Transcript Five-Forces Lighting Industry Analysis

Five-Forces Lighting Industry
Analysis
I. Factors Affecting Rivalry Among Existing
Competitors (A-1)
• Oligopolistic Market
• Major Producers
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Acuity Brands and Hubbell
OSRAM Sylvania
Philips Lighting
TCP International
Zumtobel
General Electric
The Big Three
• OSRAM Sylvania
• Philips Lighting
• General Electric
Industry Shifting
• Industry Trend
• Incandescent bulbs → CFLs → LED bulbs
• Market will consist of estimated 61% of LED bulbs by 2020 (A-1)
LED Competitors (A-2)
• Samsung
• LG
• Sharp
• Cree
• Veeco
• Why?
Industry Growth
• Overall from 2012 to 2017 projected to be 4.8% on average (A-1)
Race for Patents (A-4)
• 2000 to 2003
Company
# of Patents
Philips
69
OSRAM Sylvania
41
GE
27
Trend Setters (A-4)
• Color-changing bulbs
• Motion-sensing bulbs
• Brightest energy-saving bulbs
II. Factors Affecting the Threat of Entry
• LED lighting industry on path to securing up to 80% of market share
for lighting by 2020 (A-5)
• Steady cost reductions and improved technology performance make
new companies want to enter LED lighting industry
New Threat example
• Founded by former Philips Lighting CEO Ludo Carnotensis
• Now has 10% market penetration
• Able to beat out Philips for shelf space
OSRAM’s Advantages
• Benefits greatly from Economies of Scale
• Newly released 100 W-equivalent LED bulb
• Better quality
• Lower price
• Vertically integrated with solid positioning from upstream chips to
downstream lighting fixtures and applications
III. Factors Affecting or Reflecting Pressure from
Substitute Products and Support from
Complements
• Substitutes for light from conventional light bulbs
• Natural, ambient light
• Candles
• Lack of true substitutes in market is beneficial for lighting industry
Brand Substitutes
• “Substitutes erode profits in the same way as entrants by stealing
business and intensifying internal rivalry” (A-9)
Viability of Substitutes
• Availability
• Very accessible
• Price-value characteristics
• “The tremendous volume of products sold through these channels creates
highly competitive pricing” (A-1)
• Similarly priced, similar value
• Ability to gouge is diminished
Viability of Substitutes continued
• Generally in lighting industry, demand is price inelastic
• “When the industry-level price is large, rising industry prices tend to drive
consumers to purchase substitutes’ products” (A-9)
• Among brands, demand is elastic
• Competition
Complements
• “Complements boost the demand for the product in question,
thereby enhancing profit opportunities for the industry” (A-9)
• Shift toward light fixtures and corresponding light bulbs
• Light fixtures
• 80% of industry revenue (A-1)
IV. Factors Affecting or Reflecting Power of
Input Suppliers
• “Sales margins for lighting equipment manufacturers have been hurt
by increased cost of raw materials” (A-1)
• Suppliers of raw materials have power
• Price control
Danger of Price Increase
• More initiative on developing cheaper light bulbs
• Less expensive or fewer raw materials used
• Shift focus from producing energy-saving bulbs
• Suppliers have overall stability
• Steady industry means constant production
V. Factors Affecting or Reflecting Power of
Buyers
• Two main consumers
• Businesses
• Homeowners
• Businesses larger demand for lighting solutions
• Retail accenting
• Office work space
Pressure from Buyers
• Because lack of pursued substitutes, buyers constant demand
• Steady consumer purchases of light bulbs
• Constant pressure on manufacturers to produce
• “Nationwide home improvement centers, lighting distributors, and
general contractors assert significant price pressure on
manufacturers” (A-1)
Business Challenges
• Constant demand causes challenge for manufacturers
• Good for productivity in business
• Future goals and projects
Conclusion
FIVE FORCES ANALYSIS
FORCE
THREAT TO PROFITS
Internal Rivalry
High
Entry
Medium
Buyer Power
Medium
Supplier Power
High
Substitutes
Real: low, Brand: high
Complements
High
References
• A-1: "Lighting Equipment Manufacturing." First Research. L.E.A.R.N., 12 Aug 2013. Web. 13 Sep 2013.
<http://mergent.firstresearch-learn.com.ezproxy.uky.edu/industry_full.aspx?pid=248>.
• A-2: "Estimated LED penetration of the Global Lighting Market from 2010 to 2020." Statista. Goldman Sachs, 01 Jan 2010. Web. 13
Sep 2013. http://www.statista.com/statistics/246030/
• estimated-led-penetration-of-the-global-lighting-market.
• A-3: "Lighting Industry: Structure and Technology in the Transition to Solid State." Industry Studies 2008. National Academics, 08
Apr 2008. Web. 13 Sep 2013.
• A-4: "Lighting Controls Market in North America." Verify Markets. N.p., 01 Sept 2009. Web. 13 Sep 2013.
• A-5: “The Path to 80 Percent Market Share for LED Lights.” Greentechmedia. Stephen Lacey. 30 April 2013.
• A-6: “OSRAM SYLVANIA wins race to offer 100W-euivalent LED A-lamp.” Industry News. Maury Wright. 13 Nov 2012.
• A-7: “OSRAM SYLVANIA’s 100W-equivalent LED bulb may be pick of the bunch.” Gizmag. James Holloway. 11 May 2012
• A-8: “Lighting Applications – The Final Battleground.” CommonWealth Magazine. Fuyuan Hsiao. 04 Jun 2009.
• A-9: Besanko, Dranove, Shanley, and Schaefer, Economics of Strategy (4th edition), John Wiley & Sons, Inc., 2007.
• A-10: Lowe’s, CFL Bulbs, http://www.lowes.com/Lighting-Ceiling-Fans/Light-Bulbs/CFL-Bulbs/_/N-1z10htl/pl?cm_sp=Lighting-_LightingFans%7CPopularCat-_-Merch%7CCFL_Bulbs&cm_cr=Light+Bulbs-_-Web+Activity-_-Light+Bulbs+Top+Flex+Activity-_SC_Light+Bulbs_TopFlexible_Area-_-10377560_1_#!.
• A-11: GE Commercial Lighting Products, Where to Buy, http://www.gelighting.com/na/business_lighting/where_to_buy/.