The stable availability and supply of raw material at low costs is vital for the success of a manufacturing company. If there is a deficiency in the raw material or the cost of raw material is too high the company cannot function properly and would be forced to increase prices. A startup company cannot afford to increase prices in an industry where competition is already high and competing companies have popular brands of a product. The basic raw materials required to produce Light Emitting Diode and Light Emitting Diode based products include aluminum, gallium, zinc and silicon. Russia is one of the few countries where almost all required raw material for Light Emitting Diodes is easily available and accessible.
One of the major reasons for establishing the company in Russia is the superior quality and easy accessibility of raw material at low costs. The metallurgy sector is the second largest sector after oil and gas in Russia. The company can acquire material from an array of suppliers which offer aluminum, gallium and zinc at competitive rates. If there is a deficiency with one of the suppliers, the company can acquire additional material from other suppliers to meet requirements due to abundance of raw material. One of the objectives of the company is value maximization of shareholders through higher level of net income. The lower cost of raw material entails higher gross profit and eventually a higher level of net profit thus achieving a major objective of the company. The major input required for the production of white Light Emitting Diodes is phosphorous which though is not produced in Russia but a large volume of the substance is imported into the country. Electro-Light can purchase yellow phosphorus from one of these importers or directly purchase the material from the neighboring state of China which is the largest producer of yellow phosphorus in the world.
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