O2 PURE: CANNED OXYGEN

AGENDA

1) Company Analysis

2) Introduction of product

3) Situation Analysis

4) Customer Analysis

5) Competitive Analysis

6) SWOT

7) 4 P’s

8) Objective (product lifecycle)

COMPANY ANALYSIS• Robert Wood Johnson (1932-1963)

• Everyday millions of people around the world enjoy the benefits from the Johnson & Johnson Family of Companies.

– Customers, Community, Employees

• Offer different products in different countries to comply with each individual country’s needs

– In China producing products for vision care, diabetic equipment, and pharmaceutical products

MISSION“Creating meaningful innovation in health care

within the Consumer business franchise relies on a research strategy equally rooted

in technology and consumer insights, in keeping with our vision: BRINGING SCIENCE

TO THE ART OF HEALTHY LIVING™.”

INTRODUCTION OF PRODUCT• O2 Pure is the latest item in our line of healthy lifestyle

products

• Developed to revitalize the body and mind without any harmful chemicals– In today's polluted world our lungs and brains need extra care

– Our bodies require extra energy from sources that are natural and complement our body functions

• O2 pure will make you feel better when you are stressed, tired, or fatigued from a long day or intense exercising.

INTRODUCTION OF PRODUCT

PRODUCT• Contains 95 percent concentrated oxygen

• 250mL aluminum canister

• Small, easy to store and portable size

• Mask is attached to the bottle as a cap to decrease complications of detached components

• Various ‘scents’ (unscented, mint, strawberry and jasmine)

• Corresponding colored labels

• Product expected to last 10 days after initial use

INDUSTRY ANALYSIS• No actual industry in China, apart from the particular

case of Tibet where it is available, whereas normally not off the shelf

• Assumed that the future scenario of the market might be strongly correlated with the health care equipment industry in China

• The industry to which O2 Pure belongs is in the Introduction stage of the Product Life Cycle

HEALTH CARE EQUIPMENT INDUSTRY GROWTH

Year $ bi l l ion RMB yuan bil l ion % growth

2009 19.9 151.5 10.80%

2010 22.0 167.6 10.60%

2011 24.3 185.3 10.50%

2012 26.6 202.3 9.20%

CAGR 2007-2012: 10.5%

PORTER’S FIVE FORCES• Bargaining Power of Suppliers– Recycled Aluminium Cans & Plastic Caps

• Low bargaining power considering size of supplier’s industry and reputation and power of J&J’s

– Oxygen• Big players in the Oxygen Manufacturing industry. Medium

to High power given the market share. Relevance of the oxygen for final product is high. Thus, power of Oxygen Manufacturers is high

PORTER’S FIVE FORCES

• Bargaining Power of Buyers– Big distributive chain, such as 7-Eleven,

specialty stores or relatively small supermarkets

– Buyers have low to medium buyer power in smaller retailers

– Buyers have medium to high power in large retailers (such as 7-Eleven)

PORTER’S FIVE FORCES• Risk of Entrance– O2Pure both easy to produce and profitable

– Risk of entrance of new players in the market is High

– Entering China in the forthcoming years difficult given the new political attitude regarding foreign investments

– Barriers of entrance higher for firms which have not entered in Chinese market yet

PORTER’S FIVE FORCES

• Rivalry Among the Industry– Only assumptions about

presumable competitors, given the fact that this will be a new industry

– Competitors would become the actual health care products manufacturers

PORTER’S FIVE FORCES• Substitutes– Considering inner characteristic of the product

• Anti-pollution mask

– Considering how it might be percieved• Bottled water

• Boost drink

• Boost product

ENVIRONMENTAL FACTORS

• Political Legal– China has recently outlined sustainable

development goals, such as increased emphasis on energy efficiency and renewable power sources

– China has become quite closed to foreign investments

– China is holding a rapid expansion of welfare system in order to encourage domestic consumptions

ENVIRONMENTAL FACTORS• The incredible growth of

China that has been held in the last 10 years is facing a tiny decreasing trend– A result of stabilizing

international position as a mature developed country and for creating middle class

• Large investments in R&D and infrastructure

• Soaring inflation

CUSTOMER ANALYSIS• Target Geographic Customers– Beijing and Shanghai

– Higher educated

– Higher living standards

• Target Age Groups– Young Adults (15-29)

– Middle-Age Adults (30-59)

– Educated and care about their own health

CUSTOMER ANALYSIS• Target Consumer

Segmentation1. Studying Age

• Pressure from studying

2. D.I.N.K.S. (Double Income No Kids)• Less financial burden due to

no children = more spending power

• Educated with high income

• Care about living life and maximizing their health

COMPETITIVE ANALYSIS

• Current Available Products– Medical Canned Oxygen– Oxygen Bar

• Substitutes

– Energy Drinks– Chinese Herbal Remedies

ATTITUDES• China has a positive attitude towards products that can

improve or add value to their lives

• Recent incidents regarding the ill quality of the consumer goods produced in China

• The Chinese public reads heavily into certifications

SWOT• Strengths

– Product under the control of internationally known and trusted company, Johnson & Johnson

– Company is already strongly established in China, with relationships with retailers and familiar to consumers

– Canned oxygen product is environmentally friendly to appease increasing demand for greener products

• Weaknesses– Investment needed to educate consumers on use

and need for product; large skepticism from market– Possible side effects: toxicity from overdose,

dependency, no concrete health benefits

SWOT• Opportunities– Chinese market is massive; largest population in the world

allows for increased probability of success – Current environmental conditions allow create a need for

product and market demand; air pollution large problem, especially in largely urbanized areas

– Shanghai and Beijing largest cities in China with highest average salary per person.

– Recent 2008 Olympics put China on the world map; capitalization of awareness of country

SWOT

• Threats– Number of competitors; oxygen bars and buses

already exist in market; relaxation and spa getaway rather than simply a product

– Canned oxygen available on the internet at very low prices

– Tendency for popular products to be duplicated and sold at a lower price by local companies; especially in China where there are low costs to production; creates a price war

PRICE

Cost Margin

Company $0 None

Production $0.50 - $1.00 50% to 100%

Retai lers $1.50 - $2.00 50% to 100%

Customers $3.00 - $5.00 50% to 100%

Figure 2: Product Features Matrix

• Incentives such as 2 for 1

deals and coupons

DISTRIBUTION

• Convenient store retailers such as Seven-Eleven; more than 11,000 stores across the country

• Nutritional health stores

• Supermarkets

• Use our familiarity as a company to leverage placement in shelves

PROMOTION• Use large scale events; health and

exercise trade shows

• Trial stations and informational booths

• Magazines

• High profile individuals; athletes, professionals in the health industry; celebrities, famous athletes

• Pamphlets alongside the products

• Online media

SERVICES OFFERED

• Trial and demonstration booths set up in order to allow consumers to have a hands on experience with the product before purchase

• Informative website

• Online and phone assistance

PRODUCT LIFECYCLE

• Introductory Stage– Will last for at least one year

– Consumers need to be educated about product

– Expecting negative profits as major promotions need to be taken

• Growth Stage– Expecting to see positive profits in the third year of entry into market

– Economies of scale will benefit production costs

– Product should now be seen as something really trendy

PRODUCT LIFECYCLE• Maturation and Decline Stages

– Predicting product will reach maturation stage in 5th year as slow growth continues

– Comparing our product to bottled water

– Hard to predict when the product will actually head into decline

VOLUME AND PROFIT• Using bottled water’s volume and profit as our

benchmark

• Strong expected growth numbers in all of our target consumer groups

• Expected sales of 3 million liters

CONCLUSION

QUESTIONS?