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Sustainable Business Strategy for an Evolving
              Lighting Market
  - Are you geared up for the New Normal !



  Narayanan Alagappan, Senior Research Analyst
   Environment and Building Technology Practice
                 April 12th 2011
Focus Points



               Indian Lighting Industry, 2010



                    How Sustainable is the Business Strategy ?




                      An Evolving Lighting Market
Focus Points


                     Lighting Business Expansion Trend



               Conclusions




                                                                 2
Indian Lighting Industry
Competitive Forces Analysis


                              Lighting Industry: Competitive Forces Analysis (India), 2010

                                                        Threat of Substitutes

                         INR 77760 million                  Low/Medium
                           ($1728 million)



                                                          Intensity of Rivalry
                                Bargaining Power                                            Bargaining Power
                                   of Suppliers                                                of End user

                                     Medium                                                           High
                                                                 High




                                                      Threat of New Entrants
                                     Players
                                                               High



                                                                           Source: Frost & Sullivan


                                                                                                             3
Indian Lighting Industry
                 By Application (End User Segment)

  Based on application

                                                                                      Lighting                                              Source: Frost & Sullivan



                             Indoor                                                   Outdoor                                                       Other


                  • Office space lighting                                    • Street lighting                                      • Automotive application
                  • Retail space lighting                                    • Flood lighting                                       • Railway application
                  • Institutional lighting                                   • Landscape/ Facade                                    • Solar lighting application
                  • Residential lighting                                       lighting                                             • Miscellaneous application
                  • Hospitality lighting                                     • Gasoline station lighting                            (Special Effects Lighting, Obstacle
                  • Hospital/ Healthcare                                                                                              and Airfield Lighting and e.t.c)
                    lighting
                  • Industrial lighting

                                                                                                                                          Not into the scope of
                      INR 52101 Million                                          INR 25662 Million
                                                                                                                                             measurement
                                                                                         Outdoor
                                                             Market Value
Market Value




                                                                                                                     Market Value
                         Indoor
                                                                                                                                           Other




                                                   Time                                                       Time                                                        Time

               Development    Growth    Maturity   Decline              Development    Growth      Maturity   Decline Development                  Growth      Maturity   Decline



                                                                                                                                                                           4
Indian Lighting Industry
                By Technology

  Based on technology

                                                                                             Lighting                                                         Source: Frost & Sullivan


                      Incandescent                                                      Conventional                                                                LED

                 Lamps        Luminaire                                        Lamps                      Luminaire
                                                                                                                                                • Retrofit bulb/ lamps
               • GLS          • GLS                         •             CFL                      •     Down lighters                             • Edison screw type
                 Lamp/          based                       •             FTL                      •     Panel (2”X2”)                             • Bayonet clamping type
                 bulb           luminaire                   •             HPSV                     •     Battens                                   • MR/ PAR Lamps
                                                            •             HPMV                     •     Decorative                             • Luminaires
                                                            •             MH                       •     Outdoor                                   • Spot lights
                                                            •             Halogen                  •     Others                                    • Down lighters
                    INR 4410 Million                                                                                                               • Panel lights / 2’ X 2’ lights
                                                                                                                                                   • Street light
                                                                                     INR 70447 million
                                                                                                                                                          INR 2907 million

                                      Incandescent
Market Value




                                                                Market Value




                                                                                                                                 Market Value
                                                                                  Conventional


                                                                                                                                                     LED


                                                     Time                                                              Time                                                               Time

               Development   Growth       Maturity   Decline                   Development      Growth      Maturity   Decline                  Development        Growth      Maturity   Decline


                                                                                                                                                                                                 5
Indian Lighting Industry
    Brief segmentation

                                                          2    Lighting Industry (India): 2010, by Application                      1. Office space lighting
                                                                                                                                    2. Retail space lighting
                                                                                                                                    3. Institutional lighting
                                                               33%                                                                  4. Residential lighting
                                                                                                                                    5. Hospitality lighting
                                                                           INR 77764 million                                        6. Hospital/ Healthcare lighting
                                                                                                                 Indoor             7. Industrial lighting
1   Lighting Industry (India): 2010, by Technology
                                                                                                67%
                   6% 4%                                                                                                            1. Street lighting (road,
                                                                                                                 Outdoor               highway, bridges)
                                                                                                                                    2. Flood lighting (monument,
                                         Incandescent                                                                                  sports)
         INR 77764 million                                                                                                          3. Landscape/ Facade lighting
                                                                 4    Lighting Industry (India): 2010, by Indoor                    4. Gasoline station lighting
                                         LED lighting
           90%                                                        Luminaire
                                         Conventional
                                                                                 16%                  26%            Downlighter
                                                                      6%                                             Panel
3   Lighting Industry (India): 2010, by Component                    7%           INR 52102 million                  Suspended
                                                                                                                     Battens
                                        Includes Lamps,
                                                                           15%                 30%                   Decorative
              5%                     Fixture, Gears/ drivers                                                         Cleanroom

                                         Luminaire
         INR 77764 million                                                 5     Lighting Industry (India): 2010, by Lighting Automation and Control

                                         Lighting
                   95%                                                                  20%                                   Smart Sensors
                                         Automation &                                                          24%
                                         Control
                                                                                            INR 3564 million                  Lighting Management Systems
                                                                                 18%
                                                                                                        38%                   Smart Interfaces

                                                                                                                              SSL Controls

                                                                                                                                                                    6
Indian Lighting Industry
Market Trends


                               Key Success Factors are
                                   largely the same

                                        1
Looking at mergers                                              Deeper price discounts
and acquisitions as                                             to make sales
a means to grow                                          2
                          5
                                       INDIAN
                                      LIGHTING
                                     INDUSTRY
                                      PLAYERS



                                                   3
                               4
Need for product expansion                                   Advertising more to
portfolio to increase market                                 get noticed in the
penetration                                                  market
                                                                Source: Frost & Sullivan


                                                                                           7
Indian Lighting Industry
Growth/ Revenue forecast For Next - Gen Business



                                                                   A big million
                                                                     dollar…




                   - Are You Geared Up For The New Normal !

                                        Source: Frost & Sullivan




                                                                                   8
How Sustainable is the Business Strategy


 Hard to digest; but hard facts for lighting vendors

1•   For how long, the annual revenues totally be dependent on product sales
     a.   Short term: 1 - 2 years
     b.   Medium term: 3 – 5 years
     c.   Long term: 5 – 7 years
     d.   For ever !

2•   How often have we thought of a viable business model that
     generates annual cash flows by mere product sales

3•   Then how to lead the race and generate profitable revenues




                                                                        Source: Frost & Sullivan


                                                                                                   9
Time to think...
Leveraging the best out of the ILMS + PC.

                                                      Believe in the best !
       1                                              And the best is yet to come…                                         2


           Integrated Lighting Management Project of                       Performance Contracting for Energy Efficient
           a power transmission company                                    Street Lighting of a Municipal Corporation

                                                                           Year: 2008
           Year: 2010

                                                                           Type of project: Energy Saving Performance
           Type  of   project:   Integrated      Lighting                  Contracting
           Management System (ILMS)

                                                                           Parties to the contract: Lighting vendor and
           Parties to the       contract:   Transmission                   municipal corporation
           company & lighting vendor

                                                                           Initial  investment:      INR5.7      million
           Scope of the system:                                            (US$120,000)
                •    Street lighting mounting > 7m
                •    Pedestrian Crossings & Bus Bays.                      Scope of retrofit: 11,500 street lights were
                •    Service Roads, Slip Roads ,                           replaced with T5 FTL
                •    Pedestrian Pathways
                                                                           Ultimate aim of the project: Energy saving
           Ultimate aim of the project: bring Delhi roads                  {CO2 emissions reductions}
           to World Class levels.

               Source: Frost & Sullivan

                                                                                                                               10
What lies ahead…
  Low




                                 UNCONTESTED
Contention Levels




                                               LED lighting in street lighting


                                                 ESPC in street lighting

                                                 ILMS in street lighting
                    Indoor                                                    VALUE
                    commercial
                                                                           INNOVATION




                                                                 LEDs and
                                                                 conventional lighting
                                                                 technologies
                                 CONTESTED


                    High                              Low                                Source: Frost & Sullivan
                                     Intensity
                                                                                                                    11
An Evolving Lighting Market
  Low




                                                                                       1. Energy Efficiency
                                 UNCONTESTED                                        2. Galore of opportunities
Contention Levels




                                               LED lighting in street lighting


                                                 ESPC in street lighting

                                                 ILMS in street lighting
                    Indoor                                                    VALUE
                    commercial
                                                                           INNOVATION



                                                                                                 LED lighting
                                                                 LED lighting and                          Integrated Street Lighting
                                                                 conventional lighting                     Management
                                                                 technologies                                           Performance Contracting
                                 CONTESTED


                    High                              Low                                        Source: Frost & Sullivan
                                     Intensity
                                                                                                                                           12
Risk - Return Analysis

Energy Saving Performance Contracting market                                                          Inherent nature




                              Cost




                                      Utility cost
        ILMS +
        LED street lighting




                                                                                            Time
                                     Before                 During        After
                                     Performance            Performance   Performance
                                     contract               contract      contract




                                                     PC payments                        Cost saving




                                                                                                                        13
Lighting Business Expansion Trend



                                                           Megatrend
                                                                                  • Integrated Enterprise
                                                                                    Management for
                                                                                        •   Smart city
                                                                                        •   Smart Grid
                                                                                  • Agent Technologies/
                                          Future
                                                                                    BOTS
                                        (Get ready!)



                                                                       • Sustainable Service/ Solution
                         Present                                         Sales
                    (From 2009 – now)                                  • Product Sales



                                                       • Product sales
         Past
      (Till 2008)



                                    • Product sales

                                                                             Source: Frost & Sullivan


                                                                                                            14
Conclusion

•   Generating revenues just by sales is fading
     • High (calculated) Risk = High Return

•   Expanding the market share by product in geographical region is attractive option but not
    comprehensive; Creating an invincible blue ocean is the winning formula !

•   Sustainable business models needs to be PRO-CRE-ACTIVE by accommodating (calculated)
    risk, than to be a proactive/ reactive/ active

•   Benefits of annual cashflow from the innovative model outweigh the revenue generated
    through annual product sales

•   First mover advantage reaps benefits for the key market players

•   Energy Saving Performance Contracting based integrated lighting management system can
    be integrated with smart grids, smart cities – A Megatrend




                                                                                                15
Next Steps


 Request a proposal for or Growth Partnership Services or Growth
 Consulting Services to support you and your team to accelerate the growth of
 your company. (myfrost@frost.com) 1-877-GoFrost (1-877-463-7678)

 Join us at our annual Growth, Innovation, and Leadership 2011: A Frost &
 Sullivan Global Congress on Corporate Growth (www.gil-global.com)

 Register for the next Chairman’s Series on Growth: Driving Innovation – The
 What, Why, and How. Visions and Benchmarks as the Innovation Key
 (http://www.frost.com/growth)

 Register for Frost & Sullivan’s Growth Opportunity Newsletter and keep
 abreast of innovative growth opportunities
 (www.frost.com/news)




                                                                                16
Follow Frost & Sullivan on Facebook, LinkedIn,
SlideShare, and Twitter



            http://www.facebook.com/FrostandSullivan




             http://www.linkedin.com/companies/4506




            http://www.slideshare.net/FrostandSullivan




                  http://twitter.com/frost_sullivan

                                                         17
For Additional Information



Narayanan Alagappan          Kumar Ramesh
Senior Research Analyst      Industry Manager
Environment and Building     Environment and Building
Technology Practice          Technologies Practice
+91 44 6681 4101             +91 44 6681 4351
narayanana@frost.com         kramesh@frost.com




Ravinder Kaur
Asst. Manager
Corporate Communications
+91 44 66814080
ravinder.kaur@frost.com




                                                        18

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Sustainable business strategy for an evolving lighting market

  • 1. Sustainable Business Strategy for an Evolving Lighting Market - Are you geared up for the New Normal ! Narayanan Alagappan, Senior Research Analyst Environment and Building Technology Practice April 12th 2011
  • 2. Focus Points Indian Lighting Industry, 2010 How Sustainable is the Business Strategy ? An Evolving Lighting Market Focus Points Lighting Business Expansion Trend Conclusions 2
  • 3. Indian Lighting Industry Competitive Forces Analysis Lighting Industry: Competitive Forces Analysis (India), 2010 Threat of Substitutes INR 77760 million Low/Medium ($1728 million) Intensity of Rivalry Bargaining Power Bargaining Power of Suppliers of End user Medium High High Threat of New Entrants Players High Source: Frost & Sullivan 3
  • 4. Indian Lighting Industry By Application (End User Segment) Based on application Lighting Source: Frost & Sullivan Indoor Outdoor Other • Office space lighting • Street lighting • Automotive application • Retail space lighting • Flood lighting • Railway application • Institutional lighting • Landscape/ Facade • Solar lighting application • Residential lighting lighting • Miscellaneous application • Hospitality lighting • Gasoline station lighting (Special Effects Lighting, Obstacle • Hospital/ Healthcare and Airfield Lighting and e.t.c) lighting • Industrial lighting Not into the scope of INR 52101 Million INR 25662 Million measurement Outdoor Market Value Market Value Market Value Indoor Other Time Time Time Development Growth Maturity Decline Development Growth Maturity Decline Development Growth Maturity Decline 4
  • 5. Indian Lighting Industry By Technology Based on technology Lighting Source: Frost & Sullivan Incandescent Conventional LED Lamps Luminaire Lamps Luminaire • Retrofit bulb/ lamps • GLS • GLS • CFL • Down lighters • Edison screw type Lamp/ based • FTL • Panel (2”X2”) • Bayonet clamping type bulb luminaire • HPSV • Battens • MR/ PAR Lamps • HPMV • Decorative • Luminaires • MH • Outdoor • Spot lights • Halogen • Others • Down lighters INR 4410 Million • Panel lights / 2’ X 2’ lights • Street light INR 70447 million INR 2907 million Incandescent Market Value Market Value Market Value Conventional LED Time Time Time Development Growth Maturity Decline Development Growth Maturity Decline Development Growth Maturity Decline 5
  • 6. Indian Lighting Industry Brief segmentation 2 Lighting Industry (India): 2010, by Application 1. Office space lighting 2. Retail space lighting 3. Institutional lighting 33% 4. Residential lighting 5. Hospitality lighting INR 77764 million 6. Hospital/ Healthcare lighting Indoor 7. Industrial lighting 1 Lighting Industry (India): 2010, by Technology 67% 6% 4% 1. Street lighting (road, Outdoor highway, bridges) 2. Flood lighting (monument, Incandescent sports) INR 77764 million 3. Landscape/ Facade lighting 4 Lighting Industry (India): 2010, by Indoor 4. Gasoline station lighting LED lighting 90% Luminaire Conventional 16% 26% Downlighter 6% Panel 3 Lighting Industry (India): 2010, by Component 7% INR 52102 million Suspended Battens Includes Lamps, 15% 30% Decorative 5% Fixture, Gears/ drivers Cleanroom Luminaire INR 77764 million 5 Lighting Industry (India): 2010, by Lighting Automation and Control Lighting 95% 20% Smart Sensors Automation & 24% Control INR 3564 million Lighting Management Systems 18% 38% Smart Interfaces SSL Controls 6
  • 7. Indian Lighting Industry Market Trends Key Success Factors are largely the same 1 Looking at mergers Deeper price discounts and acquisitions as to make sales a means to grow 2 5 INDIAN LIGHTING INDUSTRY PLAYERS 3 4 Need for product expansion Advertising more to portfolio to increase market get noticed in the penetration market Source: Frost & Sullivan 7
  • 8. Indian Lighting Industry Growth/ Revenue forecast For Next - Gen Business A big million dollar… - Are You Geared Up For The New Normal ! Source: Frost & Sullivan 8
  • 9. How Sustainable is the Business Strategy Hard to digest; but hard facts for lighting vendors 1• For how long, the annual revenues totally be dependent on product sales a. Short term: 1 - 2 years b. Medium term: 3 – 5 years c. Long term: 5 – 7 years d. For ever ! 2• How often have we thought of a viable business model that generates annual cash flows by mere product sales 3• Then how to lead the race and generate profitable revenues Source: Frost & Sullivan 9
  • 10. Time to think... Leveraging the best out of the ILMS + PC. Believe in the best ! 1 And the best is yet to come… 2 Integrated Lighting Management Project of Performance Contracting for Energy Efficient a power transmission company Street Lighting of a Municipal Corporation Year: 2008 Year: 2010 Type of project: Energy Saving Performance Type of project: Integrated Lighting Contracting Management System (ILMS) Parties to the contract: Lighting vendor and Parties to the contract: Transmission municipal corporation company & lighting vendor Initial investment: INR5.7 million Scope of the system: (US$120,000) • Street lighting mounting > 7m • Pedestrian Crossings & Bus Bays. Scope of retrofit: 11,500 street lights were • Service Roads, Slip Roads , replaced with T5 FTL • Pedestrian Pathways Ultimate aim of the project: Energy saving Ultimate aim of the project: bring Delhi roads {CO2 emissions reductions} to World Class levels. Source: Frost & Sullivan 10
  • 11. What lies ahead… Low UNCONTESTED Contention Levels LED lighting in street lighting ESPC in street lighting ILMS in street lighting Indoor VALUE commercial INNOVATION LEDs and conventional lighting technologies CONTESTED High Low Source: Frost & Sullivan Intensity 11
  • 12. An Evolving Lighting Market Low 1. Energy Efficiency UNCONTESTED 2. Galore of opportunities Contention Levels LED lighting in street lighting ESPC in street lighting ILMS in street lighting Indoor VALUE commercial INNOVATION LED lighting LED lighting and Integrated Street Lighting conventional lighting Management technologies Performance Contracting CONTESTED High Low Source: Frost & Sullivan Intensity 12
  • 13. Risk - Return Analysis Energy Saving Performance Contracting market Inherent nature Cost Utility cost ILMS + LED street lighting Time Before During After Performance Performance Performance contract contract contract PC payments Cost saving 13
  • 14. Lighting Business Expansion Trend Megatrend • Integrated Enterprise Management for • Smart city • Smart Grid • Agent Technologies/ Future BOTS (Get ready!) • Sustainable Service/ Solution Present Sales (From 2009 – now) • Product Sales • Product sales Past (Till 2008) • Product sales Source: Frost & Sullivan 14
  • 15. Conclusion • Generating revenues just by sales is fading • High (calculated) Risk = High Return • Expanding the market share by product in geographical region is attractive option but not comprehensive; Creating an invincible blue ocean is the winning formula ! • Sustainable business models needs to be PRO-CRE-ACTIVE by accommodating (calculated) risk, than to be a proactive/ reactive/ active • Benefits of annual cashflow from the innovative model outweigh the revenue generated through annual product sales • First mover advantage reaps benefits for the key market players • Energy Saving Performance Contracting based integrated lighting management system can be integrated with smart grids, smart cities – A Megatrend 15
  • 16. Next Steps Request a proposal for or Growth Partnership Services or Growth Consulting Services to support you and your team to accelerate the growth of your company. (myfrost@frost.com) 1-877-GoFrost (1-877-463-7678) Join us at our annual Growth, Innovation, and Leadership 2011: A Frost & Sullivan Global Congress on Corporate Growth (www.gil-global.com) Register for the next Chairman’s Series on Growth: Driving Innovation – The What, Why, and How. Visions and Benchmarks as the Innovation Key (http://www.frost.com/growth) Register for Frost & Sullivan’s Growth Opportunity Newsletter and keep abreast of innovative growth opportunities (www.frost.com/news) 16
  • 17. Follow Frost & Sullivan on Facebook, LinkedIn, SlideShare, and Twitter http://www.facebook.com/FrostandSullivan http://www.linkedin.com/companies/4506 http://www.slideshare.net/FrostandSullivan http://twitter.com/frost_sullivan 17
  • 18. For Additional Information Narayanan Alagappan Kumar Ramesh Senior Research Analyst Industry Manager Environment and Building Environment and Building Technology Practice Technologies Practice +91 44 6681 4101 +91 44 6681 4351 narayanana@frost.com kramesh@frost.com Ravinder Kaur Asst. Manager Corporate Communications +91 44 66814080 ravinder.kaur@frost.com 18