The assignment is about the strategic management of OSIM International LTD. It focuses on operations in Singapore. The study includes the strategic analysis, objective, Key broad businesslevel and international strategies. It is an important analysis of company’s strategic implementation is discussed. Then, we can do BCG matrix for company and International marketing, it will analyze past and current trends of the company and provided some predictions and suggestions in the future.
Executive summary The assignment is about the strategic management of OSIM International LTD It focuses on operations in Singapore The study includes the strategic analysis, objective, Key broad business-level and international strategies It is an important analysis of company’s strategic implementation is discussed Then, we can BCG matrix for company and International marketing, it will analyze past and current trends of the company and provided some predictions and suggestions in the future Table of Content Page 1.0 Introduction 2.0 Strategic analysis 2.1 External Analysis 2.1.1 General Environment 2.1.2 Specific Environment 2.2 Internal Analysis 3.0 2.2.1 Core Competencies 2.2.2 Sustainable Competitive advantage 2.2.3 Strengths and Weaknesses Strategic directions and strategic objectives 3.1 Vision 3.2 Mission 3.3 Objectives Key broad business-level and international strategies 4.1 Porter’s Generic Strategies 4.2 Ansoff’s Matrix? 4.3 International Strategies -Integration Responsiveness Framework 5.0 Strategic implementation: General perspective 6.0 Key strategic implementation issues 10 7.0 Strategic evaluation 11 8.0 Conclusion: Current and Future Prospects and Recommendations 12 4.0 References 13 1.0 Introduction OSIM built in 1980 in Singapore by the Ron Sim Its predecessor was Appliances and Electronics Company which named R Sim Trading In 1989, it officially changed its name and registered as a health and wellness, then OSIM will instead focus on trade of healthy lifestyle products From the establishment until now, OSIM has become a global leading brand in the healthcare market OSIM has been adhering to the concept of "bringing health lift to you" to customer service In 2003, OSIM opened its first export trade in Philippines, and now, OSIM open more sales on the world, which across more than 30 countries and over 200 cities OSIM will continue to develop innovative new products, using reliable supplies to make a healthier lifestyle to people (OSIM, n.d.) 2.0 Strategic analysis 2.1 External Analysis 2.1.1 General Environment PESTEL Analysis Political -The political situation of Singapore can be said to be stable Singapore's clean government, good political conditions will ensure OSIM and other overseas business development, which help them operation in a stable area Under an environment of relatively open political, it might be can attract many eyes of foreign investors, which will help the development of the trading enterprises same as the OSIM Economics- As is well known, Singapore is a country of economic development and trade freedom But Singapore's economy is almost all dependent on imports, especially in consumer electronics Therefore, higher manufacturing costs for OSIM is inevitable Social cultural – Singapore is a multi-ethnic country.80% of Singaporeans are Chinese, so the overall living habits are based in favour of Chinese style However, OSIM can not only meet the public's preferences, he needs to refer integrated many ethnic people’s love and habit to design products (Tan, 2011) So OSIM will be the human habit of health care products combine Technological - OSIM continues to develop their own technology and research and development capabilities in the original design manufacturing and manufacturing of the original equipment They have their own technology research and development team So now, OSIM is committed to product design and functional innovation, while developing mixed products from existing products Environmental - Singapore has been recognized as one of the best countries for business Singapore has been ranked the world's most competitive countries Whether the conditions of political, legal and economic, the Singapore’s business environment is very attractive to investors ( Monetary Authority of Singapore, 2014) A good business environment is a very friendly commercial basis for the trade enterprises Legal – No matter what the industry, there will be some rules and regulations to restrict or support services In the home health care market, OSIM will encounter the same obstacles and promotions Singapore is well known for its legal transparency Intellectual properties of the companies doing business in Singapore will be protected through it stringent laws Threats and Opportunities OSIM is an old brand, so they have many opportunities In the past they are doing high-level products for high-income group, now they can expand its sales object to low-income group Because economic globalization, Singapore is also a country of mixed economy, OSIM can be heading for overseas markets, especially in China and Hong Kong, which have been the foundation of the brands Each new product of OSIM will bring freshness to the customer, and their attitude and quality will bring great benefits to the company However OSIM will face a number of threats, the deceased of economic growth led to a decline in the purchasing power of customers, as well as the recent turmoil in the exchange rates will affect the profit of the company More importantly, because the market's brand diversification, all brands began a price war, which is a shock for the OSIM OSIM brand has been word of mouth, so that the publicity will be relatively weak, and some advertising creatives of new brand will catch customer’s eyes It is a threat of OSIM (OCBC, 2010) In the Health products market, the cost is a big threat, especially in this import-dependent countries as Singapore So the too high of cost of raw materials will affect the profits A company's management is inseparable by the human resources, which development and manufacturing new products will lead to increase the labour costs (Partne, 2013) 2.1.2 Specific Environment Porter’s Forces Substitutes The company’s products have high level of substitutes Because the costs of products are not too low, which include the costs of fabrication and new technology development The main substitutes will include many available massage parlours and beauty spas New entrant However, their threat of entrants are relatively low Because OSIM’s business belong to healthcare industry There are high capital investment, human resources and advanced technology These are great rejections But OTO, OGAWA and PANASONIC had entered the market and they are notable competitors Suppliers The bargaining power of suppliers is relatively high OSIM have three suppliers They are Oriental Export & Import CO LTD, Daito-Electric Machine Industry Company and Red Time Trading LTD OSIM is very dependent on them They provide about 70% of the production materials (OCBC, 2010) Buyers Similarly, the bargaining power of buyers is relatively high Now, there are many different healthcare products, and our price is not a big advantage So customers can choose various products from different companies voluntarily Competition In healthcare industry, the competition is very fierce OSIM have many good competitors such as OTO, OGAWA and PANASONIC They all have their special superiority Their prices are lower than OSIM and offered a variety of similar products with similar functions 2.2 Internal Analysis 2.2.1 Core Competencies OSIM's core competitiveness is the continuous development of product technology and research and development, production of different performance and targeted products Now, OSIM provides customers with the right to own experience in the store, so that customers have more in-depth understanding of the performance of the product At the same time, OSIM also opened up the network in Asia, Middle East, Europe and United States 2.2.2 Sustainable Competitive advantage With other competitors, OSIM has a long history of development They have more experience in technology and manufacturing They can combine experience with the customer's response to develop different targeted products Thus, in the entire competitive market, products have differentiations, the high quality and high performance makes OSIM have a high return Using Barney’s (1991) criteria for core competences, OSIM’s sustainable competitive advantage is deemed to be their innovative process as shown in Table 1.1 Capability V R I NS Innovative Process √ √ √ √ Quality √ × × × Monopoly √ × √ √ Strategic Location √ × × × Table 1.1 – Criteria for Sustainable Competitive Advantage Value- Innovative products can arouse the interest of customers and the company can obtain better profits And Quality, monopoly and strategic lactation also can make value for customers and company Rarity- Innovation of products is a long research process that requires human and financial resources, which is difficult that collect all the conditions However, in the health lifesyle market, the quality of almost all products are strict, which is a prerequisite for customers’ choose There are many health lifesyle brand, and OSIM does not monopolize the market OSIM's head office built in Singapore, which is an open economy of country, so the strategic location is no rarity Inimitability- OSIM’s innovation process are insiders’ research and development, they have their own team and programs and new technology can be protected, OSIM have exclusive rights But the quality of products has a masses of indicators, all the products are to follow the rules All the products have a quality inspection through professional departments, there is no Inimitability In Singapore, there are many companies like OSIM, and the competition is very fierce However, OSIM’s some products and technology are not imitate, which would have a certain degree of monopoly in the market Non-substitutability- OSIM’s products are targeted and specialize, other product cannot replace And in the protection of intellectual property, OSIM’s developed technology is protected by law And about quality and strategic location, OSIM can replace the general quality with lower price In Singapore, the economy is open and free, so that OSIM can change different location However, in the market, OSIM is an old brand, which has a certain influence For some loyalty customer’s mind, OSIM cannot be replaced 2.2.3 Strengths and Weaknesses OSIM already have 35 years of business history The brand has a considerable reputation and credibility OSIM has successfully built up their products, it make OSIM to have leadership in the market However, the cost of a good product is impossibility too low The high-tech product are non-commodities So, the OSIM’s weaknesses is the balance of cost and price 3.0 Strategic directions and strategic objectives 3.1 Vision-"To be the global leader in healthy lifestyle product” OSIM is brand leader and a preferred choice in healthcare industry However, with other brands enter the market, like OTO, OGAWA and PANASONIC This is a shock to OSIM.OSIM will strengthen and develop in order to become the best in the area (OSIM, n.d.) 3.2 Mission-“Bringing healthy lifestyle to you” Now the people's consumption levels have increased, and they want to improve the quality of life OSIM’s products give them a healthy living ideas and products OSIM’s brand promise - product innovation, unique design, quality clearance Provide the needs of customers by products (OSIM, n.d.) 3.3 Objectives- OSIM’s main strategic objectives: As the same time of service customers, OSIM can innovate products, expanding the market’s share and increase the profit OSIM will keep a good relationship with the customers, shareholders and employees (Review, 2012) 4.0 Key broad business-level and international strategies 4.1 Porter’s Generic Strategies Figure 1.1 - Porter’s Generic Strategies Compared with other healthcare companies, OSIM has differentiation OSIM have been in the business for almost 42 years They already developed a good reputation for products As some people who like brands, OSIM is a good choose that they will consider The technology of products change fast, so the company can provide more different product to customers OSIM can balance the price offerings of products and services OSIM provide to customers a close chance to experience the products in stores Meanwhile, they have a good after sale service OSIM will pay close attention to the reaction from customers This made OSIM have a group of loyal customers 4.2 Ansoff’s Matrix Figure 1.2 - Ansoff’s Matrix Based on the current situation in Singapore, OSIM appears to be adopting both Product Development and Market Development strategies Product Development OSIM will always develop new products to rest content with needs from different customers and ensure interest of the beneficiaries, they use innovative technology to develop new products which make customers keep freshness on their company and products Innovation is a way to import and improve product, each series OSIM company's products have their own characteristics For example, OSIM uAngel - the World's 1st Sofa Transformer, OSIM uPhoria - the world's 1st Tui-Na Leg Massage and uDivine Sport - The special edition of the world's 1st Human-3D massage chair with International Artiste (OSIM, n.d.) These products will give customers better experience and bring more benefits to shareholders So product development to satisfy the OSIM's two strategic objectives: product innovation and profit growth (Review, 2012) For promotion of products, OSIM does a lot of development on IT infrastructure, they began to promote and sell their products on the network, which further popularize their products Market Development OSIM always looking for high-potential products in new markets In the Singapore market, OSIM is an old brand and secure products, so OSIM maybe implement strategy is market penetration in Singapore But their ultimate strategic goal is get more market share and profit growth in the whole market So in order to expand their market share, OSIM will constantly looking for new markets (not confined to one market) and penetration into markets To this end, they started online retail and open more sales outlets in many different countries, which expand their sales channels and sales areas to improve their market share (Carver, 2010) 4.3 International Strategies - Integration Responsiveness Framework OSIM can be said to be the leading brand in the healthy lifestyle marketing In order to expand their market, there is an international strategy – OSIM global retail concept Overseas development is a very important strategy, which could increase their international visibility and ensure their market share OSIM’s point-of-sales operations across 30 countries with more than 856 outlets in the network of Asia, Oceania, Africa, the Middle East, Europe and North America in more than 111 cities (OSIM, n.d.) Especially in Chinese market, because China has a strong GDP, the market has a great potential for development 5.0 Strategic implementation After a long period of development, OSIM already knew their product‘s position They commit to develop new products and markets In the healthcare industry, OSIM has maintained sustainable development and profits in above-average level However, OSIM has been aiming at high-income group and ignoring the low-income group This may be the second goal of development by OSIM (Eng, 2012)they can develop a low-cost products of superior quality and provide to the corresponding customer base This will improve product sales and profit in the future Another point is that healthcare is a competitive and growing industry, a growing number of investors optimistic about this market, which makes a lot of new brands into the market, but the development of health care products have a very important premise - technological innovation However, some smaller brands will copy OSIM’s product design and functionality It will affect OSIM’s overall profitability 6.0 Key strategic implementation issues Figure 1.3 - McKinsey 7-S Plus Model While the long-term development, OSIM has maintained a steady growth trend and the implementation of the strategy also has good results, they still have some issues of strategic implementation First, OSIM has great achievements in innovation and development of the product, like some products combine with Chinese traditional massage, 3D full range of massage and so on But at the same time, in the problem of intellectual property protection, the consciousness of OSIM is weak It lead to many similar products from small brands on the market (Cai, 2012) Second, OSIM’s main business is retail monopoly and they started Internet sales, OSIM's point-of-sales operations across 30 countries So OSIM will find and cooperation with 10 innovative software programs and companies, which improve sales and service in the network Meanwhile, it can generate a good connection with their customers and shareholders Third, for the financial situation, OSIM financing and cash flow is not very good, insufficient financing and reduced cash flow will directly affect the company's operations and profitability (Enriques, 2011) Fourth, about OSIM personnel training problems OSIM’s CEO- Mr Ron Sim is core leader of whole company, although in the past 40 years, Mr Ron Sim have a good grade for OSIM, in the face of future challenges and threats, OSIM can’t bear if they don’t draw into new management talent and clearer OSIM’s goals in further develop, OSIM’s development may be hindered 7.0 Strategic evaluation The strategic evaluation is conducted using the Kaplan and Norton’s (1992) balance score card: Strategic Perspective Financial Perspective Example Example of Scorecard Measures Shareholder’s objectives for Profits growth performance Cost reduction Sales performance growth Customer Customer satisfaction, Price favourable Perspective loyalty and freshness after sales service Product diversification Acquisition of new customers Personnel development Product quality Products innovation Research and development Internal Perspective innovation Learning & Growth Future development of the Expand promotion space Orientation training Employee satisfaction and loyalty 11 Perspective company Improve Company infrastructure staff welfare Table 1.2 - Kaplan and Norton’s (1992) balance score card 8.0 Conclusion: Current and Future Prospects and Recommendations In the current economic situation, OSIM still has a stable growth As a well-known healthy lifestyle industry leader, OSIM has been developing different products In addition, it has been focused on improve the production efficiency and performance and increase online sales service OSIM's strategy, it has a group of experienced management team so that they focus more on management and information, and create access to services and products But in order to OSIM can bring a higher level, OSIM should consider that they will import new blood into the management OSIM’s aim is high-income earners, so we will recommend OSIM adjust their products to meet low-income families as their new target markets It also makes the lower family enjoying their products, this is better reflect OSIM’s mission OSIM will be better in the future development 12 References Cai, H X., 2012 Getting a grip on China [Online] Available at: Getting a grip on China Retrieved November 17, 2012, from http://www.asiaone.com/A1Business/SME%2BCentral/Story/A1Story20121031-380714.htm [Accessed 10 July 2015] Carver, M & K D., 2010 Ansoff's Strategic Issue Management System A Validation for use in the Banking Industry during high Turbulent Environments Business Renaissance Quarterly, 5, pp 5976 Eng, M K., 2012 OSIM International: Taking a lead out of the KVMH book [Online] Available at: http://www.remisiers.org/cms_images/research/Mar19-Mar23_2012/OSIM_IC_1903121.pdf [Accessed July 2015] Enriques, M., 2011 OSIM to issue convertible bonds [Online] Available at: http://www.channelnewsasia.com/stories/singaporebusinessnews/view/ 1133980/1/.html [Accessed 10 July 2015] OCBC, 2010 OSIM International Ltd [Online] Available at: http://www.ocbcresearch.com/pdf_reports/company/OSIM-100701-OIR.pdf [Accessed 30 June 2015] OSIM, n.d Brand OSIM [Online] Available at: http://corporate.osim.com/SG/brand_osim.html [Accessed 15 July 2015] Review, S B., 2012 Risks escalate for OSIM International [Online] Available at: http://sbr.com.sg/markets-investing/markets-investing/risks-escalate-OSIMinternational [Accessed 25 2015] Tan, J., 2011 Taipei Times [Online] Available at: http://www.taipeitimes.com/News/biz/archives/2011/05/30/2003504488 [Accessed 14 2015] 13 14