First, the background and reasons for the price war

The LED industry is an emerging industry supported by the state. The market prospect is good, the entry threshold is low, and the profit can be expected, attracting a large number of manufacturers.

However, in the early stage of the industry, the price of Led Display products is too high, and the "high price" LED display can not afford the average consumer. As the consumer of the last link of the price chain, its price requirements are also driving the Led screen enterprises to continuously improve the technology to reduce production costs. As long as the price of the product is above the consumer's expected price, the price decline is inevitable. The consumer is always the referee of the market product and the decider of the company's fate. Consumers' consumption expectations have prompted prices to fall, and price declines have not only benefited consumers, but have quickly boosted the market for LED display industry. With the rapid development of technology, the price of core components such as lamp bead and LED power supply of LED display cores began to decline, and the price of LED display began to “close to the people” and went to civilians.

In recent years, the upgrading of technology in the LED industry has become faster and faster, and there are different levels of overcapacity in the industry. Serious overcapacity will cause LED enterprises to face a huge survival crisis; industry innovation awareness is generally lacking, product homogeneity The phenomenon is serious, and the marketing level is low... In the face of such a dilemma, most enterprises have nothing to do except price cuts; more SMEs are forced to participate in price wars in the market economy competition, due to their own enterprise strength, scale, etc. It is not the same as big companies. The result is often heavy losses, the market is falling, and the interests are damaged.

Once the industry is facing overcapacity, the first thing that enterprises think of is price reduction promotion. When the larger-scale enterprises cut prices, many small and medium-sized enterprises have to be forced to “combat”, and then two families and three families have cut prices, and then the domino effect broke out, affecting the entire Price wars in the LED industry are inevitable.

Price war started

1. Overcapacity products are seriously homogenized

After the rapid development in recent years, the LED display industry has formed a certain market scale, and the product types and quantities have greatly increased. The maturity of the technology and the demand of the market are driving the LED display industry to a fine division of labor and fine The road to the market, the threshold for entering the industry is getting lower and lower, the vast development space and rich profits have become a big cake for everyone who wants to share a piece of cake. Many manufacturers finally can't hold back and go to the LED industry. Enterprises look at opportunities to start replicating, and the number of small enterprises with no characteristics is exploding.

On the one hand, with the substantial increase in productivity, coupled with the blind optimism and expansion of some companies in the early stage, overcapacity problems began to appear in the LED display industry. Excessive production capacity, oversupply, waste of resources, but also lead to weak market demand in the industry, consumer desire is not strong. In order to survive and develop, LED enterprises must stimulate consumption. It is the best choice for enterprises to quickly break through the price by pulling prices to stimulate consumption.

On the other hand, the LED display industry products are rich and diverse, satisfying the broad needs of the market, and are prosperous; however, the number of companies producing the same products is increasing, the appearance and structure of the products are almost the same, and the gold content is low. Many companies lack innovation, and products do not reflect differences. The homogenized products in the market are getting together. Under such a background, it is difficult to survive without price reduction. In the highly homogenized LED industry, it must be said that it is a sorrow to drastically reduce prices to convince consumers to switch from other companies.

2, technology pushes costs to drive

After so many years of development, the LED display industry has formed a certain scale, and the speed of technology upgrading is also getting faster and faster. The emergence or introduction of a large number of new technologies accelerates the speed of product replacement and shortens the production and life of products. Cycles, new products emerge in an endless stream, old products gradually delisted, and it is understandable to cut prices to clean up the inventory of factories and channels.

In addition, the use of new technologies to promote scale growth, scale advantages will lead to a decline in the production costs of products, the cost reduction naturally led to the decline in product prices, the price war based on cost advantages also broke out. Some companies have achieved greater cost advantages within the industry through scale operations, establishing a healthy cost structure and effective management measures, so that they can continue to carry out price wars and put long-term pressure on competitors in terms of price. .

Second, the characteristics of the price war in the industry

Since 2012, LED companies have fought for “price wars” in order to compete for market share and market channels. LED companies are unbearable, but they are still enjoying it. With the addition of LED industry giants, the "price war" has become the main theme of the LED industry. So what are the characteristics of the price war in the LED display industry?

1, increase income does not increase profits

According to the data, during the three years from 2006 to 2008, the profit of LED display can reach 30%~50% at the time. Many manufacturers also joined the ranks of LED display production. At present, China's LED display industry production capacity is basically in excess, and price war is inevitable.

It is understood that in the past two years, the profit of the mid-end display project has remained at 10% to 15%. Channel dealers can maintain 8% to 10%, and some 5% of profits are not. There have been market research institutes that have done statistics: there are more than 40 companies with a display screen of more than 100 million yuan, and not many companies with a net profit of 10%. Listed companies in the LED display industry also showed an increase in revenue without increasing profits, while revenues increased and net profit declined.

At present, the concentration of the LED display industry is still not high, and the shuffling of the big waves will continue.

2, the price range is wide and wide

With the development of the LED display industry slowing down, the profit of Led Display Screens has a linear downward trend compared with the frequent booming of the market. According to statistics, in recent years, the price of LED displays has dropped by 20% to 30% year by year, and prices have been sharply reduced, which has weakened the profits of the industry. Some companies have revealed to the reporter that the LED display industry currently only has a gross profit margin of about 20% and a net profit of 5%.

The price of LED display products is transparent and the competition is intensifying. Some display companies have no long-term awareness. As long as they can receive orders, they can do so without losing money, which not only reduces their own profits, but also easily causes other companies in the same industry to follow suit and lower prices. Leading to the industry's turn to cut prices, set off a price war. It is characterized by a large price cut, a wide range of price-cutting products and regions, and a long duration, while the product price is difficult to return to the original level.

3, the products involved are mostly low-end

At present, the concentration of the LED display industry is obviously insufficient. Although after a series of running tides and bankruptcies, the number of small enterprises in the industry is still large. Many small enterprises register with less capital, are subject to technology and capital, can not produce high-margin products with technological advantages, can only do some conventional LED display products, and these products face serious homogenization and low gold content in the market. When the problem is, the competition is often quite fierce.

At present, most of the price reduction products in the industry are ordinary LED display screens, while large-size high-definition LED display screens, special-shaped screens, small pitch and other products require high technical accumulation as a support. There are only a handful of manufacturers in China that can achieve this level. Therefore, such products with high "gold content" are not among the price cuts. LED display companies that do not have the scale and technological advantages in the future will find it increasingly difficult to gain a foothold in a highly competitive market.

Third, the double-sidedness of the price war

There are advantages and disadvantages in the price war: from the perspective of enterprises, some small and medium-sized LED companies are not deep enough in their own capital chain budget and analysis, whether they are forced to reduce prices by competitive pressure, or blindly follow the price war, which eventually leads to the break of the capital chain, the business owner Overwhelmed by the roads; from the product point of view, many small and medium-sized LED companies in order to survive in the whirlpool of price wars, are constantly challenging the bottom line of product quality, seriously affecting the public's awareness and confidence in the industry , which in turn seriously affects the development of enterprises and even the industry.

Price war

Although the price war has produced a huge stimulus to consumption, its negative effect is very obvious. The current price war in the LED display industry has fallen into a quagmire of vicious competition. The disadvantages are less and less favorable to the development of the industry and should be contained.

The danger of price war

1. Suppress innovation consciousness

For some LED companies that have no independent intellectual property rights and no core competitiveness, playing price wars is tantamount to drinking and quenching thirst. In the short term, price reduction promotion can help enterprises clear inventory and ease capital pressure. However, in the long run, because product homogeneity is serious and technology content is low, it is difficult to form a fixed supply and demand relationship. Once the balance between supply and demand is broken, Have to take a more substantial price cut to stimulate the market to survive. For the problems facing the eyes, if LED companies resort to price wars every time, then this will undoubtedly greatly impact the company's innovation consciousness and subjective initiative, and endless harm.

The prolonged price war has made the company's investment in research and development shrink. For most companies, R&D is time-consuming and expensive, and the risks are high and the results are slow. The companies that are willing to invest in R&D are rare. At the same time, in the case that the intellectual property protection system is not perfect, many companies are worried that their hard-working research results will be copied; on the other hand, they will plagiarize foreign or domestic advanced products, and they will be less eager to make more profits. Clinking.

At present, the "patent pirates" in the LED industry are rampant. The arguments such as "plagiarism is the mother of innovation", "the copy of the nationals are wrong, and the copying of foreigners is not guilty" was once regarded as truth, and the plagiarized manufacturers became ridiculed. Objects, such strange phenomena further suppressed the industry's sense of innovation, leading to increased product homogeneity, and the industry entered a vicious circle.

2, damage the brand image

The price war is the way to increase the turnover at the expense of profits. It is tantamount to fishing and burning forests. If the LED display company sells at a low price for a long time, the profits obtained by the company itself will naturally decrease, and the profits will decrease. The company will reduce its investment in research and development, marketing (including brand marketing) and management, resulting in insufficient development potential. The lack of development stamina will in turn further affect the business income of the company, making it difficult for the company to enter a vicious circle.

The price war is over-reliance on consumers' trust in products, and the image damage to corporate brands and product brands is enormous. A product that is always sold at a reduced price will seriously damage consumers' awareness and loyalty to the brand. In addition, the price war makes the sales price more and more close to the cost price, and the profit margin of the LED enterprise is becoming narrower. In this case, the quality of the produced product is difficult to guarantee. When consumers buy products with the trust of product brands, but in the short-term products have quality problems, spend money to buy defective products, the loyalty to the brand in exchange for the manufacturers' deception, the brand image is greatly reduced. Injuring the interests of consumers is also a kind of harm to the company itself.

3, product quality is getting worse and worse, market consumption capacity is declining

Frequent and lasting price wars have severely reduced the profit margins of LED manufacturers. Due to insufficient profits, the lack of financial support to maintain product quality and after-sales service further affects product quality. Although the price cut can increase the sales volume of the products, if the sales volume rises less than the price decline, the profits of LED enterprises will continue to decrease. Some enterprises will reduce the cost, at the expense of the quality of products and services, resulting in a large number of inferior quality. The products are flooding the market, which not only damages the interests of consumers, but also disrupts the order of the LED industry and oversees the future development potential and profit margin of the LED industry.

In addition, frequent price cuts may also lead to strange phenomena that no one buys. Once this price war begins, it has to go down all the time. It is difficult to "brake". Consumers have identified the marketing methods of the manufacturers. After the price reduction of the products, many consumers have reversed

With a wait-and-see attitude, expecting product prices to fall further, there will be no sales without price reduction, and the more homogenized products, the more serious this situation, such as some products of LED lighting. After three to five price cuts, the short-term product preservation time will make early buyers feel like being deceived, which also hurt consumers' desire for consumption and make the market consumption capacity decline.

Positive role of price war

Accelerate industry shuffling to optimize resource allocation

The price war in the LED display industry is an inevitable outcome of the industry's development to a certain stage. The price war is conducive to consumers, and it can quickly promote market expansion. At the same time, it can eliminate a group of inferior product manufacturers and seek short-term interests, and stop duplication of investment, resulting in The re-allocation of social resources and the redistribution of social interests, many small and small enterprises will withdraw from market competition or be integrated by mergers and acquisitions. In fact, every round of intense price wars has accelerated the process of reshuffling the entire LED industry.

In addition, the price war has also prompted LED companies to start thinking about how to improve their core competitiveness under the premise of combining their own conditions.

Fourth, the future trend of price war

In recent years, China's LED industry has developed rapidly and its scale has been expanding. More and more enterprises have begun to get involved in the LED industry, and the industry is more competitive. The government's financial subsidies promote the rapid development and expansion of the LED industry. The product technology is becoming more and more mature. The scale and specialization make the production cost of the product further decline. The quality and the price are the king, the product homogenization is serious... These factors all drive the LED. The price trend of the products has made it all the way down, and with the large number of enterprises in the industry, the market competition is very cruel, and the price war is not difficult to understand.

In order to win a place in the brutal market competition, many LED companies can be described as racking their brains. Considering that price competition has always been the usual means of operation for LED companies, coupled with the slowdown in China's economic and consumption growth and the tightening of national policies, Xiao Bian believes that although the survival of the inferior and the weak meat is an inevitable rule in the development of all walks of life, but LED Industry reshuffle caused by price wars in the industry is not likely to happen overnight, it will take some time, so the price war will continue in the next few years, and it will not be ruled out that it will intensify, but will eventually return as the LED industry matures. reason.

When the LED industry transitions from an outbreak to a mature stage, the number of companies left in the industry will become suitable. At this time, LED products have relatively stable prices and profits. Before this, LED companies learned to face price wars rationally. It is very necessary.

V. Corporate response strategies

With the rapid development of technology and the gradual transparency of LED products prices, LED has gone down the altar and gradually moved from the era of profiteering to the era of low profits. The high price profit has become out of date, and price cuts have become inevitable. For many LED small enterprises, it is necessary to face the market impact of domestic large enterprises, but also face the challenges from foreign-funded enterprises. Enterprises with strong capital and strength have launched price wars with advantages such as scale and low cost. Small enterprises Nature can only be tired of coping, and price wars are inevitable.

In the fierce competition environment, based on the LED company's own situation, despite the variety of marketing strategies, but the role of price can not be ignored, the price is still a competitive trump card mastered by LED companies. So in the face of the intensified price war, how should LED companies deal with it?

1. Take the road of difference management

There is a certain economic law in the outbreak of price wars. Generally speaking, price wars rarely occur in highly differentiated industries. To implement the differentiation strategy is to develop strengths and avoid weaknesses, highlight characteristics, give full play to competitive advantages, increase market share, and obtain considerable profits. LED companies should actively implement differentiated strategies, so that people do not have me, people have my new, take the initiative.

1 segmentation target market

Market segmentation is to deepen the customer's market demand. Through market research, we can understand customer spending power, consumer preferences, buying habits, etc., establish an effective customer information feedback system, promote close contact between LED companies and the market, and simultaneously segment the market segments of different customer groups and meet them in a targeted manner. Target customer needs.

Under the premise of referring to the customer information feedback system, LED companies can combine their core strengths to determine the target market segment, exchange less profits for less investment, get rid of the price war vortex of homogenized products, and highlight the encirclement. In addition, LED companies can also cut into new areas that meet the needs of the market, from areas where competition is relatively small and their capabilities are strong.

2 product differentiation

LED companies that produce single and simple products are often the first companies to be overwhelmed by price wars. Because the product line is too monolithic, it is like a desperate attempt to easily annihilate the whole army. Therefore, in order to effectively resist the impact of price wars, LED companies should invest funds to develop new technologies, produce new products, and establish product lines suitable for their own development and resource allocation; for example, in the same product line, arrange high value-added products, ordinary Products and special products, each product is divided and sold; reasonable product line arrangement, LED companies can avoid heavy weight and speed in the price war.

3 build a brand

Enterprises that fail in price wars are often enterprises with lack of characteristics and brand characteristics. However, enterprises that have stood up for many price wars are often enterprises with distinctive brands and distinctive products and services. A brand is equivalent to a business card of a company or a product. It has an inestimable potential value. It requires a long period of investment and persistence to establish. It is the purpose of the enterprise to settle down. It cannot be the slightest opportunistic or lazy. Therefore, LED enterprises must establish their own brands. In addition to excellent product quality, service quality is also a link that cannot be ignored.

Many products have high service requirements, especially after-sales service. Good service quality can consolidate customers' trust in the brand, while the distinctive service quality also helps to differentiate their products from other products. Companies can use this to improve service quality, provide customers with personalized service needs, help customers solve problems and create value for customers.

2, holding a group to warm or mergers and acquisitions

At present, the LED industry has excess production capacity, and the homogenization phenomenon is very serious. The homogenization products have to be disposed of in a price-reducing manner to reduce inventory pressure and revolve funds. In this link, small and medium-sized LED enterprises are facing The risk of a broken capital chain. For small and medium-sized LED enterprises, it is possible to consider establishing a strategic alliance with the group to warm up, not only enhance competitiveness but also resist risks, and use their strong resources to complement each other and strive to achieve a win-win situation.

In addition, large-scale LED companies with strong strength can swallow small LED companies, and take advantage of brand strategy, such as acquiring a second-line brand LED company with the leading cost control level of homogenization products, using cost advantage to follow up the opponent price and implement counterattack. An alternative strategy.

3. Establish a market early warning mechanism

Price wars seem inevitable, but LED companies can minimize the damage caused by price wars by establishing a market warning mechanism. The sooner you anticipate the price war, the sooner LED companies can prepare, adjust the product line structure and inventory, adjust the purchasing and sales rhythm, etc., so that they are in an active position in the price war, and the price war will be reduced to themselves. To the lowest point. In order to establish a market early warning mechanism, the sales department and the marketing department within the LED enterprise must work closely together to establish a market competitive intelligence system, form a strict market monitoring and feedback system, and be able to respond quickly according to the results of the research monitoring and analysis, and at the same time through practice. Continuously improve and improve the market early warning mechanism.

Sixth, price war reflection

Through the price war, the competitiveness of products, the survival and management capabilities of enterprises, the market status and potential of the entire industry are fully exposed. LED companies are aware of their own shortcomings in the chaotic price war. They also know that the price war is not a long-term solution, and will inevitably seek a new way out, otherwise it can only be eliminated by the market.

The essence of LED companies is to make profits by innovating technologies and products to meet market demand. To return to the essence, nature has to raise the issue of innovation.

LED enterprises are the mainstay of industry innovation, and they are the key to the formation and development of LED industry. In order to continue to grow and develop, and in an invincible position in the market, LED companies must adhere to technological innovation. Technological innovation can create new products, improve the "gold content" of products, make their products unique in the market, and also help brand building; at the same time, technology upgrade and maturity can also increase productivity and reduce production costs.

Technological innovation is the driving force for LED companies to open up the market. The final customer chooses your product, the quality of the product is required, the product is different in this market, and it is the irreplaceable core technology advantage. Service systems and marketing models are easily copied and replaced, but technological innovation is always the core competitiveness of LED companies.

to sum up:

LED companies compete in a variety of ways, in addition to price wars, in addition to brand competition, quality competition, service competition, product variety competition and technology competition and other competitive methods, obviously want to gain a foothold in the highly competitive market, In the long-term development, it is impossible to rely on price wars.

Although the price war in the LED industry has adversely affected the profitability and development of the industry in the short term, it has also accelerated the pace of technological innovation and marketing upgrades of LED companies, which is beneficial to the long-term development of the industry.

From the "price war" to the "technical war" and "value war", the LED industry still has a long way to go. The process is destined to be difficult, but the beautiful transformation of the broken butterfly is worth waiting for!

The blueprints are lightly painted, and the drums are heavy. On this road, we have experienced the baptism of fire, the thorns and the thorns, and bravely entered the next journey. Use your smile to keep the past, use the struggle to play the strings of the future, and don't envy the pride of getting nothing, because our mission is to forge ahead and develop.