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Lighting Companies should achieve “Economy of Scale”

Economy of Scale” is a Shortcut to securing Price Competitiveness

Jung-Bae Kim | 기사입력 2021/02/16 [12:01]

Lighting Companies should achieve “Economy of Scale”

Economy of Scale” is a Shortcut to securing Price Competitiveness

Jung-Bae Kim | 입력 : 2021/02/16 [12:01]

 

 

▲ The scene of'Light + Building 2018'. (Photo courtesy of Messe Frankfurt)  © World Lighting News.

 

 

In 2020, lighting companies around the world couldn't do business for the year because

they were swept away by the'Corona 19' that occurred in January.

 

However, the business of 2021, which started from January 1st, is also expected to be

poor, unlike what lighting companies expect. Although the United States, the United

Kingdom, Israel and other countries have been vaccinated against Corona 19.

 

However, it is expected that it will take a long time for each country to reach the state of collective immunity. This is because it will be impossible to escape from the dangers of

Corona 19 until 70% to 90% of the nation's total population has immunized antibodies

against Corona 19.

 

In this situation, if lighting companies around the world are to survive, they will need to

build the strength to keep the company in any way until the world reaches a state of

collective immunity. Such power comes from a company's competitiveness. In the end, it means that lighting companies must strengthen their competitiveness and win the market competition.

 

Of course, the way lighting companies around the world increase their competitiveness

will inevitably vary depending on the situation they face. However, the most important

competitiveness for lighting companies is price. Even if the performance, quality, and

design level are the same, in the end, buyers choose a product with a lower price.

 

Even if the price of the product is the same, buyers will choose a product with better

performance, quality and design. Either way, the fact that the price is the basis for buyers

to purchase lighting products does not change.

 

Then, how can lighting companies around the world secure such price competitiveness?

It's about making better products and selling more. This is because the basic principle of

economy is that the higher the quantity of products sold, the lower the production cost

for one product. This is the “Economy of scale”.

 

We have seen the historical fact that a country completely dominated the world's lighting market through this “Economy of Scale” so far. Representative countries are Taiwan in the 1980s and China after the mid-1990s.

 

The fate of Taiwan and China lighting industry determined by “price”

 

Taiwan produced lighting products with a low quality-to-price ratio based on low worker wages and real estate rents, reigning as the “world's lighting kingdom” from the late

1980s to early 1990s.

 

The driving force behind Taiwan's production of low-quality lighting products at this time was the receipt of large quantities of orders from buyers from around the world. Overseas buyers, who were attracted by the low price compared to the quality, placed orders to

purchase many products, and the increased production volume made Taiwan's lighting

companies achieve a “Economy of Scale”.

 

This lowered production cost became a factor that once again lowered the price of

Taiwanese lighting products. The lower price of the product attracted more orders, and

the increased order again became a factor in lowering the price of the product.

 

The reason why Taiwan, which had been so successful in this way, handed over the

leadership of the global lighting market to China was because of the “product price”.

 

The quality and design of lighting products produced by Chinese lighting companies were very low until 1995. However, because the price of the product was so low, overseas

buyers flocked to China. As a result, Taiwanese lighting companies' export orders were forced to decline.

 

And in the mid-1990s, more than 80% of Taiwanese lighting companies relocated their

factories to different regions of China, including Dongguan in Guangdong Province, in

search of low worker wages and affordable real estate, the era of the “world's lighting

kingdom of Taiwan” ended.

 

The history of the lighting industry in Taiwan and China clearly shows us the importance

of price competitiveness in the lighting industry, lighting market, and lighting business.

And behind such price competitiveness, there was a “economy of scale”, the ability to

produce “useful products” at “lower prices” and supply them to buyers.

 

If you sell good products at low prices, you are not afraid of Corona 19

 

This situation is the same now. Rather, now is the time for global lighting companies to

achieve “economy of scale”. Because of Corona 19, the purchasing power of buyers

around the world has decreased significantly compared to before the outbreak of Corona 19.

 

In these times, consumers try to buy products that are of the same quality but cheaper.

The only way for global lighting companies to produce products at such low prices is to

achieve “Economy of Scale”.

 

Therefore, lighting companies that have achieved “economy of scale” can increase sales

and profits despite the crisis of Corona 19. If you can continue to increase your sales and profits, you should never be afraid, no matter how much Corona 19 sweeps the world.

 

From this point of view, the part that the world's lighting companies should pay attention to in the future is, "Can our company achieve the'economy of scale'?" Is to do. This means that the ability to sell more products as well as developing new lighting products has

become more important to lighting companies around the world.

 

In the past, lighting companies have been competing for who can make products with

better performance, quality and design. But now that Corona 19 is inundated, who can sell more products has become more important. The more products a lighting company sells, the earlier it can achieve the “economy of scale”. And, based on the “economy of scale,” it is possible to provide lower priced products to consumers.

 

Taking this virtuous cycle of “Economy of Scale” is a goal that all lighting companies must achieve today.

 

<Copyright ⓒ World Lighting News>
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