CREE INC. CASE REVIEW

Presented to: Prof- Ashok Kaka

• HIMOSH SHARMA

• SHIRISH SHARMA

EBM 635

INTRODUCTION CREE. INC

Starting of twenty-first many country efforts to curb global

warming by improving energy efficiency targeted lightening.

Which alone consumed 19% of global electricity production.

In 2007, the U.S. passed a law that would ban the most

inefficient incandescent through an extended phase out.

The manufacture and import of 40 and 60 watt bulbs

prohibited from January 2014.

INTRODUCTION…

In mid of 1990’s CFL bulb were sold in the U.S.

Later one- third the energy of incandescent bulb,

were seen as the obvious replacement.

Also some industry insiders began touting light-

emitting diodes (LEDs) as the next generation of

lightning.

LEDS INTRODUCED- 1960’S

Light emitting diodes were introduced commercially in

the 1960s as low-power red indicator lights.

By 2007, LEDs were available in a full range of colors,

including white, and could generate light at high outputs.

LED backlighting for LCD TVs was quickly catching on,

and expected to grow quickly to $7 billion by 2013.

CREE INC. MAJOR PLAYER

Major player in the developing LED market market

was Cree,Inc.,

It is a Durham, North Carolina-based LED chip and

component manufacturer.

Accordingly from its IPO in 1993 to 2006, Cree’s

annual revenues grew from $6.3 million to$423

million.

CREE INC. MAJOR PLAYER..

Total employees were 2500 of the company, and earned most of

its revenue by selling LED “Chips” and components to business.

Also Cree’s customer used to packaged and re-sold its LED

chips and components in various applications, including mobile

phone, keypads, TVs.

By 2006, however, Cree’s net income had started to decline; and

annual revenue decreased for the first time in the company’s

history in 2007.

PROBLEM

Should CREE continue to make LED Backlighting

Market for monitors and TV screens?

Withdraw from their current strategy to pursue

new opportunities ?

Should they do both?

LED LIGHTING MARKET

GENRAL LIGHT- 7%

MOBILE APPLIANCES- 44%

SIGNS AND DISPLAYS- 17%

AUTOMOTIVE- 15%

OTHER- 17%

MARKET RIVALRY

GE-5%

OSRAM- 14%

Philips- 4%

Private Labels- 7%

Other 70%

MARKET SUBSTITUTES

CFL is the available and the biggest substitute

Technological enhancement can bring in a new

market in the lighting industry

NEW ENTRANTS

As the market grows, new entrants is not an unknown

Since the establishment, Cree has been dealing with new

entries

Cree has strengths to overcome entrants because:

Subsequent patents

E. O Scale and low cost leadership

Market Reputation

Good Value of the product:

3 MAJOR STEPS

To add value to the product

Differentiate Product

Cost leadership

Finishing and looks

FUTURE OUTLOOK

GENERAL LIGHTING

Total Market Size in 2007: $110Billion

Costs at LED’s Market In General Lighting were

expected to drop 70% by 2015

Offer to Initiate the first LED City

LED lighting markets are processed to achieve

high growth as the market leads on using cost

efficient LEDs

INTERNAL SCENARIO

HUMAN RESOURCES

Skilled Labor

Open Minded Management

No MBA’s

INNOVATION

Unstructured

Creative Problem Solving

INTERNAL SCENARIO..

REPUTATIONAL

Durable Products

No Brand Equity

Legitimate Suppliers

FINANCIAL

Excess Cash

High Borrowing Capacity

INTERNAL SCENARIO..

TECHNOLOGICAL

State of the art R&D facilities

Expertise in SiC and wafer Tech production.

3 YEARS ROA AND ROE

CORE COMPETENCIES OF CREE INC.

CREE’S STRATEGIES

Business-Level Strategies:

Integrated Cost-Leadership Differentiation

oCree seeks to provide a superior quality good at

competitive prices.

oBy taking advantage of E.O Scale in input logistics

and centralizing R&D with continuous innovation.

RECOMMENDATIONS

CREE SHOULD PURSUE BOTH MARKETS

Backlighting: Utilizing Cost-Leadership

Management Strategy

LED General Lighting: Differentiation Management

Strategy

MANAGING LEADERSHIP

• Make a significant investment in capital assets

• Innovate designs for a shorter assembly line

• Retain Experience and Skills of the organization

• ERP management and control over the supply

and distribution chain.

COST LEADERSHIP

Production outsource/ cheaper cost geography

B2B promotion to cut down middle man

Online distribution and sales could be a cheaper

selling platform

Constant R&D for Low cost product innovation

THANK YOU!!