Becoming a Global Player by Creating a New Market Category: The Case of AMOREPACIFIC

Innovation has long been viewed as a source of sustainable competitive advantage for a f irm.1 However, innovation has become a core challenge for many organizations because they face ever-increasing levels of competition and rapid changes in technology.2 In most technological sectors, f irms in developed countries such as the United States of America (USA), Japan, and some countries in Europe have accumulated technological capabilities for many years and are now recognized as global technology leaders. Firms in emerging economies are behind these incumbent leaders. However, recently a few leading f irms in emerging economies have rapidly developed their own technological capabilities and transformed themselves into innovators so that they could catch up with incumbent leaders in developed countries and globalize successfully.3 AMOREPACIFIC, which has been the number 1 beauty company in the Republic of Korea (Korea) for more than 70 years, provides an excellent case study of an organization that has globalized through innovation (see Chapter 7 about another organization—MasterCard—involved in radical innovation). Because AMOREPACIFIC’s market originated in Korea, which comprises only 3% of the global beauty market, this remarkable growth could not have been achieved without the successful implementation of a series of innovations. AMOREPACIFIC, recently making the quantum leap from a regional to a global player in the cosmetics industry, built its business and brand both in domestic and in overseas markets by continuously creating new product categories. The most important of these, and the one that has propelled AMOREPACIFIC into the global arena, is the cushion compact. The cushion compact is a new type of face makeup product that integrates coverage, UV (ultraviolet) sun protection, cooling and sweatproof properties, and moisturizing benef its in a special sponge that is soaked with liquid foundation and stored in a double-sided airtight container. This product is more than a simple upgrade of previously existing face makeup products: it is an example of a breakthrough innovation that created a whole new category. By meeting customers’ unmet need for convenient, quickly applied, and f lawless face makeup, AMOREPACIFIC created a new market category in face makeup that, in turn, allowed it to gain a prominent position as an innovator in the global cosmetics market. Its success has led other global industry leaders to launch their own cushion compact products at a later point in time, following AMOREPACIFIC’s lead. In most studies, innovation is considered to be a generic concept rather than a process consisting of two distinct stages: the creativity stage, which generates new ideas; and the implementation stage, which successfully implements those creative ideas.4 This chapter will consider the example of AMOREPACIFIC’s successful transformation into a global player by investigating the company’s breakthrough innovation and analysing it in terms of these two stages. It will also examine the new challenges the company is facing as it grows its presence in the global cosmetics market.