Osram Sylvania

By Gediminas Sumyla

Company overview

• OSRAM is one of the two largest lighting manufacturers in the world.

• OSRAM products are used in about 150 countries.

• With sales outside Germany accounting for 88 % of total turnover and a sales presence on every continent, OSRAM is a true global player.

• OSRAM SYLVANIA is the North American operation of OSRAM GmbH, Germany.

• “We're proud of our long standing reputation of providing lighting solutions in homes, businesses and institutions, automobiles and a broad range of specialty applications.” – OSRAM management team

Mission and vision

• Company’s mission is to shape today's materials into the lighting solutions of tomorrow.

• OSRAM believes that its ideas can make a difference in every person's life and that its products reflect a commitment to making the world more comfortable, more productive and more imaginative.

• Company continues to strive on growth and profitability and are guided by set of values:

OSRAM SYLVANIA is its people Company is customer focused They respect and care for the environment They are open to, and drive, positive change OSRAM sets clear and ambitious goals to stay ahead of the

pack Company is profitable and strong

History

• SYLVANIA traces its roots back to 1901, when young entrepreneur Frank Poor became a partner in a small company in Middleton, Massachusetts, that renewed burned-out light bulbs.

• Poor soon moved the business to Danvers, bought out his partner, and called his new company Bay State Lamp Company. His brothers soon joined him in the enterprise.

• The Poor brothers started the Hygrade Incandescent Lamp Company in 1909 to sell new carbon-filament light bulbs.

• In 1916, Hygrade opened a new plant and headquarters in Salem, Massachusetts, which could turn out 16,000 lamps a day.

• After several transitions, the company was finally purchased in 1922 by entrepreneur Bernard Erskine and two associates, who founded the Nilco Lamp Works.

History (cont’d)

• The 1940s and 1950s company witnessed enormous growth, as new plants were opened. It increased its production of materials and components, phosphors and metals, for example, used in lighting and other products.

• Sylvania also expanded into consumer electronics, television tubes and radios.

• In the 1970s and 1980s, OSRAM gradually moved out of consumer electronics to focus on lighting and precision materials.

• In the 1980s, the SYLVANIA Octron® fluorescent lamp and the OSRAM Dulux® compact fluorescent lamp represented major innovations.

• OSRAM SYLVANIA in its current form was created in January 1993.

• In 1998 company established confidential e-team to begin discussing how best to utilize the Web to forward the company’s business objectives.

Facts of the case

• Lighting market consisted of $12-$15 billion.• It is dominated by three major players: Philips

Lighting, General Electric Lighting and OSRAM Sylvania.

• Bulbs are commodity product, so companies were competing by introducing higher-end, value-added products that increase the life of the product, improve the quality, and lower energy costs.

• Lighting consumes 15%-20% of world’s energy, and general lighting is responsible for about 60% of the energy in office and commercial buildings.

Customers and channels

• Customers include consumers who purchase lightbulbs for their homes, contractors who purchase products for renovated and commercial buildings, and large accounts such as hotel chains or retail stores.

• Company has several distribution channels:

For consumers it uses retail channels.For business-to-business company sells through

distributors and directly to large customers.

Web presence

• In 1998 company established e-team to discuss how bet to utilize the Web.

• Team started analyzing the opportunities that Web offered.

• The first focus was on business-to-business sell side.

• Company had no interest selling to individual users over the Internet.

• Web was used to offer personalization at the channel level and build a customer-only web site called mySYLVANIA.com.

• Web site offers secure on-to-one communication between company and user.

Use of SAP

• OSRAM Sylvania built the site using SAP as the backbone.

• Company already had implemented SAP R/3 as an enterprise resource planning system, so it was easier to integrate and upgrade.

• The use of SAP allowed customers to place orders, pay for them, and track them online.

• This solution also handled each customer’s particular discount, payment terms, and other contract conditions.

• Using SAP through business helped customers and partners to do business anytime anywhere.

External issues

• Major customer concern was security.Customers wanted some guarantee

of security while using company’s website.

Different customers demanded different security levels.

There was need to create personalized security.

Internal issues

• It was hard to adopt the new online customer interface.

• Needed sales force to believe in web presence, because they were who would be introducing the system to customers.

• “At the beginning there were a lot of nonbelievers” – Mehrdad Laghaeian, CIO

• People didn’t think system would work.• Employees were uncomfortable changing the

established ways of doing business.

New opportunities

• mySYLVANIA.com opened new opportunities for serving small customers.

• Web site set up new channel for this group of customers.

• It also allowed to personalize down to customer level and achieve true one-to-one marketing.

Implementation strategy

• First of all OSRAM should create and guarantee security for different customers with different demands, so customers will feel comfortable.

• Second, company should create different authorization levels for particular users. (For example: managers, employees, administrators)

• Third, company should use all data that is gathered on website to personalize, better understand and market the customers.

Implementation plan (cont’d)

• OSRAM should analyze tracked data and make better decisions on: What customers are viewing the most and what

transactions are used the most, company should make marketing more personalized, apply discounts and special offers to attract customer to buy the product.

For the date last signed on data, company should use remainders for customers.

For most dollar amount purchased, OSRAM should give better discounts, special offers and make them loyal customers.

For products looked and not purchased, analyze why products were not selected. Use banner-ad survey to ask why customer didn’t chose the product, and focus on promoting that product.

Implementation strategy (cont’d)

• Company should also sign contracts and service agreements with loyal customers to “lock” them in.

• By personalizing, giving more security and better customer service, providing better discounts and special offers, interacting with end-users will add more value.

Communication and selling analysis

• Personalization, targeted promotions, contacting customers via newsletters and customer support will build greater communication between customer and company.

• This also will build greater trust and better understanding about the consumer.

• Creating more value to the customer by personalizing, security and customer service, discounts and special offers, interaction with end-users will create trust-based selling and bring higher sales.

• With a creation of a new channel for end-users Sylvania will have to go through all four functional substitution elements: generate awareness, build perception of the product, convince customers of product’s value and lead them to purchase.

• To generate awareness about the product OSRAM Sylvania should use the clickstream and transaction data that is collected through the web site and use it to expand marketing efforts and fine-tune company’s campaigns.

Key to success

• Key to success was Sylvania’s understanding about expanding the market to smaller segments, because there were a lot of small customers which would capture greater market share.

• Company’s Web presence brought down the costs of doing business with small customers.

• Finally, Web presence expanded the communication and request capacity.