Cree Inc. believed that LEDs have a potential to be the main lighting application market and made technological improvements in cutting production cost and increased brightness of LEDs.
They had a disappointing financial results in 2007 due to market saturations and customers such as contractors, home residents, real estate developers and many more still prefer to use other types of light bulbs as it is cheaper for short-term period. Cree is very experienced with LEDs Research and Developments(R&D), has future growth potential yet it seemed the brand awareness is very low. They have opportunities they can seize with an very positive forecast for LED market size but they have so many competitors that it will be hard to be the main player in LEDs (2009:Market share 10%, Cree’s Sales= 500 million, Worldwide Market= $5 Billion). Incandescent light bulbs had a market share of 50% in general lighting market. The core question: How can Cree
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Although Nichia is the dominant manufacturer in LED (exhibit 15) with $1.3 billion sales in 2009 (Cree’s sales is $500 million), there are a lot of small players that make up $1.75 billion(total worldwide LED Market is $5 billion). They also have to compete with the different types of light bulbs manufacturing companies. There are three different types of light bulbs: Incandescent, CFL and LED. General Electric($3 billion sales) and Philips Lighting($9 billion sales) dominates the lighting market especially in the U.S. residential lighting market in incandescents and CFLs. These two companies they move up the value chain reaching the end product to consumers. The other two types of light bulbs are favored due to their cheap cost (Incandescent: $1.12, CFL= $9.97, LED Lamp= $49.99) that results in cheaper retail