ANALYSIS OF THE HEALTH LIFESTYLE INDUSTRY
OSIM (HK) International
Table of Contents
I. Introduction
II. Background of the Company
A. The Industry
B. The Target Market
C. Vision and Mission of the Company
D. The Strategy
III. External Environment of the Company
A. PEST Analysis
1. Political Environment
2. Economic Environment
3. Socio-cultural Environment
4. Technological Environment
B. Five Forces Model
1. Supplier Power
2. Intensity of Rivalry
3. Threat of Substitutes
4. Buyer Power
5. Threat of New Entrants
IV. Internal Environment of OSIM
A. SWOT Analysis
1. Strength
2. Weaknesses
3. Opportunities
4. Threats
B. Value Chain Analysis
V. Conclusion
VI. Bibliography
I. Introduction
In this world where only the fast and efficient way of doing things are preferred, the common individual encounters stress of enormous proportions. This prompts companies like OSIM International to find ways to allow the common individual the means towards dealing with these types of work related risks. To do this, they afford the individual a chance for a healthy lifestyle. The company is basically one of the pioneers in this type of industry and it is building an empire by installing global presence using its worldwide network. This paper will provide an analysis of OSIM International, more specifically a look on the internal and external environment of the organisation. To do this, the paper shall initially provide a background description of the company. In this part a discussion of its basic tenets as well as the key factors that drive the operations of the company. Subsequently, the internal and external environments shall be examined using analytic tools like the PEST analysis, Porter’s Five Forces, SWOT Analysis to name a few. The data used in this paper shall consist of data acquired from the website of the company and its annual reports. On the other hand, the discussions as per the theories, arguments and observations shall be based on the data acquired from scholarly and academic articles and journals. In the end of this paper, a summation of all these arguments and observations shall be provided in a conclusion. In the same manner, the study shall also indicate some recommendations for the company to ensure continued growth in its industry.
II. Background of the Company
The company is basically one of the more synonymous names with lifestyle products. Its most notable merchandise includes iconic chairs that ushered the company into a major international brand name.
A. The Industry
The industry on which OSIM operates is dominated by the company. This is basically because there are a scarce number of players in the field of healthy lifestyle products. OSIM virtually have a monopoly in this field as it holds on a great market share in its operations. Based on the website of the company, they have made a niche and consequently established a demand for their products. This makes them the pioneers in the industry. With South Asia as their hub of operations, Hong Kong has become one of the top earners of the company’s global network.
B. The Target Market
In its operations in Hong Kong, it appears that the target market of the company is those individuals that are in their later teens and late thirties who are health conscious and lead a very fast paced lifestyle. This is manifested with their events like the marathons and triathlons that they organise. Basically though they have this specific target market as among their core customers, their annual report maintains that they intend to expand their market and reach other age brackets to cater to their individual needs.
C. Vision and Mission of the Company
The vision of OSIM International is to provide a holistic and integrated approach to healthy lifestyle. The company is geared towards providing the public products that “carry the fundamental theme of health and well-being.” In order to do this, the company needs to focus its operations into four major areas: health, hygiene nutrition, and fitness. In the area of health, the company seeks to help the individual to manage a healthy lifestyle by offering a wide range of health products from massagers to blood pressure monitors. In the area of hygiene, the company seeks to provide the public an access to cleaner water, air and a clean environment in general. Products like water freshener and water purifiers are among those that spearhead this mission. In the area of nutrition, OSIM provides the public a selection of dietary supplements that helps in maintaining a balanced diet. And lastly, the company also focuses on fitness as a part of their overall mission statement. This is manifested in their home gym equipments which allow the common individual a chance to work out in the comfort of their own home. These products range from stationary bicycles to treadmills.
D. The Strategy
Aside from these general strategies, the company has a growth strategy in their 2008 performance. Their annual report maintained that the company intends to introduce more innovative products that will share the market with their existing major products. It is also said that the company intends to improve store performance by increasing productivity. In this level, the company shows that it seeks to maintain its hold on the international scene.
III. External Environment of the Company
The following discussion shall provide a description on the external environment of the company. In this case, the focus of the discussions shall be the external environment of OSIM International in Hong Kong. To carry this out, the PEST analysis as well as Porter’s Five Forces model shall be employed.
A. PEST Analysis
The PEST analysis is often used in the planning stage in the organisation. More particularly, this analytical tool tends to specify the factors and implications on which the organisation reacts on certain changes in its direct environment. (Blair and Hitchcock 2001, 99) The existing literature using this tool point to this analysis by many other names, the bottom-line is that it seeks to establish the effects of the political, environmental, socio-economic, and technological environments on the organisation itself.
1. Political Environment
The government of Hong Kong has adhered to a considerably liberalised market. This is manifested in their policies on trade, specifically their adherence to the principles of the World Trade Organisation. This means that any of the other companies coming from another member state could enter into the market. In case of OSIM International, their operations in Hong Kong are compounded by this element of the political environment. In the same manner, the policies and laws that directly affect trade somehow encourages investments into the Hong Kong market.
2. Economic Environment
Being one of the deemed commercial destinations in Asia, Hong Kong caters to a wide array of consumers. This is further complicated by the fact that the consumers in Hong Kong tends to be both coming from foreign and local buyers. (Kam-Yee and Kim-Ming, 2006, 217) The number of inbound tourists in the administrative region is augmented by the recent opening of the Disney theme park. Reports also indicate that a good number of consumers come from the Mainland in the past years. (Kam-Yee and Kim-Ming, 2006, 217) Hence, the company thus intimate the dependence of the market on the traffic of customers coming in and out of the prescribed territories of the administrative region.
3. Socio-cultural Environment
Studies have shown that the consumers in Hong Kong have low uncertainty avoidance. This means that the buying behaviour tends to be overly impulsive. (Chan et al, 1999, 12) Added to this data is the fact that Hong Kong consumers tend to manifest high levels of long term orientation. Hence, the brand loyalty tends to be a considerable element to considerate for companies that intend to operate in the market. (Chan et al, 1999, 12) In considering the findings of the two studies, it appears that consumers will go for products that are interesting and of high quality. In the same regard, companies must make sure that they have a good customer relationship management.
4. Technological Environment
The consumers of Hong Kong are said to have a flair for the innovative and highly tech savvy merchandise. (Koo, Lee, Ngan, 2003) This manifests a mix of consumers who are confident of their skills on technology. In the case of OSIM International, they offer the public a set of innovative products that serves the purpose of handing an innovative way towards achieving a healthy lifestyle. Moreover, the discussions above pointed to the propensity of the company to integrate new technologies on their products as seen in their iconic chairs and stationary bikes.
B. Five Forces Model
The attractiveness of the market is one of the major considerations of organisations in the occasion of their operations. A good tool to address this is Porter’s Five Forces model. (Shermann and Black 2006, 29) This is done by analysing the microenvironment on which the company operates; in the case of OSIM International the appeal of Hong Kong environment is in question.
1. Supplier Power
Normally, the products sold by OSIM International in Hong Kong come from the headquarters of the company which is located in Singapore. This means that the operations in Hong Kong don’t deal much with suppliers as the headquarters provide these stores with the finished products. However, the operations of OSIM International still require labour and other services like the delivery of this merchandise from the ware house to the store. Those that give this type of service are basically the ones on which OSIM International in Hong Kong bargains with, and since these services are essentially indistinguishable and interchangeable in the market, these service suppliers does not have that much strength with reference to their bargaining powers.
2. Intensity of Rivalry
The company has no direct competitor in Hong Kong, specifically an organisation that shares the same product line and competes in the same market as that of OSIM. However, the company have to deal with numerous competitors that operate directly against the markets of the four individual areas of operation of OSIM. This alone suggests that OSIM International have a rather tough time ahead in dealing with these competitors. This is compounded by the fact that some of these companies tend to have a greater grasp of the market share in Hong Kong in areas like dietary supplements and home gym equipments.
3. Threat of Substitutes
The market in Hong Kong appears to offer a considerable number of substitutes for the products of OSIM International. For instance, there is the ubiquitous traditional Chinese medicine that could always take the place of the dietary supplements offered by the company. In the same manner, buying the company’s home gym equipment products could be substituted by actually acquiring a membership in a gym. The use of iconic massage chairs could also be substituted by going into spas and other places where they offer massage services. This manifest the number of substitutes on which OSIM has to deal with in its operations. However, the company offers the public a more cost-effective, safer, and even provide a standard of quality better than those indicated previously. In the end, the threat of substitutes is not that strong but the company should be wary not to disregard these entirely.
4. Buyer Power
The products of the company that they offer the public are basically an issue why they may encounter problems in marketing. To illustrate, the major products that they are offering includes treadmills, dietary supplements, and fancy chairs, all of which are considered luxury. This makes the buyer have all the power in the market. They dictate as to whether they are to disburse their hard earned cash on things that they could do without. Hence, the company has to deal with the issue on how they will convince the public that they need their products and consequently buying them as opposed to the more conventional task of showing that their products are better than their competitor. They have to show that their products give the consumers their money’s worth.
5. Threat of New Entrants
As mentioned in the earlier parts of the paper, the market is liberalised in Hong Kong. This means that any company that seeks to enter into competition, either direct or indirect, with OSIM International is capable. However, they should understand that the company is already entrenched in the market and is considered synonymous to the types of products which they sell. Hence, new entrants in the market are rather weak.
IV. Internal Environment of OSIM
The cognizance of the external environment is not sufficient to ensure successful operations in the market. It is imperative to analyse the internal environment so as to strike a balance and provide flexibility on company.
A. SWOT Analysis
Another planning tool used by companies is the SWOT analysis. It examines the organisation’s existing strengths, weaknesses, opportunities, and threats of an organisation. (Bielski 2006, 27) The following discussions shall provide a description of these elements present in OSIM International operating in Hong Kong.
1. Strength
As indicated in the earlier parts of the discussion, the company has already established a name in the industry. This is because of the demand that they successfully established for their products as well as the actual niche that they have formed in the process. Following these facts, the company has already cleaved on the actual nuances in the market.
2. Weaknesses
The main weakness of the company, as maintained in the earlier discussions, is the nature of the products on which the company offers the public. Aside from the fact that these products are non-commodities, these products are essentially pricey. The costs of these products tend to affect the buying decisions of the consumers.
3. Opportunities
The company should take cognisance of the fact that there is an emerging culture in Hong Kong that encourages healthy living and a hale and hearty lifestyle. In this context, the company should expect a much larger market for the industry. The company should also look into the creation of new products that are more accessible and competitively priced so as to reach a wider range of the market in Hong Kong. In the same manner, the company should also look into the possibility of tying their operations with the existing gyms and fitness centres in Hong Kong. This will allow the company to expand its network and earn allies on these establishments.
4. Threats
The market tends to stagnate itself because of the limited possibility of development or of a possibility of expanding its sales in due course. The main threat for this company and the industry as a whole is the fact that the value of the consumers’ money in Hong Kong has recently increased. This is an offshoot of the considerable changes in exchange rates as the erratic conditions of the international market have incessantly taken place.
B. Value Chain Analysis
The value chain of the company establishes the parts on which the company are strong and where they are lacking. The following illustration presents the value chain of OSIM International in Hong Kong.
The primary activities of OSIM International are inbound logistics, operations, outbound logistics, marketing and sales, and service. The figure above summarises these elements. Seeing the value chain above, one can observe that there are some connections and interrelationships that subsist in the value chain of the company.
V. Conclusion
The case of OSIM International is considerably an interesting one as it is among those organisations that realised a need of the market and heeded the call. Upon considering this fact, it appears that the company owns an exclusive niche in the market. However, despite the uniqueness of the company, it is not exempt from the conventional issues that a normal company encounters. It is still necessary for the company to find ways to exude flexibility so as to effectively deal with the demands of the external environment. This will only take place provided that there is a balance between the internal and external environment.
On the whole, the company is a strong one especially in its operations in the Hong Kong market. However, there is this looming possibility that the company’s performance falls off as there are numerous possibilities and threats on which OSIM International is subject to encounter. New entrants could freely compete with the company. Substitutes could easily be chosen by the public over the products of OSIM International. These are only a few of the things that threaten the Hong Kong operations of the company. Hence, the company must not be complacent in order not to allow any of these threats to become a realisation.
VI. Bibliography
Bielski, L. (2006) “The SWOT for Retail IT Reveals the Interconnections of Technology; If You Want to Know-And Serve-Your Customers Better, Think in Terms of “STP” from the Infrastructure to the Application Layer.” ABA Banking Journal. 98(11), 27.
Blair, A. and Hitchcock, D. (2001) Environment and Business. Routledge. London.
Chan, A., Chow, W., Fosh, P., Snape, E., Westwood, R. (1999) Hong Kong Management and Labour: Change and Continuity. Routledge. London.
Kam-Yee, L., and Kim-Ming, L. (2006) “Citizenship, Economy and Social Exclusion of Mainland Chinese Immigrants in Hong Kong.” Journal of Contemporary Asia. 36(2), 217.
Koo, R., Lee, C., Ngan, M. (2003) “Voices and Implementation of Information Technology in an Elementary School Classroom: A Hong Kong Case Study.” Childhood Education. 79(5) 268
Sherman, S., and Black, J. (2006) “Proactive Reification: Shifting Market Structure and Enrepreneurship.” SAM Advanced Management Journal. 71(2), 29.
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