Woongjin Coway Water Purifier
CHOI, Jaehoon LEE, hyojung Kim, yejin
1
0. Index
Problem
Rental
Service &
Cody(1997)
Problem
Development
of RO
Membrane
(2007)
Strategic
Alliance
Success
2
1. Introduction – Company Overview
1989
1994
1996
1998
2000
2001
Establish the company
Obtain Clean Mark
Launch air cleaner
Start the rental service system
Launch water-softener and bidet
Be listed on KOSPI
Category of
business
Manufacturing and
Retail
President CEO
Hong, jun-gi
Annual Turnover
12,131,000
The Number of
Employees
1,746
3
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
Environmental pollution
caused by the
Industrialization
 Awareness of water
problem
Raising demand in
clean water caused
by the pollution
case and improved
economy
Phenol pollution
case in Nakdong
River
Asian Games Seoul Olympic
1948
…
1970
…
1986 1988
1991
Water purifier Market has grown since 1990s
4
2-1. Woongjin Coway’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
5
2-1. Woongjin Coway’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
6
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
The number of Cody
<What benefits can Woongjin get?>
• The number of Cody : 13,500(2011)
 Deliver the careful image and trust of
customers
15000
12000
10000
5000
13500
9000
3500
0
(Year) 2001
2004
2006
2011
7
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
•
The annual number of new customers
Growth rate was under depression in
2006~2008
– Something new to allure customer 
8
3. Innovation of RO Membrane
<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
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
9
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
10
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
11
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
4. Strategic Alliance
<Pay Free Service>
Strategic alliance with KEB, hyundai card, lotte card,
and SK marketing company.
5. Rental fee
Coway
4. Cash
Customer
Rental device
1.Join
Pay free
card
Point
managem
ent
3. Change
point to cash
Card
company
2. Point
accumulation
13
4. Strategic Alliance
<Results of pay-free service>
2008
2009
2008
2009
264000
1.15
%
1.09 %
117000
Rental
growth
net rental result
124.9%↑
termination rate
about 7300 contracts↓
14
4. Strategic Alliance
<Saehan M&A>
Saehan
Woongjin
•
Woongjin wanted to quicken
•
In 2007, the RO membrane was
acquisition of industrial RO
produced by five foreign filter makers,
membrane technology and
including the US-based Dow
reduce cost
Chemical, and one domestic company
- The ratio of the materials of
Saehan Industries.
Saehan used in the Woongjin
-
products was more than 50%
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.
15
4. Strategic Alliance
<Results of Saehan M&A>
+ SAEHAN
•
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.
“Leveraging years-long experiences and technology
prowess of Saehan in environmental materials sector,
Woongjin Coway expects to gain significant synergy in
improving competitive edge”
16
4. Strategic Alliance
<Water treatment companies M&A>
•
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, KC삼양정수 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)
17
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
18
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
19
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
…
20
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
Water Softener
•
Bidet
Air purifier
Vacuum cleaner
Food waste
treatment system
Globalization
- Five local subsidiaries in USA, Japan, China, Thailand, Malaysia, Netherland
- Export to more than 40 countries
21
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
Export to other countries
 price advantage compared to
japan product
Various consumer segment
 Low brand awareness in global market
 Some business part have low brand
awareness
Cheap copy and fake products
Domestic market in slump
Soaring raw material costs
22
7. Five Forces Model
Bargaining
Power of
Suppliers
Bargaining
Power of
Customers
- Extreme price sensitivity
-Ability to substitute
-Low switching cost
Threat of
Potential
entrants
- LG Electronics,
Chungho nice
entered water purifier
market
Rivalry
among
Existing
Firms
-Many suppliers
-High contribution
of materials to the
product price
Threat of
Substitutes
-Growth of mineral water
market
-Relatively low brand awareness(global market)
-High brand loyalty(domestic)
-Many competitors
23
7. BCG Matrix
5th
company in
global
market
Woong jin
coway
LG Electronics
Chung ho nice
Woong jin
coway
 Domestic market is growing slowly
 But global market is increasing especia
lly in China
Have 60% of Korean water purifier
market share
24
8. Conclusion
Service Innovation
Problem
Expensive
Not high-tech
No A/S
Rental
Service &
Cody(1997)
Problem
Global market change
Depression
Technology Innovation
Development
of RO
Membrane
(2007)
Strategic
Alliance
Pay free service, M&A
Success
Sales, # customers, certificate& Award
25
Q&A
26
(Appendix) Woongjin Coway IT Infra (1/5)
•
To deal with huge amount of customer's information,
Woongjin Coway adopted SAP ERP system
27
Woongjin Coway IT Infra (2/5)
<End to end process>
28
Woongjin Coway IT Infra (3/5)
<Achievements of ERP system>
Inventory
35 billion
won
Prime cost
10 billion
won
29
Woongjin Coway 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's
performance, but also it provide
feedback.
•
Woongjin can motivate their
employee and provide best service
by using MIS.
30
Woongjin Coway IT Infra (5/5)
< Woongjin’s EIS>
Value added
Information
Effective
Presentation
Flexibility
• High quality of
information
• KPI management
• ad hoc information
• Grasp at a time
• Make use of active
information
• Deal with rapid
changing circumstances
• Get information at
the right time
31