With low-barriers to entry, the competitive business environment of the beauty products industry requires companies to secure steady sales channels, and make great marketing efforts to identify its products. However, the beauty products industry is strongly related to the style industry which is constantly changing and provide potential development opportunities. Consequently, plastic products routinely have brief product life-cycles because which require mass-customization features and creation agility.
Personal Care
On the other palm, personal care products business is a comparatively a mature industry. Also with a low-barrier to entry, the home market is currently saturated with competition. In addition, the emergence of large-scale discount stores and new sales systems has needed quickly changing marketing and distribution channels. Consequently, the domestic personal care products industry is focusing on developing niche market segments by differentiating its product as offering top quality and value.
1. 2. Overview of AMOREPACIFIC
AMOREPACIFIC Corporation ("AMOREPACIFIC" or "the business") aims to become a global beauty company using its central businesses in makeup products and personal care and health products. Founded in 1945 as a Pacific Chemical substance Company, AMOREPACIFIC Firm has been involved with beauty products.
With the organization perspective of "THE EARTH will know us as the 'Asian Beauty Creator', " AMOREPACIFIC looks for to thrust the limitations of traditional beauty with ground breaking solutions attracted from its abundant Asian heritage. THE BUSINESS also strains the five values: Openness, Innovation, Closeness, Sincerity, and Challenge to openly communicate with its customers and employees, follow ground breaking ideas and new ideas, maintain literally and psychologically close to customers, fulfill responsibilities to society, and be passionate about conquering challenges.
The Company first began its export sales via OEM and also started out to sell makeup products under its own brand "AMORE" in 1964. In 1990, the business turned to international markets by establishing its first international subsidiary in France, followed by creating its Shanghai and Chartres crops in 2002 and 2004, respectively.
In 2010, AMOREPACIFIC's sales come to KRW 2 trillion, with operating profit of KRW 340 billion and world wide web earnings of KRW 285 billion. The Company maintains its number one player in the domestic market with a 34. 9% beauty products market share in 2010 2010. In terms of its overseas operations, the business has increased its sales this year 2010 by approximately 11% to KRW 335. 8 billion.
With its strong domestic position, the Company is focusing on sales and operating profit progress of 10% in 2011 by creation of progress markets. For each business segment, the Company's Cosmetics Division is focusing on securing competitiveness in the Asian market segments through support of R&D activities to provide differentiated products and services. For the non-public care products business or "Mass Cosmetic makeup products & Sulloc Department, " the business is purpose on strengthening domestic market competency by extension into high-functional products in major personal good care categories.
2. International Business Strategy of AMOREPACIFIC's Cosmetic Products
AMOREPACIFIC aims to be always a Global Top 10 10 cosmetic makeup products company. While tapping on matured and developed markets such as THE UNITED STATES and Western Europe, AMOREPACIFIC is more focusing on growing countries such as China and other Southeast Parts of asia.
To overcome the constraints of the market size and increasing level of competition in the local market and complete economies of level through market expansion using its own line of competitive products, AMOREPACIFIC, utilizing its number 1 position in the home market, has been looking to develop international market with in its efforts to gain existence and become an effective international player in an exceedingly competitive global makeup products industry environment.
While the home market has been steadily growing scheduled to a rise in the number of professional business women who've caused buying ability of female customers, producing market conditions for high-function cosmetic products from the middle-class aging human population, as well as an increasing demand from men for cosmetics products, AMOREPACIFIC has been facing increasing competition from the local competitors and market penetration from global makeup products companies. Nevertheless, AMOREPACIFIC has potential to be successful in international market considering following effective factors:
The quality and variety of products of AMOREPACIFIC has already reached the level to be competitive against global brands generally in most product lines.
Experiences of highly competitive market in Korea enriched the Company with various competitive marketing strategies.
Korea's cultural wave has generated friendly needs of Korean beauty products among customers, especially in Asian market.
Globalization strategy of AMOREPACIFIC is mainly predicated on a multi-domestic approach where international strategies take on differentiated approaches for each and every regional market as divergent needs for beauty products products exist credited to different levels of industrial and economic development for every single country/region. Furthermore, advantages from standardization are less significant credited to segmented dynamics of cosmetics market even within the country/region and price functions differently for every customer segment which is not usually the major factor for identifying purchase. Finally, since demand in overseas market for beauty products are highly divergent and the business possesses the capability and resources to leverage with to meet those divergent demand, multi local strategy would be ideal for AMOREPACIFIC.
Based on such multi-domestic strategy, AMOREPACIFIC's globalization strategy assumes differentiated solutions for developed and developing countries. For appearing countries, AMOREPACIFIC is designed for an early on market penetration, while, nurturing image by concentrating on the prestige brand lines in developed markets. Two representative countries of AMOREPACIFIC (France and China) have been examined below to judge its international strategy in each country contrasting AMOREPACIFIC's strategies in each respected country.
2. 1. Extension in to the France Market
2. 1. 1. Market Penetration with Lolita Lempicka
France has long been renowned as the capital of cosmetic industry and fashion. AMOREPACIFIC started out to penetrate the France Market with the Lolita Lempicka Perfume from 1997. In 1997, the Lolita Lempicka Perfume received all the most notable honors at the French FIFI Honor for best women's perfume, best men's scent, and perfume design. AMOREPACIFIC released Lolita Lempicka L in 2006 and released Si Lolita Lempicka in 2009 2009. Using the success in France, Lolita Lempicka products are now available for purchase in over 100 countries worldwide.
2. 1. 2. Rationale
France is considered one of the primary markets of cosmetic makeup products products and style innovator of fashion and beauty goods and the market of competition for global cosmetics manufacturing companies. Experiences and reputation in France market can result in an development in developed marketplaces like the U. S. where the AMOREPACIFIC would consider as major market for expansion.
2. 1. 3. Accessibility Mode Selection
Notwithstanding the high risk of failure, AMOREPACIFIC made a decision to permeate the France market via direct ownership to establish strategic position as a flagship business in the developed market. With such higher level of determination and resourcing from the headquarters, the Company appointed local management with entrepreneurial spirits to experiment with new brand and new strategy. AMOREPACIFIC recognized that its entrance mode in to the France Market was necessary to be able to deploy local talents which would enable development into adjacent high-end Western markets once strategic position is made.
2. 1. 4. Marketing and HR Strategy in France
Abandoning nationality and company title to defeat the stereotype against Asian aesthetic brands, AMOREPACIFIC teamed up with local marketing agents, manufacturers and distributors.
As a newcomer to the market, AMOREPACIFIC differentiated its strategy by naming its brand after young local developer to target customers pursuing up-to-date trends of unisex mode and strong scent. Also limited immediate distribution stations have been used for syndication and advertising campaign is supplied through only high-end magazines targeting customers in their twenties and thirties as well as models and designers. As is important to the cosmetic makeup products products to be acknowledged by word-of-mouth, advertising activities are targeted in providing samples to superstars and influential group of people. Through employing entrepreneurial local experts in marketing of beauty products, AMOREPACIFIC could up grade its marketing know-how in luxury/prime market one notch above.
2. 1. 5. Analysis of the International Strategy in France
Global Configuration
The Company's entry to the France Market had not been influenced by cost variations or economies of size, but it alternatively served the reason to produce a case for experiments in the key market. Together with the successful introduction of the Lolita Lempicka brand in France by leveraging the local ability and blinding nationality and company name, other high-end brand can be joined in to the market using the distribution channels guaranteed through perfume business. In addition, AMOREPACIFIC may consider producing other more competitive premium brands on the market through large scale international makeup products franchise stores such as Sephora.
Global Coordination
Learning the effects from highly autonomous management of local subsidiaries and transfer of such knowledge to other developed market strategy (e. g. , U. S. ) is likely to benefit the company through global networking. Though it is unavoidable to touch on developed market to notch up brand recognition level, considering the Company's ultimate goal of globalization to expand its market, concentrating on developed countries would lead to limited volume growth at least in the mid-term as we could see from the financial results of France market that was out of red first time in 2010 2010 since its unveiling in 1997.
2. 2. China Market Expansion
2. 2. 1. China Market Analysis
The volume of cosmetic makeup products sales in China continues to be explosive and has high potential to expansion (Yearly cosmetics utilization of $13 per person in comparison to $50 in global average). China Market is well stratified regarding to products which are consistent with development periods of different areas (eastern seaside and traditional western inland). They comprise of all four major segmentation including top luxury market, high grade market, middle market and mass market.
In China, the cosmetic makeup products market is not dominated by single or a few major manufacturers yet and appropriately, market penetration is not too difficult. Compared to use of make-up products, the skin care products are prominent in market, as Koreans have similar type of skin as Chinese customers, the Company can hold strong competitive position against the multinational competitors. With an increase of level of earnings, demand for high quality brands is also expected to develop significantly.
2. 2. 2. Rationale
With Korean market being saturated, the high development potential China market appears to be the next reasonable choice for AMOREPACIFIC. THE BUSINESS can fully leverage the beneficial impact of Korean ethnical influx in China. Although the business has entered other Asian countries in tandem with China market, the progress and experiences in China market provides the business with boosting capacity to increase further into other Asian countries. Also, the proximity to Korean market and similar cultural background can give the business competitive border against other multinational manufacturers.
2. 2. 3. Admittance mode selection
The Company got into into China market through immediate investment since 2002. The decision to enter China in a kind of direct investment was mainly due to the potential threats other global and local companies' possibly increasing foothold in China. The Company needed to stay in competitive position by internalizing complex advantage and products quality while local brands are growing in fast speed. As competition has already been intensified in China market, advanced of determination of resources from head office is essential for sustainable progress in China market.
2. 2. 4. Marketing and HR strategy in China
As the Company owns line-ups of products for all those segmented market segments, success in one market segmentation can result in relatively easier starting of other products under more competitive conditions.
The major products advertised in China is the Laneige Brand, which is premium make of AMOREPACIFIC which targets the middle-class. As brand acceptance is gained from Laneige through skin-care products, it is considered a good strategic move for AMOREPACIFIC to market other lines of products under same brand including make-up and products with specific functions including anti-aging and whitening.
As Korean influx is huge in China market, AMOREPACIFIC leverages the benefit to its maximum by using famous Korean superstars as models for its flagship brand (Laneige) and sponsoring Korean television set dramas shown in China and live concert events. However, As Chinese language people are known to be not reliant on advert on mass media and beauty products products are characterized that information on the products is commonly delivered by word-of-mouth through experience of family or friends, AMOREPACIFIC setup free booths that provide make-up service, free training and samples.
2. 2. 5. Evaluation of the International Strategy in China
Global Configuration
The main drive for access into China market is the market extension. As China market will surely bring larger volume to accomplish economy of range and its spillover result to other territories in Asia region will give further raise to AMOREPACIFIC's effort in those countries.
Although AMOREPACIFIC started out with high quality brand to produce a circumstance in China market, the largest portion of the marketplace section is the mass market with great demands for budget products. As AMOREPACIFIC has a line-up of products to cope with all those needs, with success from high grade brand, it can expand its efforts to advertise development into more everyday younger-customer targeted brands. However, throughout taking products in other portion, AMOREPACIFIC carefully must consider the probability of everyday brands adversely impacting the prime brand image to the clients. In this regard, AMOREPACIFIC might need to deploy differentiated marketing strategy, such as blinding the company name not to be named same company's brand and targeted advertising to specific group of customers (younger generation or low income customers).
Also, distribution programs other than department stores should be desired for differentiation. The brand retailers that offer variety of brands of beauty products can be totally utilized.
Global Coordination
Proximity to Korea can provide as an advantage for effective and productive coordination with local operation. However, major cities located all around the vast land will bring about new challenges to AMOREPACIFIC that have focused on market segments in smaller in size. For this case, AMOREPACIFIC must bring in local competence in logistics and will try to establish stable distribution programs.
During the launches of its first superior brand, the close monitoring and control by hq and local subsidiaries will need to have been unavoidable. However, to broaden into other portion (mass market and luxury market), it is necessary, to fine tune its strategy, to leverage the experienced local management by delegating more vitality for further autonomous procedure.
3. Suggestion for New Potential Market Strategy: India
Based on the analyses and assessments of AMOREPACIFC's international business strategy, India may be looked at as another potential marketplace because of its international reach. The suggestions for entry mode and marketing strategies for AMOREPACIFIC's entry into India are based on key success factors produced from the following market evaluation and SWOT research.
3. 1. Market Assessment
The Indian beauty products market grew by 9. 5% in '09 2009 to attain a value of $141. 6 million. In 2014, the Indian cosmetics market is likely to develop to $198. 7 million, which really is a 40. 3% increase from 2009.
India's Cosmetics market volume: million devices, 2005-09(e)
(Source: Make-Up Industry Profile: India, DataMonitor, May 2010)
Despite the development of the Indian cosmetics market, the scope of poverty in the country means that sales would come from only a small consumer platform. In this regard, the prospective market might need to focus on feminine professionals living in cities who are brand-conscious. As observed in the graph below, the beauty products market in India has already been dominated by the very best 3 global brands which take into account 68% of the total market show.
India's Makeup Market Show: % Talk about by Value, 2009(e)
(Source: Make-Up Industry Profile: India, DataMonitor, May 2010)
Another interesting observation is the marketplace segmentation of the cosmetics type. As seen in the below graph, lip make-up is the major section of the cosmetics market in India, accounting for 51. 2% of the full total market value.
India's Cosmetics Market Segmentation: % show, by value, 2009(e)
Also, Indian market has shown significant growth in the whitening products of 20% every year, making up 55% of total cream products.
3. 2. SWOT Analysis
Based on the aforementioned market analysis of India, AMOREPACIFIC's SWOT research can be carried out the following:
Strength
AMOREPACIFIC's strong management initiatives for globalization would give you a sound strategic decision process. As already proven in previous initiatives for globalization, the business retains competitiveness of its type of products. Furthermore, having less infrastructure of the India in conditions of syndication and sales channels would prove to be favorable for AMOREPACIFIC, because the Company retains a unique sales syndication of direct-sales approach, where salespersons privately visit door-to-door for marketing and sales.
Weakness
AMOREPACIFIC's relatively small existence in a limited variety of countries, as well as its poor brand image compared to global players would create challenge for the business in terms of creating its brand. Also, the lack of expertise in plastic products for dark complexions could be considered a weakness, considering the Indian populace.
Opportunities
Considering that the cosmetic makeup products industry typically has low-barriers to entry, AMOREPACIFIC has opportunities to quickly enter into the Indian market. Furthermore, the market expansion probable of India considering its population size and financial expansion would offer AMOREPACIFC to enhance its occurrence in the global market.
Threats
Considering the different culture and spiritual backdrop of Indian people, the necessity for decentralized management could warrant potential management problems with the Headquarters in Korea for potential misalignment in AMOREPACIFIC's globalization strategy.
3. 3. Accessibility Mode Recommendation: High Local Responsiveness Approach
In case of AMOREPACIFIC, its admittance mode to the Indian market should think about the uniqueness of the culture. India has a distinctive religion and also offers a strong history in their stratification system called Indian Solid system. In order to deal with such unique culture and history, AMOREPACIFIC would have to be highly responsive on the local culture.
Observations could be made for other situations where tries to permeate into India makeup products market with high amount of localization have been better off being successful in the India market. Hyundai Motors and LG Gadgets are a few of examples which were successful cases where localization have been an integral success element in entering the market. On the contrary, Samsung Electronics strategy to seek global efficiency has been enjoying relatively smaller success in India.
Considering that AMOREPACIFIC acquired no preceding experience in India, the business should create their entry function as be highly reactive on the neighborhood needs. Selecting local professionals and staffs who understand the Indian culture would also be very very important to the procedure of AMOREPACIFIC in India. Joint-venture strategy could also end up being a viable alternative for AMOREPACIFIC considering its less experience for customers with darker pores and skin tones. In addition, AMOREPACIFIC may utilize the friendly impression that Hyundai Motors and LG Gadgets are making on the brains of Indian people.
3. 4. ONLINE MARKETING STRATEGY Recommendation: Positioning, Circulation Channel
Brand positioning and distribution channel would be a very important decision point for entering a market. Being successfully positioned in the India market, AMOREPACIFIC should think about two factors. First, AMOREPACIFIC should position its products to compete with other internationally renowned brands to cope with the increasing brand-conscious consumers in India. Second, the Company might need to consider tighter margins to keep up cost competitiveness and capture market share against already founded brands.
Consequently, AMOREPACIFIC should use a high-end luxury brand strategy allocated in department stores and duty free outlets. This would permit AMOREPACIFIC build up a brand image of high-end quality cosmetic makeup products. And at exactly the same time, the business could utilize supplementary affordable mass-market brands to meet the average income consumers in India.
An interesting circulation route that AMOREPACIFIC could additionally setup in India is where that they had prevailed in Korea, which is immediate, face-to-face-sales methodology. As the transportation in India is underdeveloped, being able to visit consumers directly and offer quality services should be a great opportunity in joining the marketplace.
3. 5. Conclusion
Since its foundation in 1945, AMOREPACIFIC has been one of the dominant players in the domestic beauty products industry, with quality products which range from anti-aging alternatives and make-up products to personal maintenance systems such as shampoos, body cleansers, and toothpastes. With progressively more competitive local environment, AMOREPACIFIC has flipped its eyes to the global industry. With its eye-sight that "The World will know us as the 'Asian Beauty Creator', " AMOREPACIFIC has effectively proven its probable in France with its type of perfume products. Furthermore, AMOREPACIFIC required beneficial opportunity of the 'Korean Wave' to sell its products in China considering its ethnic similarities and has established a strong brand name.
As AMOREPACIFIC has ambitiously declared its goal to become a Global Top 10 cosmetic makeup products company, it requires to continuously seek opportunities overseas where it might utilize its core competencies to establish and reinforce its brand image while preserving a clear give attention to the mark market and customers.
