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Domestically, anticipated entry by multinationals forced major changes in corporate and business strategy with a rigorous refocus on cosmetics by the id-1 sass, slashing of affiliates and reduction of headcount. [At the business level, it repositioned itself and its brands domestically and deepened its commitments by investing in product development and manufacturing as well as marketing/distribution in selected foreign markets, gearing itself for the challenges of the new millennium.
Suggested Assignment Questions 1. Where does Imprecation make most of its money? How has it been able to dominate the Korean market against local firms such as LEG Household and Healthcare (HOC)? Against multinationals such as L’Oreal? 2. Assess the performance of Mac’s – how do they compare against local competitors? What are the reasons for local companies outperforming Mac’s? 3. Which of Imprecation’s three principal international targets?France/Europe, China and the United States?seems the most promising?
Should a penetration strategy for the u. S. /Europe differ from that for China? 4. What other recommendations would you make to Such Gung-Babe about Imprecation’s internationalization? Class Timeline The timeline for a typical class of 80 minutes might be as follows; Timing Introduction 5 minutes STOW analysis and challenges faced by local companies in the face minutes of foreign competitors Examination of the economics of local vs.. Litigation entrants 20 minutes Identification of patterns in market selection and discussion of future opportunities 20 minutes Update & Summary TOTAL: Case Analysis 10 min tutees 80 min tutees MORE Pacifism’s initial exploration of exporting face powders to USA based COW, coupled with its strong market share in Korea, and its strength in herbal/ home remedies all paved the way for a successful entry into the international arena. But this path was not without the initial bumps as Imprecation had a slow start; SUccess only came about after deep understanding of the various foreign markets along with committed R&D and infrastructure investment.
The biggest future challenge for Imprecation is achieving synergy across its main markets and continuing with further expansions into new markets/ countries. For this a comprehensive strategy outlining products, production/ sourcing, marketing and distribution is required. This is important because in a very diverse world, many foreign contexts will be alien to many of the managers who must decide on cross- border issues. In such situations, success in home country is not enough. 1) Where does Imprecation make most of its money? How has it been able Healthcare (HOC)?
Against multinationals such as L’Oreal? In 2004 More pacific nabbed a place in the top 30 companies worldwide with a 30% share of the Korean market. While that of LEG Household and Healthcare stood at 8% within the same context. Amongst other reasons one of the reasons for its relatively slow progress in comparison to Imprecation was its late entry into the cosmetics business along with the heavy financial and restructuring costs over the same time period. This lead to a lack of innovation on its part generally following a me-too strategy to Imprecation.
For example setting up its own chain of stores and establishing door to door sales network without a clear strategy. According to exhibit 7 Anorectic leads the market with significant investments in advertising, sales, and R; 20,000 More women, 350 specialty outlets versus 39 outlets for LEG, development of innovative and relevant distribution channels and strong positioning of different product lines are just a few of the examples. Multinationals entering the market was relatively difficult due to the overspent division and depreciation of the dollar.
This was magnified with the fact that the multinationals like L’oreal had to import their products due to a lack of investment in production infrastructure. This lead too higher cost of goods sold mainly due to high tariff rates of 8%. Consequently leading to a high priced product to the consumer and this availability and distribution was restricted to high priced departmental store channels. We can see that LEG HOC was losing money, and was never very profitable in economic terms, after allowing for cost of capital.
This was mainly due to emitted access/scale of distribution; cosmetics was not the main business for LEG HOC. On the other hand More Pacific enjoyed a strategic advantage over LEG as all their efforts were centered around the cosmetics business and they had greater advantages to leverage and typically get trade and consumer on their Side; thus share of specific market winning over total size of business. Imprecation had been earning healthy (20%-plus) operating margins on the Korean cosmetic business whereas LEG had seen its profitability drop down to zero in 2004.
In a situation like this considering price realizations, or the willingness to ay; it is difficult to supports door-to-door sales force if you’ve got a 10%, 15% share of the market. 2) Assess the performance of Mac’s – how do they compare against local competitors? What are the reasons for local companies outperforming Mac’s? More Pacification’s P&GUnilever Shied Global Expansion strategy Mainly centering around acquisitions in the Asian market starting off with Mariners in China which was a well penetrated skin- care brand and later Hue-SAA.
This enabled L’Oreal to bank on the existing company’s consumer and market expertise in the region without initiating eave investment in product development, distribution or marketing strategy. Focus on Inorganic growth. Shied favored a joint investment with local partners. Protectionism Large established share; Fid’s welcomes at much later stage in country Financial support Global presence provided the backbone for investments in the wake of Koreans financial and money market crisis. R Vertical integration aiding operations and quick product development.
Successive launches of Hear, POPE and Slashdot focusing on different age groups, SEC’s and distribution channels. Focus on developing rodents as per Korean tastes rose after 10 years of its presence in Korea Distribution Rationalized distribution: Imprecation was operating at three distribution markets. One was mass, the other one was door to door, and the third one was specialty Success in self developed channel of door-to-door (contributing 85% sales comprising 20,000 women employees) and agility in specialty stores (More opened 350 outlets in Korea while for LEG opened only 39. Concentration on high end/ high cost department store channel. Shied opened up Less Salons du Appall Royal, a high end beauty parlor in Paris in 1992 and focused on providing "beauty consulting” to consumers Marketing Superintending focus with media advertising, beauty magazines and sponsoring relevant events; moving onto more innovative means of communication via magazines and new media. High investment in advertising spend and expertise in marketing management.
Shied localized product development but used global modeling for marketing (AAU deedless by Sissy Mistake of Japan and Jean Paul Guiltier, named after its French creator) Cost vs.. Foreignness advantage Local manufacturing with indigenous materials sustaining prices at lower levels than Mac’s. Added support through the "Made in Korea” campaign. Adapting to market conditions; sticking to local celebrities albeit at higher cost to consumers Product Portfolio Focus on skin care and products developed typically for the Korean woman (products developed from home remedies with ginseng proving to be LISP).
Leverage of the biggest global beauty brands in its portfolio. To keep prices affordable for local consumers L’Oreal launched Amiability with little success in bringing down relative prices Also operating in household products but mainstay was Lola; a personal care brand Largest player in various food disgorges with an extensive interest in personal care Competing in global perfumes market as well as cosmetics. Brand management/restructuring: Strong brand personality, project top of the line product, Asian beauty with global appeal; supported by a strong diverse product line each with their distinct positioning.
Scale/ relative size: More Pacifism’s cosmetic presence was about three times as big versus LEG. Given that R, and advertising should be considered fixed costs and wouldn’t vary with volume; assuming they spend 10% on R&D and sales, and 14%, 15% advertising, supported by a higher local share, AP can amortize the cost over their international volume. Better understanding of the market: This lead to stronger strategies that were not easy to implement for multinational companies who have less flexibility and were not as prepared to come with a door-to-door sales force or the same marketing tactics.
Product development and R&D: Having a strong R&D infrastructure provides a strength like no other and also serves a a strong barrier to entry for multinationals. Brand loyalty: More Pacific has been number one in the Korean market for 60 years and has a solid line of loyal consumers and traders on its side. ) Which of Imprecation’s three principal international targets?France/ Europe, China and the United States?seems the most promising? Should a penetration strategy for the U. S. /Europe differ from that for China?