Amore Pacific: Reasons for Success
In 1945, Amore Pacific Corporation began operations as a Pacific Chemical Company, during which time it was involved in the manufacturing of beauty products. AMOREPACIFIC Corporation is working toward the goal of becoming a beauty company that has a global presence. The company is especially successful in the areas of personal care products, cosmetics, and health products. The most important contributors to successful outcomes are summarized as follows:
Operational Excellence
AmorePacific possesses the rights to sell domestically its manufactured products in addition to the limited number of foreign brands that it imports. AmorePacific initiated programs focusing on total cost reduction and the whole creative revolution in order to maximize the effectiveness of its capital. These programs have resulted in savings and revenues that are equivalent to 2% of the annual total (AmorePacific, 2012).
Focus on New Product Development
This was the most critical and visible success factor of the corporation’s repositioning, and it was also the factor that had the most influence. The most important products on the Korean market were Sulwhasoo (introduced in 1997), Iope (in 1996), and Hera (in 1995), all of which were introduced by the company in the years 1995, 1996, and 1996 respectively. The introduction of these products aimed for higher prices while still operating in a variety of ways. Iope, for example, was in the line of masstige cosmeceuticals, which caused it to sell at relatively higher costs through channels mass-market, while Hera was the prestige of upper and middle-price brand whose customers were predominantly young women, and Sulwhasoo was the super-prestige, herbal-medicinal brand that went for high prices and was primarily intended for older women. In 2004, Sulwhasoo established itself as the most successful cosmetics and toiletries brand in Korea, holding approximately 6% of the retail share.
Sensible Marketing with Traditional Values
The marketing success of Sulwhasoo as a luxury brand reflects not only its appeal function based on the Korean-Chinese herbal medicine tradition but also a range of choices of the market including the packaging in elegant jars, influenced by Skirts of Korean culture, and painted in traditional colors meant primarily for the women who are 35 years old as the primary target market. As an illustration, AMOREPACIFIC had a total revenue of 2 trillion Korean Won in 2010, a total operating profit of 340 billion Korean Won, and a total net earnings amount of 285 billion Korean Won. Based on this projection, the company is now the leading player in the domestic market for cosmetics, holding a share of 34.9% of the market. AmorePacific’s sales from its international operations increased by approximately 11% in 2010, reaching a total of KRW 335.8 billion (AmorePacific, 2012). Because of this powerful position in the domestic market, the company was able to achieve a 10% increase in both its target sales and operating profits in 2011.
Expertise in Distribution
The repositioning of AmorePacific entails a number of realignments of overdue relationships in the distribution of their products. The company operates close to two hundred stores ranging from small to medium to large, and Hera and Sulwhasoo are employed as negotiation strategies in some of these locations. In addition, the company has introduced single-brand counters or booths as a means of facilitating its practice of engaging in sales of multiple brands (AmorePacific, 2012).
Company Infrastructure as an Asset
The company made great strides toward the adoption of value-based management, which has resulted in increased women’s friendliness within the company as well as increased corporate transparency toward its workforce, of which 53% are female (AmorePacific, 2012).
Targeting the Korean Beauty Market
The Product Market Fit for Amore Pacific was exceptionally good for Korean Market. As a result, Amore Pacific found it thriving and doing really well in the beauty market in Korea. Simultaneously, there was also acceptance of Korean beauty and flawless skin in the Global markets. Amore Pacific could well target the same for future expansion
The Original Case Amore Pacific: From Local to Global Beauty Can be Found here
Amore Pacific: Countries to Expand
| CAGE ANALYSIS | CULTURAL DISTANCE | GEOGRAPHIC DISTANCE | ADMINISTRATIVE DISTANCE | GEOGRAPHIC DISTANCE |
| FRANCE | Because of their distinctive cultural orientations, Koreans and French people each have their own unique conception of what constitutes physical beauty. For example, AmorePacific saw lower-than-anticipated sales of its products in France, which prompted the company to bring on Dauphin Catherine, a veteran of the cosmetics and perfume industry in France, to work on the company’s product development. Catherine is from France. Additionally, there was reluctance on the market in France to purchase cosmetics products originating from Korea. | In terms of the literal distance that separates one country from another, South Korea and France are separated by 9,407 kilometers. In addition, there is no land border between the two countries of France and South Korea. Last but not least, the time difference between South Korea and France made it difficult for the product to adjust to the conditions of the local market. As a consequence, the product did not achieve the same level of success in the French market. | South Korea and France both operate under different legal systems and use different currencies; they do not have any common colonial ties. Because of this, there is a barrier caused by language, and additionally, the two nations do not belong to the same regional trading block. | It is widely acknowledged that France is one of the most developed markets for cosmetics. It is the location of almost all of the world’s most well-known cosmetic brands, including L’Oréal. |
| CHINA | There is a strong cultural connection between China and South Korea, which results in a high degree of affinity between the two countries. Both of their cultures have their roots in East Asia, which explains the striking similarities between their approaches to work. They also have a great deal of heritage in common and a recent history that is very similar, in which both of their countries rose from the depths of extreme poverty to become one of the most industrialized regions in the world. | China and South Korea are going to get very close to one another. They are separated from one another geographically by the Yellow River and the Amarok River. | Since the 1980s, South Korea and China have maintained close market ties, which has resulted in nearly 195% – 300% trade-offs on cosmetics. Additionally, both South Korea and China prohibit foreign direct investment, and both countries have sales of cosmetics. The rule of door-to-door business. | Both of these economies are major players on the global stage. The Chinese government provides significant assistance to domestic businesses, in contrast to the Korean government, which encouraged the growth of state-owned monopolies known as chaebols, which dominated the export of Korean goods globally |
| US | Both the United States of America and South Korea is home to a variety of linguistic and cultural subgroups. In addition to this, the two nations adhere to different standards and norms, and lastly, each country operates under a distinct national labor system. | The United States of America and South Korea are separated by a total of 10,766 kilometers. Both Korea and the United States do not share a land border, and their respective time zones are distinct from one another. | South Korea and the United States do not share a regional trading block, a legal system, or a currency; different colonies colonized both countries; and, finally, South Korea and the United States do not share a common legal system or currency. | There is a wide range of consumer incomes in both the United States and Korea. The economic size of Amore Pacific in Korea is greater than its commercial size in the United States. Lastly, both the United States and Korea have a wide variety of resources that are available to them. |
Conclusion
It might be prudent for Amore Pacific to consider the CAGE Framework before expanding. The CAGE Framework will therefore allow Amore Pacific to stay focused on its core competencies before launching fully in any country. In our opinion, Amore Pacific should expand to either China or Europe rather than to the USA.
Reasons for Amore Pacific to Consider China
- Geographical Proximity
- Better Distribution Network
- Cultural Similarity
Reasons for Amore Pacific to consider France
- Better Talent attraction
- It is a hub for cosmetic Business
Whatever might be the case, Amore Pacific will have to think and consider all the options.
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Samrat is a Delhi-based MBA from the Indian Institute of Management. He is a Strategy, AI, and Marketing Enthusiast and passionately writes about core and emerging topics in Management studies. Reach out to his LinkedIn for a discussion or follow his Quora Page