Taizinai Group Co., Ltd. is locked in crisis because it has run out of investment. And the chief executive and president, Li Tuchun, whose company first came to fame when it won the sub-primetime consumer goods ad slot on China Central Television (CCTV) with RMB88.88 million (US$13 million) in October 1997, is making headline news again. But this time, Li would rather not have the publicity. He and his company’s fortunes have certainly zigzagged since the bid 11 years ago. But the company’s current fate is not unlike that of other former prime-time bid winners.
In 1995 and 1996, Shandong Qinchi Distillery, which had previously been a little-known company, won two CCTV prime-time commercial bids for RMB66.66 million (US$9.7 million) and RMB321.21 million (US$46.9 million) respectively. The liquor maker became a household name overnight. In 1996, its sales increased fivefold. The bid for the CCTV prime-time slot in 1994 also saw a dark horse rise from nowhere. Shangdong Kongfuyan wine, also a virtual unknown, became one of the best selling wines that year.
Between 1994 and 2007, eight companies were the top winners of 13 CCTV prime-time commercial bids. Apart from Procter & Gamble Co., which is a foreign company, the other seven winners were private businesses. Of the seven, only BBK Electronic Corp. and Hangzhou Wahaha Group Co. are now operating normally. Four winners, namely Kongfuyan, Qinchi, IDALL Technology Co., Ltd and Panda Electronics Group Co., have disappeared from the marketplace.
The remaining one, Mengniu, is currently caught in a consumer confidence crisis. Although both Mengniu and Taizinai are in trouble, the reasons behind their respective problems are quite different. Mengniu’s crisis is due to deficient product quality, while Taizinai’s woes have been caused by excessive expansion.
Compared to some other bid winners from the early days, Taizinai managed to survive for 11 years. This showed that Taizinai at least had some extraordinary merits. According to Li Tuchun, an important reason for the fall of other CCTV prime-time commercial bid winners was that they only relied on commercials, but not on high product quality to satisfy long-term consumer demands.
This was also proven by the fact that Kongfuyan and Qinchi took base liquor from Sichuan and then blended it. Therefore, their product quality was not persuasive. The VCD player produced by IDALL was only a transitional product which was always going to become obsolete. The latest Mengniu crisis was also a product quality issue. Mengniu’s milk products lost their attraction because of the mildly toxic melamine.
Good product quality is surely a major reason why Taizinai survived into 2008. To ensure product quality, Li even abandoned home-made milk powder and instead chose powder imported from New Zealand, despite the higher cost.
But the issue is whether good product quality is adequate to support the long-term existence and success of a company. The funding predicament Taizinai is now undergoing shows that a good product alone is not enough to ensure a company’s long-term growth, despite of large-scale advertising campaigns.
It’s nothing new for private business owners to experience crises. Especially in an emerging market that is experiencing social transition, like China, private businesses suffer some innate shortcomings in terms of strategy and management. Unless the owners have some extraordinary merits, such shortcomings often jeopardize growth and existence of these private businesses.
Devising strategy is a step that a business takes to rationally allocate all its resources around long-term operational goals. Two factors, rationality and long-term vision, are indispensable. Actually, not only the fall of the CCTV prime-time commercial bid winners, but also the failure of any known private business can be attributed to a lack of rationality and of long-term vision.