debate LED

  1. why MNC will dominate
    • capital to do R&D and market research
    • branding 
    • first mover-created their niche market
    • trained and experienced personnel
    • cross-licensing creates entry barriers
    • capacity for carrying out large projects
    • vertical integration along the value chain 
    • extensive network with suppliers, government; customer base
    • established distribution channel
    • M&A
    • low pricing-low profit margin
  2. vertical integration
    • allows stable supply of raw materials
    • provides synergies when they integrate LED into their own products
    • in the future we expect the market to shift to general lighting; there's no point buying an LED light if the socket is incompatible with the existing one, large companies can provide the complete service
  3. low pricing
    LED industry huge fixed cost, or sunk cost, are incurred, In this sense big firms already have capital to rely on, while small firms have more to lose, just like in the telephone service industry.

    They rather accept lower price than scale back production. New entrants cannot engage in price war; those who haven't enter the market find the market price too low to be worth entering
  4. against agility, learn from the mistakes of big firms and developing superior products
    not talking about whos superior in technology, talking about doing business, the actual execution of designing, manufacturing and distributing to customers

    have the choice to be agile, but the lack of funding sometimes makes small firm more risk adverse; a lot of uncertainty whether customers are willing to pay more, for a slight improvement.

    longer time to market-sometimes even if the technology is superior, the overall product may not be satisfactory because (downstream small firms) usually outsource their production in Asia, which is hard to monitor and cause quality control issues; By that time the so-called superior product may be overtaken by a better one in the fast evolving market
  5. M&A
    • once big firms sees opportunity and potential threats in medium sized firms, won't hesitate to acquire them, example:
    • cree-ruud lighting for the BetaLED brand in 2011 to expand into the outdoor lighting
    • osram-encelium technologies to further domination in lighting controls in 2011
    • ge-albeo technologies just recently to provide a more complete and integrated LED solution
  6. branding
    • helps them gain customers, trusted with large projects, like lighting infrastructure
    • in 2010, the climate group partner with philips in the clean revoluton campaign, the campaign launched a program called lightsaver, where philips will be the prime provider of LED lights for the public spaces in 10 pilot cities, inc hk, london, NYC
    • easier to borrow funds due to higher credibility and perhaps more liquidity
  7. first mover
    • timing is crucial for the niche market
    • the currently dominant firms are the ones who seize this one opportunity
    • philips-lumiled for officially entering the LED market in 2005
    • long standing operating experience makes their leadership difficult to overtake
  8. cross licensing
    • quicker product development-simplify R&D and less time to work around the competitors patent
    • reduce the risk of accidentally infringing on others' patent; eliminate huge money spent on litigation; dominant=holer of large patent portfolio
    • Barriers-without its own extensive patent portfolio, impossible not the infringe and forced to pay royalties to major competitors
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debate LED
debate LED