Growing Pains: Growing A Small Company To A $100 Million Company

Finelite designs and manufactures high performance, environmentally sustainable lighting solutions and products for commercial, educational and healthcare facilities. After several years of slow to no sales growth since the Great Recession of 2008, the company is recently experiencing quick product acceptance and high market demand for newly introduced LED product lines which present both opportunities and challenges to the company.

The exciting challenge to the company now is how to meet and fulfill 30 to 40% sales growth. In order to create the strategic plan, I will perform a SWOT analysis and Porter's Five-Forces Analysis, review the company's core competencies and competitive advantage, and analyze corporate resources and capabilities. The strategic plan will help the company capitalize on the new opportunities and meet the challenges it is facing.

Starting in 2011, the company began the introduction of LED product offerings. In the short two years, sales from these new LED product lines have eclipsed the total sales from all legacy fluorescent products offered by the company over its 20 years. LED technology represents a game changer in the lighting industry which has traditionally been slow to adopt new technologies. It is the most significant change to the industry in 130 years. In 2014, the company will be introducing HP2 another new LED product that is projected to be as big as the company's HP4 series which was introduced in 2012 and now accounts for one-third of the company's total sales. HP4 also has higher gross margin that the company's legacy products.'
Company Background
Finelite was founded in 1991 by Terry Clark. As a lighting industry veteran, he saw the opportunity for high-performance indirect lighting in America's workplaces and schools, while understanding the challenges keeping this user-preferred lighting from being the standard in commercial buildings. He envisioned 'innovative and attractive high-performance indirect fixtures could be built to the highest quality standards, shipped and installed quickly and sold at affordable prices'. Terry believed that 'by combining these attributes with indirect fixtures capable of performing effectively in buildings with low ceilings, the world's finest workplace lighting would finally be within reach of virtually all commercial and institutional organizations'. In pursuit of these goals, the company has invested in independent research studies, lighting technology, product design, lean manufacturing systems and environmental sustainability.

Finelite's corporate headquarters and factory is located in Union City, California. Its 175,000 square foot manufacturing facility is capable of producing 20,000 linear feet of fixtures per day The company has delivered on its 10-day ship guarantee 99.9% to date

In 2014, Finelite concentrates on developing and building of high-performance, environmentally sustainable lighting systems for office, educational and healthcare facilities. The lighting revolution promised by LEDs demands reinventing luminaires and lighting systems. Finelite is working with research organizations to create new benchmark practices in LED lighting.
Finelite Vision: Enhance people's lives and the environment through better lighting.
' Build to the highest quality standards
' Shipped and installed quickly
' Sold at affordable prices
' Environmentally sustainable
Finelite Values:
' Provide Superior Customer Service: Settle for nothing less than 100 percent customer satisfaction. Serve your customer as if he or she is your best friend.
' Foster Innovation: Continual innovation must be pursued and implemented. New ways of doing business must be developed to bring our customers superior support and solutions as they grow in sophistication and experience.
' Deliver Quality: Take pride in giving your best effort to your customers. Identify potential problems and solve them before they have a chance to become problems for your customer.
' Show Respect for People: Respect for people provides the foundation for the integrity that should guide our every action. Pursue this every day and you will gain excellence in one of the most important areas of life and business.
' Take Individual Initiative: Get things done. Try lots of small experiments. See what works and do it again. Find out why other things didn't work, make changes, then experiment again.
What are LEDs?
LEDs, or light'emitting diodes, are semiconductor devices that produce visible light when an electrical current is passed through them. LEDs are a type of Solid State Lighting (SSL), as are organic light'emitting diodes (OLEDs) and light'emitting polymers (LEPs).
How is LED lighting different than other light sources, such as incandescent and CFL?
LED lighting differs from incandescent and compact fluorescent lighting in several ways. When designed well, LED lighting can be more efficient, durable, versatile and longer lasting.
Common LED colors include amber, red, green, and blue. There is actually no such thing as a 'white' LED. To get white light the kind we use for lighting our homes and offices, different color LEDs are mixed or covered with a phosphor material that converts the color of the light. '
SWOT Analysis
1. Internal Strengths
a. Market knowledge of team
b. Drive to research solutions for applications
c. Market connections throughout industry
d. Efficient operations
i. Lean manufacturing
ii. 10-day shipping guarantee
iii. System testing
iv. Product packaging and shipment to jobsites
e. Strong vendor partnerships.
f. Support of primary sales force (independent reps in all 50 states and Canada)
g. Product design results in better installations.
h. Manufacturing partnerships are strong
i. Strong balance sheet
j. Strong brand in how we interact with the community
2. Internal Weaknesses
a. Product development time line needs to be improved
b. Marketing' sophistication and reach of competitive marketing actions is greater
c. Manufacturing growth potential of strategic partners.
d. Company is relatively inexperienced with product class - improving but behind competitors.
e. Shipping Costs ' California-based production yields higher costs for other parts of country.
3. External Opportunities
a. Conglomerate instability with regards to service, product quality, and job support.
b. Conglomerates are less likely to place much risk on new product innovations.
c. Sustainability drive in marketplace is in line with Finelite and LED product lines' strengths.
d. LED product attributes and message can be easily incorporated into our existing market leadership position with regards to ICLS and IOLS research.
4. External Threats
a. Negative conglomerate response to LED product lines.
b. Product development strength of competitors
i. Will they change the product sufficiently to force a change in product line that will require a fast response by Finelite?
c. Conglomerates focus on pricing and distribution as sales features.
d. Commoditization of current product family would reduce impact of our product differentiation.
e. Product cost PRESENTED to our customers is outside our control.
f. Existing sales channel makes it more difficult to experiment with alternative channel strategies.
g. Economic environment increases challenge to gain share of mind among customers.
h. Economic environment may make it more difficult for customers to risk change.
i. Economy will continue to negatively impact office and school project process
j. Technology shift will drive customers away sooner than expected. '
Porter's Five-Forces Analysis
a. Threat of new entrants is high
i. Mainly from existing luminaire manufacturers, although most of the conglomerates already have competing products
ii. Not as likely that a brand new luminaire manufacturer would emerge to compete in industry
b. Threat of substitute products is high
i. Could be other design solutions
ii. Not all players in the lighting industry would value the product differentiation beyond price
c. Rivalry among existing competitors is high
i. Importance of specific competitors varies by sales agent strength and product mix in regional markets
ii. Conglomerates have more resources and clout with sales agents and distribution channels
d. Bargaining power of buyers is high
i. Many players are part of buying chain and must be influenced
ii. Recovering market conditions make competition fierce
e. Bargaining power of suppliers is low
i. Finelite has developed strong relationships / partnerships with suppliers
ii. Current economic conditions make it more likely for suppliers to support our business

Finelite's corporate strategy:
' 10-Day Ship Guarantee
' Competitively Priced Product Lines
' Consistently High Quality Products
Finelite is unique and different from its competitors by allowing sales agents the ability to earn unlimited commissions on sale of its products over list prices. The combination of guaranteed 'quick ship' in 10 days, consistently quality products and competitive pricing which enables sales agents to quickly sell, deliver and earn high commission gives Finelite a competitive advantage.

The table below shows Finelite's 2014 year-to-date sales revenue by product line. The company's began introducing LED options of its Linear and HPR product lines in mid-2011. In the first 4 months of 2014, the percentage of LED fixture sales exceeded the percentage of fluorescent fixture sales in all product lines.
Linear HPR PLS
Fluorescent 44% 41% 0%
LED 56% 59% 100%

1. According to Phillips Lighting, from 2013 to 2016 the lighting market is projected to grow between 4-6% per year. LED lighting solutions will make the majority of the expected increases at 45% share by 2015.
2. Acuity Brands reported the huge shift driven by LED lighting and the transformation of the lighting industry in 2013.
3. NEMA is an association of electrical equipment and medical imaging manufacturers. The NEMA's LED lamps index showed shipments in Q3 2013 increased 71.9 percent over Q2 2013.
4. The US lighting fixture industry is a $17.6 billion market according to market research by the Freedonia Group.
5. Pike Research states LEDs is the most significant breakthrough in lighting technology since the introduction of the electric light in the 1880's.
6. According to a research study by McKinsey & Company, LED is considered the most viable clean technology in 2020 even over photovoltaic solar power, wind power and electric vehicles.
7. According to the U.S. Department of Energy (DoE), LEDs compared to incandescent bulbs are six times more efficient and 25 times longer lasting. The DoE also says the cost of LEDs have fallen more than 85 percent since 2008.
8. Illuminating Engineering Society (IES) of North America recognized Hubbell as an industry leader offering one of the largest lines of LED commercial lighting fixtures.
9. LED compared favorably to traditional light sources like incandescent, halogen, and fluorescent. Benefits of LEDs include lower energy consumption, longer lifetime, higher robustness, more flexible lamp design and lower maintenance cost. Pham citation.
Finelite should focus new development efforts on new LED product offerings.
Finelite is not the first-mover in the LED market. Finelite is a niche player growing toward the $100 million sales mark. There are huge opportunities for growth in the more that $_______ market. Finelite should concentrate the focus of new development efforts and resources on new LED product lines.
This is a very exciting time at Finelite and the entire lighting industry in general. Finelite is poised to take advantage of the tremendous growth opportunity that LED represents.

Source: ChinaStones -

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