Presentation by:Taylor ClaytonNatalia PamichDhruv DhallJason HanOur Mission:Improving peoples lives through meaningful innovation. Innovation is integral to everything we do. But innovation does not only mean new technology. It can also mean a new application, a new business model or a unique customer proposition brought about by an innovative partnership. By tracking global trends and understanding the challenges facing people in their daily lives, we ensure that peoples needs and aspirations are at the heart of our innovation endeavors.Philips . . . Largest manufacturer of lighting products World-class technology, customer service, and inventions Pioneer in the green-technology initiative Greenpeace rates Philips as one of the top 10 Environmentally friendly companies in the world Healthcare: Imaging Systems, Patient Care & Clinical Informatics, Home Healthcare Solutions, Customer Services Lighting: Lamps, Consumer Luminaires, Professional Luminaires, Lighting Systems & Controls, Automotive Lighting, Lumileds Consumer Lifestyle: Health & Wellness, Personal Care, Domestic Appliances, Lifestyle EntertainmentHigh Market Share Low Market ShareHigh Growth RateStar Question MarkLow Growth RateCow Dog1. The Philips brand is very popular (Leading global lighting company)2. Philips has the ability to produce some of the best quality products in the consumer market3. Strong innovation capabilities4. Large global footprint (Serving 100+ countries)5. Low-cost and highly efficient manufacturing and supply base.1. Hue is currently for sale exclusively in the Apple Store.2. The High Price of Hue 1. Growing market for energy efficient products2. Emergence of new markets, services and customers3. Technological change4. Taxation law (recognized throughenergy efficient tax credits)5. Government regulation and policies1. Cheaper competitive products2. Macroeconomic changes3. More competitors enter the market4. Foreign competitors making similar products, but utilizingcheap labor $825 million revenue Projected annual growth of 3.4% High demand for energy-efficient lighting systems environmental concerns, lower electricity costs Growth stage of the industry life cycle High competition with high barriers to entry Philips market share of 43.1%LIFX LED Smart Bulbs- Kickstarter Project- Wireless hub-free- Notifications- Music syncGreen Wave Smart LED Light Bulb- White light only- Additional physical remote- $200 initial price, $20 for each bulb thereafterProduct Features Advantages BenefitsHue LED Smart Light Bulbs Easy to use smartphone interface Interconnectivity through wireless hub Shapedlike traditional light bulbs Easy to learn how to use Control lights from anywhere Fits into old fixtures Savings in time Savings in Time Savings in $LIFX LED Smart Bulbs Interconnectivity through Wi-Fi Social network and email notifications Lights can sync with music Control lights from anywhere Instant notifications Quickly create party environment Savings in TimeSavings in TimeSavings in Time & $Greenwave Reality Smart LED Bulbs Wireless hub connectivity Additional physical remote White light Control lights from anywhere Allows for more control Cheap replication of traditional white light Savings in Time Savings in Time Savings in $MARKETS PRODUCTSCurrent NewCurrent Market Penetration- Phillips Sells Endura LED- Are In Decline Phase of PlC- Energy Saving Lamps- Sell at higher price and same amount- Product Can Either fade away or make minor profitProduct Development- Time for HUE Led Light Bulbs- Current Markets of Families and Average Young Consumers- Risk as I-phone compatibility too specific and expensiveNew Market Development- Expand Current Bulbs to Spas and Clubs- Lack of interest and decline could prevent expansion and salesDiversification- Sell to brand new market of hospitality- Good expansion and large industry- Diversify Phillips product line and increase hotel revenue Social Media is imperative in connection Lighting is an important part of the guests stay Increased concern for the environment. 42% of energy from lighting and 70% of that is inefficient. Hue is not inefficient. Hermesworldwide.com economy is rebounding Luxury vacations and luxury hotels are more popularHue can give luxury hotels favorable impressions through customizable options and Apple functions Smart Phones are in growth stage of PLC Popularity can be a marketing tactic to intrigue customers Ipads in room : customizability! Increased emphasis forgreen technology Popular pick for hotels Main competitor LED LIFX Independent and not out yet Green Wave Reality Light Bulb No color options, not customizable However, it is cheaper EISA(Energy Independence and Security Act of 2007) Medium screw base and socket Voltage range within 110 and 130 volts Minimum CRI rating of 80 Hue has 91 Large Environmental Emphasis in Todays Society Baltimore Business Journal Lighting turned off after a time period. Hue is energy efficient so gives more total usage Natural Disaster in Hurricane Sandy Entire Cities Ran Out of Power Entire Hotel would lose lighting Need Emergency Response Team HUE requires many resources Supply chain manager must ensure that there is a stock for emergency situations Hospitality segment Small share of Philips Lighting division business High-end, cosmopolitan hotels with modern and colorful dcor Age range of guests is 25 to 55To maintain youthful and colorful themes that attract consumers Growing trend for making tablet devices available to guests in their rooms so they are satisfied with their rooms modern and high-tech features For example, St. Regis in Shenzhen, China and the Four Seasons in Beverly Hills, California Philips Hue Six sigma Objectives: gain market share, social responsibility Constraints: newness of the product, type of competitive markets, current economic condition Demand: demand curves, price elasticity Costs: associated with production Break-Even Quantity Strategies: Demand-oriented: captive pricing, target pricing, bundle pricing Profit-oriented: target profit, target return-on-sales, target return-on-investment Competition-oriented: customary pricing, psychological pricing Dynamic, flexible-price policy with price cuts for bulk-buying.Price = $20/bulb (Based on customary/targetpricing) With 100% mark-upBEQ = FC (P-UVC) = 36 545 905.82/(20 10) = 3 654 591 units BES = 3 654 591 units * 20 = $73 091 811.64 salesRegular Price Bundle Price with HueiTouch$199 $99iPad Mini$329 $229iPad$399 $249Hue Apple Bundle Price New, discounted prices for Apple equipment: The Promotion is a key factor in the success of this campaign As demand is on the rise perfect time for Hue No comparison to any hospitality lighting Apple functionality and social media key aspects Building relationships core as well Brand New Product so Informational Product Style Introduce Hospitality Industry to HUE Marketing it with Apple is core Both Hue and Apple Benefit from this Methods TV Apple I-pad advertisements Great wide scale exposure Large and diverse customer base Social Media Dedicated Managers to manage hotel accounts Hue can create accounts to build relationships and reach out to clients Constantly Show off Features as well Hotel conventions PR team directly represent HUE Networking and brand development Mixers Gain Data and Keep in Touch Generate Buzz Marketing Spread the Word Bulk Sales Include some amounts of Apple I-pads with sales and orders Cross Promotional Feature Provides Increased Luxury to rooms Boston.com more features in a room, more satisfaction Provides incentive to purchase and a deal Direct Conversation Through Social Media Direct Marketing through TV Ads Iphone app also a form. Managers might see Ad on TV Direct Meetings Best and Most Detailed Information Must have all materials and convey FABs Conventions While PR Manages Image, Sales should gain interest and desire for product through displays Remember to use variety of methods for success Di Sales Team specifically for Hospitality Conduct research into expectations and wants Must have knowledge of product to explain Six Steps PBC Negotiate Prices and Develop Deals Develop Customer Relationships Use Need Satisfaction Format of presentation Corporate system of distribution 20 Sales agents who engage in direct selling to modern luxury hotels No need for wholesalers, distributors or stores Maintain our own sales force to perform all channel functions Strategic channel alliance with other divisions of Philips involved in the hospitality industry Value created by quick transactional functionAdds value to customer experience by having modern and high-tech features at their fingertips to customize their roomCompatibility with Hotels Style/DecorPerceived Customer Value of GuestroomPerceptual MapHighHigh LowOther White LED light bulbsHueLimited time: 1 MonthLimited place: The Los Angeles W Hotel Profit: high ROI and profit Sales: $100 million in sales Market Shares: increase the LED light bulb share in the luxury hospitality market Quality Customer Satisfaction Employee Welfare Social Responsibility: promote energy efficiency Lighting& Bulb Cost (as a percent of co. revenue)+LED Cost (as a percent of co. revenue)=LED Light Bulb Cost (as a percent of co. revenue)Profit6.5% + 10.0% = 16.5% / 2=8.25%Wages19.1% + 14.7% = 33.8% / 2= 16.9%Purchases49.9% + 22.0% = 71.9% / 2= 35.95%Depreciation3.2% + 10.5% = 13.7% / 2=6.85%Marketing1.0% + (4.0%) = 5.0% / 2= 2.5%Rent & Utilities4.1% + 8.5% = 12.6% / 2= 6.3%OtherTotals:16.2%100%+ (30.3%)100%= 46.5% / 2=23.25%= 100%Lighting& Bulb Manufacturing LED Bulb ManufacturingInput Materials: Glass and glass products Metal wire Plastic Rubber Inert gases. Input materials: Different quantities of: Synthetic sapphire Gallium Indium Silicon carbide Aluminum Epoxy resin Copper LED Manufacturingrequires a combination of resources used in these two separate manufacturing processes To arrive at total budget we used Philips 2011 reported net operating capital for their lighting division of $6,554,614,000 Multiply net operating capital by the LS&E market share of 53% Gives the budget for the LS&E and electronics division$6,554,614,000 x 53%=$3,473,945,420 Next, apply our estimate of Hues 8% budget share to the LS&E budget to arrive at Hues final estimated budget$3,473,945,420 x 8% = $277,915,633.60LED Light Bulb Cost (as a percent of co. revenue)XHues Total Budget=Estimated Budget for Each Cost CategoryProfit7.25% X $3,473,945,420 =$20,148,883Wages16.9% X $3,473,945,420 =$46,967,742Purchases35.95% X $3,473,945,420 =$99,910,670Depreciation6.85% X $3,473,945,420 =$19,037,220Marketing2.5% X $3,473,945,420 =$6,947,890Rent & Utilities6.3% X $3,473,945,420 =$17,508,684OtherTotal23.25%100%X $3,473,945,420 ==$64,615,384$3,473,945,420 Price Placehttp://www.newscenter.philips.com/main/standard/news/press/2012/20121029-connected-lighting-system-for-the-home.wpd#.ULMN_7Se18shttp://www.theverge.com/2012/11/8/3616828/smart-bulbs-phillips-hue-greenwave-reality-insteon-ledhttp://energy.gov/energysaver/articles/frequently-asked-questions-lighting-choices-save-you-moneyhttp://www.kickstarter.com/projects/limemouse/lifx-the-light-bulb-reinventedhttp://www.bulbs.com/learning/ledfaq.aspx#anchorlasthttp://thenextweb.com/gadgets/2012/10/29/meet-philips-hue-the-smart-led-light-bulb-exclusively-hitting-apple-stores-on-october-30/http://www.newscenter.philips.com/main/standard/news/press/2012/20121029-connected-lighting-system-for-the-home.wpd#.ULMN_7Se18shttp://www.greenwavereality.comhttp://eartheasy.com/live_led_bulbs_comparison.htmlhttp://clients1.ibisworld.com.lib.pepperdine.edu/reports/us/industry/default.aspx?entid=4456http://www.newscenter.philips.com/pwc_nc/main/corpcomms/resources/corporate/Q2_2012/presentation_2Q12.pdfhttp://www.philips.com/about/company/companyprofile.pagehttp://www.usa.philips.com/c/led-light-bulbs/30033/cat/en/