FInal Amperna International strategy plan PDF

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INTERNATIONAL BUSINESS STRATEGY

AMPERNA PROBIOTIC MOISTOURISERS. INTERNATIONAL STRATEGIC PLAN.

LAURA DANIELA JUTINICO GONZALES STUDENT ID 9923519

QUEENSLAND UNIVERSITY OF TECHNOLOGY 2019.

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TABLE OF CONTENTS.

1. INTRODUCTION. 2. CHOSEN FIRM ANALYSIS. 2.1. COMPARATIVE ADVANTAGE. 2.2. SWOT ANALYSIS.

3. EXPORT READINESS. 3.1. KOREA-AUSTRALIA FREE TRADE AGREEMENT. 3.2.SUITABLE AND ADEQUATE RESOURCES. 3.2.1. CLEAR STRATEGY AND COMMITMENT. 3.2.1.1. STRATEGY. 3.2.1.2. COMMITMENT. 3.3. COMPETITIVE FORCES. 4. TARGET MARKET ANALYSIS. 4.1.CAGE ANALYSIS. 5. ENTRY STRATEGY.

6. CONCLUSIONS. 7. REFERENCES.

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1. INTRODUCTION. The purpose of this report is to analyse South Korea´s skincare industry in order to determine its potential as a new market, including some analysis and recommendations on what strategy should be used in this scenario. To begin with, this report will evaluate the readiness of the Australian firm Amperna to start with export activities in South Korea. Furthermore, It will consider the market conditions of the both domestic and overseas skincare industry, followed by an analysis of the local economies. Consequently, It will then suggest a potential entry method for Amperna to compete in the South Korean market. Lastly, it will provide some conclusions and recommendations on how to enter the Korean skincare industry.

2. CHOSEN FIRM ANALYSIS. The firm AMPERNA is an Australian skincare brand created in 2015 by Kiri Yachenko, who personally struggled with adult acne. Amperna is committed to creating active products specifically formulated for sensitive skins so they can be used by everybody. (Amperna, 2019). According to (Richardson, 2019) niche category specialisations and premium product segments, such as probiotics and botanical serums, will likely boost industry revenue growth as the “clean beauty” trend continues to gain popularity. Therefore, It is possible to assume that Amperna will gain a larger market share in the upcoming years. Amperna has been growing and gaining recognition since it first started four years ago. For instance, eighteen different magazines, including Cosmopolitan and Elle, have recommended their products. However, the firm does not publicly share its financial statements or any financial information; therefore, consumer trend reports and market analysis are going to be used in order to assess the firm’s suitability to enter into the Korean market.

2.1. COMPARATIVE ADVANTAGE.

A. FIRST MOVER ADVANTAGE: AMPERNA® is the first active probiotic skincare range made in Australia. As a result, this company might be able to establish strong brand recognition and customer loyalty before other competitors enter the market.

B. AUSTRALIAN-MADE GOODS: Nineteen 90% of Australians aged 14+ are more likely to purchase Australian-made products than the ones made offshore, which gives AMPERNA® a comparative advantage over international products.

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a. SWOT ANALYSIS. A. STRENGTHS. -

Innovation: The brand founder by Kiri Yanchenko is result driven and always looking for new ways to improve. (AMPERNA®, 2019), as a result, the company has gained first-mover advantages in the mature skincare market.

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Consumer recognition: or brand recognition. The firm has been slowly gaining recognition from customers, as well as popular magazines such as Cosmopolitan and ELLE Australia. Currently, AMPERNA´s Instagram account counts with almost 3,000 followers and more than 100 testimonies from customers.

B. WEAKNESSES. -

Probiotics reputation: Probiotics products have become trendy in the last couple of years; however, there is still a debate in academia whether the use of probiotics is safe and efficient. According to (Shira Doron, 2015), safety outcomes are inconsistent, and more research is needed to explain the seriousness of adverse effects related to probiotics adequately. If probiotics were found to be unsafe, the company might cease to exist, given that customers will most likely not be willing to buy probiotics-related products.

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However, probiotics have a long history of safe use, and several clinical trials support the assumption that these products are generally safe for most populations. (Shira Doron, 2015)

C. OPPORTUNITIES. -

Increase in “clean – beauty” trends: In the last past, five years of ethical consumerism and "chemical-free" products have become increasingly popular. This industry is expected to grow at an annualised 9.1% over the five years through 202324 to $550.5 million. (Richardson, 2019)o increase at 3.1% annually

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Growing skincare industry: The cosmetics industry around the world has grown significantly during the last couple of years. Even though the skincare industry is mature in most developed countries, it presents high levels of innovation. Recently, the revenue for these businesses is expected to increase at 3.1% annually to $356.7 billion over the next five years. (Koronios, 2019).

D. THREATS. -

New commercial competitors: As mentioned earlier, the clean beauty industry has gained popularity among Australians. According to (Richardson, 2019) this customer trend has caught the attention of large corporations that are currently trying to implement natural ingredients into their products in order to serve the needs of that segment of customers.

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Potential increase in the price of raw materials: As mentioned earlier, the probiotic industry is expected to grow at a significant pace in the next couple of years; this might have an impact on the price of the raw materials. The number of materials needed to produce high-quality probiotics could decrease due to an increase in the demand for these resources.

3. EXPORT READINESS. In this section, the principal findings regarding the South Korean market will be analysed. The first section will analyse the existent trade agreement existent between South Korean and Australia. Finally, It will assess the readiness and capability of Amperna, followed by a macro analysis of the socio-economic position of South Korea and its business environments.

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3.1. KOREA – AUSTRALIA FREE TRADE AGREEMENT.

Australia and Korea have had strong commercial relationships for many years, which eventually lead to the formation of the Korean- Australia trade agreement that came into force on the 12th of December of 2014. Under the new agreement, specific barriers were removed in order to strengthen the commercial relationships between the two countries. Before, there was a tariff of 6,5% imposed in all the cosmetic products manufactured in Australia. After the agreement was in force, the tariff was eliminated, and currently, there are zero percent tariffs for this type of product. Currently, the cosmetic products are cataloged under the market snapshot 3304.99. (Australian Government, 2019) This new trend agreement has effectively strengthened the relationships between these markets. For instance, just two years after the agreement was in force, US$767 million worth of products under this code. (Korea Australia Free trade Agreement, 2019)

3.2.SUITABLE AND ADEQUATE RESOURCES.

As mentioned earlier, the company has not yet shared any financial statement that can indicate how financially ready is the company to start exporting. However, Amperna is currently shipping its products to order all over the world. This might suggest that the company has the technology, knowledge, and resources to expand their operations overseas. It is essential to highlight that this is just an assumption, and more research needs to be done in order to assess how financially ready is the company to start exporting. 3.2.1. CLEAR STRATEGY AND COMMITMENT. 3.2.1.1.STRATEGY. Amperna aims to differentiate its product by tailoring skincare regimes on a case-by-case, offering ongoing communication and personalised support during the customer´s skin health journey (AMPERNA®, 2019). 3.2.1.2. COMMITMENT. Amperna is committed to creating simple, active skincare products using revolutionary Australian made formulas. (Amperna, 2019)

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3.3. COMPETITIVE FORCES.

Firstly, the threat of new competitors in this industry is considered limited. In order to enter this market, competitors must invest large quantities of money, which might be considered risky for investors and might discourage them from entering the market. Furthermore, Korea has a strict product regulation that slows down the exportation – importation process. For instance, an ingredient list, a bovine free declaration, the Ministry of Food and Drug safety certificate, quality testing, animal testing, and other specific product related certificates must be done to obtain the necessary licenses to distribute in the country. (Australian trade and investment commission, 2019) Also, the rivalry in the industry is considered moderate. The South Korean skincare market is concentrated, with four players controlling almost seventy percent of the market and, two of these players controlling over half percent of the total market share. (Marketline Industry Profile, 2019). These findings suggest that there is a high level of rivalry in the skincare industry; however, most of these brands have not developed probiotic products; therefore, the level of rivalry is

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much lower in the probiotic subsegment. In 2015 the Korean skincare market grew almost six percent, and in the upcoming years, this industry is expected to grow by seven percent during 2018-2023. This steady growth has already alleviated the high level of rivalry in the industry, and it is expected to easy rivalry it even more. Another vital competitive force of this industry is the threat of substitutes. In this case, the risk of alternative products is considered limited. According to (Marketline Industry Profile, 2019), homemade products may pose significant threats in undeveloped markets. However, this option requires time and specific knowledge regarding product composition for its preparation, and it might not offer the same effects as brad products. On the other hand, standard products may be a potential substitute since those have been sold for generations in the Korean market; however, the expected growth on the “green-beauty” trend might restrict consumers from buying those products. Moving on, the power of the suppliers is believed to be moderate-high. Most commonly, the skincare suppliers include manufacturers from the pharmaceuticals, vegetable oils, plastic, and packaging industries. According to (Marketline Industry Profile, 2019), the quality of the raw materials is often highly crucial in this market, and as a consequence, there are a large number of processes and certificates that need to be obtained before the products reach the shelves in Korea. These safety regulations decreased the supplier´s power since they should demonstrate that they have the safety standards to be considered a qualified supplier. However, once they achieve that qualification, its supplier bargain power gets strengthen, as an increased number of rivals might want to purchase those materials. Lastly, it is vital to consider consumer bargaining power. Consumers are now aware of the impacts of unwanted chemicals in the products, which has pressure companies into developing "clean" or organic products. (Marketline Industry Profile, 2019) Even though consumers are more aware of ethical safety practices than in the past, well-known brands, and robust business heavily marketing their products, pressuring retailers into displaying their products on their shelves by marketing. Interestingly, the level of competition and the power of suppliers and the threat of substitutes in South Korea is not as high as expected. The significant growth of the skincare industry summed up to the high levels of innovation, specialisation, and diversification in the business sector has considerably eased the high levels of competition in the market.

4. TARGET MARKET ANALYSIS.

4.1.CAGE ANALYSIS. A. CULTURAL DISTANCE.

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Retrieved from GlobeSmart. https://globesmart.aperianglobal.com/profile/comparison?culture=AU& culture=KR

The are several cultural differences between the Australian and Korean culture. The language spoken is just one of them. As illustrated by the graph above, these two countries have a considerable difference in their working style. While Australia tends to be a more egalitarian country, Korea tends to be a status-oriented country. This means that Koreans usually did not challenge those in higher positions and assumed power and authority should be reserved for a few people. Moreover, Australians minimise differences and try to treat everyone the same. They are comfortable challenging superiors and assuming power in a group. As illustrated by the graph, Australians place a higher value on reaching goals and objectives than on maintaining relationships with their co-workers. This scenario looks significantly different for its business partners. Koreans emphasises relationship building since it can develop trust among team members and therefore boost efficiency. An example of this situation is the gift-giving practice in the South Korean market. These presents are often presented in the first board meeting. The most valuable one is often presented to the person with the highest rank within the organisation, these presents represent the willingness to stablish strong business relationships; however, these gifts are often not welcome by their counterparts.

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B. ADMINISTRATIVE. There are some notorious differences in the administrative methods of these countries. To begin with, Korea´s currency is the Korean Won, while the Australian currency is the Australian Dollar. These differences in currency might be problematic for firms that are interested in carrying international activities since the fluctuation in currency can directly impact the level of profit made for the exporting company. It can also complicate the accounting process. Moreover, the Korean government has some political instability related to their relationships with North Korea and Japan. This political scenario will be analysed later in the report. There is an interesting factor that has caught the attention of the writer and, it is risk management. As illustrated in the graph above, the Asian country tends to value thoroughness over speed, whereas Australian workers prefer rapid decision making and quick results over thoroughness. The risk management procedures might cause conflicts within Amperna and its Korean business partners, and it is something that should be kept in mind when doing business with Koreans.

C. GEOGRAPHIC DISTANCE. Korea is within a 3-hour flight distance from 147 cities with a population of more than 1 million. At Incheon International Airport, 83 airlines operate flights to 175 cities in 54 countries, including 13 Chinese airlines. As the port of Busan, a hub port in Korea, is located at the center of major sea routes, a total of 536 regular routes for container vessels pass through Busan, with 78 to China, 84 to Japan, 148 to Southeast Asia, and 75 to North America. (Invest in Korea, 2019).

D. ECONOMIC DISTANCE. Korean´s GDP per capita reached $31,363 in 2018, which was an increase of five percent in comparison with the previous year. On the other hand, Australia reached a GPD per capita of 54, 595 in the same year. (World Bank, 2019) It is possible to argue that, despite the higher GDP reached by Korea, the Asian country still is an attractive business destination for Australian firms. According to the world bank, Korea reached a population of 51 million people in 2018, which is double the number of people living in Australia. (World Bank, 2019). Therefore, the full market size of that country represents an opportunity for the Australian brand Amperna.

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4. ENTRY STRATEGY. After a thorough analysis of the skincare industry and the examination of the socioeconomic conditions of both countries, the recommendation of the researcher is a joint venture. As seen earlier, there is a significant cultural distance between both nations. These cultural differences might result in challenging to address for the Australian brand. However, a local business partner with previous expertise in the Asian market could be of great help in order to properly understand Korean customers. This entry strategy might help to ensure the survival of Amperna´s competitive advantage. Earlier in this report, the first-mover advantage was described as one of the advantages of the firm. However, this advantage might be eliminated in the Korean market, since a few firms are manufacturing probiotic serums. It is essential to highlight that up to now, and there are not firms specialised in probiotics skincare products. Some local players, such as Missha have developed one product with those characteristics, but a full range of probiotic products is not yet available in the Korean market. In order to survive in the Korean market, Amperna should use its strengths, such as innovation and expertise in the Australian market. This assets together with the expertise of their business partners in Korea should be enough to create new competitive advantages to

5. CONCLUSION. To summarise, the Australian business Amperna has the potential opportunity to export its probiotic products into the Korean market. The steady growth of the cosmetic industry in Korea, in addition to the popularity of "green" products, makes Korea the ideal market to export into. Join venture should be considered as the predilect entry strategy since the firm may lack sufficient knowledge of the Asian markets. An Asian business partner might help to refine the competitive advantages needed to enter into that market. It is imperative to mention that this study is just a preview of the potential of these products in the Korean market. More research needs to be done to accurately assess the suitability of this firm in the Asian market.

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6. REFERENCES. Amperna. (2019, August 16). Amperna. Retrieved from https://amperna.com/pages/about-us

AMPERNA®. (2019, October 17). The AMPERNA® Story. Retrieved from AMPERNA: https://amperna.com/pages/about-us

Australian Government . (2019). Australian Government . Retrieved from Free Trade Agreement Portal: https://ftaportal.dfat.gov.au/KOR/AUS/KAFTA/product/3304999000/market

Australia and Korea. Retrieved from GlobeSmart. https://globesmart.aperianglobal.com/profile/comparison?culture=AU&culture=KR

Australian trade and investment commission. (2019). Cosmetics to Korea. Retrieved from Export markets - Republic of Korea: https://www.austrade.gov.au/australian/export/export-markets/countries/republic-ofkorea/industries/cosmetics-to-korea

Australian trade and investment commission. (2019). Export markets - Republic of Korea. Retrieved from https://www.austrade.gov.au/Australian/Export/Exportmarkets/Countries/Republic-of-Korea/Doing-business

Invest Korea. (2019). 28 reasons to choose Korea. Retrieved from http://www.investkorea.org/en/invest/asianhub.do?mode=view&articleNo=1740

Korea Australia Free trade Agreement. (2019). Retrieved from Australian Government. Department of foreign affairs and trade: https://dfat.gov.au/trade/agreements/inforce/kafta/Pages/korea-australia-fta.aspx Koronios, E. (2019). Global Cosmetics Manufacturing. Industry Report C1934-GL. IBISWorld.

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Marketline Industry Profile. (2019). Skincare in South Korea. Retrieved from https://advantage-marketlinecom.ezp01.library.qut.edu.au/Analysis/ViewasPDF/south-korea-skincare-76602

Morgan, R. (2019, October 16). Aussies give stamp of approval to Australian-made goods. Retrieved from Roy Morgan: http://www.roymorgan.com/findin...