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Amorepacific: from Local to Global Beauty Case

In: Business and Management

Submitted By jkgiad
Words 12002
Pages 49
9-706-411
REV: NOVEMBER 21, 2006

PANKAJ GHEMAWAT
CARIN-ISABEL KNOOP
DAVID KIRON

AmorePacific: From Local to Global Beauty
In 2005, Suh Kyung-Bae, President and CEO of South Korean cosmetics company AmorePacific, surveyed a map in his office in downtown Seoul:
We have held off major multinational players, the L’Oréals and Estée Lauders, in Korea and are competing successfully with them around the world. We went to France, the Mecca of beauty products, and developed the #4 fragrance in that country, Lolita Lempicka. In China, our cosmetics line is sold in more than 100 department stores in 70 cities and business is finally growing. And we have opened a flagship spa in New York that is doing very well.
For 2004, AmorePacific reported 3,300 employees and sales of 1,272 billion Korean Won (KRW), equivalent to US$1,111 million. Cosmetics and toiletries generated four-fifths of sales (and green tea and health care the rest), placing the company among the top 30 worldwide. AmorePacific held a share of more than 30% of the Korean market for cosmetics, versus 8% for its leading local competitor, LG Household and Health Care, and 4% for L’Oréal, the world’s largest beauty products company and the leading multinational competitor in Korea.1
But although AmorePacific’s share of the Korean market had reached record levels and its overall operating margins of 15%+ ranked among the highest in the sector, its sales fell by 5% from 2003 to
2004—and its operating income by 7%—mostly because of the contraction and continued restructuring of the Korean market. International sales crossed KRW 100 billion (nearly $100 million) in 2004, after foreign direct investments of comparable magnitude, but continued to be unprofitable.
Could AmorePacific fulfill its vision of becoming one of the top-10 cosmetics companies in the world, with $4 billion in sales by 2015,...

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