Price warfare generally refers to a kind of commercial competition behavior between enterprises by competing to reduce the market price of commodities, and also refers to various market competition behaviors by using price as a competitive strategy. Its main internal driving forces are market pull, cost promotion and technology promotion. The purpose is to suppress competitors, occupy more market share, digest inventory, etc. It has many advantages such as strong lethality, shortness and quickness, and is favored and adopted by many manufacturers. In the increasingly competitive LED industry, there has also been a price war.
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LED lighting light development trend
Changfang Lighting recently announced its third quarter earnings report. According to the report, the company's operating income and net profit from January to September were approximately 404 million yuan and 40.628 million yuan, respectively, an increase of 27.78 and a decrease of 14.88 over the same period last year.
For the reasons of the decline in profits in the first three quarters, the short-party explanation is that in order to consolidate and expand market share, provide customers with cost-effective products and adopt a strategy of actively reducing prices; at the same time, the company implements long-distance office lighting, Tongyu home lighting and Donghan The brand strategy of the three major brands of commercial lighting has been promoted simultaneously, and the high initial investment has led to a decline in net profit.
Indeed, in January last year, an LED lamp of Changfang Lighting was reduced from 70 yuan to 50 yuan, and later the price dropped to 30 yuan, opening the price war in the LED lighting industry. In 2012, many companies including Changfang Lighting, Mulinsen, Zhenmingli and Dehao Runda participated in the price war.
With the rapid development of LED lighting, the competition in the domestic LED industry has become increasingly fierce. In this situation, LED manufacturers need to come up with their own methods for the market, and the Eight Immortals cross the sea. With fierce competition, price wars have begun to spread. Many manufacturers' sales strategies are tilted toward price, and many manufacturers have followed suit into the price war.
Profit market dilemma
It is easy to see that the long-distance lighting has occupied the market by cutting the price, that is, playing the price war, but it has led to a decline in its profits, which has also caused new problems.
The high price of LED products has made it difficult for consumers to accept. With the continuous development of LED lighting industry, the acceptance of high-efficiency energy-saving lighting is getting higher and higher, and the potential market for LED lighting is also growing. One result of this is the expansion of the LED lighting market, and the market share of merchants is very fragmented.
In order to occupy the LED lighting market, LED manufacturers are willing to take advantage of the price war to carry out enclosure movements and seize the emerging lighting market, which is followed by a decline in profits. The profit of manufacturers in the price war has dropped significantly, which makes it difficult for these companies to use profits for further development in the future development. But not participating in the price war, LED manufacturers are afraid to lose a favorable position in the market, which is unfavorable in the future development.
To profit or to market, this has become a dilemma for LED manufacturers: high pricing can bring high profits but it is difficult to increase sales: low prices can seize the market but it is difficult to guarantee profits. As a result, the choice of manufacturers has become more difficult, and it is easy to make irrational choices in the face of growing markets.
Price war is important for development
Undoubtedly, the price war has caused the price of LED lighting products to drop sharply, which means that the disadvantage of high price of LED lighting products has begun to reverse. Compared with other lighting products, one of the biggest disadvantages of LED lamps is that it is also a bottleneck for popularization. Although the price of LED lighting products will drop to an acceptable level along with the improvement of production level and technology, there is no doubt that the price war has brought this level ahead of time, which has promoted the development of LED lighting market and LED lighting. Popularity.
The decline in prices has made the promotion of LED lighting easy, and the expansion of the market scale has also spurred businesses to start building their own brands and channels, and try to occupy a favorable position in the market. Obviously, the original intention of the price war in the long-distance lighting is also the same, I hope to occupy the market by price war, sacrifice short-term benefits in exchange for a more durable product outlet.
The price war can also encourage LED companies to improve production technology, improve production efficiency, and enable more advanced production processes and more technical patents to be applied to production, which also improves the productivity level of the whole industry.
It is worth noting that the fierce price war has also led to the heating of LED lighting products, and the popularity of LED products has increased. All kinds of propaganda that can't be avoided in the price war make the reputation of LED more known to consumers, and the corresponding market is gradually expanding. From this perspective, the price war has promoted the development of the industry, which is worthy of recognition.
Improving product quality is key
The price war of LED lighting products is good for the development of the industry, but this does not mean that the price war is a long-term solution. Some merchants are not prepared and measured before entering the price war, and are vulnerable to shocks in the fierce market competition, which in turn affects the future development of the company.
Another result of the price war is that some LED manufacturers do not weigh the quality when manufacturing products, which makes the overall quality of LED products decline, which also weakens the advantages of LED lighting products, which is not conducive to the development of the industry. Therefore, the price war in the LED industry is not a panacea, and it is not advisable to rely solely on price wars to develop.
Similar to the rectangular lighting, Mulinsen and other companies, hope to expand channels and build brands through low prices, the competition is the overall competitive strategy from product to after-sales service. How to minimize the low cost, seize the market and build the brand, all need to carry out a comprehensive layout, the price war can not be separated from the overall enterprise development.
There are many ways to deal with price wars. LED companies should formulate their development strategies based on their actual situation. The low-price strategy puts higher demands on the comprehensive strengths of the company's technology, capital and scale. Blindly following the trend, it is possible to make itself Losing losses, so the price war is not the only way for LED companies.
Replacing the market with low prices should be the means of market competition, not the ultimate goal. LED companies not only need to improve production technology, improve production efficiency to reduce costs and gain profits, but also increase the technical content, enhance product value, and shift product competition from the price battlefield to achieve more comprehensive and longer-term development. The fierce competition has a favorable position; the core strategy of the company must be to return to the brand value, firmly grasp the bottom line of quality, and seek management and quality improvement in the long-term competition, let the products in the domestic and international markets. Take a place on the top.
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