Last year, the global retail industry experienced a surprise. Over the last 20 years, Wal-Mart has been the biggest retail company in the world. It is still globally dominant in terms of size, but stepped down from first to second place last year in the list of top retailers based on market capitalization. Which company then took the No.1 spot? It was the American online retailer, Amazon. It had previously occupied second place until 2014 but finally won the title of being the biggest retailer in the world.

As we learned in history class, the Bronze Age came after the Stone Age. But how did the Bronze Age begin? Is it because there were no more stones left to make stone tools? No, that is because bronze tools were better than stone tools and as a result, triggered a paradigm shift. It's the same story as what happened with the horse-drawn carriage. It had been used for thousands of years but slowly disappeared after the advent of automobile. It became extinct not because of a shortage of horses, but because of the advanced invention, the automobile. Indeed, its demise followed as a natural consequence.

The biggest phenomenon going on at the moment is that the world is growing less dependent on oil, but going digital. It seems like forever since humans first started to use oil, but oil was only first found in 1859. It was merely about 150 years ago. And now, the backbone of industry is being shifted once again.

The recent struggles of the Korean economy are partly attributed to the country's oil-based business structure. The shipping industry has been a powerhouse in Korea, but today, it is mired in recession. There are several reasons and one of them is the stagnant oil business. A decrease in the volume of oil transports brought difficulties to not only the overall shipping business, but also shipbuilders making oil tankers. As demand for steel plates used in oil tankers decreased, the steel industry took a hit and as oil demand reduced, development and operation of oil exploration ships and drilling ships declined. Moreover, oil producing countries in the Middle East scaled back their investment in construction as their oil sales revenue greatly reduced.

In the oil-based society over the last 100 years, the size of a company determined its success. A plant about the size of a village was a representation of a company's success. But with society going digital, the number of friends (users/customers) and speed became much more important than the size in terms of business success. A year ago, a corporate giant in Korea sold its oil business-related affiliate to another giant at little less than KRW 2 trillion. What's interesting is that Korea recently saw fruit being sold at a higher price. That fruit was MelOn. Kakao invested nearly KRW 2 trillion to take over Loen Entertainment operating MelOn, the No.1 music streaming service in Korea. MelOn has a large number of subscribers (friends) and moves quickly to provide a fun, enjoyable service. Likewise, the paradigm of corporate value and success is changing. We need to communicate with customers, sell products and manage the company in a way that's sensitive to the digital age and do what needs to be done. This is the challenge facing us.

There are 3.5 billion people living within an 8-hour flight distance from Korea and about 1 billion among them will be incorporated into middle class bracket. And when that happens, our business pursuits will be able to fully bloom. That is, cosmetics sell when purchasing power reaches a certain level. In the past, when Korea was going through difficult times, soup was the only product that people could reach out and use to wash their face, body and hair. Thinking back to 25 years ago, there used to be huge soap sections in retail stores. But today, they are about 1/5 of the size from that time because of product categorization and specialization. There are now categories of products, for example, shampoo, facial cleansers, body cleansers and hand cleansers doing what soap used to do. The rise of the middle class with purchasing power today and in the near future is important to our business. We must appeal to large numbers of new customers who are close within our reach. People in China, 600 million people in ASEAN region and 1.2 billion in India can all be our customers. And so can people in the Middle East. The recent lifting of sanctions against Iran, with its population of 80 million, is making every headline. Last week, I read a news article with a picture of Iranian President and the French President sitting together. Iran has been isolated over the years and what it needs most is an airplane. Iran agreed to buy 118 airbus planes from France. It is worth over KRW 30 trillion. Iran also announced that it will order 500 more aircrafts. Iran's demand for vehicles is expected to be high as well. It once again showed that we have huge growing markets at close hand and their potential is enormous. The whole world is now seeing the onset of the new Eurasia era.

Looking back on last year, we received an array of intangible benefits and help in doing our business. When business is good, we must look outside the "window." It is important to know and remember what has helped us. But when business is not good, we must take a good look at ourselves in the "mirror." Reflect upon ourselves and find what we've done wrong and what should be changed to get business back on track.

For the recent years, the Korean economic structure has been engineered to go in line with high oil prices trend. Oil prices may be high, but they provide a boost to many industries. Last year, the price of oil significantly dropped over past years and Korea saved about KRW 50 trillion in oil imports. Given that the average annual budget for oil is about KRW 100 trillion, it accounted for a savings of almost half. Meanwhile, not every country has gasoline production facilities. As it takes a great deal of capital to build and maintain oil refineries, it is more efficient to buy refined oil instead of making it. Korea is one of the largest refined oil exporters in the world and as the price of refined oil dropped with the fall of the price of oil last year, there were almost KRW 20 trillion of deductions from importing countries. Plus, the oil price decline allowed individuals who own private automobiles to save about KRW 10 trillion. The remaining KRW 20 trillion from a total of KRW 50 trillion brought benefits to companies. The price of oil used by companies declined as well and manufacturers took advantage of the cost savings.

Furthermore, millions of tourists from China visited Korea last year and bought many of our products through duty free stores. Only 4% among all of the Chinese population has a passport at the moment but that is expected to increase to over 30%. A total of 120 million Chinese people travelled abroad last year and this number will increase up to 200-300 million in years. Chinese tourists bring benefits to Europe, Korea and many other countries through the luxury goods sector. In this regard, we must remember that our growth in different channels including the duty free channel is driven by many rapid changes in the world. Last year alone, we grew about 7% in the Korean market. It is less than half of our overall growth. We have to bring innovations into both Korean and global markets and work toward becoming a Great Global Brand Company building sustainable growth.

Now, I'd like to talk about a new headquarters building which will be completed next autumn. The new headquarters building features 21 floors above ground and seven underground. But it means more than a new place of work. Building and moving into a new headquarters is a part of our effort to become the world leader with a singular beauty that only we can create. In other words, it is "a hall of beauty" where our efforts come to fruition. People construct buildings and make working spaces but because building and space influence people as well, the new headquarters building is of great value in many aspects.

You spend most of your time at the office and therefore your ideas are given much weight. This year, your input on the new headquarters building project is vital for its successful completion by next autumn. Programs and details – everything will be discussed and determined this year. Once review of spatial arrangements, lighting system and furniture is done, we will bring it all together next year. Our new headquarters building is cube-shaped, 100 meters in width, length and height. Part of the center will be left empty to allow for a courtyard but that aside, each floor of the building is as wide as 8,264.46 square meters. That is, the new headquarters building is about 7 times bigger than the one in Yongsan, Seoul with a floor area of 1,322.31 square meters. Here, important facilities for each brand and staff member will be installed. The first floor will be used to showcase the world of our brand to customers along with a gallery and the second floor will have special facilities for improved interaction with customers, including a makeup and hair studio, skincare center and perfume laboratory. On the fifth floor overlooking Yongsan Park, a cafeteria, library and fitness center for staff members will be located. In addition, the service hours of this fitness center will not be limited, but instead be flexible as befitting the digital era, so that you can come and work out regardless of traditional business hours. You will also be able to experience and use hairdressing, makeup and nail care services using employee welfare points. There will also be adequate childcare facilities for working mothers and fathers. Children represent our hope. Japan is struggling with a low birth rate crisis and Korea will soon face the same problem. As a result, our efforts to improve systems and facilities for working parents should be continued.

Please contribute your ideas to create our own space where every one of us can work with pride and engage your imagination to the fullest to create beauty through creative communication. It is important that we come together to build the space of our own. Let us work together here and make products that can make lasting impacts on the whole world. Let's explore new markets with singular, powerful products and take the lead in the digital and mobile era. We are now witnessing a new future of the world. It is growing wider and yet becoming closer connected. Soon, we will be able to travel across Eurasia through high-speed rail from North Korea or perhaps China through Istanbul and Munich. Let us embrace the rapid changes that the world is facing and prepare for a new future ahead of others.

The world's energy is changing and through energy, the world is changing. Now that mechanical energy from fossil fuel is converting into a new energy through digital technology and solar power, we will create a number of stories about beauty in our own space dedicated to presenting special beauty to the world. "Great People, Great Company." I please ask for you to be a part of our great journey towards becoming a great company with great people. Thank you.