By Laiyin Yuan
Author: Li Kunkun
Translator: Laiyin Yuan
Published on: 07/18/2014
Source: African Business Insider
Original text (in Chinese): http://www.abitimes.com/portal.php?mod=view&aid=139
This is a story about a “unique” Chinese cellphone manufacturer that is obscure in China, but not so low-profile in Africa. As popular as Samsung or Nokia are among African consumers, Chinese brand Tecno is equally popular and it represents the strength of Chinese companies in regards to localization, brand building, and distribution-channel expansion. How can a Chinese company only do business in Africa, and how was Tecno so successful? Maybe this report can provide some answers.
– Laiyin Yuan (translator)
Last month, one of my British friends, Emma, wanted to buy a cellphone in Lira, a town in northern Uganda, to replace the Nokia phone she brought with her from England. While we were chatting, she asked me about the brand Tecno: “I saw Tecno phones in many Lira stores, and I heard that it was a Chinese brand. You must have heard of it.” However, the truth is I have never came across this brand before coming to Africa. When I told her that Tecno phones are never actually sold in China, Emma was very surprised: “I thought Tecno was a popular brand in China!”
During my yearlong trip to Africa, I have seen advertisements and the blue-white logo of Tecno phones almost everywhere. From the sales booths in Kumasi, Ghana, to the Luthuli mobile phone wholesale center in Nairobi, Kenya, Tecno products are ubiquitous anywhere there is commerce being done. In a small downtown market in Kigali, the capital city of Rwanda, Tecno signs are visible every few meters. With posters on windows, doors, billboards and both interior and exterior walls, especially conspicuous “Nokia, Tecno, Samsung, Tecno” ads, these stores are selling Tecno feature phones with prices ranging from 100 to 200 yuan (16 to 33 U.S. dollars). In Uganda, Tecno posters are not only on the streetlights of the Kololo – the capital city’s affluent neighborhood – but also alongside the roads of Gulu, a small town in the remote northern area near South Sudan. During the recent World Cup, there were also international Tecno commercials on Super Sport Africa Channel rebroadcast.
Tecno first caught my eye because of two apparently unique features – its extensive distribution channel, and its unusually strong brand appeal as a Chinese manufacturer. Before coming to Africa, I had two kinds of ideas about the types of Chinese phone strategies in the African market. First was from small phone dealers, who mainly imported fake or low-end cellphones to sell in African countries. The other was from the large telecom enterprises that are exploring the Africa mobile terminal market, represented by companies like Huawei or ZTE. I thought Tecno was a producer and dealer of low-end cellphones. To some extent, it still is, but I cannot help but wonder how this Chinese company can develop its deep and wide-ranging grassroots distribution channel among so many African countries. I want to know what it went through. Additionally, it is rare for overseas Chinese companies to have a sense of brand building. The blue-white logo of Tecno is simple and elegant. In its World Cup commercial, Tecno did not introduce any of its products. Instead, it described a vision for life and the value of communications. What are the future development plans of this company, and what does the team behind it look like?
Transsion Holdings (formerly known as Tecno Telecom Limited), the company that manages the Tecno brand, was founded in 2006. Its founder, Zhu Zhaojiang, used to be the overseas sales director of Ningbo Bird Co.,Ltd. (a famous Chinese high-tech company headquartered in Zhejiang Province, http://www.chinabird.com/en/about/about.asp – Laiyin Yuan). He came to Shenzhen with entrepreneurial dreams, and established Celltel Communications Co., Ltd. with three other former Bird colleagues, otherwise known as the “Iron Four”: Wang Zuo (current CEO of Celltel); Tao Xinhua (current CEO of PhoenixComm Co., Ltd.); and Jiang Delong (current CEO of Shenzhen Entern Sanitary Ware Co., Ltd.). At the end of 2007, Zhu left Celltel to create Transsion Holdings, whose core businesses include research and development manufacturing, and cellphone sales and other mobile terminals.
During an interview with How We Made It in Africa, Arif Chowdhury, the vice president of Transsion Holdings, stated that Tecno mainly focused on South Asia during its first two years. Later, with comprehensive research on the Southeast Asian, African, and Latin American markets, they found out that Africa was the region with the most promising potential for profits, so Tecno established offices in Africa starting in 2008. When Tecno first entered Kenya, their monthly sales volume was less than 40,000, while Nokia’s market share was as high as 80%. Rocky Wang, the sales manager at Tecno, emphasized that they were not like other Chinese companies who just wanted to make a quick buck. Many business people from neighboring countries, such as Uganda and Tanzania, usually come to Kenya to source product because it is the commercial center of the entire East Africa. With more and more new buyers from Arab countries, the market size will keep increasing.
Currently, Tecno has already explored 17 mature markets in Africa, including Kenya, Nigeria, Madagascar, Cameroon, and Ethiopia. According to data published by X2000, Tecno’s monthly sales figures are currently 5 million to 7 million units with a market share of more than 20%. The company is now developing in Southern and Northern Africa with a focus on South Africa and Egypt. “We have already completely left the Asian Market. Now we only do business in Africa,” said Arif.
Transsion Holdings has three brands – Tecno, Itel, and Oraimo – and mostly sells low-price phones in African countries. The prices of their cellphones range from a few dozen to three hundred yuan. Arif attributed their rapid development to successful product localization based on customer demand. For instance, African consumers like watching TV on their devices, so Tecno added antenna and TV functionality on their low-priced phones. In addition, Tecno also established the Carlcare Service Center, a joint venture specialized in after-sale service for Tecno products, which makes Tecno the first cellphone brand to provide technical support and after-sale service for personal consumer electronics in Africa.
From the point of sales volume and brand impact, Tecno is without doubt the de facto representative of Chinese cellphone companies in Africa. However, Tecno will not ignore the how and why its former competitor – Nokia – lost its market dominance with the increasing competition from smartphones. Smartphone fever has already gripped many African cities. Intensifying its promotional activities on smartphones, Huawei has recently increased its presence with large outdoor advertisements in many East African cities. Countless radio hosts also enthusiastically share their Huawei usage experience with their audience. Tecno’s limited achievements in the feature phone arena are threatened due to its insufficient smartphone market strategy. According to a CNBC report, Nokia and Samsung have a nearly 50% share in the Africa feature phone market, while the remaining share is mostly taken by various “made-in-China” cellphones. For cellphone producers from all over the world, this new smartphone market provides them with both challenges and opportunities.
Arif said that they were already aware of this tendency, and also understood the special needs of youth consumers, such as games or chatting functions. Therefore, the consumer switch from feature phone to smartphone is also an opportunity for Tecno. With falling prices and production costs of smartphones, Tecno is actively exploring the market of low-end smartphones, and their products are already making an impact in African countries. In 2012, Tecno launched its first batch of smartphones made in Ethiopia, and its factories in Kenya and Nigeria are both currently under construction. As Arif said about the future of Tecno, “we are planning to move all our production to Africa, because it is our only market!”
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African Business Insider is an independent media platform that is based in Africa and is dedicated to be the most professional, practical and active observer of Chinese business on this continent. Besides original reports, it also curates relevant articles from other media sources to form a better collection of Sino-Africa insights.