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 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

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/.