Osram Sylvania

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Osram Sylvania

• By Gediminas Sumyla

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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 longstanding reputation of
  providing lighting solutions in homes, businesses
  and institutions, automobiles and a broad range
  of specialty applications. OSRAM management
  team

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Mission and vision

• Companys 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

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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.

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History (contd)

• 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 companys business objectives.

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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 worlds energy, and
  general lighting is responsible for about 60 of
  the energy in office and commercial buildings.

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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.

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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.

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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 customers
  particular discount, payment terms, and other
  contract conditions.
• Using SAP through business helped customers and
  partners to do business anytime anywhere.

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External issues

• Major customer concern was security.
• Customers wanted some guarantee of security while
  using companys website.
• Different customers demanded different security
  levels.
• There was need to create personalized security.

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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 didnt think system would work.
• Employees were uncomfortable changing the
  established ways of doing business.

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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.

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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.

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Implementation plan (contd)

• 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 didnt chose the
  product, and focus on promoting that product.

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Implementation strategy (contd)

• 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.

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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 products 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 companys campaigns.

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Key to success

• Key to success was Sylvanias understanding about
  expanding the market to smaller segments, because
  there were a lot of small customers which would
  capture greater market share.
• Companys Web presence brought down the costs of
  doing business with small customers.
• Finally, Web presence expanded the communication
  and request capacity.