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  • Subject area(s): Marketing
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  • Published on: 14th September 2019
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  • Number of pages: 2

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In the 19th century, cosmetic development was made easier due to the ability to replace natural substances with chemicals. This caused the global market to rapidly expand and by 2004 the industry was worth $150 billion. Three major regions accounted for 90% of the revenues: Europe (41%), Asia-Pacific (27%), and the United States (22%). By 2009, The global personal care market was expected to reach $180 billion, meaning the global market allows for immense room for growth, as it was growing faster than global GDP. In Western Europe and North America product standardization is high. Whereas, in Asia there are vast variations in income, openness to imports, temperature, and ethnicity, making products difficult to standardize.

Common customer needs and tastes   


Many firms have expanded into global markets, as global concentration has increased in most beauty product categories. These firms have intended to reach more global markets with increasing intensity. L'Oreal has a 10% share of the global market, P&G 9%, Estee Lauder 4%, Unilever 8%, and Shiseido 3%. Each of these companies created extensive product lines on a global scale ranging from luxury products, mass market goods, and discount offerings. Many of the competitors increased their global expansion through brand extensions, new product launches, acquisitions, and brand marketing.

Competitors globalized


Improvements in distribution channels for cosmetics provide favorable logistics that drive globalization of the industry. These improvements allowed for more access to products as well as raised consumer awareness about affordable cosmetics. Many companies utilize the “door-to-door” channel in emerging markets. These firms will enlist ordinary women to sell their products, which enables the firm to reach even the most remote areas. For example, in Korea from 1996 to 2003, average door-to-door sales by person increased from 210 to 1,079 in KRW billion. (Exhibit 5) As the markets develop, firms relied increasingly on large-scale supermarkets, hypermarkets, and discounter stores, which intensified price competition. In Korea Total Mass Market sales increased from 1,692 to 2,184 KRW billion between 1996 and 2003 and Department Store sales increased from 202 to 968 KRW billion over the same period of time. (Exhibit 5) If firms take advantage of these improving distribution channels, they will eventually have economies of scale, which will ultimately decrease costs and increase probability of global success.

Favorable logistics

Questions #2

AmorePacific was successful because of its streamlined operations, quick launch of three new brands, increased R&D, successful marketing, refocusing of distribution channels, and modernized firm infrastructure. AmorePacific manufactured all of its products itself, aside from some imports to which they had domestic selling rights. Additionally, they were vertically integrated because of their early mover advantage, which increased capital intensity. The company also implemented programs in order to ensure streamlined operations and efficiency that added the equivalent of 2% of revenues between 2001-2004. AmorePacific targeted higher price points by launching three products, Hera, Iope, and Sulwhasoo. that ultimately became megabrands. The company increased R&D to 3% of sales by 2004, which led to over 1,000 domestic and international patents. Additionally, this R&D enabled AmorePacific to employ more researchers than their Korean competitors. The company took advantage of the “Buy Korean” wave and targeted women over 35 who were high end department store shoppers as well as door-to-door customers. AmorePacific increased advertising to 7% of domestic sales but targeted this advertising for certain products. 60% of advertising was reserved for products found in specialty and discount stores. The company decreased its television advertising and instead focused on print and new media channels. AmorePacific strengthened its distribution relationships by realigning with these channels and also focused on the door-to-door channels, which accounted for an 84% share of total retail revenues in 2005. Finally, the firm moved to upgrade its infrastructure by modernizing management, infrastructure, and human resources. Some of AmorePacific's major efforts were emphasizing value-based management, corporate transparency, and a policy of hiring more women.

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