The new challenges of Amore Pacific

By; Leonardo Geraldino

Korean cosmetics market in 2005 was around 3,900 million, representing an increase of 3%
compared to the previous year's figures. With these figures Korea ranks as the third largest
cosmetics market in Asia, after China and Japan , and between the eighth and tenth worldwide.

The Korean cosmetics market thrives in 86'5 % of domestic production , not in vain Korea has
about 420 cosmetics manufacturers. The major cosmetic companies the country are Amore
Pacific , LG Household & Health Care , The FACE Shop, Missha and Korean which together
accounted for 53 % of the national market. In this domain the local market, business strategies
of these companies are now heading to the internationalization of their products , opening
branches and franchises in third countries, mainly in Southeast Asia. Korea currently exports
7.7 % of national production.

Imports of cosmetics in 2005 totaled $ 664 million , presenting an increase of 9 % over the
previous year figures . Most products imported correspond to high-end cosmetics from major
international firms ,mainly Japanese , American and French.

New strategic path Amore Pacific

1. Which country can offer the highest returns to additional investments of resources ,
management attention and emphasis? and Where , if all could reduce the commitment of
resources?

So far China has the highest return and also has a very large projection , since it is currently the
largest country in which AmorePacific entered . Another aspect which is that China is the
country with a projected further growth. On the other hand the purchasing power of the country
has also grown , and we know that in an economy where this power grows spendest women
start these goods .

A more Chinese market is one that works more like the way South Korea , but noticed in the
case that you cannot enter a market feeling that is going to make me like income. The Chinese
market also has the advantage that it can take advantage of economies of scale and proximity
to Korea, these factors reduce costs. These factors plus the fact that this market is growing, are
the factors which show that China is the most promising market.

2 What should be concern about the different ways to approach they had in the three largest
countries, regions ? THE Chinese market was addressed from the bottom up. USA from the top
down, maintaining the presence in the lower segments . The expansion in France / Europe
became segmenting the Premium group , but local brands rather than a Korean .

The first thing to keep in mind is that the company initially failed to expand properly, since I did
not consider differences in the market with which addressed , remember the problems faced
when entering France, the biggest mistake was entering this market, which is the guru on the
subject, with a brand name in Korean, after a he understood time and adjust its strategy to the
work culture by hiring local workforce and hiding the real source of the Lolita Lempicka brand
The cosmetics industry in China

The cosmetics industry in China is the fourth in terms of economic transactions in business in
China, only surpassed by the real estate, automotive and tourism. In recent years it has grown
to be the second largest in Asia, behind Japan and the seventh in the world. It is growing,
relying mainly on increasing disposable income and rising middle class, as well as changing
lifestyles, which makes pay more attention to your image.

The profile of consumers of cosmetics in China

As is logical , is not the same type of market rural than urban , as it is a series of products that
are not necessities. It is in the cities of the east where a mature market is located, with a large
customer base and has already spent several years using these products, so they are familiar
with them . In these areas the best-selling cosmetics are large multinational, offering a product
with an important technological component of quality and a strong brand image. It is in rural
areas or cities of second order where local companies face concentrated to provide a basic and
affordable product .Furthermore, according to the latest data provided by Euromonitor
International, the largest consumers of cosmetics in China are between 21 and 40 years
( approximately 70 %).

The Chinese people also likes to go to beauty salons and spas, and is estimated between 1.2
and 2 million such establishments across the country . Usually these places have loyalty cards ,
so that every time the Chinese come over to these sites and are encouraging the emergence of
franchise chains .

What should be the strategy to enter a new market ?

To enter new markets Mergers and acquisitions is the most appropriate strategy for Amore
Pacific, with this achieved its objectives of promoting long-term growth. The objective of the
merger or acquisition of another company is to create a new entity with more competitive force.
the management teams should look to grow faster and achieve greater profitability than
independent companies could achieve on their own.

The transfer of knowledge and technology should be structured in market knowledge and
recruitment of local labor.

Geographic expansion

Building a brand presence in a particular geographic area requires the expenditure of human
and financial resources and enter a market at the right time. The acquisition of an existing
company with a strong presence in a region allows the companies making the acquisition
accelerate the process of market entry. They have prepared a composite system of distribution
and customer base.

Increased efficiency, reduced costs

The combination of two companies can allow both to reduce operating costs. Administrative
tasks, such as processing of accounting data or functions can be shared, allowing total staffing
levels are reduced in the combined entity. Productivity gains can be achieved as well. Suppose
company A has an unusual ability to manufacture, but Company B has more orders than it can
fill its existing manufacturing facilities. The combined entity would have improved gross margins,
low average cost per unit of production and increased income to be able to fulfill orders.
Conclusion;

Mergers of local companies, Hiring of local labor, technology transfer, product presence in major
department stores. and product development through the research center should be the
cornerstones of Amore Pacific's expansion to other countries