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Woongjin Coway Water Purifier

Woongjin Coway Water Purifier. CHOI, Jaehoon LEE, hyojung Kim, yejin. 0. Index. Rental Service & Cody(1997). Problem. Development of RO Membrane (2007). Strategic Alliance. Problem. Success. 1. Introduction – Company Overview. Establish the company Obtain Clean Mark

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Woongjin Coway Water Purifier

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  1. Woongjin Coway Water Purifier CHOI, Jaehoon LEE, hyojung Kim, yejin

  2. 0. Index Rental Service & Cody(1997) Problem Development of RO Membrane (2007) Strategic Alliance Problem Success

  3. 1. Introduction – Company Overview Establish the company Obtain Clean Mark Launch air cleaner Start the rental service system 2000 Launch water-softener and bidet 2001 Be listed on KOSPI

  4. 1. Introduction – Purifier market in 1990s <How have water purifier market grown?> First appearance of mineral water for foreigners The first water purifier in Korea was used in the U.S. army Raising demand in clean water caused by the pollution case and improved economy Environmental pollution caused by the Industrialization  Awareness of water problem Phenol pollution case in Nakdong River Asian Games Seoul Olympic … … 1948 1986 1970 1988 1991 Water purifier Market has grown since 1990s

  5. 2-1. WoongjinCoway’s Rental Service <Why water purifier was not popular before 1998?> • Expensive : Only big company or public place had the water purifiers • Not high-technology : There was a distrust on the functions of the product • No following-up service : Many complaints arose from filter problems • At 1998 : IMF - Contraction in consumption Sales Expensive Luxuries!! Year

  6. 2-1. WoongjinCoway’s Rental Service <Why rental service is needed?> • Customer didn’t buy it or couldn’t be satisfied with it Failed to attract customers • Then, let the customers rent a clean water purifier(1998. 4. first released). <What benefits can customers get from the rental service?> • \1,000,000  \26,000/month + additional service(CODY service) Woongjin’s rental water purifier

  7. 2-2. WoongjinCoway’s Cody Service <What is Cody?> • Cody(Coway-Lady) • Experts of managing the water-purifier • Providing follow-up management <What do Cody does?> • Carrying out regular inspection and changing the filter at free • Before Service System • Filter-replacement time, The time to change component, How to change them • <What benefits can Woongjin get?> • The number of Cody : 13,500(2011) • Deliver the careful image and trust of customers

  8. 3. Innovation of RO Membrane <Why Woongjin innovated their technology?> • The need for pure water is a problem of global proportions Water treatment has become an area of global concern RO systems have emerged as an effective solution • Huge quantity of water treatment with less chemicals & smaller space • But, it was produced only by five foreign filter makers and one domestic company • Growth rate was under depression in 2006~2008 • Something new to allure customer  The annual number of new customers

  9. 3. Innovation of RO Membrane <What did Woongjin succeed?> • Woongjin successfully developed RO membrane(2007) • The 4thlargetest RO membrane market share in the world • The durability of the filter was enhanced • When the pollutant is accumulated, it makes the purification function worse, consequently, the filter should be replaced • <What’s the impact of RO system? > • The development of source technology for the RO membrane will enable them to save costs by 30% •  Save 50billion won annually!! • A base for a future growth in the water treatment industry including desalination, etc

  10. 3. Innovation of RO Membrane Backgrounds <What is a membrane?> • Selective separation : A separator or filter that allows the selective removal of a molecule from liquid or gas compound • Major types : microfiltration, ultra-filtration, Reverse osmosis( depending on permeability, selectivity) • Used as high-molecular materials, ceramic and metal materials. Reverse osmosis Microfiltration Utrafiltration

  11. 3. Innovation of RO Membrane Backgrounds <What is RO membrane?> • 70% of domestic purifiers use the RO membrane method • Through its 0.0001 – micro pores, RO membrane filter is capable of removing water contaminants such as heavy metals, water-borne microorganisms and other harmful organic chemicals. • Requires advanced technology; • Very permeable, the salt rejection rate↑ • The mechanics; strong enough to endure feed pressure How RO membrane works RO membrane filter in the process of water filtration

  12. 3-1 Types of Innovation • Product Innovation vs. Process Innovation • RO membrane was totally new type of membrane • Incremental Innovation vs. Radical Innovation • Woong jin coway kept developing new membrane technology • Architectural vs. Component • Membrane was a part of the water purifier • Competence Enhancing vs. Competence Destroying • Because of its superiority, customer do not choose other membranes but, RO membrane

  13. 4. Strategic Alliance <Pay Free Service> Strategic alliance with KEB, hyundai card, lotte card, and SK marketing company. 5. Rental fee 4. Cash Coway Point management Customer Rental device 3. Change point to cash 1.Join Pay free card Card company 2. Point accumulation

  14. 4. Strategic Alliance <Results of pay-free service> % % Rental growth about 7300 contracts↓ 124.9%↑

  15. 4. Strategic Alliance <Saehan M&A> • In 2007, the RO membrane was produced by five foreign filter makers, including the US-based Dow Chemical, and one domestic company Saehan Industries. • Saehan Industries owned RO membrane manufacturing technology for both household and industrial uses. Saehan Woongjin • Woongjinwanted to quicken acquisition of industrial RO membrane technology and reduce cost • - The ratio of the materials of Saehan used in the Woongjin products was more than 50% • Established in 1972 • Producing textiles and environment substances such as filters and sheets.

  16. 4. Strategic Alliance <Results of Saehan M&A> • With the acquisition of Saehan, WoongjinCoway expected • To augment its proprietary filter technologies • To reduce costs through vertical collaboration with substance manufacturer. • Saehan could secure a steady customer, Woongjin Coway • In conclusion, Woongjin can get the development of new materials related to textile and environment in order to sharpen competitive edge in original substances. + SAEHAN “Leveraging years-long experiences and technology prowess of Saehan in environmental materials sector, Woongjin Coway expects to gain significant synergy in improving competitive edge”

  17. 4. Strategic Alliance <Water treatment companies M&A> • Business diversification through M&A • Woongjin have its own RO membrane technology • Woongjin entered water treatment fieldby merging water treatment engineering companies(GET in 2010, KC삼양정수 in 2011) • Synergy effect : Membrane technology + water treatment engineering • In 2011, Woongjinwon a lot of contracts in water treatment field • (Totally 90 billion won)

  18. 5.Success of Woongjin Coway • Increasing sales revenue • In 1994, sales was 84.8 billion won and kept growing steadily • After introduction of the rental service in 1998, the sales revenue has been increasing steeply in spite of the IMF crisis Annual revenue

  19. 5. Success of Woongjin Coway • The number of rental customers also keep growing • Up to about 5millions totally # of total rental customers(unit. 1000) Purifier Air cleaner Bidet Water softener Leftover cleaner Others Total

  20. 5. Success of Woongjin Coway • Certification & Award WQA Certified Water Quality Specialist WQA Gold Seal Mark Certified Institution Approval, ISO 9001, ISO 14001 Certification Guiness Book of Records Coway Co., Ltd. Global Brand Competency Index Number 1 No. 1 in Brand Power …

  21. 6. Recent Trend of Woongjin Coway • Diffusion - Woongjin Coway has the high-level filter technology so it can adapt this technology to the many kinds of products which need the filter • Globalization - Five local subsidiaries in USA, Japan, China, Thailand, Malaysia, Netherland - Export to more than 40 countries Water Softener Bidet Air purifier Vacuum cleaner Food waste treatment system

  22. 7. SWOT SWOT analysis of Woong jin coway • First mover of cody & rental service • High market share and brand awareness in domestic market • Huge amount of investment on R&D • Low brand awareness in global market • Some business part have low brand awareness Weakness Strength Opportunity Threats • Export to other countries • price advantage compared to japan product • Various consumer segment • Cheap copy and fake products • Domestic market in slump • Soaring raw material costs

  23. 7. Five Forces Model Bargaining Power of Customers Bargaining Power of Suppliers • Many suppliers • High contribution of materials to the product price • - Extreme price sensitivity • Ability to substitute • Low switching cost Threat of Substitutes Rivalry among Existing Firms Threat of Potential entrants -Growth of mineral water market - LG Electronics, Chungho nice entered water purifier market -Relatively low brand awareness(global market) -High brand loyalty(domestic) -Many competitors

  24. 7. BCG Matrix 5th company in global market Woong jincoway Woong jin coway Chung ho nice LG Electronics • Domestic market is growing slowly • But global market is increasing especially in China • Have 60% of Korean water purifier market share

  25. 8. Conclusion Service Innovation Rental Service & Cody(1997) Problem Technology Innovation Expensive Not high-tech No A/S Development of RO Membrane (2007) Strategic Alliance Problem Global market change Depression Pay free service, M&A Success Sales, # customers, certificate& Award

  26. Q&A

  27. (Appendix) WoongjinCoway IT Infra (1/5) • To deal with huge amount of customer's information, Woongjin Coway adopted SAP ERP system

  28. WoongjinCoway IT Infra (2/5) <End to end process>

  29. WoongjinCoway IT Infra (3/5) <Achievements of ERP system> Prime cost Inventory 35 billion won 10 billion won

  30. WoongjinCoway IT Infra (4/5) <Woongjin’s MIS> • Woongjin wanted to check the performance of hundreds of offices on a daily basis • So, they adopted MIS system. • Not only it determine a Cody'sperformance, but also it provide feedback. • Woongjin can motivate theiremployee and provide best serviceby using MIS.

  31. WoongjinCoway IT Infra (5/5) < Woongjin’s EIS> Value added Information Effective Presentation Flexibility • KPI management • Grasp at a time • Deal with rapid changing circumstances • ad hoc information • Get information at the right time • High quality of information • Make use of active information

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