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OSIM International Ltd Analysis

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Published: Tue, 06 Feb 2018

INTRODUCTION

OSIM is a global leader in branded healthy lifestyle products such as massage chair, shoulder and neck massagers, foot massager and slim belt. The company is well-known in Malaysia. OSIM is a brand management and niche marketing company with a focus on the consumer. Today, OSIM Company operates a wide point-of-sales network with outlets is over 371 cities over 33 countries in Asia, Australia, Africa, the Middle East, United Kingdom and North America.“Inspiring Life” is the motto of the OSIM Company.

OSIM (M) Sdn Bhd is engaged in marketing, distributing and franchising of healthy lifestyle products. The Company operates in two segments that are retail and distribution. The retail segment is engaged in outlets and counters operated by it in selected shopping centers and departmental stores where the products are sold directly to end user customers. The distribution segment is engaged in products distributed by the Company and franchisees in overseas markets. Its subsidiaries include OSIM International Trading (Shanghai) Co., Ltd, OSIM (M) Sdn Bhd, OSIM (HK) Company Limited, OSIM (Taiwan) Co., Ltd, Nutrition Focus (USA) Inc, Global Active Limited (GAL), OSIM (China) Co., Ltd, Nutri Active Pte Ltd, Victoria House Pte Ltd and VHE China Limited.

OSIM (M) Sdn Bhd also the most trusted brand. They receive a title as International Safety Standards because harmony to worldwide health and safety regulations. The entire product designed with safety and appropriate to health and safety regulations. Furthermore, the company also good in quality performance because all their product has been approved from clinic research, medical certifications and scientific studies. Their health-care product also checked and studies scientifically by expertise and they awarded certification and recognition from independents bodies. In terms of innovation and technology,

OSIM company are worldwide technology patents and have a design right and trademark rights. OSIM is always in the frontline of innovation and the development of the most exhaustive range of products to bring the good health benefit to customer.

OSIM also receive Award-Winning Design. OSIM brand and product design awards garnered from Japan, Europe and Asia. OSIM product was awarded the Largest Health Check and Care Equipment Retail Chain by the Malaysian Book of Records and Asia Pacific Honesty Enterprise Keris Award 2002. OSIM has been recently awarded ASIA No 1 Brand in healthy lifestyle equipment by a prestigious International Survey, it is for international market research company to determine Asian most preferred brand of health-care products. Besides, OSIM has also been rated by AC Nielsen survey in 2005 as the Number One brand in seven attributes (High Quality Products, Advance Technology, Premium Brand, Innovative Design & Features, Trustworthy Brand, Good Customer Service and Good Store Ambience).

BACKGROUND AND HISTORY

The origins of OSIM International Ltd business began in November 1980 when Dr Ron Sim Chye Hock commenced his sole proprietor business of retailing an array of household goods such as knives, knife-sharpeners and mobile drying rods under R. Sim Trading Co and it was originally established in Singapore. OSIM were subsequently incorporated in 1983 under the name ‘‘R.Sim Trading Co. Pte Ltd” to take over the sole proprietorship. Operating from OSIM International Ltd company first premises is at a shop Peoples’ Park, OSIM were only selling 2 health-care related products, namely, hand-held massagers and foot reflexology rollers. By 1987, OSIM had created a distribution network of 10 outlets in Singapore, Hong Kong and Taiwan marketing household goods and health-care related products.

Dr Ron Sim Chye Hock is a founder of OSIM then felt that there was market potential for specialty home health care products in an increasingly affluent Asia. Early 1987, OSIM saw that the home health care products sector was dominated by a disparate group of equipment manufacturers with little or no emphasis on marketing and as a result there was a lack of brand consciousness among consumers. Hence, in 1989 their decided to bring together different home health-care products from different equipment manufacturers and market their product using specialty branding. For this purpose, OSIM created the brand ‘‘Health Check & Care” to build and exploit a niche market in home health-care products. OSIM business start grew rapidly and by 1994 we had approximately 60 point-of-sales outlets in Asia.

In business strategy, they believe that marketing and strengthening of their brand equity is of vital importance. As ‘‘Health Check & Care” was a generic name and was difficult to be registered as a trademark in many countries, in 1996 the company officially launched ‘‘OSIM” brand name which had been using since the early 1990s. ‘‘OSIM” is a combination of the founder’s surname and the letter ‘‘O” which symbolizes for vision to become a globally recognized brand. As at 31 May 2000, the company have registered the name ‘‘OSIM” as a trademark in 26 countries spanning Asia (including Australia), Europe, North and South America, South Africa and Israel. There are also made trademark applications for ‘‘OSIM” in 10 other countries.

A major tenet of OSIM marketing strategy is to have an extensive point-of-sales network and geographical coverage in their markets. Presently, they have point-of-sales outlets in Singapore located in all major departmental stores and suburban shopping malls. The company began developing their overseas distribution network in 1986 when they ventured into Hong Kong and in the following year, into Taiwan. To ride on the rapid development of the Asian economies in the early 1990s, OSIM expanded their operations to Thailand in 1990, Malaysia in 1992, Indonesia and Beijing in 1993, and Shanghai in 1994 by opening point-of-sales outlets in these countries either directly or through their franchisees and distributors. Furthermore, OSIM expanded their markets to the United States in 1997 and Dubai in 1999 through the appointment of franchisees/licensees to market and sell their products in these countries. At present, OSIM have 10 franchisees/licensees, 3 subsidiaries, 6 are affiliated companies controlled by their Controlling Shareholders and the remaining 1 is an unrelated company.

The company point-of-sales outlets in Singapore, Hong Kong, Taiwan and Malaysia are operated by Company and subsidiaries. The rest of their point-of-sales outlets are franchised outlets with the exception of outlets in the PRC for which we have trademark and licensing agreements with the owners. This is OSIM business strategy that future expansion of their point-of-sales network will be substantially undertaken by franchising. OSIM company begun to gradually move away from being a retailer to being a franchisor and, in furtherance of this strategy, they have also entered into franchise agreements with their subsidiaries, OSIM (HK), OSIM (Taiwan) and OSIM (M’sia). Further, franchising help them to expand and multiply their point-of-sales outlets to more geographical markets at a faster pace with significantly less capital exposure. Franchising is also less taxing on their management’s time than operating self-owned outlets in penetrating new markets.

To diversify their sources of revenue, in 1998 OSIM ventured into wholesale distribution of health-check and health-care products such as blood pressure monitors, thermometers and pulse massagers, in Singapore to hospitals like Tan Tock Seng Hospital and Kandang Kerbau Women’s and Children’s Hospital, pharmacies like the Apex Pharmacy and the Guardian Pharmacy chains, and Chinese medical halls. While wholesale distribution is currently only carried out in Singapore which contributes between 1 and 2 per cent. to their turnover in Singapore, and then the company intend to develop this business and carry out wholesale distribution in all their principal markets eventually.

As part of its business strategy to extend the control over of their business process and to exercise greater involvement and participation in the source of supply for their products, in 1995 the company entered into a joint venture with Daito Electric Machine Industry Company Limited (‘‘Daito”), a Japanese supplier to OSIM Group, to take up a 30 per cent interest in Daito-OSIM (Suzhou) with Daito taking up the remaining 70 per cent.. Presently, Daito-OSIM (Suzhou) has a plant in the Singapore-Suzhou Industrial Park in Jiangsu, PRC that manufactures products like hand-held massagers and foot reflexology rollers mainly for re-export and distribution to the markets in Japan and USA. Under the joint venture agreement, Daito has the right to appoint 3 directors of Daito-OSIM (Suzhou) while OSIM only have the right to appoint 2 directors as they are the minority shareholder. However, Daito-OSIM (Suzhou) shall not change the scope of its business activities from that as described in the foregoing, without the consent of Daito and OSIM. Any material financial commitment which is above US$100,000 or material contract to be entered by Daito-OSIM (Suzhou) also requires the consent of Daito and OSIM. The joint venture agreement is of unlimited duration but may be terminated with the consent of Daito and OSIM. Neither Daito nor OSIM can transfer an interest in the shares in Daito-OSIM (Suzhou) without first making an offer to sell the interest to the other shareholder.

On 28 March 2000, the founder Dr Ron Sim Chye Hock was conferred an honorary doctorate in business administration by the Wisconsin International University in recognition of his prominent achievements in business.

In July 2000, pursuant to the Subscription Agreement, Investor, a wholly-owned subsidiary of Temasek Holdings (Private) Limited, subscribed for 11,600,000 new Shares, representing approximately 5 per cent. of the post-Investor Subscription and post-Invitation enlarged share capital of the Company, at the price of $0.47 per Share, representing a discount of approximately 10 per cent. to the Offer Price. The company believes that the investment by Investor is a milestone in their corporate development and an endorsement of their Group. Investor has given an undertaking not to dispose of or transfer any part of its respective shareholding for a period of 6 months commencing from the date of their admission to the Official List of the SGX-ST. Mr Khor Peng Soon, a nominee of Investor, was appointed as OSIM non-executive Director in June 2000.

Ethics

Ethics are common believes on what’s right or wrong and good or bad based on individual’s values and morals, plus a behaviours’ social context. Business ethics definition is ‘a normative undertaking, seeks to provide ethical insight and guidance to individuals in business, businesses as organizations, and to society’. Although there is an overlap between corporate social responsibility and business ethics, they still can be distinguishing. Corporate social responsibility is about responsibility to all stakeholders and not just shareholders where as ethics is about morally correct behaviour. Not many business organisations’ directors will deny the essentialness of good, trusting relationships with customers, employees, suppliers and the community. All these are actually the elements of success that a company should rely on. Ethics in business is a very prominent issue nowadays especially in this high competitive business world. Organizations usually have a set of ethical as well as operational or business values which they wished to see in operating their business. These values guide ideas of acceptable, desirable and responsible behavior, above and beyond compliance with laws and regulations.

Ethics is formulated to enhance the standard of corporate governance and corporate behaviour. One should be ethical for motivation, good behaviour usually bring a reward. Think about it, if it were always in one’s interest to be good, there would be no need for ethics. One can simply act selfishly and forget about obligation. People invented ethics precisely because it does not always coincide with self interest. Owners, employees, suppliers and customers were expected to have a good behaviour in their work place giving that issues of ethics will affect the business.

Starting from the individual ethics, it is important since everyone has their own responsibilities in their work place. The very least a person can do is to be honest about what they do each day. Bribery should not be tolerated. There is so much poverty, so much hunger across the world. Greed for revenue and profits can only transform our world into an animal kingdom. Top management level of the company should have first practice good ethics themselves in order to show a good example to the employees and lead them to become more productive and efficient.

Behaviour toward the employees, top management level of the company should practice fair policies such as adequate amount of time given to the employee to be notified if the company intend to conduct layoff exercise within the company and affected parties should be compensated accordingly. Other than that, the company is responsible for providing conducive environment which is clean and save for its employee to work in too. Employee salaries should be paid according to agreed amount based on their working hours and job classification. Privacy of employees must be respected too.

Based on the information we gathered through our interview with OSIM, their company do have ethics practices. One of the examples is, employees who were stationed out of town for training were provided with decent accommodation. Every single employee has equal chances of being promoted. Outlet supervisors must also possess high accountability and responsibility in performing duties, without abusing power and position for self-gain or other interested parties. Employees are expected to always endeavour to improve knowledge, creativity and innovation as well as team spirit. Those who are in the sales position are required to be self-motivated to achieve great sales like there’s no limit to it. Proper basic personal grooming and dress in clean, smart and decent clothing at work is a must and it’s considered basic manners for especially for those in sales position working at the outlets. Strict basic grooming is required to reflect the professionalism of the employee.

Furthermore, OSIM emphasised a lot on professionalism among its employees. Employees must always carry out duties efficiently, effectively and productively in order to produce excellent service. The managers are very strict on the employee, they must always on good behaviour and punctuality. The company will always provide in-house training for their employees. In addition, the company sales force undergoes trainings like product training, salesmanship training and on-the-job training. Other than that, OSIM organise talks by health-care professionals in their corporate headquarters for their sales staff. Periodically, they will also send senior management staff overseas to attend seminars and exhibitions. Therefore, employees are expected to improve knowledge and skills to produce efficient, prompt and accurate service as well as to possess characteristics of creativity, innovation, motivation and competitiveness This show that the company practices good ethics as their provide and give chances for them equip themselves. The product of OSIM International Ltd complies with Safety and Quality Standards of International Certification Boards. The company does not compromise its products quality lightly, and this is a good business ethics practice. OSIM have the quality controls namely product quality assurance for its products and service quality assurance to ensure the staff deliver their best. Last but not least, the company take honesty into account very seriously. No one in the company should leak out the company’s private and confidential information such as internal finance reports, marketing strategies and etcetera. Disciplinary action will be taken against those who leak out the information might face dismissal from the company.

In conclusion, every business organisation has strict ethics to follow. The field and practice of business ethics is now well established. Often time’s senior individuals were hired in large companies and other organisations with dedicated teams to monitor that ethical standard and corporate responsibility (CR) commitments are understood and advocated. These commitments will be driven both by a set of ethical and business values set by the organisation itself, and by relevant legal and regulatory requirements that determine what acceptable conduct is. It is important to establish a standard or ethics of competence for corporate accountability which includes standards of professionalism and trustworthiness in order to uphold good corporate integrity. The experience within the country like Malaysia has exposed a critical need for the formulation of corporate accountability standards in order to establish an ethical corporate environment. It also ensures Malaysia is on the right track in turning into a first world country. Companies who are truly committed to uphold ethical conduct were found to be consistently outperforming companies who do not display ethical conduct according to research done by “Does Business Ethics Pay?” by The Institute of Business Ethics (IBE). “If you have integrity, nothing else matters. If you don’t have integrity, nothing else matters.” — Alan K. Simpson

INFORMATION TECHNOLOGY USED

“Information technology (IT) by definition is the acquisition, processing, storage and dissemination of vocal, pictorial, textual and numerical information by a microelectronics-based combination of computing and telecommunications”. More recently it is the use of the computers and IT to improve the efficiency and competitiveness of businesses that has led to technological change. Due to technological changes is so rapid, there are important implications for businesses. A business can be affected by the following technological change in production, the provision of services and in the office IT act as an effective tool to aid businesses gain and make the best use of knowledge. Some of the systems can be very tedious to set up and time-consuming to maintain. About two decades ago, most businesses agreed that effective IT strategies needed to be embedded within the business strategy. Business executives needed to possess those IT strategies as well as the business strategies in order to implement those business strategies successfully. Undeniably, IT has become an increasingly important business tool from small to big organisations, it is important for businesses to ensure that their business gets the most out of any system it introduces. In order to achieve this, you need to make sure that the IT system chosen supports the business and adds value to it.

Databases organise information for easy access, managed and updated. For example, a business might have a database of customers storing their contact information, their orders and preferences. The database is one of the cornerstones of information technology, and its ability to organise, process and manage information in a structured and controlled manner is the key to many areas of modern business efficiency. As a business, the more we understand about our customers, suppliers and competitors, the better. Hence, the gathering, storing and processing of informationusing databases cangive businessesa distinct advantage. The advantages are such as cutting down the amount of time spent managing data. Allowing businesses personnel the ability to analyse data in a many of ways. It is also a way of promoting a disciplined approach to data management. In addition, databases technology turns different information into a valuable resource and improving the quality and consistency of information. Value of information in line with maintenance and production cost. Most companies produce information on demand to place a value to it.

E-commerce is the ability of businesses to trade with the world via websites. With E-commerce, businesses are able to market and create awareness on their products a larger group of audience and business is now open 24 hours every day. This has created new opportunities for businesses that trade locally and may not trade internationally before to now expand the size of their market to worldwide. Amazon.com is one example of e-commerce as a worldwide book and CD sellers. Consumers can also make comparison on the products and search for best deals online. It allows entrepreneurs and or even individuals to sell directly to consumers. This is the opposite of conventional ways of selling at retail outlets. In other words, business transactions are now taking place online too. OSIM Directors believe that e-commerce is emerging as a very important marketing and distribution channel for businesses although the extent of the impact of e-commerce cannot be conclusively known today. OSIM have the intention of tapping into the huge potential of e-commerce and other health-care retailers may also follow suit.

Smartphone with internet access enabled and personal computers featured with office applications with office applications, save businesses time and travelling cost by enabling employees, customers, and suppliers to communicate from any location. This gives much convenience for the on-site and off-site employee to communication with each other. However, effective communication is very essential to most IT and e-commerce systems. Most of these technologies are invented to make communication between buyers and sellers faster and more reliable. On top of that, Computers can be used to process, analyse and store vast amounts of data to give the business more quality information.

The Internet can also be useful for various purposes. One of it is to make business sales message to be send out to customers especially potential ones. To get sales message out to customers and potential customers, marketing by email and on the internet offers speed and cost benefits over traditional mail marketing. Company resources are put into better use as chances of reaching out potential customers are much greater. Other types of online marketing such as social media like Facebook also provide a cost-effective avenue for businesses in reaching customers.

OSIM has registered their own website ‘‘www.osim.com to market themselves on the Internet to let more people know about the company and its products. It is important for a company to have a website especially for developing new products, offering new services and reaching new clients. Today’s information age has leaded many people to use internet to search information and others. People can access to any website with just a few clicks. Although setting up a website might be costly, it is offset by reaching a large pool of potential customers and providing necessary information for existing customers too. OSIM is making use of the popular Facebook as a tool for them to promote their products and provide brief information and latest happenings in regard to their road shows. Job recruitment advertisement is also in their website, this will save the company’s cost in advertising in other means such as the newspaper. Consumers can also sign up for the mailing list to receive special offers, promotions and well-being tips from OSIM. Last but not least, OSIM made us of IT to provide its customers order tracking if they are not sure if their package has been delivered .The order tracking service will help you track it down.

In conclusion, technological change can bring many benefits to a business. It reduces running costs, improve productivity, improved competitiveness, improved quality of service (e.g. speed of service) and reduce resources wastage. For companies who have yet to use IT to run their businesses should really consider it. Technology and business go hand in hand. Hence, technology is compulsory for business.

4P ANALYSIS

DIAGRAM 1: The Marketing Mix

Marketing mix is one of the most important aspects in marketing. The important of marketing mix are usually categories into four parts which are product, price, place, and promotion. The main purpose of this four P’s marketing is to help the company to achieving their target market. Customers are not the components of the marketing mix. However, the customer is the target of all the company’s marketing.

Product can be usually classified under two parts that is consumer product and producer products. Consumer product normally purchased for individuals used and these products are divided into three more categories that is convenience product, shopping product and specialty product. Secondly, the producer product, this product is purchased to use in running businesses. Beside

that, physical of the product also become the main point to attract the customers for example the packaging and size of the product.

Price is the price level that business wants to sell their product to consumer. There are many parts need to be consider first before the product were decides to be sell. The considerations such as objective of the business, the degree of competitor in the industry, channel of distribution and the business image. Furthermore, there are some strategies that can help a business in order to arrive at a selling of their product such as cost-plus pricing, mark-up pricing, predatory pricing, skimming pricing, penetration pricing, prestige pricing and demand-orientated pricing.

Place is where the product put on the target market. This place refers to those points that are stores and the retail outlets where the product should be easily accessible by the customer. Next, is to the channel of distribution means the business uses to get their product from factory and make it available to consumers. Wholesaler, retailer and Distribution Company are example for channel of distribution.

Promotion is the method of the company introducing and selling products and its one of the ways to attract consumers aware of their product. There are various ways of promotion such as advertising, personal selling, sales promotions, branding and packaging, direct email and loss leaders. Promotion is important of communication between the product and the customer in order to increase the sales.

In conclusion, a marketing mix involves four P’s. In another word, the four P’s entire are related to each other in reaching target market.

PRODUCT

OSIM is a company that sells healthy lifestyle product. There are various type of health product that they sells such as massage chair, foot massagers, head massagers, back massagers, eye massagers, soothing gel pads, slim belts, pedometer, blood pressure monitor, personal hygiene and water purifiers. These products are help to maintain health and can give relaxing to the people.

The latest product that OSIM launched is uDivine massage chair. The uDivine was designed by Japanese Master, Sato Tsuyoshi and he is expert of Japanese Chiropractic Massage. The uDivine is the world first Human-3D massage chair and this massage chair are combined with strategically position system airbags, realistic and human contour based, delivering the most humanized, pleasurable and effective full body massage. uDivine have multi-sensory pleasures from head to toe. The design of this massage chair are intelligent design with plenty to admire and it give more living space, seamless navigation, stereo sound build-in speakers, supreme comfort and family-friendly safety function.

OSIM Company makes a consideration to the number of stage in development of new product. The first stage is the generation of ideas. The company thinks future whether the product that they create meet the objective of the business or not. Furthermore, they also make a question will the product contribute to the continued growth of their business and does the business have the spare capacity to produce the product.

Secondly, is testing the new concept. OSIM want to know is there a sufficient market for the new product. This stage of the product development process will involve carrying out extensive primary market research to test consumer’s reaction to the suggested product.

Next, analyzing the cost or revenues. Based on cost of production, they will set the reasonable price of product to be selling. OSIM also caring of what will be the profitability of the new product and how many units of the product they want to produce.

Furthermore, they make a considered of developing a prototype. The design, materials, quality and safety of the product will become paramount. A prototype of the product will be developed using the detail that the market research indicated that consumer wanted. It is essential to ensure that this stage of the development process is detailed ad extensive, since to make alterations and modification at a later date will be extremely expensive and time-consuming.

Lastly, the goal of the company for their product is to make the customer easy to recognize its brand and provide customer satisfaction. If the product does not fit the customer needs or meet the standard, the company accepts the criticism and modifies their products until it is fulfilling the needs of their customer.

PRICE

OSIM (is one of the high-end brands that sells health-care product in the market. It stands by its own name, image, quality and safety. The good in pricing strategy of the company will affect the quantity of sell and the profit-margin received per unit. In order to achieve at selling price for its product, there are some method that can be use which is cost-plus pricing, mark-up pricing, predatory pricing, skimming pricing, penetration pricing, prestige pricing, demand-oriented pricing and competition-oriented pricing.

The first procedure for setting price is to determine the objectives of pricing. Earning a profit is the main objective. OSIM Company has three strategies in setting the price of their product. OSIM used cost-plus pricing, where the total cost of producing each unit of product is calculated. After that, the percentage profit is added to this unit cost to arrive at the selling price.

Next is skimming pricing, all of their products are innovative and high technology product. So the strategies for these products usually set at the high price because it required high cost to produce the product and it design to create an up-market. Nonetheless, another pricing strategy of OSIM Company is competition-oriented pricing. Competition-oriented pricing is the strategies to set a price for a product with comparison with the competitor. Some product of OSIM were pricing based on the price charge by the competitors.

In conclusion, setting a price is not an easy job, it need certain method to set the product price. For the beginning, a listing price, varieties of discount and allowance should include when setting a price.

PLACE

MAP 1:

MAP 2:

OSIM has chosen the right place for selling their products. In Map 1 shown one of the places which OSIM outlet located, that is in Bintang Mega Mall, Miri, Sarawak. Our group got to visit this outlet to conduct interview about OSIM for this team project.

Normally in business, without a good place to promote the company product will make harder to get successful in target market even the product have a reasonable price. In other words, to reach the target market, positioning is one of the important steps for placing. The location of the product should be easier for customer to purchases the product. If the customer hard to get the product, they might give advantage to other companies which they can get it easily. However, every customer has different needs with aspect of time and place. In order to attract more customers, the location of the product should fulfill the customer’s requirement. The company also can offer a delivery service in order to make


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