AmorePacific : “France Expedition"

1. AmorePacific :“France Expedition" Group 4 Suah SIRH Sibylle SCHERRER Francis DUFAY Thomas HUDE

2. About AmorePacific • AmorePacific Korea • Europe S.A • Faced Problems in Early Age • Why AP came to France • Problems • Putting a Multicultural Manager • Solutions and Success • France Attractivity • Benefits • Constraints • Advise from AmorePacific • Our Conclusion

3. About AP AmorePacific Co. Description • Korean provider of cosmetics (78%), personal care (16%), and healthcare products (6%) Vision • World‘s top 10 cosmetics companies by 2015 Key Figures • Revenue: 1 Billion € • Profit: 122 Million € CEO • Suh Kyungbae (Korean) Others 4 Employees • 3000 France 6 Unit:% Place • Seoul: Headquarter • 9 overseas subsidiaries Korea 90 Brands <Best in France>, Fall 2006

4. Revenue • Total: 60 Million € Unit:% Others France 50 S. Korea 2.5 Middle East 6 US 7.5 Spain 5 About AP Europe S.A. - Overview Description • Europe S.A is in charge of Perfume business • High degree of autonomy CEO • JOHN Insoo (Korean) Employees • 200 (Manufacturing: 120) • Paris: Headquarter • Chartres: Factory Place Direct Investment • 62 Million € Product • see next slide <Best in France>, Fall 2006

5. Perfumes: Lolita Lempicka L Castelbajac For men and women Target group: 20-25 years (LL) 25-35 years (L) About AP The Product _Perfume Lolita Lempicka Castelbajac <Best in France>, Fall 2006

6. Established - Bought Cosmetics Factory in Chartre - Started to develop Skincare products About AP Europe S.A - History 1st Wave : Go Native Operate with Native People for Global Success 2nd Wave : Aim to Growth With new investment, aim to grow Sales 5 times until 2015 Decided to license Lolita Lempicka 90 92 95 97 06 09 Launched Lirikos - Total cost was too high - Regarded as a strange, exotic product to French People Launched Lolita Lempicka Launched L • Second Product • Targeting Women in age 25-35 <Best in France>, Fall 2006

7. About AmorePacific • AmorePacific Korea • Europe S.A • Faced Problems in Early Age • Why AP came to France • Problems • Putting a Multicultural Manager • Solutions and Success • France Attractivity • Benefits • Constraints • Advise from AmorePacific • Our Conclusion

8. 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” Problems Why AP came to France Reason Implication 1956, Seoul Suh Sunghwan <Best in France>, Fall 2006

9. Because of less development in Korean Cosmetic Industry Cultural issue Problems 3 Key Problems they Faced No understanding of Western Culture • The first product line of Europe S.A ‘Lirikos’ got a reputation “Strange and Exotic” • AP could not sell any product Operation by Korean managers Hardly accessing to French Know-how • It takes time for ‘Learning’ to know different country • Learning curve Less innovation, and Creativity <Best in France>, Fall 2006

10. 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 Introduced Multicultural CEO Career Record Insoo JOHN <Best in France>, Fall 2006

11. Hired French cosmetics experts and made them to be a manager of each department There is no Korean in AP Europe now Problems Executed “Go Native” Strategy Cost Operating with Native People 1 Relatively higher labor cost than Korean worker 2 Licensing the Native Brand A part of the product price is paid for a license fee • Licensed French designer brand “Lolita Lempicka” and “Castelbajac” • Positioned as a French product when AP introduce its Perfume in the market <Best in France>, Fall 2006

12. Hired French cosmetics experts Licensed a French fashion designer brand Problems 1st Wave Problems Solution Result Operation by Koreans Localization Great Success In Global Market • All managers are Korean • Lack of input from French expertise • Poor market response • 5th most popular perfume in France • Sold in about 90 countries today <Best in France>, Fall 2006

13. With its past success, Europe S.A. wants to grow Until 2015, it visions now grow its sales 5 times more Problems 2nd Wave – New Challenge 2015 Diversified • Growth Strategy • Broaden Product line • Widen Customer Base Product Range 2006 Focused Customer Range Focused Mass <Best in France>, Fall 2006

14. About AmorePacific • AmorePacific Korea • Europe S.A • Faced Problems in Early Age • Why AP came to France • Problems • Putting a Multicultural Manager • Solutions and Success • France Attractivity • Benefits • Constraints • Advise from AmorePacific • Our Conclusion

15. Attractivity “France” Benefits in cosmetics business • Plenty of competitive human resource • Highly innovative, and creative HR • Technology Expertise Infra structure • Good suppliers • Well-developed logistics • Competitors • Network • Cluster • “France” is a strong brand Image of the Country Financial Stability • Stable political, economical environment • Reduces risks of return <Best in France>, Fall 2006

16. Attractivity “France” Constraintsin cosmetics business Cultural Individualism • 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 • Rooted from cultural, historical background • Workers want to get their portion regardless of company’s performance or future High concerns about Value Distribution  Hard to make “Pie” bigger <Best in France>, Fall 2006

17. “France” Constraintsin cosmetics business Over protection 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 Labor cost Social Security Tax 40% more Labor cost Social Security Burden  Raise COGS <Best in France>, Fall 2006

18. 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 France Attractivity Cosmetics Industry Cost Competitive Labor Concentrated • Is not a labor concentrated industry • Needs creative and innovative resources High Costs Cons Pros Pros Labor Protection <Best in France>, Fall 2006

19. 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 Attractivity Advise for the better from AP Over Protection of Workers Cultural Individualism Phenomenon Solution Focusing on the Value Distribution rather than Value Creation Enterprise / Political Efforts €€ €€ <Best in France>, Fall 2006

20. About AmorePacific • AmorePacific Korea • Europe S.A • Faced Problems in Early Age • Why AP came to France • Problems • Putting a Multicultural Manager • Solutions and Success • France Attractivity • Benefits • Constraints • Advise from AmorePacific • Our Conclusion

21. 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 <Best in France>, Fall 2006

22. Conclusion Our Conclusion _ Recommendations for AFII • To maintain its position of being the 4th largest FDIcountry, 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. <Best in France>, Fall 2006

23. Thank you Any Questions? <Best in France>, Fall 2006

24. We thank • JOHN Insoo, • CEO • Mobile: +33.6.82.80.47.35 • Email: insoojohn@hanmail.net • Address: 6, rue Caroline 75017 Paris <Best in France>, Fall 2006

25. 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. <Best in France>, Fall 2006

26. 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 • sirhsuah@gmail.com • SCHERRER Sibylle • HEC CH J29, 1, Rue de la Liberation 78351 Jouy en Josas • Uf de Breiti 1, 8460 Marthalen, Switzerland • sibyllescherrer@bluewin.ch • DUFAY Francis • HEC CH C86, 1, Rue de la Liberation 78351 Jouy en Josas • chemin de la combe 69400 Liergues France • francis.dufay@mailhec.net • HUDE Thomas • 177 rue du Faubourg Poissonnière 75009 Paris. • Thomas.HUDE@mailhec.net <Best in France>, Fall 2006