OGAWA World Bhd is formed by Mr. Wong Lee Keong and Ms. Lim Poh Khian in 1986. They started up with Morwell Sdn Bhd and began their enterprise into the trading of household and electrical products in Malaysia.
They found that there is a potential market for health and wellness equipment market in mid 1996. Thus, this is the beginning of the venture into the brand name OGAWA. In 2006, OGAWA World Bhd launched a brand name — DEKI for the price sensitive market. The creation of Healthy World in 2001 has led OGAWA business growth rapidly. This strategic formulation was in line with the business strategy of strengthening the OGAWA brand name in the health and wellness equipment industry, locally and abroad.
Today, Ogawa World Bhd has successfully introduced various innovative designs under the OGAWA brand name. They have expended into China, Vietnam, Hong Kong Singapore, Indonesia, and Australia market. On 18 April 2007, they successfully listed on the KLSE Main Board of Bursa Securities.
Ogawa products can be divided into five categories which are Relaxation, Therapeutic, Fitness, Diagnostic and Hygiene as shown in table as below. Under Relaxation, this product line has included high-end massage chairs like Sensual, middle-range massage chair like Mobile Seat, eye massagers, handheld massager and so on. For therapeutic product line, Ogawa has combined OSIM uPapa back massager and OSIM uSqueez foot massager to become Ogawa Chi Master.
Ogawa has a few competitors in Malaysia market. They were OSIM, Gintel and OTO. As shown in the graph beside, the largest and closer competitor of OGAWA is OSIM. Therefore, in this assignment, we will analyze OGAWA by comparison with OSIM. 1. 4 Vision, Mission and Objectives OGAWA executive chairman, Wong Lee Keong had noticed that the group’s vision is to become an international brand. To achieve this vision, their primary mission is to further entrench the products across all market segments, to expand their geographical reach both in domestic and overseas markets, as well as to introduce more new products to serve the existing and new customer. Objectives: To penetrate the second-tier townships on the East Coast of Malaysia and East Malaysia.
- To explore new markets such as the Middle East, Thailand and India.
- To embark on a franchising system under the OGAWA trademark to cover more geographical markets whilst minimizing the inherent risk.
- To introduce at least five new products in different design, feature and functionality every year.
The Group registered profit before tax is RM22. 2 million which show an improvement of 27. 6% over RM17. 4 million recorded in previous year. Profit after tax attributable to shareholders in 2007 amounted to RM14. 4 million, an increase of 39. 6% from RM10. 4 million previously. Corporate Social Responsibility (CSR) Ogawa main concern in CSR is promoting the importance of healthy living to everyone because they believe with health, comes wealth and happiness. They had joined the activities that organized by non-profit organizations and schools to enhance the quality of life of communities. Activities such as Malaysian Tsunami Disaster Fund, Donation for education study loan fund and so on. During year 2006, they have donated their products to various old folk’s homes throughout West Malaysia.
The whole corporate had grown greatly in 2005, which revenue and profit had increased more than 90% due to market penetration in China. Since China market is successfully bring a lot of sales and develop their international management skills, they decided to expand their business to Hong Kong and Vietnam in 2006. According to The Edge Daily (2008), in the first quarter of year 2007, Ogawa incurred loss of RM192,000. However, Ogawa able to turn it into profit of RM627,000 in the second quarter year.
As the result, the growth rate of 2007 is slowing down compare to the previous year because Ogawa has affected by US economic recession. To place these result in context, we can compare Ogawa with OSIM, a global leader in branded healthy lifestyle products and has over 25 years of experience in developing innovative and reliable healthy lifestyle products while Ogawa just having enter to this industry for 12 years. Moreover, OSIM have 1,100 outlets in more than 28 countries in Asia, Australia, Africa, the Middle East, United Kingdom and North America compare to Ogawa which just start globalize its business in 2002 and having 152 outlets in 6 countries.
By looking at those figures, all measurements had shown that OSIM was outperforming Ogawa in years before 2007. However, by looking at the growth rate, Ogawa had grown faster and perform better than OSIM in the recent year. Table 2. 2 had shown that OSIM’s profit before tax and net profit tend to decline year by year. Especially in year 2007, although OSIM’s annual report still showing that its revenue was higher than Ogawa but OSIM profit was dropped dramatically and it was lower than Ogawa.
From our observation, we found that OSIM had developed a lot of products which do not adapt to the market demand during 2007. Moreover, due to economic recession, the purchasing power of consumer has decrease. So, it caused their return on investment might not be ideal as they predicted. All data had shown that Ogawa has the potential to grow and preempting OSIM once a day if Ogawa keep doing well in its strategic management.
Coupled with increases in food prices, higher cost of energy would have a huge knock-on rise effects on prices of goods. Thus, there is a probability that the purchasing power in future becomes lower as the consumer spending which supported the gross domestic products (GDP) growth in the last couple of quarters may amid softer external environment; the moderation would hit the economy as well. In additional, the government also indicated that inflation might rise 4% to 5% this year, and the real inflation effect could be considerably larger. Due to this global market fuel price hike, it definitely has a major effect on all sectors including the inflationary impact on all inputs, and probable rise in staff costs.
This may have a strong impact for Ogawa revenue and earnings because the product that Ogawa providing is shopping goods. The demand for shopping goods may decrease if the economy of country is having inflation. Political-Legal Environment Malaysia is one of the countries in Asia with stable political situation. Malaysia government is headed by the Yang di- Pertuan Agong and politically led by Prime Minister Datuk Seri Abdullah Ahmad Badawi. Since independence in 1957, Malaysia government has been governed by a multi-party coalition known as Barisan Nationa l(BN). Currently, there is no Malaysian law or regulation that governs the retail of health and wellness equipment in Malaysia.
Moreover, the Ogawa health and wellness equipments falls under the household and personal goods which does not required to be licensed or certified by Malaysian authority SIRIM and also the Ministry of Health Malaysia. However, Ogawa do need to conduct safety and quality assurance by continuous monitoring during the manufacturing of the equipment as well as meeting the international safety standards such as the CE mark which show the full compliance with the European directive in regard to consumer confidence on the Ogawa product. Technological Environment:
- Unlimited opportunities of innovation Technological advances in general at which the speed of progress continues forward. For instance: the rate of development of computers and the progress in medical research, treatment, care, and rehabilitation which further enhanced quality of life. In order to hold the position as the market leader in Malaysia, Ogawa might be facing the challenges that there is a must to keep creating innovative products as well as improvement in their existing designs of products such as enhancing the aesthetic features or functions of their existing products.
- Varying R budgets In the current market of health and wellness equipment, many companies have also developed massaging and slimming equipment of popular brands in an attempt to appeal to women. These associate the product with two key female aspirations: being slim and attractive.
So many companies are content to put their money into copying competitor’s products and making minor feature and style improvement. But increasingly research directed toward major breakthroughs. For example, some companies put capital and technical together on research in new product to satisfy the women’s need “as an ease to their leg pain after spending whole day walking at the shopping malls”. Because of the nature of competitiveness, companies did whatever they believed they had to do in order to boost profits and what better way than to feed into ‘feminine’ ideals. Thus, it’s a must for Ogawa to continue on their research & development in order to cope with the market demands. Natural Environment
In the world today, the deterioration of the natural environment has reached the dangerous level. The peoples are concern with the products that may harm the environment such as the air pollution due to the release of carbon dioxide from manufacturing processes as well as the green house effect. This is mainly due to the global warming which is one of the side effects due to the deterioration of the natural environment. Therefore, this is an opportunity for Ogawa to come out with some equipment that can further maintain good air, water, and natural environments. Besides that, the earth’s finite non renewable raw materials are deteriorating vastly.
Ogawa needs resources like zinc, silver, metal, and some other finite non-renewable resources to produce their products. Although the demand of natural resources has increased dramatically over years, yet there is still some shortage of certain resources. Thus, if there is an increment in energy cost it will definitely increase the cost of goods and the operational cost for Ogawa. Social Cultural Environment Malaysia is a multi-ethnic, multi-cultural and multilingual society, the estimated population as off July 2008 is 25. 27 million (CIA the World Factbook) consisting of 62% Malays, 24% Chinese, 8% Indians, the rest are others and indigenous people (Department of Statistics Malaysia, 2006).
According to market research, there is indication that Malaysian people are in greater stresses of a fast-paced society than ever before and this situation is increasingly being felt and as the elderly population grows. Moreover, peoples are becoming more health conscious due to their life routines and the exposure to health news, magazines, and articles from internet and advices by doctors has become a major influence on their daily workouts as well as their food intakes. Hence, It is an opportunity for Ogawa to introduce their product and services due to increase awareness of healthy life in Malaysia. Demographic Environment The demographic trends have direct impact towards Ogawa which produces health and wellness equipments.
According to the United Nations Report released by the World Health Organisation, the world average life expectancy will rise to 73 years by 2025, representing a 50% improvement on the 1955 average of only 48 years. The number of aged over 65 and over will increase around 4% by year 2025. Hence, the prospect of a healthy and extended old age is becoming a reality for more people than ever. They are not only living longer yet they are also living more healthily, with their rates of disability going down at the same time their life expectancy goes up. Thus, Ogawa can design and promote their products which will further enhance the quality of life, especially for the older and aging population. Besides that, we can divide group based on ethnic market in Malaysia. Each group of people has certain wants and buying habits.
For example, Chinese group contend to have an enjoyable lifestyle so Ogawa can set major target on this group. However, the Malays group tend to spend more on house decoration item, so Ogawa can create some product with creative design that makes their home looks nicer.
In the health and wellness equipment manufacturer industry, there are many similar manufacturers but the closest rival for Ogawa is OSIM who provides similar products and services. When OSIM added new features in its products and services with new technologies, Ogawa will quickly followed and take similar actions to its products in order to keep abreast with changing consumers’ taste and preferences. Furthermore, Ogawa and OSIM are very powerful companies in this industry. The new entrants might not be able to compete with them. Therefore, the rivalry among existing firm is high. ii) Product or Services Characteristics In the health and wellness equipment industry, Ogawa and OSIM are providing the similar products and services characteristics therefore it increases the competition.
In order to gain competitive advantages and market share, Ogawa have to create more unique products and services characteristics to attract more customers to keep on competing head-to-head with its rivals. For example, Ogawa has evolved from using simple merchanics to sophisticated features including spine sensor and air bags mode of massaging in its massage chairs. iii) Height of Exit Barriers Generally, Ogawa is hard to exit from health and wellness industry. For instance, Ogawa is now become bigger international family which have 173 outlets in Malaysia, China, Hong Kong and Singapore and 44 sole distributors in Indonesia, Australia, Vietnam and Thailand. (Ogawa World Berhad, 2008). Ogawa also plays an important role in health and wellness equipment market where Ogawa has obtained 44. 8% of market shares in the industry.
On the other hands, Ogawa will lose huge amount if exit from the industry because it has invested huge capital into research and development process to come out with innovative product to compete with its competitors. Therefore, the rivalry among existing firms is high. Threat of New Entrants Firstly, the economy of scale in manufacturing the health and wellness equipment products might be a barrier to new entrants into this industry because they might not have the ability and capability to produce huge number of products. When the production cost is high, the cost of each single product becomes high. Ogawa who already has obtained the market share since year 2005 has achieved the economy of scale in producing the products. Next, the new entrants are requiring having huge capital when they invest into this industry.
It needs huge amount of capital in innovation which involved in research and development to come out with some new innovative and special products to compete with existing competitors. Ogawa has spent a lot of moneys in innovate new products in order to come out with some products that meet customers’ preference. Ogawa is able to spend so much capital because it wants to maintain its current market shares. Moreover, product differentiation also one of the barrier to the new entrants, however, there is not much different in the health and wellness equipment products in the market because most of the products are similar the same. Therefore, Ogawa has focus on its strategy to design and develop new products to expand its current range of product-models.
Thus, Ogawa has focus on its product expansion and diversification including designing and develop a new range of lower priced products in order to target at those customers who are more sensitive to pricing. Lastly, government policy is not strictly to the relaxation and therapeutic health and wellness equipment because it falls under the general consumer goods category. Therefore, there are no any specific government health regulations as well as other licensing or certification regulations by Malaysian authority such as SIRIM towards health and wellness equipment in Malaysia. However, consumers’ confidence towards the products will based on the international safety standards such as performance and safety requirements which set out by most developed countries such as Europe Union and America to protect consumers.
Besides, the health and lifestyle industry is in the growth stage in Malaysia Hence, there will be some possible new entrants to entry into the industry. In conclusion, threat of new entrants into health and wellness equipment industry in medium. Treats of Substitute Nowadays, we have been found that health and wellness equipment has played a very complementary role in relief of tension and stress or for general well-being. However, it has some possible substitutes which are fish health spa, massage services, hydrotherapies or a wide selection of essentials oils, mud, sea salt and foams for relaxation and therapeutic value that provided by human massage therapists.
Although there are many different types of substitutes, health and wellness equipment still has the advantage over its substitute. The health and wellness equipment provided profitability and the users can be enjoy the massage anytime and anywhere at their convenience compare with human massage services that users need to make appointments with the service provider and have to go to their shop. Moreover, the cost of the massage chairs could be spread over their usage and thus, will be comparatively less costly than the spa. Therefore the treats of substitute products and services are low. Bargaining Power of Suppliers Ogawa has appointed external manufactures for the manufacture of its health and wellness equipment products.
Ogawa do not create a long term contracts with the external manufacturers because they believe that is more flexible for them. Without the long term contracts, they can search or source for other manufactures in order to take advantage of any competitive offers made by the external manufactures. On the other hands, Ogawa has expand its current base of external manufactures’ by sourcing new manufactures to prevent over reliance on any external manufactures. Even though the switching cost between the suppliers is high but there is no guarantee in product quality. Therefore, the bargaining power of supplier for Ogawa is low in the current situations.
Bargaining Power of Customer Ogawa products consists of consumer items and mainly sold to the general public directly through its own retail outlets, permanent counters and road-shows, and indirectly through its sole distributors. Therefore, Ogawa products are known as shopping goods which consumers are not or must to buy the products. Consumers has alternative options to select what they actually prefer or desire shopping goods that would beneficial them after buying. However, the switching cost is high for the consumers because they can buy whatever they like and preference. Therefore, the decision of buying is at consumers but not for the company.
And when OGAWA wanted to set up retail outlets in their new market outside their usual distribution place, it will be tough for them to find suitable location and it will cost more on rental fees. Other than that, OGAWA only have 152 outlets in 6 countries which are far behind from their competitor OSIM that has 1,100 outlets in over 28 countries. This is a big issues for OGAWA because whenever customers want to purchase the health and wellness equipment, they can find OSIM easily but not OGAWA. This will end up of customers switching their mind to competitors.