AMOREPACIFIC International Business Strategy

1. Introduction

1. 1. Industry overview

Cosmetics

With low-barriers to entry, the competitive business environment of the beauty products industry requires companies to secure secure sales channels, and make great marketing efforts to distinguish its products. However, the makeup products industry is tightly related to the style industry which is continually changing and provide potential development opportunities. Consequently, aesthetic products routinely have short product life-cycles because which require mass-customization capabilities and production agility.

Personal Care

On the other hands, personal care products business is a relatively an adult industry. Also with a low-barrier to entry, the domestic market is currently saturated with competition. In addition, the introduction of large-scale discount stores and new sales networks has needed rapidly changing marketing and syndication channels. As a result, the home personal maintenance systems industry is concentrating on developing niche market segments by differentiating its product as offering higher quality and value.

1. 2. Summary of AMOREPACIFIC

AMOREPACIFIC Corporation ("AMOREPACIFIC" or "the business") aims to become global beauty company using its primary businesses in cosmetic makeup products and personal good care and health products. Founded in 1945 as a Pacific Chemical Company, AMOREPACIFIC Organization has been involved with beauty products.

With the corporate eye-sight of "THE ENTIRE WORLD will know us as the 'Asian Beauty Creator', " AMOREPACIFIC seeks to thrust the boundaries of traditional beauty with ground breaking solutions drawn from its wealthy Asian heritage. The Company also stresses the five prices: Openness, Invention, Proximity, Sincerity, and Obstacle to openly talk to its customers and employees, pursue impressive ideas and new concepts, maintain in physical form and psychologically near customers, fulfill obligations to society, and become passionate about conquering challenges.

The Company first began its export sales via OEM and also began to sell makeup products under its own brand "AMORE" in 1964. In 1990, the Company considered international market segments by establishing its first abroad subsidiary in France, accompanied by establishing its Shanghai and Chartres crops in 2002 and 2004, respectively.

In 2010, AMOREPACIFIC's sales come to KRW 2 trillion, with operating earnings of KRW 340 billion and world wide web revenue of KRW 285 billion. The Company maintains its number 1 player in the home market with a 34. 9% cosmetic makeup products market share this year 2010. In conditions of its overseas operations, the business has improved its sales in 2010 2010 by approximately 11% to KRW 335. 8 billion.

With its strong home position, the business is concentrating on sales and operating income progress of 10% in 2011 by creation of expansion markets. For each business segment, the business's Cosmetics Section is concentrating on securing competitiveness in the Asian markets through reinforcement of R&D activities to provide differentiated products and services. For the non-public maintenance systems business or "Mass Makeup products & Sulloc Department, " the Company is intention on strengthening domestic market competency by extension into high-functional products in major personal care categories.

2. International Business Strategy of AMOREPACIFIC's Plastic Products

AMOREPACIFIC aims to be a Global Top 10 beauty products company. While tapping on matured and developed marketplaces such as North America and Western Europe, AMOREPACIFIC is more concentrating on growing countries such as China and other Southeast Parts of asia.

To overcome the restrictions of the marketplace size and increasing degree of competition in the domestic market and attain economies of level through market expansion using its own type of competitive products, AMOREPACIFIC, utilizing its number one position in the domestic market, has been seeking to develop overseas market with in its efforts to gain occurrence and become an effective international player in a very competitive global cosmetics industry environment.

While the local market has been continuously growing credited to a rise in the number of professional business women who have brought about buying vitality of feminine customers, growing market conditions for high-function aesthetic products from the middle-class maturing population, as well as a growing demand from men for makeup products products, AMOREPACIFIC has been facing increasing competition from the home rivals and market penetration from global cosmetics companies. Nevertheless, AMOREPACIFIC has potential to be successful in international market taking into account following advantageous factors
  1. The quality and diversity of products of AMOREPACIFIC has reached the level to be competitive against global brands generally in most product lines.
  2. Experiences of highly competitive market in Korea enriched the Company with various competitive marketing strategies.
  3. Korea's cultural influx has created friendly needs of Korean beauty products among customers, especially in Asian market.

Globalization strategy of AMOREPACIFIC is mostly predicated on a multi-domestic strategy where international strategies take on differentiated approaches for every single regional market as divergent requirements for cosmetics products exist due to different degrees of industrial and monetary development for each and every country/region. Furthermore, benefits from standardization are less significant scheduled to segmented nature of cosmetics market even within the country/region and price functions in a different way for each and every customer segment and it is not usually the major factor for deciding purchase. Finally, since demand in overseas market for cosmetics are highly divergent and the business possesses the capability and resources to leverage with to meet those divergent demand, multi domestic strategy would be ideal for AMOREPACIFIC.

Based on such multi-domestic strategy, AMOREPACIFIC's globalization strategy assumes differentiated techniques for developed and expanding countries. For growing countries, AMOREPACIFIC aims for an early on market penetration, while, elevating image by concentrating on the prestige brand lines in developed markets. Two representative countries of AMOREPACIFIC (France and China) have been analyzed below to judge its international strategy in each country contrasting AMOREPACIFIC's strategies in each particular country.

2. 1. Development into the France Market

2. 1. 1. Market Penetration with Lolita Lempicka

France has long been renowned as the administrative centre of plastic industry and fashion. AMOREPACIFIC started out to permeate the France Market with the Lolita Lempicka Perfume from 1997. In 1997, the Lolita Lempicka Perfume received all the most notable honours at the French FIFI Honor for best women's fragrance, best men's fragrance, and perfume design. AMOREPACIFIC released Lolita Lempicka L in 2006 and released Si Lolita Lempicka in '09 2009. Together with the success in France, Lolita Lempicka products are now available for sale in over 100 countries worldwide

2. 1. 2. Rationale

France is considered one of the biggest markets of makeup products products and pattern leader of fashion and beauty goods and the market of competition for global makeup products manufacturing companies. Experiences and reputation in France market can result in an development in developed marketplaces including the U. S. where the AMOREPACIFIC would consider as major market for development.

2. 1. 3. Entry Mode Selection

Notwithstanding the risky of failure, AMOREPACIFIC decided to penetrate the France market via direct ownership to establish proper position as a flagship business in the developed market. With such high level of determination and resourcing from the head office, the Company appointed local management with entrepreneurial spirits to experiment with new brand and new strategy. AMOREPACIFIC recognized that its accessibility mode in to the France Market was necessary in order to deploy local talents which would permit development into adjacent high-end Western european markets once tactical position is made.

2. 1. 4. Marketing and HR Strategy in France

Abandoning nationality and company subject to beat the stereotype against Asian plastic brands, AMOREPACIFIC teamed up with local marketing agents, manufacturers and vendors.

As a newcomer to the market, AMOREPACIFIC differentiated its way by naming its brand after young local developer to target customers pursuing up-to-date trends of unisex setting and strong fragrance. Also limited immediate distribution stations have been employed for distribution and advert is delivered through only high-end fashion magazines targeting customers in their twenties and thirties as well as models and designers. As is important to the makeup products to be acknowledged by word-of-mouth, advertising activities are focused in providing samples to stars and influential group of people. Through selecting entrepreneurial local experts in marketing of beauty products, AMOREPACIFIC could up grade its marketing expertise in luxury/high quality market one notch above.

2. 1. 5. Analysis of the International Strategy in France

Global Configuration

The Company's entry to the France Market was not powered by cost differences or economies of range, but it alternatively served the purpose to make a case for experiments in the main market. Along with the successful launch of the Lolita Lempicka brand in France by leveraging the local expertise and blinding nationality and company name, other high-end brand can be joined into the market using the distribution channels anchored through perfume business. Furthermore, AMOREPACIFIC may consider presenting other more competitive superior brands in the market through large scale international makeup franchise stores such as Sephora.

Global Coordination

Learning the effects from highly autonomous management of local subsidiaries and copy of such knowledge to other developed market strategy (e. g. , U. S. ) is likely to benefit the business through global networking. Although it is unavoidable to touch on developed market to notch up brand popularity level, considering the Company's ultimate goal of globalization to expand its market, targeting developed countries would cause limited volume progress at least in the mid-term as we're able to see from the financial results of France market which was out of red first-time in 2010 2010 since its launch in 1997.

2. 2. China Market Expansion

2. 2. 1. China Market Analysis

The volume of makeup sales in China is still explosive and has high potential to expansion (Yearly cosmetics intake of $13 per person in comparison to $50 in global average). China Market is well stratified according to products which are in line with development phases of different areas (eastern seaside and western inland). They comprise of all four major segmentation including top luxury market, high quality market, middle market and mass market.

In China, the beauty products market is not dominated by one or a few major manufacturers yet and appropriately, market penetration is relatively easy. In comparison to use of make-up products, your skin care products are dominating in market, and since Koreans have similar skin type as Chinese customers, the Company can hold strong competitive position up against the multinational competitors. With an increase of level of cash flow, demand for high quality brands is also likely to grow significantly.

2. 2. 2. Rationale

With Korean market being saturated, the high expansion potential China market is apparently the next logical choice for AMOREPACIFIC. The Company is able to fully leverage the beneficial impact of Korean ethnical influx in China. Although the business has moved into other Asian countries in tandem with China market, the growth and experience in China market can provide the business with boosting capacity to grow further into other Asian countries. Also, the proximity to Korean market and similar cultural background can give the Company competitive border against other multinational manufacturers.

2. 2. 3. Admittance mode selection

The Company entered into China market through direct investment since 2002. Your choice to enter into China in a form of immediate investment was primarily due to the potential risks other global and local companies' possibly increasing foothold in China. THE BUSINESS needed to stay in competitive position by internalizing technical benefit and products quality while local brands are growing in fast rate. As competition has already been intensified in China market, higher level of determination of resources from head office is necessary for sustainable progress in China market.

2. 2. 4. Marketing and HR strategy in China

As the business is the owner of line-ups of products for all those segmented market segments, success in a single 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 promote 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 power to its maximum by using famous Korean stars as models because of its flagship brand (Laneige) and sponsoring Korean television dramas shown in China and concert events. However, As Chinese language people are known to be not reliant on advertising campaign on marketing and makeup products products are characterized that information on the products is commonly sent by word-of-mouth through encounters of family or friends, AMOREPACIFIC set up free booths offering make-up service, free lessons and samples.

2. 2. 5. Evaluation of the International Strategy in China

Global Configuration

The main drive for entry into China market is the market enlargement. As China market will surely bring much larger volume to accomplish economy of scale and its spillover effect to other territories in Asia region will give further raise to AMOREPACIFIC's work in those countries.

Although AMOREPACIFIC started out with top quality brand to produce a case in China market, the largest portion of the marketplace segment is the mass market with great demands for budget products. As AMOREPACIFIC has a line-up of products to cope with all those demands, with success from top quality brand, it can increase its efforts to advertise enlargement into more everyday younger-customer targeted brands. However, throughout providing products in other section, AMOREPACIFIC carefully must consider the probability of informal brands adversely affecting the high grade brand image to the customers. In this respect, AMOREPACIFIC may need to deploy differentiated marketing way, such as blinding the company name never to be named same company's brand and targeted campaign to specific group of customers (younger generation or lower income customers).

Also, distribution channels other than department stores should be searched for for differentiation. The brand outlets that offer variety of brands of cosmetic makeup products can be fully utilized.

Global Coordination

Proximity to Korea can serve as an edge for effective and efficient coordination with local operation. However, major locations located all around the vast land provides about new issues to AMOREPACIFIC that have focused on marketplaces in smaller in size. For this case, AMOREPACIFIC needs to generate local know-how in logistics and will try to establish stable distribution stations.

During the launches of its first top quality brand, the close monitoring and control by head office and local subsidiaries will need to have been unavoidable. However, to expand into other segment (mass market and luxury market), it is necessary, to fine tune its strategy, to leverage the experienced local management by delegating more power for additional autonomous operation.

3. Advice for New Potential Market Strategy: India

Based on the analyses and evaluations of AMOREPACIFC's international business strategy, India may be looked at as the next potential target market because of its international reach. The tips for entry function and marketing strategies for AMOREPACIFIC's entrance into India are based on key success factors produced from the next market assessment and SWOT examination.

3. 1. Market Assessment

The Indian cosmetic makeup products market grew by 9. 5% in '09 2009 to reach a value of $141. 6 million. In 2014, the Indian beauty products market is likely to increase to $198. 7 million, which really is a 40. 3% increase from 2009.

India's Cosmetic makeup products market level: million models, 2005-09(e)

Despite the growth of the Indian makeup products market, the extent of poverty in the united states means that sales would come from only a little consumer bottom part. In this respect, the prospective market might need to focus on feminine professionals moving into urban areas who are brand-conscious. As seen in the graph below, the makeup market in India has already been dominated by the most notable 3 global brands which account for 68% of the full total market share.

India's Beauty products Market Show: % Talk about by Value, 2009(e)

Another interesting observation is the market segmentation of the cosmetic makeup products type. As observed in the below chart, lip make-up is the major portion of the beauty products market in India, accounting for 51. 2% of the total market value

India's Cosmetics Market Segmentation: % show, by value, 2009(e)

Also, Indian market has shown significant development in the whitening products of 20% each year, making up 55% of total cream products.

3. 2. SWOT Analysis

Based on the above market analysis of India, AMOREPACIFIC's SWOT evaluation can be performed the following

Strength

AMOREPACIFIC's strong management initiatives for globalization would provide a sound proper decision process. As already proven in preceding initiatives for globalization, the business keeps competitiveness of its type of products. In addition, having less infrastructure of the India in conditions of circulation and sales programs would end up being advantageous for AMOREPACIFIC, because the Company retains a distinctive sales circulation of direct-sales approach, where salespersons professionally visit door-to-door for marketing and sales.

Weakness

AMOREPACIFIC's relatively small occurrence in a limited quantity of countries, as well as its weak brand image in comparison to global players would create challenge for the business in terms of creating its brand. Also, having less expertise in plastic products for dark complexions could be considered a weakness, taking into consideration the Indian people.

Opportunities

Considering that the makeup products industry typically has low-barriers to entry, AMOREPACIFIC has opportunities to quickly enter into the Indian market. Furthermore, the market progress probable of India considering its inhabitants size and economic development would offer AMOREPACIFC to enhance its existence in the global market.

Threats

Considering the several culture and spiritual track record of Indian people, the need for decentralized management could warrant potential management issues with the Head office in Korea for potential misalignment in AMOREPACIFIC's globalization strategy.

3. 3. Entrance Mode Advice: High Local Responsiveness Approach

In circumstance of AMOREPACIFIC, its accessibility method to the Indian market should consider the uniqueness of the culture. India has a distinctive religion and also offers a strong record in their stratification system named Indian Ensemble system. To be able to manage such unique culture and history, AMOREPACIFIC would have to be highly reactive on the local culture.

Observations could be produced for other cases where efforts to penetrate into India cosmetics market with high degree of localization had been better off being successful in the India market. Hyundai Motors and LG Electronics are some of examples which were successful circumstances where localization have been a key success factor in entering the market. On the contrary, Samsung Electronics technique to seek global efficiency has been enjoying relatively smaller success in India.

Considering that AMOREPACIFIC had no prior experience in India, the Company should create their entry method as be highly responsive on the neighborhood needs. Employing local managers and staffs who understand the Indian culture would also be very important for the procedure of AMOREPACIFIC in India. Joint-venture strategy may also prove to be a viable alternative for AMOREPACIFIC considering its less skills for customers with darker pores and skin tones. Furthermore, AMOREPACIFIC may utilize the friendly impression that Hyundai Motors and LG Consumer electronics are making on the heads of Indian people.

3. 4. ONLINE MARKETING STRATEGY Recommendation: Positioning, Syndication Channel

Brand positioning and distribution channel will be a very important decision point for stepping into a market. To become successfully situated in the India market, AMOREPACIFIC should consider two factors. First, AMOREPACIFIC should position its products to contend with other internationally renowned brands to handle the increasing brand-conscious consumers in India. Second, the business might need to consider tighter margins to keep up cost competitiveness and take market show against already established brands.

Consequently, AMOREPACIFIC should use a high-end luxury brand strategy sent out in shops and duty free retailers. This would enable AMOREPACIFIC build-up a brand image of high-end quality beauty products. And at the same time, the business could utilize secondary affordable mass-market brands to meet up with the average income consumers in India.

An interesting syndication channel that AMOREPACIFIC could on top of that create in India is where that they had prevailed in Korea, which is direct, face-to-face-sales way. As the travel in India is underdeveloped, having the ability to visit consumers directly and provide quality services should be a great opportunity in getting into the market.

3. 5. Conclusion

Since its basis in 1945, AMOREPACIFIC has been one of the dominant players in the home cosmetic makeup products industry, with quality products ranging from anti-aging solutions and make-up products to personal care products such as shampoos, body cleansers, and toothpastes. With increasingly competitive domestic environment, AMOREPACIFIC has converted its sight to the global area. With its vision that "The World will know us as the 'Asian Beauty Creator', " AMOREPACIFIC has successfully proven its probable in France with its line of perfume products. Furthermore, AMOREPACIFIC got favorable 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 announced its goal to become a Global Top 10 10 beauty products company, it requires to consistently seek opportunities abroad where it could utilize its central competencies to establish and bolster its brand image while maintaining a clear focus on the mark market and customers.

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