it in a proper way .... don't copy from anywhere #What will be the strategy if you want to enter in the light Bulb industry as a new entrant. Case: Man Lal relaxed in business class as the aircraft skimmed across the Uril Mountains. Generally he considered himself a contented man. He had successfully built his company, Ling, to be the largest light bulb manufacturing company in the world, with global revenues of $750m. From its factories in Lindisztan it supplied a worldwide market for LED (light emitting diodes) light bulbs. Lal congratulated himself on the fact that he had quickly spotted the potential of LED light bulbs and had entered large-scale production whilst his rivals were still focusing their production on candescent and halogen bulbs. The world now realized that LED light bulbs provided a cheaper, more energy efficient, greener solution than all of its alternatives. To that end, many countries had passed legislation requiring domestic and business consumers to replace candescent light bulbs with greener equivalents. In fact, he was on his way right now to Skod, a country which had passed efficient lighting legislation which, from 2017, banned the use of candescent bulbs in commercial premises and outlawed their production and importation after that date. Domestic consumers were expected to replace their candescent bulbs with newer technology as their bulbs failed. Man Lal confidently expected that LED would be, for many, the newer technology of choice. The visit to Skod was of great significance to Man Lal because it was here that he did his business studies degree at Skodmore University. Indeed, he was due to give a lecture to the staff and students of the university the following day and he felt great personal pride in returning to describe the extent of his success and the fulfilment of his personal ambitions. He was also planning to visit a company called Flick which Ling was considering acquiring. This would be a new growth method for Ling. Up to now its worldwide expansion had been achieved by establishing wholly owned distribution companies in each targeted country. All production had remained in Lindisztan. However, for various reasons, Ling was now considering entering the Skod market by acquiring one of its light bulb producers, Flick. In fact, remembering this brought a slight frown across Man Lal's face. To help fund his global expansion, he had sold 49% of Ling to institutional investors. These institutional investors required growth and high dividends and he was having difficulty meeting their demands. There was now very little growth in the domestic Lindisztan market and the distribution approach used to expand into foreign countries was taking a long time to mature. The investors were demanding quicker growth and acquisitions appeared to promise this. Despite paying high dividends over the last few years, the company still had significant retained profits and this was another issue for the institutional shareholders. They felt that this money should be used to promote growth and have agreed to a $400m acquisition fund. So, thought Man Lal, what better place to start those acquisitions than Skod, the place where I studied as a poor overseas student so many years ago. However, he had to admit to himself, he was still much happier with organic growth through setting up his own distribution companies. Ling had made a few acquisitions in Lindisztan, but had never bought a foreign company and he was worried about the risk of failure. 'We must also ask our citizens to continue with their energy saving measures. As you know, the government has agreed that all street lighting will be turned off from 2300 hours to 0500 hours. I have also decreed that all government offices must proactively embrace energy saving lighting and heating. In the same way, I expect our citizens to look at ways of saving money and energy Skod electric light bulb industry All electric light bulbs are largely made out of glass and metal and this is likely to remain the same in the foreseeable future. In Skod, 90% of glass is produced by three companies. However, for all of these three companies, light bulb manufacturers are unimportant customers. Most glass manufacture goes to the construction industry, light bulb manufacturers take less than 05% of the country's glass production. Metal manufacture in Skod is dominated by one company, OmniMetal. Most metal is sold to the automobile industry. Light bulb manufacturers take less than 01% of OmniMetal's production. However, the quality of glass and metal required by the light bulb manufacturers is quite standard, so switching between suppliers is, in theory, relatively easy. Light bulb manufacture takes place in factories which require substantial initial investment and have no obvious alternative use. In Skod, light bulbs are low cost commodity products which are replaced infrequently by domestic consumers. Commercial consumers change their light bulbs a little more often and some businesses have recently switched all their bulbs to LED to save energy, reduce costs in the long term and to reflect their aspirations as 'green businesses'. There is very little brand awareness in the light bulb market and all the light bulbs have to fit the standard sockets used in the country. Electric light bulb manufacture in Skod is dominated by the five companies listed in Table One. Two years ago a large American light bulb manufacturer, Krysal, attempted to enter the market. The five dominant companies in the industry reacted to this by cutting prices, running marketing campaigns which emphasized the benefits to the country of home-based production and lobbying supermarket groups to not stock products produced by the new entrant. Krysal withdrew from the market after six months. When not focused on fighting new entrants, the five main competitors are regularly involved in price cutting, disruption of competitors' distribution channels and aggressive marketing. Company Revenue (2018) Revenue (2017) Voltface $85m $80m LiteWorld $80m $80m Flick $70m $65m ABC $65m $60m L2L $60m $60m Other companies $140m $145m Total $500m $490m Table One: Skod-based light bulb manufacturers The products produced by the Skod light bulb industry are largely sold through supermarket groups (50%), household product superstores (30%) and large electrical chains (10%). The rest of the production is sold through small shops, except for a tiny percentage of production (less than 1%) which is sold directly to large organisations, such as government departments. However, light bulbs do not constitute a large sales item for any of these distribution channels. In fact, in a recent report, light bulb sales were one of the products which contributed less than 01% of a major supermarket's revenue. Extract from financial statements All figures in $millions Flick Skod industry totals 2018 2018 Assets Non-current assets Property, plant, equipment 190 1,635 Goodwill 10 100 ------ Total non-current assets 200 1,735 Current assets ------ Inventory 45 200 Trade receivables 20 250 Cash and cash equivalents 35 115 ------ Total current assets 100 565 ------ Total assets 300 2,300 ------ Equity and liabilities Share capital 150 1,000 Retained earnings 50 340 Non-current liabilities Long-term borrowings 70 750 Current liabilities Trade payables 29 200 Current tax payable 1 10 ------ Total current liabilities 30 210 ------ Total liabilities 100 960 ------ Total equity and liabilities 300 2,300 ------ Revenue 700 5000 Cost of sales (550) (3500) ------ Gross profit 150 1500 Administrative expenses (40) (300) ------ Profit before tax and interest 110 1200 Finance cost (25) (500) ------ Profit before tax 85 700 Tax expense (10) (120) ------ Profit for the period 75 580 ------ The light bulb companies in Skod have largely focused on candescent (60% of production) and halogen (30% of production) technologies. Man Lal intends to fund the updating of the production facilities at Flick to allow the production of LED lights, alongside the continued production of candescent and halogen light bulbs. He wants to achieve this before domestic competitors in Skod gear up their own LED light bulb production. He believes that Ling's competencies in LED manufacture will give Flick a head start. Initial discussions with Flick suggest that the company is open to acquisition and a bid price has been agreed which is acceptable to both parties