Economic and Environmental factors

The external economic environment of Neo-Neon can be divided into two parts according to its market that its LED lights allocated: Chinese economic situation and foreign economic situation.

 

China has been keeping higher GDP growth rate for more than 30 years, although many western commentators and researchers public their worry about Chinese current economy, the annual official growth rate of 7.9% in the early 2012 illustrates the Chinese economy is little affected by the globe glooming economy caused by European Debt Crisis. Nobel Prize Winner Robert W. Fogel (2010) even expected an average 8% annual growth rate in China from 2000 to 2040, which leads to a share of 40% of global GDP vs. United States (14%) and the European Union (5%). Chinese economic development will greatly improve people’s power of purchasing; the price of LED lights is much higher than the traditional lights so that many people cannot accept the LED products; with the improvement of purchasing power, the LED products with characteristics of high quality and environment friendly will be the focus of the future consumption.

 

In the international market, the biggest LED-consumption countries are suffering from European Debt Crisis. The countries in European Unions are cutting off their budget on the government purchasing and the negative growth rate makes their people decrease their shopping lists. Japan and America are fallen into the slowing economic growth. The recent UN report shows that Japanese economy is zero-growth in October in 2012, and America economic growth rate is just less 1% in 2011. However, the commentators and researchers have positive attitude towards the future global economy, they predict that the global economy will gradually recovery from 2013.

(3) Technological factor

The main problems that the current LED technology faces are high cost and lower efficiency of lightening.  But experts predict the LED technology will be greatly improved and the price will be decreased. The lighting efficiency had been improved up to 150 Lm / W in 2012 from 75Lm / W in 2007, and the cost had been decreased to USD 0.77 per million lumens from USD 2.18 in 2007 (Neo-Neo annual report, 2011). American Energy Department (2010) predicted that the market share of LED products would be up to 65% in 2013 because of its excellent characteristics.   

(4)Legal factor

The legal environment that Neo-Neon faces is negative to its development. From January to October in 2012, Chinese anti-dumping cases were amounted to 200 with involved amount to 20 billion dollar, more than three times than the same periods in the last year. The domestic legislative condition is also not favorable to the development of the Neo-Neo company; the incomplete intellectual property laws make the patent infringements common in the Chinese market, lack of supervision by the relevant government departments leads to the lack of motivation of creation. Thus, the international and domestic legislative situation is harm to the development of Neo-Neo        

(5) Social factors

The social factors affect the development of Neo-Neon though two channels: one is from the people’s awareness of environment protection; another is from the traditional festival, such as Western Halloween and Christmas and Chinese spring festival. The western festivals can exert large influence on the Neo-Neon. Most purchasing orders from western markets always begins on March every year and lasts for 5 months, the mount of orders arrives at the top on July, August and September, and then gradually decrease from that on, the quantity decreases to the lowest level. The revenues in the first two quarters just accounts for 28.5% while the later two quarters accounts for 71.5% into the whole year. At the top of production, the labor demand is up to 20000, this number is just 5000 in the slack time (Shilata, 2010). The order circle has large influence on the business strategy to balance the labor cost and labor demands, which requires the managers should take the order circle into consideration.

 

Neo-Neon is also affected by the improvement of awareness of environment protection. The improvement of awareness of environment protection can keep the sustainable demand growth rate from the global market. Unlike the impact of the traditional festival on the demand from the company, people’s awareness has a long impact on the development of the entire industry. For the managers, they must be aware of the trendy and grasp this opportunity to extend their international markets.