UNIVERSITY OF SUNDERLAND

Bachelor of Arts (Hons)

Student ID: 149159070

Student Name: Wen Wen Du

Module Code: SIM336

Module Name / Title: STRATEGIC MANAGEMENT

Centre / College: MANAGEMENT DEVELOPMENT INSTITUTE OF SINGAPORE

Due Date: 11 August 2015 Hand in Date:

Assignment Title:

Strategic Analysis

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sources of information have been referenced)

Du Wenwen

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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 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.
Table of Content Page

1.0 Introduction 1

2.0 Strategic analysis 1

2.1 External Analysis 1

2.1.1 General Environment 3

2.1.2 Specific Environment 4

2.2 Internal Analysis 4

2.2.1 Core Competencies 4

2.2.2 Sustainable Competitive advantage 6

2.2.3 Strengths and Weaknesses 6

3.0 Strategic directions and strategic objectives 6

3.1 Vision 6

3.2 Mission 6

3.3 Objectives 6

4.0 Key broad business-level and international strategies 7

4.1 Porter’s Generic Strategies 7

4.2 Ansoff’s Matrix? 8

4.3 International Strategies -Integration Responsiveness Framework 9

5.0 Strategic implementation: General perspective 9

6.0 Key strategic implementation issues 10

7.0 Strategic evaluation 11

8.0 Conclusion: Current and Future Prospects and Recommendations 12

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 [ CITATION OSInd \l 2052 ].

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

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to design products[ CITATION Tan11 \l 2052 ] . 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[ CITATION Mon14 \l 2052 ]. 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

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creatives of new brand will catch customer’s eyes. It is a threat of OSIM [CITATION OCB10 \l
18441 ]. 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[ CITATION Wei13 \l 2052 ].

2.1.2 Specific Environment

Porter’s 5 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[CITATION OCB10 \l 18441 ].

Buyers

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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 √ × × ×

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 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.

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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[CITATION OSInd \l 2052 ].

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 [CITATION OSInd \l 2052 ].

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 [ CITATION
Sin121 \l 18441 ].

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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.

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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

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special edition of the world's 1st Human-3D massage chair with International
Artiste[ CITATION OSInd \l 2052 ]. 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 [ CITATION Sin121 \l 2052 ]. 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 [ CITATION Car101 \l 18441 ].

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 [ CITATION OSInd \l 18441 ] . Especially
in Chinese market, because China has a strong GDP, the market has a great potential for
development.

5.0 Strategic implementation

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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 [CITATION May12 \l 18441 ]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

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 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[ CITATION Cai12 \l 18441 ].

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
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[ CITATION Enr11 \l 18441 ].

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 Example Example of Scorecard Measures

Financial Perspective Shareholder’s objectives for
performance
Customer Customer satisfaction,
Perspective loyalty and freshness
Internal Perspective Personnel development
 Profits growth
 Cost reduction
 Sales performance growth
 Price favourable
 after sales service
 Product diversification
 Acquisition of new customers
 Product quality
 Research and development

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 Products innovation
Learning & Growth Future development of the
Perspective company
innovation
 Expand promotion space
 Orientation training
 Employee satisfaction and loyalty
 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.

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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, 2 5, pp. 59-
76.

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 2 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-OSIM-

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international
[Accessed 25 6 2015].

Tan, J., 2011. Taipei Times. [Online]

Available at: http://www.taipeitimes.com/News/biz/archives/2011/05/30/2003504488
[Accessed 14 6 2015].

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