AmorePacific Paper

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AmorePacific Paper

In 2004, AmorePacific held a share of more than 30 percent of the Korean cosmetics market. Its
largest international competitor, L'Oréal, poses a threat to the expansion and profitability of
Amore Pacific's market. Moreover, due to contraction and restructuring of the Korean market,
the company's sales reduced dramatically from 2003 to 2004. Although AmorePacific's
international sales remained steady during this period, they were not profitable. Owing to
globalization and stiff competition, AmorePacific ought to increase its international presence to
maintain its dominance in the cosmetics market. L'Oréal's expansion of its market in Asia by
acquiring Chinese franchises, Mininurse and Yue-Sai, pushed AmorePacific into taking
mitigatory measures. This paper analyses the essence of inorganic growth for AmorePacific,
qualitative and quantitative characteristics of potential partners to the company, and proper
evaluation routes for partner companies.

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 1. Where would you advise Suh Kyung-Bae to focus?

The three major regions in the fashion and cosmetics world are; Europe, Asia, and the United
States. Specifically, the U.S. is the largest fashion provider, followed by Japan and France with
L'Oréal as its leading exporter. Before Suh Kyung-Bae, the C.E.O of AmorePacific makes a
decision on globalization techniques, he should analyze the steps taken by significant
competitors. L'Oréal not only acquired market in China, one of AmorePacific's buyers, but also
has a footing in Korea. As stated in the case study, L'Oréal has a 4 to 5 percent hold in the
Korean cosmetics industry through its low-priced brand, Maybelline (Ghemawat, Knoop, &
Kiron, 2006). After its acquisition of Mininurse and Yue-Sai, the company exhibited its
dominance in the Asian market, which is AmorePacific's territory. However, statistics show that
after merging or acquisitions, many Chinese brands lose their popularity after purchase (CPC
News, 2011). Furthermore, Yue-Sai is a Chinese-only franchise, hence would not gain
international recognition.

Since Asians appreciate more natural looking cosmetics such as pale white looking skin and coal
black hair, that AmorePacific provides, L'Oréal's brands may stagger in the Asian market
(Ghemawat, Knoop, & Kiron, 2006). Suh Kyung-Bae could take advantage of L'Oréal's
weakness and penetrate the Chinese market. However, to grow internationally, Suh must
diversify AmorePacific's market to L'Oréal's territory to create a healthy competition. Therefore,
AmorePacific should pursue inorganic growth in France. Inorganic growth comes from mergers
or takeovers rather than a company's sales. Compared to organic growth, companies obtain faster
results through this method. Since L'Oréal invaded the Asian market, AmorePacific should
merger with a strong cosmetics company in France to increase its brand recognition.

2. What are the qualitative and quantitative characteristics of the companies Suh Kyung-
Bae should target?

Suh needs to evaluate the qualitative and quantitative characteristics of its target companies. For
instance, the French business, Yves Saint Laurent, is well known for its diverse classes of
fashionwear and cosmetics. It has a large portfolio I n various items such as shoes and
accessories. Moreover, the company has a strong presence of seventy stores in three continents.
The SWOT analysis states that through its acquisition of Gucci, Yves Sint Laurent increased its
international dominance (Bhasin, 2019). The company shows signs of rapid expansion and
promise. Therefore, Yves Saint Laurent fulfills all the qualitative requirements because it
contains recognition and has branding and marketing positioning in major markets. Due to its
iconic and timeless styles, Yves Saint Laurent makes significant profits and revenues of
approximately 2.05 billion euros annually (O'Connell, 2020). A merger with Yves Saint Laurent
would not only ensure AmorePacific's dominance in France by the entire Europe. Also, since
Yves Saint Laurent has footing in the U.S. because of Gucci, Suh's company would become a
global sensation.

In the current years, the Korean and generally Asian people have a higher purchasing power than
most Continents. A merger with AmorePacific would also significantly increase Yves Saint
Laurent's profit. AmorePacific should also take a que from its global competitors and emulate
their strategies. Such strategies include brand extensions, new products, acquisitions, and

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 narrower segments. Since Asian markets are more focused on skincare than fragrances,
AmorePacific should increase their brand categories to successfully penetrate global markets.

3. What could Suh Kyung-Bae do to better evaluate where and which company to acquire?

The AAA framework assists in the successful evaluation of which region and company to
acquire. The framework uses aggregation, arbitrage, and adaptation to help explain market
penetration. Suh should Adapt to the European culture to meet the market's local preferences in
cosmetics. AmorePacific, having worked with Coty and other French brand, will not be new to
the French market. Since it has some experience on French preferences, like the need for skin
cleansers and creams for sensitive skins, AmorePacific would easily adapt to the French market.
The second A, arbitrage, focuses on exploiting national differences. Cultural arbitrage, for
instance, dictates that association with the French culture breeds international success in fashion,
foods, wine, and fragrances (Peng, 2013). Therefore, French would inadvertently reduce Amore
Pacific's risks, costs, and increase the company's performance and profit. Aggregation is the third
A and it focuses on standardization of prices to create economies of scope or scale. The
framework exploits similarities in geographies rather than adapting to a country's preferences.
AmorePacific could centralize its global production in strategic locations both in France and
Korea. After, the company could then expand to other regions and continents. Moreover, they
could change their branding strategy from product to global branding.

Using the CAGE framework, Suh could determine which market to target by analyzing legal,
administrative, economic and cultural frameworks. For instance, factors such as language,
ethnicity, political, and religious differences may factor into gaining dominance and consumer
trust in France. Also, understanding trading blocks or bias in markets may help AmorePacific
navigate the European market. Finding a middle ground where both countries benefit in business
is imperative in Suh's success (Peng, 2013). The Four I's also guides a business on the essential
factors in international non-market environments. The first I, issues, evaluates factors such as the
buying power and marker=ting expenditures in foreign nations. Institutions such as political
legislations, public sentiment, and news media would also help in AmorePacific's advertisement
(Peng, 2013). Suh should also understand the interests and needs of the French market and obtain
information on factors like causes of price differences, inflation, and consumer incentives.

AmorePacific aspires to become a world-class company. Its flexibility and ability to mix Eastern
and Western needs in its brands increases its competitive edge. Therefore, to gain an equal
competitive standing as L'Oréal, Suh must ensure successful penetration into the European
market. Yves Saint Laurent is an imperative pathway in AmorePacific's globalization.

References

Bhasin, H. (2019). What is the CAGE framework? Marketing91. Retrieved from

https://www.marketing91.com/tag/marketing-strategy/.

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 CPC News. (2011). Skincare brand Mininurse
dissolves inside Chinese market after L'Oréal
acquisition. Retrieved from
http://en.people.cn/90001/90778/7262332.htm
l.
Ghemawat, P., Knoop, C., & Kiron, D.
(2006). AmorePacific: From local to global
beauty. Harvard Business School, 706 (411):
1-27.
O'Connell, L. (2020). SWOT Analysis of Yves
Saint Laurent. Marketing91. Retrieved from
https://www.marketing91.com/swot-analysis-
of-yves-saint-laurent/.
Peng, M. (2013). Global Strategy. Boston,
MA: Cengage Learning

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