Amore Pacific Essay

Amore peace-loving, the leader in the Korean commercialise for spectator ingatherings, was established in 1945 with a solid focus on researching and developing harvest-tides based on Korean family remedies. The company 1959, listed its shargons in the Korea Stock Exchange in 1973, and changed its name to Amore pacific deal in 1993. Industry dynamics and pace of using at Amore Pacific accelerated greatly during the 1990s. Domestically, anticipated entry by transnationals forced major(ip) changes in corporate and handicraft strategy with a rigorous refocus on cosmetics by the mid-1990s, slashing of affiliates and reduction of headcount.At the railway line level, it repositi superstard itself and its spots domestically and deepened its commitments by investing in harvest ontogeny and manufacturing as tumesce as grocery/ scattering in selected foreign market places, gearing itself for the challenges of the new millennium.Suggested appellative Questions1.Where does Amore Pacific make most of its money? How has it been able to dominate the Korean market a derivest local firms such as LG Household and Healthc be (HHC)? Against multinationals such as LOreal?2.Assess the performance of MNCs how do they compare against local competitors? What are the reasons for local companies outperforming MNCs?3.Which of AmorePacifics cardinal principal global targetsFrance/ europium, master(prenominal)land china and the coupled Statesseems the most promising? Should a penetration strategy for the U.S./Europe resist from that for China?4.What other recommendations would you make to Suh Kyung-Bae well-nigh AmorePacifics internationalization?Class TimelineThe timeline for a typical class of 80 minutes readiness be as followsTimingIntroduction5 minutesSWOT analysis and challenges confront by local companies in the face 25minutesof foreign competitorsExamination of the economics of local vs. multinational entrants20 minutesIdentification of patterns in market f illing and20 minutes discussion of prospective opportunitiesUpdate & international axerophtholere Summary10 minutes fare80 minutesCase AnalysisAMORE PACIFICs initial exploration of exporting face powders to USA based Coty, coupled with its reinforced market share in Korea, and its strength in herbal/ sept remedies all paved the way for a successful entry into the international arena. But this path was not without the initial bumps as AmorePacific had a muffled start success only came about after deep pinch of the various foreign markets along with committed R&D and infrastructure enthronization. The biggest future challenge for AmorePacific is achieving synergy crossways its main markets and go on with further magnifications into new markets/ countries. For this a comprehensive strategy outlining harvestings, proceedsion/ sourcing, merchandise and dispersion is involve. This is important because in a very diverse world, some foreign contexts will be alien to many of the managers who must finalise on cross-border issues. In such situations, success in home terra firma is not enough.1)Where does AmorePacific make most of its money? How has it been able to dominate the Korean market against local firms such as LG Household and Health care (HHC)? Against multinationals such as LOreal?In 2004 Amore pacific nabbed a place in the cap 30 companies worldwide with a 30% share of the Korean market. While that of LG Household and Healthcare stood at 8% within the same context. Amongst other reasons one of the reasons for its relatively slow progress in parity to Amorepacific was its late entry into the cosmetics business along with the heavy financial and restructuring be over the same time period. This lead to a miss of pattern on its part generally following a me-too strategy to AmorePacific. For modelling setting up its own chain of stores and establishing door to door gross sales netwoek without a clear strategy.According to exhibit 7 Amor ePacfic leads the market with evidentiary investments in advertising, sales, and R&D 20,000 Amore women, 350 specialty outlets versus 39 outlets for LG, development of innovative and relevant distribution gets and bullocky positioning of polar product lines are just a few of the examples. Multinationals entering the market was relatively difficult due to the government division and depreciation of the dollar. This was enlarged with the fact that the multinationals like Loreal had to import their products due to a lack of investment in production infrastructure. This lead to a richlyer equal of goods sold mainly due to laid-back tariff rates of 8%. Consequently leading to a high priced product to the consumer and this availability and distribution was restricted to high priced departmental store channels.We can see that LG HHC was losing money, and was never very profitable in economic terms, after allowing for make up of capital. This was mainly due to limited access/ scale of distribution cosmetics was not the main business for LG HHC. On the other hand Amore Pacific enjoyed a strategic advantage over LG as all their efforts were mettleed more or less the cosmetics business and they had greater advantages to leverage and typically get trade and consumer on their stance thus share of specific market winning over broad(a) size of business. AmorePacific had been earning healthy (20%-plus) operational margins on the Korean cosmetic business whereas LG had seen its profitability drop down to zero in 2004.In a situation like this considering price realizations, or the willingness to pay it is difficult to throw a direct sales force if youve got a 10%, 15% share of the market.2)Assess the performance of MNCs how do they compare against local competitors? What are the reasons for local companies outperformaing MNCs?Amore PacificLOrealP&GUnileverShiseidoGlobal Expansion strategyMainly centering around acquisitions in the Asian market start ing off with Mininurse in China which was a well penetrated skin-care brand and by and by Yue-Sai. This enabled LOreal to bank on the existing companys consumer and market expertise in the land without initiating heavy investment in product development, distribution or merchandise strategy. Focus on Inorganic harvest-feast. Shiseido favored a joint investment with local partners. ProtectionismLarge established share FDIs wel stick withs at much later stage in country Financial supportGlobal front end provided the backbone for investments in the wake of Koreas financial and money market crisis. R&DVertical integration aiding operations and quick product development. Successive launches of Hera, IOPE and Sulwhasoo focusing on different age groups, SECs and distribution channels.Focus on developing products as per Korean tastes rose after 10 geezerhood of its presence in Korea Distribution Rationalized distribution AmorePacific was operating at three distribution markets. One was mass, the other one was door to door, and the third one was specialty Success in self developed channel of door-to-door (contributing 85% sales comprising 20,000 women employees) and agility in specialty stores (Amore opened 350 outlets in Korea while for LG opened only 39.)Concentration on high end/ high cost department store channel. Shisiedo opened up Les Salons du Palais Royal, a high end beauty parlor in Paris in 1992 and focussed on providing beauty consulting to consumers Marketing Expenditure tough focus with media advertising, beauty magazines and sponsoring relevant events mournful onto more innovative means of communication via magazines and new media.High investment in advertising spend and expertise in merchandising management. Shisiedo place product development but used global modeling for marketing (Eau dIssey by Issey Miyake of Japan and Jean Paul Gaultier, named after its French creator) Cost vs. Foreignness advantageLocal manufacturing with indigenous materia ls sustaining prices at lower levels than MNCs. Added support done the Made in Korea campaign. Adapting to market conditions sticking to local celebrities albeit at high cost to consumers Product PortfolioFocus on skin care and products developed typically for the Korean woman (products developed from home remedies with ginseng proving to be USP).leverage of the biggest global beauty brands in its portfolio. To keep prices affordable for local consumers LOreal launched Maybelline with little success in bringing down relative pricesAlso operating in household products but mainstay was Olay a personal care brandLargest player in various food categories with an extensive interest in personal care Competing in global perfumes market as well as cosmetics.Brand management/restructuring Strong brand personality, project top of the line product, Asian beauty with global appeal supported by a strong diverse product line each with their clear positioning. Scale/ relative size Amore Pacific s cosmetic presence was about three times as big versus LG. Given that R&D, and advertising should be considered fixed costs and wouldnt deviate with volume assuming they spend 10% on R&D and sales, and 14%, 15% advertising, supported by a higher(prenominal) local share, AP can amortize the cost over their international volume. breach understanding of the market This lead to stronger strategies that were not easy to implement for multinational companies who have less flexibility and were not as prepared to come with a door-to-door sales force or the same marketing tactics. Product development and R&D Having a strong R&D infrastructure provides a strength like no other and also serves a a strong obstacle to entry for multinationals. Brand fast(a)ty Amore Pacififc has been number one in the Korean market for 60 years and has a solid line of loyal consumers and traders on its side.3)Which of AmorePacifics three principal international targetsFrance/Europe, China and t he United Statesseems the most promising? Should a penetration strategy for the U.S./Europe differ from that for China?ChinaFranceUSAMarket positionEconomy considered poorer and smaller than KoreaSignificant requiring focused investment in R&D, strategy and productionV small/dual problems Market characteristicsGeographically and culturally closer. middle(a) of the line product range with focus on naturalist and product driven consumersDistant in consumer tastes and market peculiarities perfumes vs. skin care and makeup. Geographically conflicting prestige market seemingly offering higher potential. Market potentialPopulation of 1.3bn potentially with rising incomes. Considered home of cosmetics and important to gain strong foothold in global beauty business industry. Largest personal care market in size $33bn.-Which market makes most sense for cosmetic company from Korea/how do you select which market to go into? CulturalAdministrativeGeographicEconomicClose cultural ties invol vingi) script The Korean alphabet (Hangeul) not developed until 1392 ii) Colonial rule China control North Korea from 108 B.C. to 313 A.D. iii) Similarities in values and traditions Chinese herbal medicines used in southernmost Korea iv)Religion Confucianism and Buddhism are common religious and moral systems v)differences in concepts of beauty and levels of personal hygiene vi)varying importance, usage and importance of personal care products vii)Home warp preference for using local brandsviii)influence of traditions on personal care productsNo cultural stands with France or USA distinctly separate finis, values and traditions across twain continents from that of Koreai) No shared monetary or political association ii) Little political hostility (China backing North Korea South Koreans contemptible toward reconciliation with North Korea iii) Democracy (South Korea) versus Communism (China)iv) High government sake in Chinese industry presence of state-owned enterprises, m any of which are unable and/or insolventRelatively less government involvement in South Korean industry v)Both countries harbor distrust of Japan (recent colonial memories) vi)potential discrimination against French productsNo administrative ties with France or USA single out of not being part of EUCommon border in the 19th century, South Korea closed all borders to trade except for the one with ChinaStrong logistic set-up coupled with infrastructural investment involving production, distribution and marketing. Differences in climate modify usage, need and type of personal care productsDisparity in disposable income levels ranch in % of wages spent on personal careDifferences in infrastructure and distribution structuresThe second part of the question should be analyse using the ADDING value framework Adding VolumeFulfillment of the 2015 vision required global expansion with significant growth from the international markets. In 2004, Amore Pacific had international sales worth $100mn. Coming from France, China and USA and modestly from Hong Kong and Taiwan. Geographic affinity to China coupled with close cultural ties and alike distribution scenario vs. greater investment in R&D, brand development and marketing strategy in USA The value of growth had to pass the ROI test with business earning positive economic results coupled with superior market potential. Decreasing CostsGlobal expansion can descend costs through either size (scale/scope) economies or absolute economies. Size-based cost economies seem redundant in this industry product/ brand affiliations center more around brand benefit, loyalty and credibility expenditures on product development and branding are constant Similarities in opportunities across both countries includes Set-up of specialty stores prolific in both countries ROI seemingly better in USA since target market is upper SEC Retail expansion leading to price affordability of products Differentiating/Driving up Willingness to PayUSA market focused on prestige product lineBrand-building with new product line containing Asian botanicals in USAAmore Pacific beauty movement and Spa in Soho New York adding imagery Special ingredient thou tea extract adding to exclusive imageChinese consumer more product drivenGrowing popularity of Korean culture Hallyu with support from Korean study stars and celebrities image creation and brand building through beauty centers, culture halls, and Hyangjang the magazine published by Amore Pacific. Improving Industry Attractiveness incoming new territories with market relevant products perfumes in France, luxury products in USA. unvaried innovation to meet continuous demands of consumers Lucrative market excellent future prospects growth expected to exceed increase in global gross domestic product Evidence of product improvements trickling down into the masstige market New trade and distribution channels enabling wider access to consumers Neutralizing RiskFrequent econ omic crisis on the home front leading to inflexibility of investment abroad Differing strategies and product lines across international markets Differing consumer tastes requiring further investment and R&D short lived span for perfumes vs. longer spans for skin care products. Generating and Upgrading Knowledge/Capabilities/ different ResourcesConstant R&D both at the technical foul and consumer front International aspiration multinational management, international consultants, product development and brand / corporate image repositioning4)What other recommendations would you make to Suh Kyung-Bae about AmorePacifics internationalization?Product innovationSpecialty ingredients like green teas proven success along with Korean herbal/ medicinal inheritance focus for future product developments Distribution structureSpecialty and discount stores gaining importance for masstige channel large scale supermarkets and hyper markets also increasing in importance to gain masstige ma rket appeal. Party plans involving product demonstrations/sales to groups of consumers to be explored as a future alternative Building brands and credibilityContinue brand / image building efforts in both upscale and mass markets Inorganic growthEvaluate acquiring smaller/ financially distressed players in both key and upcoming markets like Hong Kong and Taiwan. enkindle we give reference to some academic theories here, based on issues of internationalization strategy?