Why Amore Pacific has made the “World’s Most Innovative Companies” list 4 years in a row

BeautyTech.jp
Nov 14, 2019 · 5 min read

South Korea’s largest cosmetics company, Amore Pacific, has made Forbes’ World’s 100 Most Innovative Companies list for four consecutive years. We take a look at why the company is so highly appraised for its innovation and the secret behind its success.

In a nutshell, what makes Amore Pacific innovative can be attributed to the revolutionary products they make, such as their cushion foundation that became a huge hit around the world, and their innovation-friendly company structure. Now, let’s take a look at the company’s roots.

Active R&D investment and an extensive product lineup

When it was founded in 1945, Amore Pacific was developing products in partnership with other companies. However, in 1954 they set up their own laboratory, a first for a South Korean cosmetics company. Through active investment in R&D, they worked steadily to commodify their technologies, leading to the company’s growth.

Around the mid-80s, competition within South Korea became much more intense due to the liberalization of imports. However, by focusing on bringing out products that suit consumers’ needs, such as functional cosmetics and cosmetics for aging, Amore Pacific was able to raise their sales to around US$4.5 billion, becoming the largest cosmetics maker in the country.

In the first half of the 90s, having streamlined their strategy to focus on the health and beauty fields, they sold and liquidated 24 of their affiliated companies that were involved in areas such as finance, advertising, and fashion. By slimming down to their specialty before the Asian Financial Crisis hit, they became one of the few South Korean firms that maintained an increase in revenue despite the severe economic troubles.

South Korean set sights on the world

These days, South Korean companies tend to have their sights set from the get-go not just on the domestic market but also overseas — at the very least with neighboring China — and their operations and strategies are attuned as such. This is in no small part due to the Asian Financial Crisis that occurred in July 1997.

In order to prop up the country’s economy, which had become sluggish through the breakup of chaebol conglomerates and a steep drop in stock prices, the South Korean government began easing numerous restrictions and forming policies for the exportation of Korean cultural content. The aim was to stimulate the country and its companies, which had come to have a poor image, and raise awareness abroad of South Korean products to encourage a surge in exports.

As a result of these efforts, by 2002 the revenue from exporting South Korean TV shows surpassed the costs involved in importing overseas TV shows. In the same year, Amore Pacific took its brand Laneige to Hong Kong and Shanghai. In 2004, they started boosting their recognizability by using famous South Korean celebrities as the faces of their brands. Also, in 2004, they brought their brand Sulwhasoo to Hong Kong, which gained popularity there. By cleverly riding the Korean culture wave, they were able to expand in the Chinese market.

Going global while staying local and forefront

Amore Pacific’s success in China can be attributed to two factors: (1) the creation of new product categories; and (2) thoroughness in localization.

For instance, Sulwhasoo marketed improvements in their formula that particularly help treat skin problems that occur in women around the age of 35 — a period marked by some of the biggest changes in a woman’s body. These improvements involved the adding of traditional Korean ingredients, such as ginseng, and with this, they established the new market of Korean herbal cosmetics. They sought to understand the lifestyles of their customers, discovered their as-yet-unfulfilled needs, and offered new value to them. In this way, they found a pattern of success as an innovator and an opener of new markets.

However, to continue as an innovator, cultivating the right company culture is essential.

Amore Pacific sought to try and create a company where employees can feel free to speak frankly with their managers and seniors, despite South Korea’s deep roots in Confucianism.

Also, putting forth new ideas for products is not just restricted to the R&D team but is allowed by any other department, from marketing to SCM, and where necessary collaboration-teams made up of members from those other departments can be formed. This is because having multiple departments cooperate smoothly leads to a better understanding of customers’ needs, better taking in of feedback, and makes the incorporation of product and technical development easier.

The management team’s good understanding of innovation is another point. Amore Pacific’s representative product Cushion Compact, which became a global hit, was developed in 2008, but up until 2011 was still yet to be a success at home in South Korea. The management team, who assumed that the market launch of a new category would take time and effort back in their home market, had the patience to try out a variety of ads and methods of marketing. The product finally found explosive success domestically through the channel of TV-shopping, and Cushion Compact’s place in the South Korean market became firmly established.

Thoroughness in localization

Another area Amore Pacific puts a lot of effort into is localization. When they entered the Chinese market, riding on the wave of the Korean culture boom, they pushed the idea that traditional Korean medicine was originally an offshoot of Chinese medicine when marketing Sulwhasoo, and by appealing to consumers the common points and affinity between the two cultures, they were able to ensure the establishment of the brand in China. Furthermore, they’ve been customizing products to the needs of each country’s customers. By adapting in accordance with different markets they’ve been able to capture considerable market segments.

On the operation side as well, their localization has been thorough. Particularly in France, they’ve hired mostly local employees and conducted marketing that refrains from putting any Korean elements at the forefront. Analyzing the cultures of each country and entering their markets in a flexible manner, without falling back on the Korean way of doing things, has been one of Amore Pacific’s strengths.

Amore Pacific says its goal is to become the number one cosmetics company in Asia by 2020. The company has so far grown well due to maintaining an open company culture unhindered by top-down relations in order to stimulate creativity, and also thanks to their determination to continue taking on new challenges. Keeping up this pace, their 2020 goal may be within reach.

Text: Ching Li Tor
Original text (Japanese): Yukari Akiyama

BeautyTech.jp

BeautyTech.jp is a digital magazine in Japan that overviews and analyzes current movements of beauty industry focusing on technology and digital marketing.

BeautyTech.jp

Written by

BeautyTech.jp is a digital magazine in Japan that overviews and analyzes current movements of beauty industry focusing on technology and digital marketing.

BeautyTech.jp

BeautyTech.jp is a digital magazine in Japan that overviews and analyzes current movements of beauty industry focusing on technology and digital marketing.

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