Competitiveness Strategy of South Korean Cosmetic Brands: Current Practices and Opportunities for Russian Cosmetic Brands

Abstract

This study analyzes place, trends and competitiveness of the South Korean cosmetics brands to identify opportunities for the Russian cosmetics brands, whose country has suffered from a large trade deficit in the cosmetics industry despite the government’s vigorous attempts in implementing import substitution policies. We constructed the econometric models (with ordinary least square, weighted least square and robust least square estimators) of the cosmetics brands’ competitiveness by employing the endogenous factors of Porter’s diamond model, which are comprised of firm factor conditions, demand conditions, related and supporting industries, and strategy, structure and rivalry. From the regression analysis, it is revealed that the brand diversification, expansion of e-commerce sales and improvement of governance quality are factors that drive up sales revenues of a cosmetic company. The follow-up comparative analysis between Russian and South Korean companies allowed us to substantiate that the main factors causing the gap between Russian and South Korean cosmetic brands are e-commerce strategies and the efficiency of the governmental system. Russian cosmetic companies should construct stable global and domestic supply chain and expand contact points with foreign customers through big data analysis and development of customized product portfolio. Furthermore, the government is recommended to implement digital services and construct a data-sharing ecosystem to enhance efficiencies of the business process.