Rivalry

In addition to brands such as Ogawa and OTO, OSIM faces rampant imitation
from its largest market and supplier, China. Such firms are able to reproduce the
products that OSIM develops and undercut them by a significant margin. They
also have very low costs and large capacities. Apart from starting a price war,
imitation products were often inferior and were accompanied by astonishing and
unrealistic health benefit claims. Such advertising is normal in the Chinese
market, however, such conduct has led to bad publicity in foreign and domestic
markets. This is due purely to perceived association, or perhaps confusion, with
OSIM products which look similar (Wong and Khoo 2009). These problems are
compounded by the slowing of economic growth in the region and mass
urbanisation planning by the government is likely to make rivalries even more
intense as the stakes get higher. With a large market and an increasingly
undifferentiated product, rivalry is very high. On the other hand, OSIM has been
doing reasonably well with their research and development of new products.
Releases of new products give OSIM a temporary reprieve as imitators scramble
to copy them. With the expansion of TWG, this could signal OSIMs unwillingness
to compete solely in the massage chair market.

Supplier Bargaining Power

OSIMs main source of supply comes from Oriental Export & Import Co. Ltd (OEI),
Daito-Electric Machine Industry Company Ltd (DEMI) and Red Time Trading Ltd
(RT). OEI and DEMI are based in Japan with most of their manufacturing done in
China through subsidiaries or joint ventures. RT is based in Taiwan and is
responsible for their foot reflexology products. Out of these three, OEI is the
largest supplier with more than 50% of OSIMs purchases coming from OEI (OSIM
2015). With such a heavy reliance on OEI, this places bargaining power in the
hands of the suppliers. While the company is taking steps to reduce their
vulnerability, this would most likely result in high switching costs or adverse
results in their products. So far, they have disclosed that they are sourcing for
new manufacturers and diversifying their manufacturing for their key products.
They are also entering into joint ventures with their manufacturers to assure a
more mutual and fair business relationship. However, as OSIM is a big player in
this industry, this helps to mitigate the power imbalance as OSIM is the suppliers
gateway into large portions of the Asian market.

Wong, Yu Liang and Khoo, Victor. Letter to Investors: 2009 Half Year Review.
Lumiere Value Fund. 2009.

Osim International Ltd. Invitation in Respect of 58,000,000 Ordinary Shares.

2000. Accessed November 1 2015.