Five-Forces Lighting Industry Analysis

I. Factors Affecting Rivalry Among Existing Competitors (A-1)• Oligopolistic Market

• Major Producers• 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 2003Company # 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

ConclusionFIVE FORCES ANALYSIS

FORCE THREAT TO PROFITSInternal 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/.