Apply Porter’s 5 Competitive Forces Industry Background Merchant Sounds like a good idea. John Here’s some background research I gathered about our proposal and some information on the lighting industry in general. John At this point, which force do you think should be our biggest concern? John Industry Background Industry Background Facts Industry is projected to grow at 1.5%/year for the next few years Lighting fixtures industry is roughly $4 billion worldwide Manufacturing . Mostly smaller manufacturers • Few, if any, manufacturers have a recognized brand • Popular designs are rapidly copied • Patents offer little protection • Technology for internet-connected smart fixtures is growing slowly • Creating specialized production lines is necessary Distribution Channels • Many smaller manufacturers sell directly through large retailers such as Home Depot, Target, and Walmart . Some retailers offer their own private label brands • Large manufacturers sell directly through their websites (as well as through retail) • Individuals often compare prices across all channels before making a purchase Suppliers Primary materials are commodities like metal, wood, plastic, and glass . Most manufacturers use a wide variety of suppliers for these commodities • Each commodity has a large number of suppliers from which to choose Startup Process An efficient factory can cost between $15-50 million dollars • Outsourced manufacturing can reduce initial costs for a niche player to less than $100,000 • The regulations are simple and straightforward for lighting fixtures • Marketing expenditures can be controlled through targeted ads Suppliers Buyers New Entrants Rivalry Submit
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