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

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Woongjin Coway Water PurifierCHOI, Jaehoon LEE, hyojung Kim, yejin

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0. Index

Problem

Rental Service &

Cody(1997)

Problem

Develop-ment of RO Membrane

(2007)

Strategic Al-liance

Success

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1. Introduction – Company Overview

1989 Establish the company1994 Obtain Clean Mark 1996 Launch air cleaner1998 Start the rental service sys-

tem2000 Launch water-softener and bidet2001 Be listed on KOSPI Category of busi-ness

Manufacturing and Retail

President CEO Hong, jun-gi

Annual Turnover 12,131,000

The Number of Employees 1,746

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1. Introduction – Purifier market in 1990s

1948 1970 19861988 1991… …

The first water purifier in Korea was used in the U.S. army Environmental pollu-

tion caused by the Industrialization Awareness of water problem

Asian Games Seoul Olympic

First appearance of mineral water for for-eigners

Phenol pollu-tion case in Nakdong River

Raising demand in clean water caused by the pol-lution case and improved econ-omy

Water purifier Market has grown since 1990s

<How have water purifier market grown?>

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2-1. Woongjin Coway’s Rental Service

• At 1998 : IMF - Contraction in consumption

Expensive Luxuries!!

• 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

<Why water purifier was not popular before 1998?>

Year

Sales

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2-1. Woongjin Coway’s Rental Service

<Why rental service is needed?>• Customer didn’t buy it or couldn’t be satisfied

with itFailed 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 ser-vice(CODY service)

Woongjin’s rental water purifier

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2-2. Woongjin Coway’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

2001 2004 2006 20110

2000400060008000

10000120001400016000

3500

9000

1200013500

The number of Cody

(Year)

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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 fil-ter makers and one domestic company

• Growth rate was under depression in 2006~2008

– Something new to allure customer

The annual number of new cus-tomers

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<What did Woongjin succeed?>• Woongjin successfully developed RO membrane(2007)• The 4th largetest 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 tech-

nology for the RO membrane will enable them to save costs by 30%

Save 50billion won an-nually!!

• A base for a future growth in the water treatment industry including desalination, etc

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<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

Backgrounds

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<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

RO membrane filter in the process of wa-ter filtration

How RO membrane works

Backgrounds

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

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4. Strategic Alliance

<Pay Free Service>

Strategic alliance with KEB, hyundai card, lotte card, and SK marketing company.

Cus-tomer

Pay freecard

Card company

Point man-

agementCoway

1.Join

2. Point ac-cumulation

4. Cash5. Rental fee

Rental de-vice

3. Change point to cash

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net rental result

117000

264000

2008 2009

termination rate

1.151.09

2008 2009

124.9%↑ about 7300 contracts↓

<Results of pay-free service>

Rental growth

%

%

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• 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.


- Established in 1972 - Producing textiles and environment

substances such as filters and sheets.

• Woongjin wanted 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%

Woongjin Saehan

<Saehan M&A>

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• With the acquisition of Saehan, Woongjin Coway 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 sec-tor, Woongjin Coway expects to gain significant syn-ergy in improving competitive edge”

<Results of Saehan M&A>

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• Business diversification through M&A

– Woongjin have its own RO membrane technology

– Woongjin entered water treatment field by merging water treatment

engineering companies(GET in 2010, KC 삼양정수 in 2011)

– Synergy effect : Membrane technology + water treatment engineering

In 2011, Woongjin won a lot of contracts in water treatment

field

(Totally 90 billion

won)

<Water treatment companies M&A>

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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

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• The number of rental customers also keep growing– Up to about 5millions totally

Purifier

Air cleanerBidet

Water soft-enerLeftover cleaner

Others

Total

# of total rental customers(unit. 1000)

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• 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 Num-ber 1

No. 1 in Brand Power

…

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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 puri-fier

Food waste treatment sys-tem

Vacuum cleaner

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7. SWOT

SWOT analysis of

Woong jin coway First mover of cody & rental ser-vice

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

Export to other countries price advantage com-

pared to japan productVarious consumer segment

Cheap copy and fake products Domestic market in slumpSoaring raw material costs

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7. Five Forces Model

Rivalry among Existing

Firms

-Relatively low brand awareness(global market)-High brand loyalty(domestic)-Many competitors

Threat of Substitutes

Threat of Po-tential en-

trants

- LG Electronics, Chungho nice en-tered water purifier market

Bargaining Power of

Customers

Bargaining Power of Suppliers

- Extreme price sensitivity-Ability to substitute-Low switching cost

-Growth of mineral water market

-Many suppliers-High contribution of materials to the product price

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7. BCG Matrix

Domestic market is growing slowly But global market is increasing es-pecially in ChinaHave 60% of Korean water purifier market share

Woong jincoway

5th com-pany in global market

LG Electronics

Chung ho nice

Woong jin coway

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8. Conclusion

Problem

Rental Service &

Cody(1997)Expensive

Not high-techNo A/S

Service Innovation

Problem

Develop-ment of RO Membrane

(2007)Global market changeDepression

Technology Innovation

Strategic Al-liance

Pay free service, M&A

Success

Sales, # customers, certificate& Award

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Q&A

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(Appendix) Woongjin Coway IT Infra (1/5)

• To deal with huge amount of customer's information, Woongjin Coway adopted SAP ERP system

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Woongjin Coway IT Infra (2/5)

<End to end process>

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35 billion won

Inventory Prime cost

10 billion won

<Achievements of ERP system>

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<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.

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< Woongjin’s EIS>

FlexibilityFlexibilityEffectivePresentation

EffectivePresentation

Value addedInformationValue addedInformation

• KPI management

• Grasp at a time

• Deal with rapid changing circum-stances

• ad hoc information

• Get information at the right time

• High quality of in-formation

• Make use of active information

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

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