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(3) The Development of Substitute Products

The substitutions limit the price of one product, when the price arrives at the level, customers will turn into its substitutions. Meanwhile, when the prices of substitutions are decreased and the cost of choosing the substitutions is decreased, the stress from the substitution becomes larger (Christian 2007). Incandescent and fluorescent lamps, as the substitutions of the LED lights, can satisfy the similar demands from the target market. But with decrease of LED price, the stress from its substitution becomes smaller. In addition, LED products are characteristic with energy-saving and environment-protection, which also decreases the stress from its substitution. Of course, LED Company should keep alarm against the other new products with new technology, for example, Electrodeless Dischargea Lamp.   

(4) The Bargaining Power of Suppliers

The suppliers of Neo-Neo can be divided into two parts based on its influence on the industry. One is regular suppliers which supply the LED enterprises with copper、PVC、DOP  and other simple materials, all the materials are standardized due to its low technology, there are many suppliers providing those upstream products. It is common that one LED lightening industry will collect the quotations from at least 3 suppliers for one kind of material. Thus, those suppliers have weak power of bargaining to the LED lightening industry. Another is key supplier, which provides the LED lightening with LED chips; LED chips are made up of the LED core and external technology which are monopolized by the developed countries. Except that Cree and Gelcore provides the LED epitaxial wafers, most companies in the developed countries just provide the LED products not LED chips to keep their position of menology and get the high profit. Now the main suppliers of LED chips are from Taiwan. Thus, the key suppliers have stronger power of bargaining to the LED lightening industry.

(5)The Bargaining Power of Customers

The customers of Neo-Neo can also be divided into two kinds: retailers and business customers. Retailers include chain stores, such as Home Depot, Canadian Tire and Target. Business customers include the hotels, casinos, construction companies, and distributors and so on. Obviously, the retailers have fewer initiatives to decide their desired price while the business customers have more initiatives. For the Neo-Neon, 25% revenues are from the 5% customers and 7% revenues from the largest customer. Neo-Neo gives the discount to its valued customers which just account for 5%, 95% customers have less power to bargain with Neo-Neo (Annual report 2011). Thus, the power of customers has less threat to the development of Neo-Neo.

4.2.4 Analyzing the internal environment

The following chapter will focus on the R&D, marketing, production and accounting to analyze the internal environment of Neo-Neo.

(1) The Ability of Research and Development

The R&D department in Neo-Neo focuses on the design of products, developing new products and improves the production efficiency to decrease the manufacturing cost. The R&D department owns more than 260 researchers and engineers with more than 1000 patents in America, England and China. The R&D expenditure accounts for nearly 10% of its total revenues (Annual report 2011). According to the Official Website (, Neo-Neo pushed 684 new products and 524 new products respectively in 2010 and 2011, those new products have forming product mix to attract more customers. But the large investment into the large group products makes the Neo-Neo stacked in the new crisis.