Soon after he arrived in India on June 25 last year, Ronald Zhang took to travelling around Indian towns in autorickshaws. He was, he explained, trying to understand the psyche of the Indian consumer.
Zhang, who is director in Konka Electronics (India) Ltd and has set up four bases for the $2-billion Chinese consumer electronics giant worldwide, would probably have profited from a short study of the psyche of the Indian entrepreneur too. A little over a year later and days before Konka announced the launch of its colour TV, its Indian partner, the Rs 1,500-crore Hotline, said it wanted to sell out.
Even by Indian standards, this was a brief partnership, lasting all of one year. Konka holds a 51-per cent stake in the Indian outfit and the remaining 49 per cent is accounted for by Hotline (25 per cent) and Wittis Hong Kong. In the first place, the fact that Hotline had two joint ventures with Konka's original equipment manufacturer in China, Wittis, tilted the balance in its favour as a partner. "We were looking for a win-win situation and Hotline seemed to be the best option," explains Zhang.
Now, strangely, Zhang insists that this winning equation continues. "There is no problem with Hotline and it continues to be a win-win situation. As far as we are concerned the joint venture is still on till Hotline says it has withdrawn in writing," he insists.
What about the conspicuous absence of Anil Gupta, Konka India's vice chairman and Hotline's managing director, at the launch? "He had to go to Mohali for the inauguration of his new plant," Konka executives reply promptly.
Hotline executives are equally prompt in disagreeing. Yes, they admit, Hotline hasn't sent in a written withdrawal but Anil Gupta conveyed his decision orally. And this, it was specified, was done before Hotline's agreement with Quingdao Haier _ a $ 3-billion Chinese white goods manufacturer _ on July 29.
Gupta refused to talk, deputing D C Mathur, his company's director (finance), to do the explaining. "There is no need to write to them because we will make our point formally known at the next board meeting," says Mathur. This board meeting has not, however, been scheduled.
Significantly, despite protests to the contrary, Konka is making preparations to set up a wholly-owned manufacturing subsidiary, something that it has not done in any other country. "We are looking at various options but in all probability we will settle for Noida and the production base should be ready in another 12 months," says a senior Konka executive.
This was the partnership that was to revolutionise the Indian television market _ Konka's digital offering is to cost an incredibly cheap Rs 6,990 (for a 14-inch set). So why did it come to an abrupt end?
Especially when Gupta had initially taken keen interest in Konka's Indian operations, including getting its Defence Colony office ready for occupation 15 days after purchase and the selection of Rajiv Puri as chief executive?
Mathur says the end was not abrupt but came about as a culmination of events.
"We are a company that is known for taking quick decisions but realised that Konka was a bit slow on the operational front," he says, adding, "The products, for example, could have been launched in June-July. In fact, left to us, we would have launched the products in May itself," he says.
But Konka says this would have been impossible. "The office was inaugurated on April 7, there was no sales force, the products were not there, we didn't have a dealer network, it was simply impossible," says a top Konka executive.
Mathur disagrees, saying the Chinese were just too slow: "The finalisation of dealers, shipment of goods, everything takes so much time." He adds: "If such things were happening initially, we were not sure what the future had in store for the project and
we would not have contributed positively."
Hotline also wasn't happy with its share of power. "With a 25-per cent share, we thought we would have proportionate representation but that was not happening," says Mathur.
Anil Gupta is the only Hotline representative on the Konka board which, apart from him, consists of two Konka executives and one from Wittis.
The Delhi-based company, partner in a dozen joint ventures, also thought it had the edge over things like choosing dealers and distributors. It also believes Hotline managers could have done a better job.
A Konka executive says indignantly: "Full management control is what Gupta wanted. He wanted a say in such things as truck dispatches. Even in LG-Hotline (a 50:50 joint venture) it is Gupta who calls the shots."
Mathur shoots back: "A truck dispatch is not a minor thing. If you are looking to sell 1.5 lakh TV sets then the initiative has to come from an entrepreneur. We have worked in a minority stake environment and we have not had any problems."
Mathur insists that though Gupta likes to have a grip on the joint venture, it was management style, not control, that was the issue at stake.
It is significant, however, that it is Hotline that stands to lose the least from this break-up. The Chinese electronics giant will continue to source tuners and 20-inch and 21-inch picture tubes from Hotline.
And the demand, if one is to believe Konka's CEO Rajiv Puri, would be in the range of 1.5 lakh per year.
This way Hotline will be able to run its two plants in Noida (Uttar Pradesh) and the newly set-up manufacturing base in Mohali (near Chandigarh) at optimum levels.
A question that remains unanswered is which way Wittis will go? Wittis has two existing joint ventures with Hotline _ Hotline Wittis Electronics Ltd and Hotline Wittis Display Devices Ltd _ where the Indian partner holds 49 and 70 per cent stakes respectively.
Konka insists that Wittis will stay with it in India. Hotline says that won't affect its relationship with the Hong Kong-based company. (Wittis could not be contacted for its views.)
But will the strain in the relationship show on Konka India? "Why should it, all the products will be launched on the original schedule," says Puri, an ex-Thompson marketing chief.
With Konka's TVs out, Puri intends to launch telephones, computer monitors and fax machines in September, washing machines and microwave ovens in October, refrigerators in January 2000, and air-conditioners in April that year. Puri's clearly hot on proving Hotline wrong.
