Sylvania_Case_Study

It is a sample final paper. I do not mean it is a perfect paper. Actually the paper’s strategy suggestion section is quite weak. Just the format is right, so give it to you as a reference. Table of Contents 1. Executive Summary 3 2. Introduction 4-5 3. Current Situation 1. Current Performance 6-8 2. Strategic Posture 1. Mission 9 2. Vision 9 3. Values 9-10 4. Objectives 10 5. Strategies 10-11 4. External Factors 1. Societal, Political, Regulatory, Community Factors 12-14 2. Industry and Competitive Analysis 15-21 3. Summary of External Factors 22 5. Internal Factors- Competitive Capabilities 23-25 6. Strategy 26-28 7. Implementation 29-33 8.0 Appendices 34-37 9.0 Citation 38 1. Executive Summary OSRAM SYLVANIA is the provider of lighting solutions in homes, businesses and institutions, automobiles and a broad range of specialty applications. As follows in this plan, OSRAM SYLVANIA renews their vision and strategic focus by adding value to target segments with new and emerging technologies. SYLVANIA will use its marketing tactics to help focus and differentiate themselves from their competitors. With new emerging technologies and government regulations in the industry, SYLVANIA needs to address key issues pertaining to its current performance, next strategic moves, and implementation tactics to fully integrate a strategic campaign. To gain a comprehensive insight, the following need to be addressed: 1. Analyze current performance and industry trends. 2. Examine regulatory guidelines set by the government and other external factors that will influence decisions. 3. Better understand the needs, motivations and purchase drivers to help create strategies and solutions to meet those needs of customers. There are many obstacles and opportunities within this market. With the right resources to help understand the new regulations, new technologies and consumer demands, SYLVANIA will be profitable by effectively reaching their target goal to gain additional market share in the industry. 2. Introduction OSRAM SYLVANIA is the North American business of OSRAM GmbH of Germany, one of the world’s largest lighting manufacturers and part of the Siemens family of companies. The company manufactures and markets a wide range of lighting products; precision materials and components for businesses, consumers, computers, aerospace, automobiles and other major industries worldwide (www.sylvania.com). OSRAM SYLVANIA has seventeen manufacturing plants, one equipment assembly operation and eleven research and development laboratories, along with a network of sales offices and distribution centers serving all of the United States, Canada, Puerto Rico and Mexico. Most of the company’s products are marketed under the SYLVANIA or OSRAM brand name (www.sylvania.com). During the past few years a lot of changes are and will be occurring in the lighting industry. The Energy Independence and Security Act of 2007 was signed by President Bush on December 19, 2007. This represented a major step forward in expanding the production of renewable fuels, reducing the dependence oil, and confronting global climate change. It will increase energy security, expand production of renewable fuels and make America stronger, safer and cleaner for future generations (www.intranet.sylvania.com). This far reaching act will significantly impact many areas including the lighting industry where the most popular incandescent light bulbs will be phased out over time as well as the elimination of the higher wattage incandescent reflector lamp types for efficiency standards and new ballast efficiency requirements for lamp fixtures. As this change occurs, OSRAM SYLVANIA is faced with the challenges to create efficient technologies, such as compact fluorescent (CFL) and LED light bulbs, as well as finding better ways to market their products to a very diverse end consumer base. First, I will identify SYLVANIA’s current performance and strategies. Next, I’ll analyze the lighting industry performance; then SYLVANIA’s capabilities. In the next section, I’ll identify the potential strategies and the implementation techniques necessary for the company’s success. 3. Current Situation 3.1 Current Performance OSRAM SYLVANIA is the #1 North American lighting supplier with about a 21% market share. The financial projections for OSRAM SYLVANIA are quite encouraging. The growth of compact fluorescent lighting and new emerging technologies, such as LED’s, are contributing to the bottom line sales dollars. The company’s financial planning will be centered on the rapid growth of new technologies to penetrate the market early and quickly. During the last fiscal year, OSRAM succeeded at increasing their sales by three percent with volume growth at ten percent. These increases came from the energy saving lighting solutions, electronic products and the display optic divisions. The overall earnings were 492 million Euros with a profit margin of 10.5 percent (www.osram.com/annualreview). Revenues: OSRAM SYLVANIA’s primary sources of income are the customers within each division of the company. The divisions include, Display Optic, Trade, Retail, SYLVANIA Lighting Services, Automotive, New Ventures group, and Precision Materials and Components. Expenses: OSRAM SYLVANIA’s primary expenses include product development (this includes licenses, patents and trademarks), marketing, operations (including alliances and mergers/acquisitions), general administration (overhead and organizational expenses), and public relations (including sponsorships, and donations). The financial objective for the new fiscal year is to achieve good volume growth specifically among the innovative and energy saving products, while maintaining a high level of earnings. Investments: OSRAM SYLVANIA is actively involved in future investments to better the company as a whole. Below outlines their recent investments: A. On October 31, 2008, SYLVANIA Lighting Services (SLS), a subsidiary of OSRAM SYLVANIA, signed an agreement to buy the operating assets of Amtech Lighting Services from ABM Industries Incorporated (www.sylvania.com). This deal will expand SLS to new local and regional markets across the country and strengthen its presence in the banking, office and industrial markets. The SLS service fleet will increase from 500 to 900 vehicles nationwide, following the sale. B. OSRAM and Philips cross licensed an agreement for LED technologies in luminaries to further boost the LED based lighting in the marketplace. This agreement allows LED luminaries manufacturers to use key components from OSRAM without having to pay license fees to Philips because OSRAM has acquired special rights from Philips (www.intranet.sylvania.com). These special rights related not only to the patents held by Philips but also to patents held by Color Kinetics and TIR Systems which were acquired by Philips in 2008. C. Siemens USA allied a special marketing partnership with The Walt Disney Company. The 12-year alliance with Disney will afford Siemens and SYLVANIA unprecedented opportunities to increase the brand awareness by collaborating with one of the world’s most familiar and valuable brands. The exciting attractions the company will sponsor at the Walt Disney World in Florida and Disneyland in California are: o The nightly IllumiNations fireworks display at Epcot presented by SYLVANIA o The Osborne Family Spectacle of Lights holiday exhibit at Disney’s MGM Studios Park presented by SYLVANIA o Walt Disney’s Parade of Dreams at Disneyland and the Disney Electrical Parade at Disney’s California Adventure presented by SYLVANIA o A “Siemens Story” and product showcase in Innoventions, the futuristic pavilions at Epcot and Disneyland in California o Spaceship Earth, the huge globe that serves as the centerpiece of Epcot in Disney World, which also will feature an interactive Siemens post-show experience The Siemens sponsorship also extends to Times Square in New York City through ABC’s jumbotron with advertising abilities. Not only has SYLVANIA made significant investments through alliances and acquisitions, the company also invests in their core lighting businesses with the construction of a new $55 million state of the art distribution network to help increase delivery times; the opening of a $30 million energy efficient lighting operation in Versailles, KY to become the first T5 Fluorescent tube producer in North America, and the company also invests 5% of sales on new product development between all the business units. OSRAM SYLVANIA is exhibiting growth and pursuing new technological product innovations while still achieving their financial objectives to create a strong competitive position within the lighting industry. 3.2 Strategic Posture Mission • To Drive our Business through innovative programs that focus on shifting the mix through simplified, creative merchandising and industry leading packaging. • Create imaginative promotions that drive sales and retailer profits through increased flexibility and quick response times. • To Develop Loyal Consumers by offering easy to understand lighting choices that deliver real benefits targeted to a changing population with new products that focus on innovation and environmentally friendliness. (www.intranet.sylvania.com) Vision OSRAM SYLVANIA has a longstanding reputation of providing lighting solutions in homes, businesses and institutions, automobiles and a broad range of specialty applications. SYLVANIA believes that their ideas can make a difference in every person's life and that their products reflect a commitment to making the world more comfortable, more productive and more imaginative. At OSRAM SYLVANIA, "We make better light for better living." (www.sylvania/aboutus.com) Values As we strive for continued growth and profitability, we are guided by a core set of values. These values include: • OSRAM SYLVANIA is its people • We are customer focused • We respect and care for the environment • We are open to, and drive, positive change • We set clear and ambitious goals to stay ahead of the pack • We are profitable and strong (www.sylvania/aboutus.com) Objectives OSRAM SYLVANIA’s corporate objectives for fiscal year 08/09 shape the future of lighting by: • Leading the lighting market through pioneering technologies, innovative solutions, product cost and quality, with total focus on the customer • Achieving shareholders’ expectations with regard to profitable growth, compliance and sustainability • Inspiring our people to achieve our objectives, and recognizing their accomplishments (www.intranet sylvania.com) Strategies OSRAM SYLVANIA’s business strategies include responding to the dynamic changes in the market, actions to strengthen market position, and strong competitive capabilities. These strategies can be categorized into the following units: A. Marketing Strategy- Broad differentiation of product line in both business and consumer markets promoting quality, innovation, value, availability, reliability and world class customer service. B. Merchandising Strategy- Merchandising by Application where all products are colored coded according to their product usage application (directional, general purpose, décor, and specialty). The package icon strategy differentiates one product from the other by clearly communicating product benefits and the specific product strategies where key product categories must be represented with a broad assortment to get the greatest comp store increase- Double Life, Daylight and Compact Fluorescent (Appendix 1). C. Production Strategy- Large manufacturing plants located in North America as well as outsourced production on some new lighting technologies for better cost positioning; mass production with automation and capacity built ahead of anticipated consumer or business demand. D. Financial Strategy- Allocate monies among divisions according to budgeting needs; profit margins are not fixed but vary by customer base within each division. E. R&D Strategy- Improve existing products with new technology and innovations; be the first to market with new products, R&D on both product and processes for both product performance and cost reduction. 4. External Factors 4.1 Societal, Political, Regulatory and Community Citizenship Factors In the past few years, there have been new regulations and policies that have affected the lighting industry. The Energy Independence and Security Act of 2007 will bring about significant changes to the industry which are outlined below: * The most popular wattage general service incandescent lamps will be phased out over time. Medium screw base incandescent A-line lamps with Soft White, Clear, and Daylight finishes will be phased out beginning with the 100 watt in 2012, the 75 watt in 2013 and the 40 and 60 watt in 2014. They will be replaced with more efficient technologies including Halogen, CFL, and LED (www.intranet.sylvania.com). * Incandescent reflector lamps will have efficiency standards and wattage caps that eliminate higher wattage incandescent lamps. Halogen lamps should be used in applications that require the eliminated high wattage incandescent reflector lamps. The legislation that had been adopted by 9 states will now apply at a National level. R20's will have a wattage cap of 45, 65 BR30's can still be sold, and BR40's will have a wattage cap of 65. The wattage cap on R20's went into effect July 2008; the wattage cap on BR40's went into effect on January 1, 2008 (www.intranet.sylvania.com). * Metal Halide lamp fixtures will have new ballast efficiency requirements. This applies to fixtures manufactured on or after January 1, 2009 (www.intranet.sylvania.com). * Mercury Vapor ballasts and new Mercury Vapor luminaries cannot be imported or manufactured for use in the US effective January 1, 2008 (www.intranet.sylvania.com). These new regulations are a great concern for the industry since the “bread and butter” incandescent bulbs will be discontinued and the new emerging technologies, CFL’s and LED’s, are more expensive to produce. Not only does the technology cost more to make but the manufacturer needs to get the consumer to quickly understand the benefits of the higher priced item in a short time frame. The new technology not only is more efficient, but will last longer than a regular incandescent light bulb so the manufacturers, as well as the other businesses, only have one shot at filling the sockets in houses. Today the industry is seeing the CFL lifecycle starting to decline from previous years as household socket penetration is substantial and these don’t have to be replaced as quickly as incandescent bulbs as the life of the bulb is far greater. The industry needs to prepare for this change to shift to more efficient technologies but many concerns have ascended with the CFL’s. First, compact fluorescent light bulbs do contain a small amount of mercury that is sealed within the glass tubing. Mercury is an element that could be harmful to the environment and humans. Most mercury emissions come from coal fired power plants which can get into the water sources where humans consume the contaminated fish. Because mercury is harmful, the industry had to better educate consumers on the mercury inside the bulb since this element is essential to make it efficient. Mercury is released if the bulbs break but the industry manufacturers have greatly reduced the amount in the bulbs to about 1.4 – 2.5 milligrams per light bulb, which is the amount that would cover the tip of a ballpoint pen (www.mysylvania.com). Many consumers are concerned over the release of mercury vapor when the bulb breaks. Even though the use of these bulbs reduces the power demand of coal, which helps reduce mercury emissions from power plants, the industry needs to continually educate consumers on CFL’s and how to clean a broken CFL bulb, even though the disposal and clean up can be difficult and tedious. Second, many consumers do not like the coloring index of the bulbs. These are fluorescent lights that are not very pleasing to the eye. Many people want to save money and energy but will only place these bulbs in the areas of their homes where they don’t spend much time such as the attic, garage or outside fixtures. The industry will need to address this concern to fill the remaining sockets in households (see Appendix II). 4.2 Industry and Competitive Analysis COMPETITION General Electric (GE) lighting division makes 6,000 lighting (automotive, fluorescent, halogen) products for residential and commercial markets. The key components of GE are as follows: Leadership Businesses- GE has six leadership businesses in growing markets o GE has grown revenues 13% and EPS 14% over a five-year period. o The businesses are strong because of innovation, powerful brands, leading technologies, global scale and reach, and experienced leadership. Strong Growth- GE continues strong growth earnings due to leading technologies, an innovative Ecomagination initiative, and established presence in emerging markets. o The company is planning to spend more than $10 billion on technology over the next three years. o Ecomagination is a global theme providing a roadmap for future growth • Operational Excellence- GE is a high-performance company, built on a foundation of rigorous execution and tight financial discipline. o GE is one of only five U.S. industrial companies with an AAA-rated balance sheet (www.hoovers.com & www.ge.com). Philips Lighting Company is the world's largest lighting producer, manufacturer and marketer of products for industrial, commercial and consumer markets. With U.S. headquarters in Somerset, NJ, Philips Lighting markets more than 2,500 lighting products to the retail, industrial/commercial, consumer and original equipment manufacturer (OEM) markets. Philips Lighting innovations include ALTO® low-mercury lamp technology, the compact fluorescent lamp, QL Induction Lighting and the halogen automotive headlamp. Philips Lighting employs almost 10,000 people in manufacturing, sales and distribution facilities throughout North America, and the division had annual global sales of over $5.1 billion for the year 2003. Philips is creating an advantage by the joint venture in Africa with both CEF and Karebo Systems. The new company, which Philips Lighting will own a 40% stake, will manufacturer low energy light bulbs and act as a recycling center. Philips is also responding to the increase in environmentally responsible consumer behavior, by investing in awareness campaigns, backing select energy conserving legislation, and developing strategic partnerships, for their CFL lighting products. For new solid state lighting (LED) technology, Philips has been actively trying to grow the business, with the help from their parent company Royal Philips Electronics. Year to date, the company has spent about $4.5 billion acquiring companies that have increased manufacturing capacity, added new technologies, and expanded its product portfolio. The most significant growth occurred in 2008 when its parent spent $2.7 billion to acquire The Genlyte Group, making them the North American leading provider of lighting products, over GE (www.hoovers.com & www.philips.com). TCP and other importers manufacturer a variety of energy – efficient fluorescent lighting products with residential applications, as well as commercial-grade ballasts, customized fixtures, emergency lights, and light-emitting diode (LED) lighting products. TCP and other importers use Chinese manufacturing for their light bulbs which gives them a competitive advantage on pricing strategies (www.hoovers.com). MARKET SHARE SUMMARY- Appendix III RETAIL SHARE (SYLVANIA- OSI; PLC-Philips) Retail Share (less Auto) Retail Share (with Auto) Sylvania is #2 in Total Retail Market share in North America and growing Sylvania brand is #1 in Automotive lighting at retail Source: National Home Center News, Mass Market Retailers (MMR), NEMA, Dept. of Commerce, Vista Reporting, OSI 2007 Estimates and Nielsen for 52 Weeks Ending 6/23/07 Dominant Economic Traits The lighting industry is an oligopoly where the major global rivals, General Electric, Philips and OSRAM SYLVANIA represent about two-thirds of the worlds lighting market. The industry is a relatively large market which generates about $1.7 billion in revenues (www.IBISWorld.com). In 2007, the newest technology, Compact Fluorescents accounted for 20% of the American lightbulb market, compared to 11% in 2006, where 290 million bulbs sold (www.IBISWorld.com). The U.S. lighting industry’s demand depends primarily on residential, industrial, and commercial construction activity. The two major growth trends for this industry are increased demand for energy efficient lighting and the emergence of solid-state lighting (LED’s).The technology is expanding rapidly with new products and services but most of the products life cycles are declining. The decline is due to a number of importers emerging in the industry with lower cost products; new technology production capacities are shifting to lower cost countries; competition from substitute products and the sale of the new technologies, such as CFL’s and LED’s. The number of buyers is large and diverse. The buyers can be classified into many different segments including Mass Merchant, Do It Yourself, Grocery, Hardware, Automotive (after parts and car manufacturers), Lighting fixture manufacturers, industry/hospitality, end consumers, etc. Some buyers could be large enough to have bargaining power within the industry especially within the different areas of the global companies. Knowing that some buyers can have power, the industries products need to be different from one another, through new product innovations, advancements in technology and environmental sustainability in order for all customers to be competitive in the market. Since the pace of technology is rapidly expanding, the companies within the industry will start looking at their economies of scale to see where they can have an important cost advantage compared to their rivals. Not only are they looking to reduce overhead costs, many of the market players are running into a capacity shortage in the industry. The newest technology compact fluorescents are made overseas for lower costs. As the demand for these products grow the raw materials and production capacity cannot handle the excessive demand where some players are either not getting their products on time, or at all. In order to ensure that the product is delivered many rivals are signing exclusive contracts with the suppliers for a competitive advantage, but not for a better cost position. Even though the initial cost for the product is cheaper to produce overseas, the brand name and quality assurance of the major players increase the costs, but the strong brand name and capital requirements to enter into the industry creates a barrier for new entrants. These barriers include product development (time and money), distribution (slotting/promotional fees, shelf space, and retail demand), marketing (costs), capital costs (land, equipment), on-going acquisitions by larger companies, customer loyalty and economies of scale. These barriers will not always stop the importers of the lower cost products and they may even bring substitute products to the industry. The substitutes that are available to everyone by the internet, retail stores or infomercials on TV are the battery operated light bulbs. This may not be comparable to a standard light but can stick anywhere. Even though this is priced relatively at the same price it offers the convenience to customers that don’t have an outlet within certain areas of their house. Technology is the driving force that is altering the industry’s business environment. Product innovation is the key to gaining additional market share within the industry with the new advancements made to enhance existing products or to create new ones. Marketing is on the rise with the new ways to promote products. Coupons are a great way to save money in this industry and are used heavily on these products. Typically couponing is traditionally seen in newspapers, magazines and online, but new technology has made it easier to couponing on cell phones through text messages. Key Success Factors The key success factors in the industry are: • Packaging/Merchandising - easy to understand lighting solutions • Promotion/Advertising- creating awareness in the market place • Price- ensuring pricing policy is appropriate and offering incentives to buyers that buy in bulk • Quality- production of premium goods and services with high value • Brand Awareness- Helps customers ensure quality level • Economies of Scale- Size and scale of manufacturing locations • Innovation/Technology – ability to access and adopt new technology With the emergence of LED lighting and advancements with technology on existing or new products, many competitors want to be the first to market with a high quality product at a reasonable price. Each competitor has their own strategic move on the market with the same outlook, additional market share to increase overall unit sales and create a strong presence in new segments of geographic markets. With all the new advancements this industry is very attractive and profitable. Due to the new government regulations and the tax and energy credits for the use of more energy efficient products, the higher price products are being purchased in the market as the lower price commodity products will slowly fade away. 4.3 Summary Opportunities- Rising demand for LED’s, expand production capacity, changes in society’s energy conservation behavior, availability of energy efficient products, new technologies. Threats- Intense competition, government regulations, increased prices, construction activity, consequences of acquisitions. 5. Internal Factors 5.1 Competitive Capabilities OSRAM SYLVANIA is differentiating itself by leading the lighting market through pioneering technologies, innovative energy solutions, product cost, quality, commitment and focus on the customer to create value. SYLVANIA’s competitive capabilities include: • Core competencies in product integration - SYLVANIA designed a LED/CFL hybrid bulb which utilizes both new technologies and is available today. • A product offering that is strongly differentiated from the rivals- SYLVANIA is a full service lighting provider. The company not only manufacturers a variety of light bulbs, but also services the industrial/business overhead lighting fixtures from installation to maintenance. The product offering is differentiated with the value added product offerings such as Daylight, Double Life, Regular Life, and CFL products that are available throughout each category, directional, general purpose, specialty and décor. • Strong brand name/company reputation- SYLVANIA has been around since 1901 and it has built a reputation for exceptional performance, high quality products and strong customer service. • Product innovation capabilities- SYLVANIA’s R&D department is consistently finding new innovative ways to change existing products or creating new products through streamline processes. • Proven capabilities in improving production processes- One of the most important areas SYLVANIA focuses on is process improvement and benchmarking through internal events. These activities will lay the foundation on what actions must be taken to meet global competition. • Strong market position- OSRAM SYLVANIA is the second largest lighting equipment manufacturer in the world and produces an extensive product portfolio. In North America, SYLVANIA has the highest market share in the Northeast Grocery region with about 90% after just being awarded the Ahold business this past year. A strong market position helps enhance the brand image and gives the company a competitive advantage. Weaknesses • Higher overall unit costs compared to competitors- SYLVANIA still manufacturers lamps in the United States instead of outsourcing like most of their rivals. The company does outsource some of the newer technologies in order to stay price competitive, but still remains a supporter for domestically made products. The emergence of low cost producers to the industry has also impacted SYLVANIA to revisit their pricing strategies in order to stay competitive. SWOT SUMMARY 6. Strategy There are many different strategic approaches that can be used in the lighting industry but each one is unique and custom for each company’s strategic fits. Below outlines the suggested strategies for OSRAM SYLVANIA. Broad Differentiation strategies seek to produce a competitive advantage by incorporating attributes and features that set products/service offering apart from rivals in ways that buyers consider valuable and worth paying for (Thompson, 2008). Successful differentiation strategies allow companies to differentiate their products based on consumer segmentation to gain additional sales and consumer loyalty where they are attracted to what the brand has to offer them. Unfortunately, this type of strategy can be costly because there maybe too many product offerings; consumers don’t see or understand the value; there are changes in consumer tastes and demands or rivals are quick to copy the product attributes. Luckily SYLVANIA can facilitate this strategy based on their core competency in product integration and merchandising techniques. SYLVANIA offers easy to understand lighting choices that are color coded by application and not only integrates new product attributes to existing products but also creates new technological products to keep up with consumer’s wants and needs. With a very low advertising/promotional budget, SYLVANIA lacks the necessary capability to bring the new products to market like their competitors and relies heavily on retail advertising to get their products promoted. Based on this weakness, a focused differentiation strategy is a considerable alternative. This strategy provides a competitive advantage by developing products for a specialized niche market where your offering exceeds expectations. The market needs to be big enough and profitable in order for growth potential, but this can become costly if all resources are focused on the niche market and not the mainstream loyal customers. By using a differentiation strategy, SYLVANIA can strengthen the company’s competitiveness and market position, by utilizing internal R&D capabilities for new innovative products that adapt to the changing market conditions and customer needs, as well as their creative merchandising philosophies. SYLVANIA needs to continually focus on quality, innovation and be responsive to desires. With a differentiation strategy and a strong brand name, SYLVANIA will create perception barriers of uniqueness and be able to not only charge a premium price on certain products to improve its long term financial performance, but always be incentivized to innovate and continuously improve. Low Cost Provider strategies look to achieve a low cost advantage over rivals by outperforming competitors through effectively managing value chain activities or eliminating cost producing activities (Thompson, 2008). The advantage is that many parties involved can benefit from the lower costs by gaining higher profits, and will be able to reduce price in order to compete. The disadvantages are that competitors may find ways to produce the product at a lower cost perhaps due to technological advancements or by foreign imports. Not only can competitors hinder this strategy, but the strategy leader may lose sight of consumer tastes where no matter how low priced the product is, it no longer suites consumer preferences. SYLVANIA is committed to offering standard products at competitive pricing. With their continuous efforts to improve production processes, the company can be successful at cost leadership by determining and controlling costs and reconfiguring the value chain as needed. Unfortunately, since SYLVANIA still proudly manufacturers in the United States, costs are very high compared to their competition. The alternatives to this strategy include acquiring other companies and outsourcing. Since SYLVANIA manufactures the lower retail cost products in the U.S., these alternative strategies may help them in the quest of becoming a lower cost provider. By acquiring other companies, especially in the latest technologies, such as CFL’s and LED’s, SYLVANIA could gain additional knowledge to lower costs in R&D, have a wider geographic coverage and potentially come to market quicker with new technological advanced products that are being demanded. By outsourcing to lower cost countries, the company can be more competitive in pricing and can stream line their production processes. Unfortunately, the company not only has to lay off all plant workers locally, but they could potentially lose control of the product resources and these import products may have quality and delivery issues. By using a low cost provider strategy SYLVANIA could improve its long term performance through evaluating the ways in which their resources and capabilities can add value. A few ideas that have or could be implemented are: • To build state of art efficient facilities – the competition may not be able to imitate • Maintain tight control over production and overhead costs • Minimize cost of sales, R&D, and other services By improving production processes, SYLVANIA could improve their strategic position to increase their market share by not only developing new core competencies in manufacturing, but through creating barriers to stop firms from entering and by forcing firms to exit the market. 7. Implementation OSRAM SYLVANIA offers the future of lighting excellence by being a full service company through their divisions of retail, trade, lighting services and other components. For SYLVANIA to utilize these strategies, category management tactics such as market research, consumer insight integration, and product mix trends need to be conducted for existing and new shopper segments, as well as processes needing to be streamlined (logistics, forecasting, plan-o-gramming), creation of new marketing synergies and brand awareness through various promotional outlets. SYLVANIA’s Business Solutions, Logistics, Marketing and Brand Central departments will need to capture the following information to develop programs for our customer channels with the help from the other business units. 1. Market Research/Consumer Insight Integration/Product Mix Trends (by customer) – Category Manager, Business Solutions Department a. Who is the SYLVANIA shopper by geographic segments (end consumer)' b. Why/how are they’re tastes and preferences changing' c. What are their wants, needs, desires' d. How to better communicate to them' e. How to segment consumer buying habits' f. What types of promotions and incentives work' SYLVANIA has most of the systems needed to measure the effectiveness of each program in a timely manner, where programs can be measured, analyzed and evaluated. Category management has ACNielsen, IRI, NMI, NEEMA and other market research databases to help capture demographic, psychographic and behavioristic information regarding SYLVANIA, their customers and competitors. 2. Streamline Processes- Logistics, Forecasting & Plan-O-Grammer a. Investing in software that can handle all relevant processes (plan-o-grams, logistics and forecasting) with a centralized hub b. How to incorporate all functions at the beginning for better accuracy' c. Where/What/How to position products on shelf' d. How much space to allocate to each lighting category' e. How to differentiate products on shelf and by what merchandising tactics' JDA Space Planning software is used for plan-o-gram purposes but can be utilized in both forecasting and logistics through a centralized hub. If this program was implemented, results could be pinpointed by looking at the inventory levels before, during and after a promotion, a new customer set up or an existing customer’s re-set. 3. Marketing Synergies/ Brand Awareness- Marketing Departments for all divisions & Brand Central a. Centralization of the marketing departments within the divisions b. Better internal communications from all departments for ideas, suggestions, etc. c. How to better utilize our Affinity Groups internally to tap new market segments such as the Hispanic market and Generation Y d. Packaging re-designs (re-align our packaging programs) to adhere to new merchandising philosophies e. Promotions- how to promote to customers and end users via rebates, sweepstakes, coupons, direct mail, etc. f. Use of different advertising tactics to create additional awareness i. Use of the internet- blogs, YouTube, Facebook, MySpace, banner ads, email blasts, etc. ii. Text messaging, Podcasts, Google AdWords iii. Better use of Disney Alliance- create additional hype through use of Disney assets The marketing departments need to be centralized to better serve all of our divisions. Many departments have their own approaches to various marketing tools and campaigns that are successful and should be available for other departments to utilize. This information can be analyzed by looking at base sales and incremental sales through three time periods, pre launch, promo weeks and post launch. Lastly, SYLVANIA needs to take advantage of their relationship with Disney Parks. This could be new promotions such as sweepstakes or additional brand awareness through Disney assets. If SYLVANIA were to run a sweepstakes a website can be created to track the number of hits and submissions and category management can track sales lift though store POS data. Marketing Strategy SYLVANIA will need to support existing and new products through advertising and promotion campaigns. The company will need to continually strengthen its partnerships with various retailers by developing brand and new product awareness with the new LED and CFL technologies. The key messaging should be consistent, “See the World in a New Light.” The promotional plans to market new technologies to existing and potential new customers are: • Public Relations- Press releases issued to both trade journals and major business publications as well as local newspapers • Trade Shows- Company representatives will attend and participate in several trade shows to showcase the new products • Print Advertising- This should include magazines, newspapers, billboards, business publications and trade journals • Internet- With all the new advancements in the digital world, SYLVANIA needs to capture this audience through email blasts, banner ads, interactive tools, etc. as this method of communication will be the company’s primary marketing source in the future Sales Strategy Traditionally SYLVANIA sells their products to other businesses such as retailers, wholesalers, distributors, or B2B end consumers. With new products quickly emerging SYLVANIA needs to re-visit their sales strategy to include other methods. Catalogues and the Internet are great methods to distribution. Consumers have less time to shop, and for some, these alternatives are more pleasant and offer convenience. Although these methods may only represent a small portion of sales in other businesses, it has opportunity for potential growth. Consumers like the convenience of being able to shop from anywhere and anytime they wish. SYLVANIA should also test a kiosk store for some of their lighting gadgets to sell directly to the end consumer without going through a retail store. The prices could potentially be more attractive to end consumers since they don’t have to pay the “double” profits for both manufacturer and retailer. Conclusion SYLVANIA has proven strategies that are providing sustainable growth; best looking and easiest to understand packaging and merchandising; and the commitment to ensure a future of lighting excellence. Since trends are the driving force of the future, SYLVANIA needs to revise their current strategies to adhere to the economical, demographical, ecological, regulatory and new technological changes that are coming quickly to the industry. Many retailers will need to start positioning themselves today for the LED lighting growth trends in order to maintain sustainable growth in the lighting category and will look at the key players in the industry to point them in the right direction. SYLVANIA needs to be at the forefront with the consumer trends and technological information to be first to market to fill the initial lighting socket through new merchandising, marketing and selling techniques. Appendix I- SYLVANIA Merchandising Strategy [pic] Appendix II- Industry Trends [pic] Appendix III- Market Share Summary [pic] Source: AC Nielsen, 2006 OSI Estimates [pic] Appendix IV- Retail Trends [pic] Citation National Home Center News, Mass Market Retailers (MMR), NEMA, Dept. of Commerce, Vista Reporting, OSI 2007 Estimates and Nielsen for 52 Weeks Ending 6/23/08 Thompson, Arthur, Crafting and Executing Strategy, 16th Edition 2008, Chp5-10, pp134-352 www.sylvania.com www.intranet.sylvania.com www.osram/annualreview.com www.sylvania/aboutus.com www.mysylvania.com www.IBISWorld.com Lighting and Bulb Manufacturing 3351