Thomson Consumer Electronics (a): Global Sourcing

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After the acquisition of the former GE/RCA consumer-electronics company, Thomson Consumer Electronics is dealing with issues about global-sourcing activities. At heart is the consolidation/centralization of purchasing/sourcing activities conducted by 10 separate organizational subunits in Europe, Asia, and North America. The case was developed for a second-year MBA course on operations strategy but is also suitable for a global-operations management or a sourcing/purchasing course. Excerpt UVA-OM-0775 THOMSON CONSUMER ELECTRONICS (A): GLOBAL SOURCING As Joe Fogliano, executive vice president, Television Group, for Thomson Consumer Electronics (TCE), drove home in November 1990, he reflected on the two-hour presentation a prominent consulting firm had just made to him. The firm had been commissioned to provide an objective, in-depth analysis of the TV Group's worldwide purchasing/sourcing operations. The consultants had identified a number of opportunities for improvement. Foremost among Fogliano's concerns was whether and how to merge his European and North American sourcing operations. The consultants had confirmed Fogliano's belief that TCE had significant sourcing strengths, but he was, nonetheless, surprised at the consultant's suggestion that he needed to take a much more active role in meeting the long-term sourcing needs of the company. He was in the final phase of preparing the TV Group's budget, which he would present the following week in Paris, France, at the annual budget meeting of the Thomson Group's (TGP) top management. Management had been concerned with the severe reduction in consumer TV purchases in the United States and Europe during the last half of 1990 and the predictions of a worldwide recession in 1991. Background In 1990, Thomson S.A., a French company, was one of the world's leading electronics firms. Made up of some 150 different companies (82 French companies and 70 foreign companies were consolidated in 1989), it was active in two core business areas: professional electronics, represented by Thomson-CSF, the world's second-largest defense electronics corporation; and consumer electronics, represented by Thomson Consumer Electronics, the fourth-largest consumer electronics company in the world. Thomson Electromenager, which was managed separately from TCE, was France's top producer of home appliances and ranked high among the European market leaders. In 1990, the Thomson Group had facilities in 50 countries, and international markets accounted for 72% of its sales. Exhibit 1 provides selected information about Thomson Group. Thomson Consumer Electronics, a French-based company, was created in January 1989 to accommodate the merger of the U.S.-based Thomson Consumer Electronics, Inc., (TCE, Inc.) with the French-based Thomson Grand Public. TCE, Inc., had previously been established in 1987, in conjunction with Thomson's purchase of General Electric's consumer electronics business. TCE was organized into five major product/business groups as shown in Exhibit 2. The company's products, marketed under a wide variety of brand names around the world, included television sets, television tubes, video products (including videocassette recorders and camcorders), and audio products such as compact-disc players, radios, and stereo equipment. . . .