Missha

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I. Introduction
MISSHA has created a history in the cosmetic industry. Through MISSHA’s emergence and the remarkable success in early 2000’s, the low-priced cosmetics niche market created by them became bigger enough to attract many other companies. However, MISSHA has recently shown rather disappointing business performance. This paper describes Missha’s business model and other factors for their early success and also seeks possible recommendations for overcoming recent crisis.

II. Cosmetic Industry
1. Cosmetic Market Trend
There is a famous saying that ‘cosmetics are not selling product but beauty.’ Therefore, it is important to keep planning and developing product to meet the needs of customers who pursue beauty. In line with that, the characteristics of cosmetics industry should be understood.

Also, the customers’ trend change can be understood by looking at social, demographic factors that influence such as increases in income, working women and health concern and strengthened well-being trend. In addition to that, the cosmetics market has been extended to three relatively new segmentations that are male, senior and junior3.

III. Company Overview
Able C&C Corporation was founded in the year of 2000. In launching the women’s portal site, ‘Beautynet’, they have received outstanding support from customers as well as attention from various mass media. Assured by the success of Beautynet, In 2004, the company has achieved sales of KRW 111.4 billion and has grown at a rapid rate to be ranked top4 in Korean cosmetic markets.

1. Business Area
1) Cosmetics Production
They produce 600 kinds of makeup by OEM.
2) Franchise Business
They run MISSHA directly and by franchise.
3) Women Portal Site
They provide women’s portal Beauty Net (www.BeautyNet.co.kr) services. 4) Foreign Business
They expand their business abroad in 15 countries as of Sep. 07.

2. Business Performance
MISSHA achieved the highest net profit in 2004, but since 2005 their profits have declined a lot. In 2006, MISSHA indicates a poor business performance2.

IV. Business Model Innovation and Early Success
Cosmetics industry has various segmentations of customers who age in from teens to fifties. MISSHA’s initial target customers were women in between late teens and early twenties. Teens and twenties are unique segmentation as customers. They are highly price- sensitive compared to other segmentation groups that are more quality conscious. MISSHA created business model that reduced cost in a big scale, not compromising the quality and the loyal members of their own web-site promoted the brand.

1. Start from internet
In 1999, Mr. Seo, the CEO of MISSHA, opened a cosmetics web site, ‘Beautynet’ and attracted customers by free gifts in exchange for posting a message for the product evaluation on the site4. The event was surprisingly successful. But, Mr. Seo couldn’t soon bear shipping expenses for free giveaways as too many members more than he originally expected. Therefore, he announced the event would be stopped due to unbearable shipping costs. Then, members suggested that they would pay the shipping expenses in order to receive free cosmetics. With the members’ responses, Mr. Seo saw a golden opportunity for a potential new market. As soon as Mr. Seo perceived the hope of success, he launched a new brand, ‘MISSHA’ in 2002.

2. Break the deep-rooted perception
Cosmetics industry is one of high-margin value-added businesses. However, Mr. Seo, the CEO of MISSHA thought in different way. He believed that a cosmetic is not a luxury but also living necessaries. Therefore, he tried hard on cost cutting. By doing so, MISSHA was able to break the perception that cheap products are low quality4, 5.

3. Production, Packaging and Distribution
1) Production
Eighty percent of MISSHA’s products are produced by outsourcing. MISSHA is responsible for R&D, promotion and others except for production, which outsourcing...
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