amorepacific : “france expedition" group 4 suah sirh sibylle scherrer francis dufay thomas...

AmorePacific :“France Expedition"

Group 4

Suah SIRHSibylle SCHERRERFrancis DUFAYThomas HUDE

1.1. About AmorePacificAbout AmorePacific1.1. AmorePacific KoreaAmorePacific Korea2.2. Europe S.AEurope S.A

2.2. Faced Problems in Early AgeFaced Problems in Early Age1.1. Why AP came to FranceWhy AP came to France2.2. ProblemsProblems3.3. Putting a Multicultural Manager Putting a Multicultural Manager 4.4. Solutions and SuccessSolutions and Success

3.3. France Attractivity France Attractivity 1.1. BenefitsBenefits2.2. ConstraintsConstraints3.3. Advise from AmorePacificAdvise from AmorePacific

4.4. Our ConclusionOur Conclusion

About AP Problems Attractivity

3/24<Best in France>, Fall 2006

Conclusion

AmorePacific Co.

About AP

VisionVisionVisionVision

EmployeesEmployeesEmployeesEmployees

BrandsBrandsBrandsBrands

DescriptionDescriptionDescriptionDescription

• Suh Kyungbae (Korean)

• World‘s top 10 cosmetics companies by 2015

• Seoul: Headquarter• 9 overseas subsidiaries

• Korean provider of cosmetics (78%), personal care (16%), and healthcare products (6%)

CEOCEOCEOCEO

PlacePlacePlacePlace

• 3000

• Revenue: 1 Billion €• Profit: 122 Million €

Korea90

Unit:%France 6

Key Figures

Others 4



Conclusion

Europe S.A. - Overview

CEOCEOCEOCEO

EmployeesEmployeesEmployeesEmployees

PlacePlacePlacePlace

DirectDirectInvestmentInvestment

DirectDirectInvestmentInvestment

ProductProductProductProduct

DescriptionDescriptionDescriptionDescription

• JOHN Insoo (Korean)

• 200 (Manufacturing: 120)

• Paris: Headquarter• Chartres: Factory

• 62 Million €

• see next slide

• Total: 60 Million €

France50

US7.5

Unit:%

Middle East 6S. Korea 2.5

Spain 5

Others

Revenue

• Europe S.A is in charge of Perfume business• High degree of autonomy

About AP



Conclusion

The Product _Perfume

• Perfumes:– Lolita Lempicka– L– Castelbajac

• For men and women

• Target group: – 20-25 years (LL)– 25-35 years (L)

About AP

Lolita Lempicka

Castelbajac



Conclusion

Europe S.A - History

90 92 95 97 06 09

Established- Bought Cosmetics Fact

ory in Chartre- Started to develop Skin

care products

Launched Lirikos- Total cost was too high- Regarded as a strange, exotic pr

oduct to French People

1st Wave: Go Native

Operate with Native People for Global

Success

Decided to license Lolita Lempicka

Launched Lolita Lempic

ka

Launched L- Second Product - Targeting Women

in age 25-35

2nd Wave: Aim to Growth

With new investment, aim to grow Sales 5

times until 2015

About AP



Conclusion

Why AP came to France

• The Founder of AP got a strong impression of France and its Cosmetic industry when he visited France in late 50’s

• Because of that experience it was his dream of life to run a cosmetic business in France

• As it is seen in this case, France got a lot of benefits from the “country Image” and “Prosperity of the past”

1956, Seoul

Suh Sunghwan

Problems

ReasonReasonReasonReason

ImplicationImplicationImplicationImplication



Conclusion

3 Key Problems they Faced

Problems

Operation by Koreanmanagers

No understanding of Western Culture

Hardly accessing to French Know-how

Less innovation, and Creativity

• Because of less development in Korean Cosmetic Industry• Cultural issue

• It takes time for ‘Learning’ to know different country • Learning curve

• The first product line of Europe S.A ‘Lirikos’ got a reputation “Strange and Exotic”

• AP could not sell any product



Conclusion

Introduced Multicultural CEO

– Undergraduate in SNU, South Korea

– Graduate, Ph.D in Paris XI University (Economics)

– Studied in France 10 years before joining the AmorePacific

– Bilingual in Korean and French

– Became CEO of Europe S.A in 1997

• Very few skincare products were sold in the Western Countries until 1994

• AmorePacific hired Insoo JOHN in 1994 to turnaround the “Europe S.A

Insoo JOHN

Career Career RecordRecordCareer Career RecordRecord



Conclusion

Executed “Go Native” Strategy

– Hired French cosmetics experts and made them to be a manager of each department

– There is no Korean in AP Europe now

Problems

2

1Cost

Operating with Native People

Licensing the Native Brand– Licensed French designer brand “Lolita L

empicka” and “Castelbajac”– Positioned as a French product when AP

introduce its Perfume in the market

Relatively higher labor

cost thanKorean worker

A part of the product

price is paid for a license

fee



Conclusion

1st Wave

Problems

Localization

SolutionProblems Result

Operation by Koreans

Great SuccessIn Global Market

• Hired French cosmetics experts

• Licensed a French fashion designer brand

• 5th most popular perfume in France

• Sold in about 90 countries today

• All managers are Korean

• Lack of input from French expertise

• Poor market response



Conclusion

2nd Wave – New Challenge

• With its past success, Europe S.A. wants to grow• Until 2015, it visions now grow its sales 5 times more

CustomerRange

ProductRange

Focused Mass

Diversified

Focused

2006

2015Growth Strategy

1. Broaden Product line2. Widen Customer Base

Problems



Conclusion

“France” Benefits in cosmetics business

Attractivity

ExpertiseInfra

structure

FinancialStability

Image of the

Country

• Plenty of competitive human resource

– Highly innovative, and creative HR

• Technology

• “France” is a strong brand

• Stable political, economical environment

• Reduces risks of return

• Good suppliers• Well-developed

logistics• Competitors• Network• Cluster



Conclusion

“France” Constraints in cosmetics business

Attractivity

Highconcerns

about Value

Distribution

• Rooted from cultural, historical background• Workers want to get their portion regardless of

company’s performance or future

CulturalIndividualism

• French people more concerned about themselves than the organization

• They have strong personalities• Sacrifice and Devotion for the company is not the norm

Hard to make collective, systematic organization

Hard to make “Pie” bigger



Conclusion

Social Security

Tax40% moreLabor cost

Labor cost

“France” Constraints in cosmetics business

Overprotection of

workers

• 3 steps of protection: Labor law, Collective Bargaining and Company Union

• Strict regulations about lay-offs• Legal labor hours: 35 hours/week

Low labor flexibility + High labor cost

Social SecurityBurden

Raise COGS



Conclusion

France Attractivity

• Overall, France is a great place to operate cosmetics business• Amorepacific is satisfied with France’s operational environment• However, in other industry France could be a bad place to Invest because of its constraints

Attractivity

Cosmetics Industry

Cosmetics Industry

Cost Competitive

Cost Competitive

LaborConcentrated

LaborConcentrated

ProsCons Pros Labor

Protection

HighCosts

• Is not a labor concentrated industry• Needs creative and innovative

resources



Conclusion

Advise for the better from AP

Attractivity

Over Protection of WorkersCultural Individualism

Focusing on the Value Distribution rather than Value Creation

€€

PhenomenonPhenomenonPhenomenonPhenomenon

• France has a lack of adaptability in system of Capitalization• The most urgent problem to be solved is the conflict between French

labor and Capital

€€

Enterprise / Political Efforts

SolutionSolutionSolutionSolution



Conclusion

Our Conclusion _ Case Analysis

The story of AmorePacific in France is a success, thanks to a general adaptation of its organisation and structure to a specific market (Go-Native)

AmorePacific benefits from the local know-how, and from the image of French perfumes, in a sector where the cost of work and the flexibility of the labor market are not crucial

Conclusion



Conclusion

Our Conclusion _ Recommendations for AFII

• To maintain its position of being the 4th largest FDI country, France has to develop more “Centers of Excellence”. This will attract new companies.– e.g. making clusters, establishing educational institutions for

each industry

• The first difficulties of AmorePacific show that foreign investors should be helped to face cultural difficulties, especially through market and cultural information– e.g : coaching of new companies, database of problems faced

by new investors, etc.

Conclusion



Conclusion

Thank youAny Questions?



Conclusion

We thank

• JOHN Insoo, – CEO– Mobile: +33.6.82.80.47.35– Email: [email protected]– Address: 6, rue Caroline 75017 Paris



Conclusion

References

• http://www.amorepacific.co.kr/• http://www.amorepacific.co.kr/eng/ir/ir/ir.jsp• Datamonitor (2005). Personal Products in South Korea.

Found on November 1 2006 at http://web.ebscohost.com• Min, K.J. (2004, March 19). Asian company’s perfume

passes French smell test. The Wall Street Journal.



Conclusion

Our Team

•SIRH Suah – HEC CH J26, 1, Rue de la Liberation 78351 Jouy en Josas– Apgujungdong Hyundai APT 106/1105, Gangnamgu Seoul, South Korea– [email protected]

•SCHERRER Sibylle– HEC CH J29, 1, Rue de la Liberation 78351 Jouy en Josas – Uf de Breiti 1, 8460 Marthalen, Switzerland– [email protected]

•DUFAY Francis– HEC CH C86, 1, Rue de la Liberation 78351 Jouy en Josas– chemin de la combe 69400 Liergues France– [email protected]

•HUDE Thomas– 177 rue du Faubourg Poissonnière 75009 Paris.– [email protected]

amorepacific : “france expedition" group 4 suah sirh sibylle scherrer francis dufay thomas...

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