Business sales forecast Cree Inc case study

We are continuing the discussion of the Cree Inc. case study. For this week’s discussion I want you to develop a sales forecast for the LED light bulb. Consider some quantitative analysis for this case such as what might be the size of this market? How many households are there? How many potential light bulbs per household? What market segments are most attractive for this product? How many potential households are in this segment?

As you look to size the market, consider:

1. How many residential incandescent bulbs are sold each year? Note 88% of incandescent bulbs sold are in residential settings.

2. What % of these residential light bulbs are sold at Home Depot each year?

3. How many of the incandescent bulbs sold at Home Depot each year could be replaced with the Cree LED bulb? What % of the bulbs sold at HD are of the 40-60-75-100w variety? What % are the 40 and 60w variety?

4. Consumers can choose between halogen, CFL and LED bulbs once incandescent bulbs are phased out, what would be your guesstimate of how many consumers would choose LED? How many would choose halogen? How many would choose CFL? Then what % of LED sales might go to Cree vs. competitors who are also selling LED light bulbs?

5. How much money might Cree make from the LED light bulb sales? What is the retail margin for the LED light bulb? What is Cree’s margin? Do a price waterfall, List price, – distributor price – COGS. HD makes 25% and Cree makes 30%. Do this at a couple different list price points. Estimate the split between the 40w and the 60w version of the Cree LED bulb.

What might their total annual revenue might be? What might be their annual profit?

 

Then do an economic analysis of the cost of use and payback period for using the incandescent vs. the LED light bulb. This includes taking this out 20 years, how many incandescent bulbs will be purchased over 20 years, what is the cost of electricity over 20 years. Then how many LED bulbs will be purchased over 20 years, and the cost of electricity over 20 years?