It is earnings season for companies in the US. One company that grabbed headlines last week was Apple, which released its fourth quarter earnings. Apple reported Q4 2014 profit of USD 18 billion, which is the highest in its history. Total sales for 2014 stood at a staggering USD 200 billion (about KRW 220 trillion). The biggest contributor to its strengthened profitability is the iPhone 6. The iPhone series shows that, even when not diverse in number of product types, a company can still find success with products that become global hits.

In the fourth quarter of 2014, Apple reported 30% YOY (Year-on-Year) growth and marked 70% YOY growth in the Chinese market, with revenue of around KRW 17 trillion. It is not clear whether it sold more iPhones in China than in the US in Q4 2014 or vice versa, but whatever the actual numbers, total sales in China and the US are on a par with each other. To put it another way, then, Apple’s recent phenomenal success is thanks to the new iPhone 6 and its surging popularity in China.

The prolonged slowdown in the Korean economy has led many to question how they should strategically respond to current difficulties. The question asked is, essentially, which direction best fits us? To answer this question, I think we could gain valuable insight from the example of Switzerland. With a population of eight million, Switzerland accounts for about 1.1% of Europe's total population (700 million). Similarly, with 50 million people, Korea constitutes 1.1% of Asia’s total population, which is about 4.5 billion people. That is, simply, Korea is about the same size as Switzerland.

Switzerland is sometimes called the roof of Europe in recognition of its Alpine scenery, including the legendary Matterhorn and Jungfrau. While this nickname may sound appealing to modern people, to those who worked the land in times past, it meant hard labor for limited reward. While a country’s wealth was once based on the yield of its land, the mountainous Switzerland was left the poorest of countries. No wonder why Switzerland suffered constant invasions by the ruling power of the times, such as Rome, Austria-Hungary or France.

However, it is now much richer than Korea with GDP per capita of USD 80,000. But, what’s more surprising is that it is listed first in the OECD by happiness index. Though only a small minority of the workers are involved in its agricultural sector, Switzerland has become an agricultural and dairy powerhouse. It is also second to none when it comes to chocolate-making. The chocolate-making technologies are now common, but most of new chocolate related technologies originate in Switzerland. Though coffee has never been cultivated in Switzerland, it was a Swiss company, Nestlé, that first developed freeze-dried soluble (instant) coffee and the technology to brew an espresso from coffee capsules. And, the first ever industrialized cheese producer is also Switzerland.

Today, Switzerland is perhaps most famous for having the world’s best clock and watch making producers in the world. It exports about 300 million clocks and watches every year, which are about 10% of all clocks and watches made worldwide. Yet, it accounts for 90% of total revenue in the global watch market. This means that the clocks and watches made in Switzerland deliver astonishing added value.

And that’s not all. Many well-known precision machines are made in Switzerland, including the safety devices used in amusement parks. Big and small Swiss companies, including the world's second largest pharmaceutical company Novartis, now exert huge influence in the chemical industry. Meanwhile, Switzerland is so beautiful that many visitors to its lands want to return there, despite its deadly high prices which almost ties with London. Its beautiful landscapes have ultimately given Switzerland a terrific advance in the tourism industry. Switzerland, then, is a great example of a country that has created added value across a range of sectors through a quality-focused national strategy, while taking advantage of wealth of European markets. This is how it has become such a considerable success in the world market.


Dear Asian Beauty Creators,
There are 4.5 billion people living in Asia, with about 2 billion of them living in China and ASEAN member countries, a region that has a population 40 times greater than that of Korea. Even if we just narrow it down to 500 million people, that’s still 10 times more than people in Korea. Such large markets are right on Korea’s doorstep. It’s our challenge to find the right way to look at and succeed in doing business in these promising markets.

China has shifted from a manufacturing to a service-oriented economy. As more Chinese workers suffer respiratory disorder and other health problems caused by rapid industrialization, China is shifting its focus on the service market with soft power, rather than relying on conventional manufacturing powered by cheap labor. In general, national development entails growth of the domestic market, infrastructure and exports. China’s major growth initiatives have long been exports and infrastructure construction, but it is now focusing on fostering the domestic market. While Japan and the US are major global exporters, it is their competitiveness in their big domestic markets that really boosts their national economy. China is taking the path that Japan and the US have taken. The potential for the growth of Chinese and ASEAN domestic markets is almost limitless.

Not long ago, a special seven-part TV series was aired on KBS (Korean Broadcasting System) that painted a vivid picture of how China has developed. If you haven’t managed to see the series yet, make sure to catch it and learn about the changes in China. Remember, you need to be able to read the map to know how to get where you want to go. This is the reason why we have to know exactly how the world is changing. We must neither underestimate nor overestimate China. It is important to look at and take it as it is.

We are in the midst of a constantly changing profile of our customers and surrounding countries. All 10 ASEAN countries are growing at a different pace. If we understand the cities with a population of 10-20 million and make them beautiful, we will be able to succeed, just like Switzerland has done.


Dear AMOREPACIFIC Group members,
We are going global. What that means is that we are pursuing three-dimensional management. One-dimensional management is our One Brand, One Company initiative; an example of this is when we ran the whole company, Pacific Chemical Co. Ltd, as one brand, AMORE. Two-dimensional management is encapsulated by our Multi Brands, Multi Companies strategy, which we implemented when we were Pacific Co. Ltd. Back then, Pacific Corporation had a number of brands such as Sulwhasoo, LANEIGE and mise en scène, and subsidiaries engaged in the cosmetics industry. They generated a great synergy effect while acting independently. Three-dimensional management adds another dimension to two-dimensional management, which implies that we push ahead with two-dimensional management in multiple countries, including Korea, China, ASEAN, the US and France.

In order to lead our three-dimensional management to success, we need more than just willingness and enthusiasm. It is important to determine how we should promote communication at different levels of the organisation: board members, team leaders and team members. We must make rules and policies about the role of every single member. Structuring and making these roles an integral part of who we are is critical to successful global management. Our One Brand, One Company initiative is actually quite easy to implement. Where it gets more complex is when it involves multiple brands spread over multiple countries. Our success depends on whether we can make the assigned role part of who we are. We can succeed only when we make our neighboring countries beautiful and do business with them well. This requires that we study and understand our global customers as well as we understand our Korean customers. We have to gain an in-depth, comprehensive understanding of customers in China and ASEAN countries, maintain good business relations in the local market, establish a solid R&D basis for a rapid response to customer needs, and foster and make talented local workers an essential part of who we are. Once we succeed in doing so, our market will grow 10 times, 20 times and 30 times bigger.


My dearest members, 
To go global, we have to focus on the globalization of our Cushion product. We have created and led the Cushion category, which has come to change the makeup culture of the world. There are plenty of cosmetic companies, but only about 10 companies have changed makeup culture over the past 100 years. As of now, both global competitors and local companies in China are hot on our heels with me-too products. It is now more important than ever that we keep our technical edge as the original inventor and expand the Cushion market. Just as Apple has continued to upgrade the iPhone to constantly outperform its competitors, most recently with the new iPhone 6, we too have to secure good, competitive products through the relentless march of progress. Doing so will open the way to better globalization. To be more specific, we will be able to implement both global management and three-dimensional management once we achieve the following three capabilities: gain an in-depth understanding of each of our markets, make products that meet the needs and tastes of local customers and systemize all our business processes. Keep in mind that if any of the above is missing — understanding of our markets, having superior products and operating a well-organized system — we will never be able to succeed.

From now, we must test millions of hypotheses and learn from each one. YouTube and Google are used worldwide and Google is the unchallenged No.1 search engine worldwide. Yet, it was Yahoo that was an early pioneer of the search engine. There also were online services such as Chollian long before Naver. Then, what made it possible for Google to overtake Yahoo? The simple answer is that Google has a strong culture of hypothesis testing. At Google, people try things and fix the problems that cause them to fail almost every day.

Success is not a state void of failure. Success is simply when the outcome of a challenge is better than failure. We can succeed even if we fail in the attempt. The key part of success is to learn from each failure to secure our next victory. Amazon is not the first online retailer, but it has become the biggest. Its tremendous success was thanks to the way it fearlessly adopted new approaches, such as the new feature of a shopping cart. We, too, must not be afraid of coming up with new ideas and putting them into practice. If things do not work out well initially, we can always learn from what happens and fix any problems that arise. By doing so, we will be able to enhance our value and heighten the attractiveness of the Korean market through increasing its prosperity. Though the population of Korea is small, we can develop into a bigger company and into a bigger, richer country.

Let us keep in mind how Apple and Switzerland have grown. Switzerland used to struggle against its more powerful neighboring countries, but it has since developed into an economic powerhouse over the past 100 years. Now, it is our turn. I hope that you all think of the bright future we have ahead of us and continue to make new, creative attempts, learning and innovating throughout the year. Thank you.

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