kept the overall business Going. The
operating Income in 1997 from consumer Products was -72% whereas for Displays
and Components it was +132%.
4. Increase in Debt in order to main market position in TV Set even though the TV
Business was not profitable. Net Finance Costs in 1997 was 203 million $.Even the
Asset to Equity Ratio of 6.4 in 1997 was high as compared to the industry average.
5. Organization organized as Functional structure resulting in hiding of inefficiencies of
some segment such as TV Sets and VCR.
6. Though it is not evident from case facts, the company may not have made significant
improvements in Consumer Electronics business especially TV Set segment after
swapping the medical electronic business for GEs Consumer Electronics Business.

Q2. Identify the key events, their causes and their effects during the transformation of
Thompson from 1997 to 2007.

Key Events Causes Effects


1997-98: SPRING Lower ROE value. Improvement in Profitability
Programme to Rationalize Poor performance of enabling the firm to find
the business, Supply chain Consumer Electronic partner for sell of 24% stake.
Restructuring and continuous Business. Increase in Op. Income of
improvement. Consumer product from (-
)72% in 1997 +18% in 1999.
(Exhibit 4)
1997-98: Developing new Reducing profitability of New Segments: Digital
business to build strength in existing segments of Media Solution with Op
Video Technology and Consumer Electronics income 1.7% and New Media
Access Products Services with Op income (-
)11.7%.(Exhibit 4)
2001: Acqisition of Shift in Market from Analog New line of Business leading
Technicolor. to Digit Technology. to diversification.
Company wanted to increase Improvement in net income
its presence in video value from 286 million$ to 373
chain and create a new million$. (Exhibit 2)
customer base.
Nov 2003: Creation of Joint Lower cost of production TV Increase in profitability of
Venture with TCL to create Set in Asian Countries. TV Segment as 30%
TTE as leading TV set ownership in the joint
manufacturer. venture.
2004-2006: Revitalization- Slow Transformation from Exit from TV Set Business.
Consumer Electronics to Exit from Display Business.
video technology.
2004- Restructuring- 3 Shift in Business Strategy Technology: Accounts for
Divisions System, Service and restructuring of Business 9% Revenue and 52%
and Technology created. Portfolio Operating profit.
System: Accounts for 46%
Revenue and 24% Operating
profit.
Services: Accounts for 43%
Revenue and 29% Operating
profit.

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