Natura Cosmetics Company was founded in 1969 as a little laboratory and makeup products shop in Sao Paulo, Brazil by Luis Seabra; which is the industry innovator in the makeup, fragrances and personal hygiene market. Natura Company offers a complete selection of products with solutions for consumers' various needs, no matter age. It offers products for the face and body, mane care and attention and treatment products, make-up, fragrances, bathtub products, sun safety products, oral health products and products for children. In 1974, the company decided to follow direct selling operation and the strategy permitted to continue extension at low to average cost. Then it becomes the industry leader in direct deal, surpassing even the giant the Avon Company. In 1982, it started out its internationalization process when it arrived in Chile. Six years later, it added the Bolivian market. In 1994, it made a decision to pursue a new international business and opened in Argentina market. Besides, at the start of the 1990s, the company focused on their stakeholders' romantic relationship, defined its values and worth. Thus, a recent annual report indicates that the company's direct sales in the region will reach a turnover in the region of US$ 500 million in 2012
In the survey, it is examined and consulted for the Natura Cosmetic's international development as well as the partnership strategy, international strategy, learning and invention, and the business's portfolio of domestic, local and international market.
You are an analyst for a specialist consultancy and have been tasked with producing an diagnosis of certain areas of the Natura organization's international development, as set out in the case research "Natura Cosmetic".
In your response to the four tasks set out below you need to:
evaluate the info included within the research study provided; and
make mention of relevant theoretical ideas/models produced from the lecture programme and/or your reading of advised academic text messages.
You must not try to access, or use in your assignment, information or analysis drawn from any other resources than those observed above. You are permitted, however, to visit the Natura Company's website (see research study) to be able to become acquainted with the company, its procedures and products.
In his examination of companies, that are successful (internationally), Perlmutter identifies:
Effectiveness of an organization's relationship strategy; and
Learning & innovation
As two key factors. Using cases from the research study; assess from what extent Natura facilitates Perlmutter's theory.
Firstly, Johnson and Scholes (1993:10) state that "Strategy is the way and opportunity of an organization over the future: ideally which matches its resources to the changing environment and specifically its market, customers or clients in order to meet stakeholder objectives. " Stakeholder analysis aims to identify the stakeholders who are damaged by the results of the business's project with the result's success depending on cooperation between the stakeholder and the task. It is important to identify all stakeholders for the purpose of determining their success conditions and turning these into quality goals. It brings about the passions of the stakeholders and compares those to the goal of the task. It relates each stakeholder to the task at hand, and highlights potential conflicts to assign a level of risk or problems to the project's success. In addition, it helps identify existing interactions between stakeholders that can be affected on build firm and potential partnerships to further champion your time and effort. And there are three types of stakeholders which available in Natura Aesthetic Co.
- Inner stakeholders: they include employees and professionals. The business has employees and management team success with driving a car their company as a major family. The organizational culture of Natura is characterized by its openness, transparency and respect for its stakeholders. The managers always care steps to make stakeholders' interest and meet to make its operation performance. Middle management is constantly challenged and empowered to believe new jobs and loftier goals. Besides, their employees are important inside stakeholders of Southwest with high skills and experience. They directly use customers, so the company must motivate them. Furthermore, the company usually has technique for new skills who are developed in-house or appointed from the outside, creating a diversified group of professionals.
Connected stakeholders: shareholders, customers, and suppliers. Shareholders are essential because they're directly positioning the share and they have voting right in business's activities. They can buy their show or vote to change Natura's management if the business is not good running a business, or bad treating them, and then it directs influence on their gains and fascination with investment. On the other hand, if the business is good performance, shareholders are certain to get gains So, good romantic relationship with shareholders is necessary for Natura to build up their business. Additionally, customers are the most important stakeholders because the business is not working and endure without them. The business has various of customers as middle and upper class customer sections, both female and male, even children, plus they always make products to fulfill various of customers' needs. To be able to get profits, the business predicated on customers' using services, so their services should be high quality to provide, to keep and draw in customers. "In the customer's end, Natura's products are based on the well-being strategy, which identifies the harmonious, pleasurable romance between oneself and the body, combined with the concept of rewarding, empathetic romantic relationships with others and with nature" Thus, the business believes this process has contributed to strengthening relationships along the value chain. Moreover, to be able to provide the customers' needs, the business has sale make and expert system. "The interactions with the sales team are carefully looked after and the Natura's give attention to sales allows consultants to place orders at any time and to place several order within the same sales circuit" Also, suppliers are one of connected stakeholder to help Natura doing business effectively. Functioning in plastic market, Natura is required to produce the best quality of products as high quality, high-margin cosmetics, personal maintenance systems, perfumes, creams or make up Thus, it requires to have the best value of ingredients, fresh material, just how to make close romantic relationship with suppliers is important. Beside the self-produced material, the business has produced some products as cleaning soap bars, products including aerosols that happen to be outsourced to an authorized. "The business buys its recycleables from diverse suppliers, many of which have been partners with Natura for over twenty years. " So good romance with suppliers is vital for the business to operate and perform their business.
External stakeholders: competitors (Avon, or other multinational companies), government or interpersonal community. . . All the company must pay tax for authorities, so they may be external stakeholder that the firm must have good marriage. Besides, competitors in the market are so important that the firm needs to concentrate on to compete in the market and get strong position in the cosmetics market. Additionally, Natura produces beauty products products that effect directly on the customers' health, as results, the company needs focusing on the health community and build strong romance with each other in order to get more successful in operation business.
All of them are affected immediately and indirectly to procedures of the business, so focusing on them is very important for the company to achieve success in business because they have sufficient power to influence management's choice of strategy.
In other side of Natura's operation business, in addition they focus on the key factor of learning and innovation. Learning is approximately work, work is about learning, and both are cultural. The interpersonal world is a abundant resource, not a distraction (Dark brown & Gray, 1995; Stamps, 1997; Wenger, 1996b). Matching to Lave & Wenger (1991), it is thought that social practice is the principal, generative phenomenon, and learning is one of its characteristics. Thus learning should be examined as an integral part of the sociable practice where it is happening. Learning is not only a transfer of knowledge, but a process of building understanding (Galagan, 1993). In the case of Natura, the company can be applied both learning and technology for improving their products and their performance in business, competition in the aesthetic market and international market. It is innovated and developed the products in house on a continuous basis. The company has research and development centre in Brazil and overseas, it acquires patents and technology from universities and R&D centre for innovating and enhancing their products. It also has the timeline for the creation and commercialization a fresh product amounts which is from half a year to five years, and the timeline will depend on the degree of technology.
Using relevant theoretical models - and with illustrations from the research study - measure the company's internationalization strategy in the period 1982 - 2005.
Natura Cosmetics decides to visit international market by undertaking field most important research, traveling in another country that brings about explore and understand different market segments, styles and strategies internationally. Johanson & Vahlne (1977) described internationalization as an activity where the companies slowly but surely increase their international participation. They stated that internationalization is the merchandise of some incremental decisions. In other words, internationalization can be considered a process where the companies both increase their awareness of the direct and indirect influences of international ventures on their future establish and do ventures with other countries (Beamish, 1990). Then a global strategy is a strategy through which the firm markets its goods or services outside its home market (Hill 378). One of the primary reasons for implementing a global strategy is the fact that international markets yield potential new opportunities. Additionally, for internationalization ideas, it targets internationalization in networks, by which the business has different connections not only with customers but also with other activities in the surroundings. Relating to Hollensen, S. (2007), there are a few theories of internationalization as the original marketing way, life cycle idea for international trade, the Uppsala internationalization model and the internationalization cost way, dunning's electric methodology, the network procedure or the difference between social distance and psychic distance
Traditional marketing approach: It targets the company's central competences coupled with opportunities in the international environment (Penrose, 1959; Prahalad and Hamel, 1990). It leads the company to have got a compensating benefit in order to overcome the expense of foreignness, and then recognition of technical and marketing skills are the key elements in successful foreign accessibility (Kindleberger, 1969; Hymer, 1976).
Life cycle idea of international trade: Matching to Vernon's Product Circuit Hypothesis (1966), the companies proceed through an exporting stage before turning first to market seeking foreign direct investment (FDI), then to cost oriented FDI. The technology and marketing factors incorporate in order to make clear standardization that drives location decisions. This hypothesis is the fact that makers in advanced countries are nearer to the market segments than producers somewhere else; subsequently the first production facilities for the products will be in the advanced countries. For the standardized products, the less developed countries may offer competitive advantages as development locations.
The Uppsala internationalization model: Its model is developed by Johanson and Wiedersheim-Paul (1975) and Johanson and Vahlne (1977). Based on this model, when the business faces with unknown markets, imperfect information, and being in circumstances of constant incertitude, the company develops in international markets by implementing an activity which evolves by increments. The model advises a sequential design of admittance into successive international markets, coupled with intensifying deepening of determination to each market. Regarding to this model, the business will intensify their dedication towards foreign marketplaces as their experience grows, and psychic distance which tries to conceptualize and gauge the social distance between countries and markets (Hollensen, S. (2007)).
The internationalization/business deal cost way: Buckley and Casson (1976) broadened the choice to add licensing as a means of reaching customers abroad, quite simply, licensing can reach customers abroad. However, in the perspective the multinational company would usually choose to internalize deals via direct collateral investment alternatively than license its capabilities. The international includes two interdependent decisions as regarding location and mode of control and it is related to business deal cost theory. The internationalization and business deal cost (TC) perspective are both concerned with the minimization of TC and the conditions underlying market inability.
Dunning's eclectic procedure: Dunning (1988) mentioned the importance of locational factors in foreign investment decisions. The eclectic means a full justification of the transnational activities of the firms needs to bring on several strands of monetary theory. Based on the model, the propensity of the business to engage itself in international creation increases if three conditions if possession advantages, locational advantages and internationalization advantages are being satisfied.
The network procedure: It means the international firm cannot be examined as an isolated acting professional; it must be viewed in relation to other stars in the international environment. Relating to Johanson and Mattson, the interactions of the business within a domestic network can be utilized as associations to other sites in other countries.
The different between ethnical distance and psychic distance: Regarding to Hollensen (2007), cultural distance refers to the macro ethnic level of a country which is defined as the degree to which ethnical values in a single country will vary from those internationally. And psychic distance is defined as the average person manager's understanding of the dissimilarities between the home and the foreign market and it is an extremely subjective interpretation of fact.
In the situation, Natura runs international through an agreement with an unbiased distributor in Chile in 1982. Based on traditional marketing methodology, the business audits their resources that are core competence and provide distinctive competitive advantages. All of the resources of Natura, such as: financial, R&D skills, knowledge, suffers from, sales and circulation channel or sale pressure are valuable, hard to copy, exploited and they are sources of center competences and competitive advantages in foreign environment. Beside, marketing capability has its biggest effect on the innovative outcome for the company which has a strong resources and competences. Natura has strong R&D this means the company with a strong R&D base is the people with the most to gain from a strong marketing ability. Furthermore, the most important determinant of its performance is the connection of marketing and R&D features. And R&D is among the finest inside factors which bring opportunities for Natura to do business in new market. For example, the company acquires patents and technology from colleges and research centers in Brazil and in another country, and they target particular research initiatives on skincare products and on the lasting use of elements from Brazil's biodiversity, launching their product lines. Besides, the employees are accountable for the local procedure that means Natura has also strong human resources. In addition, in the 1990s, the politics and macro financial changes in Brazil and other South and Central North american countries; and other Latin American countries experience development rates and make an effort to develop their commercial tines with Brazil, because of this, Natura makes a decision to expand their business internationally. Additionally, following mass advertising, it generates a rising uniform trend in beauty ideas and demands in the region which leads a cultural focus on beauty and an improved knowledge of how to use cosmetics. Further, Natura recognizes the technology and marketing skills on overseas market, such as in Argentina, the business tries to avoid risk, looks the ways to diminish costs and put advertisements in the major magazines stating, and they build the nice relationship with communal pact (suppliers, employees and customers) Besides, Natura creates brand equity, quickly developing a sizable network of consultants, controlling and promoting their output as well as learning logistics and syndication. (CEO, Alessandro Carlucci, quoted in the Harvard Business Institution research study: "Natura: Global Beaty Made in Brazil", Sept, 2006).
According to Uppsala model, Johanson and Wiedersheim-Paul (1975) separate between four different modes of entering a global market, where in fact the stages represent higher levels of international participation or market determination:
No regular export activities:
Export via indie representatives
Establishment of a foreign sales subsidiary:
Foreign creation or manufacturing systems:
The enterprises goes by from one stage to another as it steadily acquires international experience. The internationalization process evolves between your development and understanding of foreign market segments and the growing commitment of its resources on the market. The Uppsala model is backed by many reports which have shown both small and large companies passing through unique and gradual stages during the development of their international affairs (Johanson and Vahlne, 1990; Oviatt and Phillips-McDougall, 1994).
From the truth, during 1970s and 1980s, the Brazilian makeup and toiletries market is relatively finished to imports, and opponents are typically multinational companies who manufactured mass market products locally, however, many US established companies face with the instable politics and hyperinflation in Brazil. As a result, until the early 1990s, it helps the development of companies as Natura that are producing high quality products for local customers. Through direct sales, franchises or retail channels, Natura is widely known brand in the home market and high reputation. However, the most relevant rival in the direct sales portion of Natura is Avon, and the company also competes global consumer products giants as Unilever, or Johnson & Johnson The Brazilian cosmetic makeup products and toiletries market is one of the greatest & most developed in Latin America, therefore the company encounters with increasing competitive environment. That leads Natura to encourage their capacity for developing more technological advanced products and products designed to certain requirements of a broad range of consumers. They focus on their product development and marketing strategies as marketing and advertising campaigns, or sales route, and they also concentrate on products for aim for consumers.
From 1982, Natura makes a decision to develop their business internationally that begins in Chile, and extend more in other South, Central American countries, Latin American countries, such as: Mexico, Argentina Natura uses direct offering and retail network or providers for distribute products in foreign markets. For example, in 2003, the business creates Natura's house notion that sale reps could be in touch with the brand and could meet each other, exchange experiences, be trained through speeches and exhibitions, or test our products Besides, it's the place that can be seen as a middle floor between a genuine direct offering model and a store chain. At exactly the same time, the company must introduce new marketing tools for growing their brand and increasing consumers' awareness. In French market, Natura starts a two storey flagship store in April 2005. The store was created to be utilized as a location where Natura's values and vision can be exhibited. However, the store opens that means the corporation has to choose a fresh sales model, and Paris store designated the first time that Natura devotes to the direct sale model, has exposed a shop.
Thus, the Natura's development of international procedure still handles problems and it is difficult to regulate and manage their functions international markets.
Using relevant theory, dispute the situation either for or against Natura adopting a function (or modes) of international market access that change(s) from the direct sales/distribution model utilized.
In international market accessibility, export is the most typical mode which is typically used in primary entry and slowly but surely evolves towards overseas based operations. It really is organized in many ways that will depend on the number and kind of intermediaries. In establishing export channels, the company has to decide that functions would be the responsibility of exterior agents and that will be handled by the company itself. (Hollensen, 2007). Inside the export method, companies face two channel options as export directly to customers in another country or export indirectly with the help of an intermediary (Peng and York, 2001). As the direct mode is the most frequent way to companies internationalization and well-addressed in the extant literature, that give attention to indirect methods to internationalize. Indirect paths to internationalization are those "whereby small firms are involved in exporting, sourcing or syndication contracts with intermediary companies who take care of, on their behalf, the transaction, sales or service with overseas companies" (Fletcher, 2004). And cooperative export requires collaborative agreements with other companies that concerning the performance of exporting functions.
In the case of Natura, the business bases for sale rep and uses 26 different delivery companies as well as the Brazilian postal services to transport products to it representatives. The business is through a nationwide network of 483, 000 productive sales reps in Brazil and 36, 000 brokers far away. The agent represents an exporting company and markets to wholesalers and retailers in the importing country. Direct selling is defined as the sale of a consumer service or product, person-to-person, from a set retail location, advertised through 3rd party sales associates. The sale representatives are also referred to as consultants, vendors or other headings. Natura's sale representatives are "well trained, autonomous female salespersons with a no exclusivity contract, and the company has romance with sales makes that mainly comprises "middle income housewives selling to their friends, independent specialists, secretaries and personnel personnel at all types of companies leveraging their in company connections and maids advertising to co-workers or employers". Natura specializes in sales and sales team that "allows consultants to put orders at any time also to place several order within the same sales routine, with the company adapting its logistics and circulation plans and costs to meet requirement". (Natura Beauty products). Natura uses providers and sale associates in international market which cover rare geographic areas and also have subagents helping them. And its own model is familiar with the neighborhood market, customs and conventions then have existing business connections and employ foreign national. Additionally, the company uses agents which may have a direct incentive to market through wither commission payment or product margin, however, because the remuneration is tied to sales, it leads to reluctant to spend enough time and effort towards developing a market for a new products. Moreover, the business can be insufficient control and control the market feedback and their operation, if the agent is doing well and develops the market it challenges being replaced by way of a subsidiary of the main. (Hollensen, 2007)
Thus, in the long - term strategy, the company must consider any new admittance mode decision. To get more expansion in overseas market, Natura must focus on international sales, branch/sales and creation subsidiary method. Although its subsidiary mode is high preliminary capital for investment, risky and also taxation problem, it is ideal for the business to full control and manages of these procedure and reduces the carry costs. It means that the business will most likely keep a central marketing function at their home platform, but sometimes a local marketing function can be contained in the sale subsidiary. When the actions of sales are performed, all foreign purchases are channeled through the subsidiary that than sells to their clients at normal low cost or retail prices (Hollensen, 2007). Other reason behind Natura chooses sales subsidiary is the fact the company will take advantage of taxes in the international market where income tax is low. Furthermore, this mode eradicates the possibility that a national spouse gets a free ride, and acquires market knowledge straight as sales subsidiary. And deal subsidiary is the possibility of transferring greater autonomy and responsibility to these submits that is being near to customers. It is also accessed to recycleables and labor as creation subsidiary, reduction of obligations as creation subsidiary and market access as sales subsidiary.
Natura's development facilities are positioned in Brazil. Assess whether this decision is accurate in conditions of strategy and logistic & circulation - given the business's portfolio of local, regional and international market segments.
Natura's creation facilities are positioned in Brazil that is correct decision in terms of strategy and logistic & syndication for the business's portfolio of domestic, local and international market. Based on 12C construction, it is utilized to recognize and measure the key strategic issues that Natura can be faced in international market for cosmetic products. The 12C construction includes the problems of culture/consumer patterns, channels, commitment, money, communication, capacity to pay, caveats, contractual responsibilities, consumption, choices, attentiveness and country. The 12C is an instrument which can be used to recognize the constraints when the business enters a new international markets. Each C will independently be used to gauge the business's strategies. Then it is the method for Natura find out opportunities and challenges because of their decision in term of strategy, logistic and circulation in widening internationally. In the case of Natura, it is considered the C of country, social, determination and communication.
Firstly, the business's home bottom part is Brazil which is the most significant market in Latin America and the world's fifth most popular country. Beside, the GDP of Brazil is the world's tenth-largest market. So it can be an significantly attractive market for all business and one of the world's most effective growing economies. And Brazil in addition has abundant natural resources with 4. 6 million hectares of planted forest mainly located in the South. Regarding Natura, it is good for the company creation facilities situated in Brazil and their recycleables. The company's main procedures are concentrated in an integrated creation, logistics and R&D centre situated on the outskirts of Sao Paulo where devices for cosmetics, shampoos, consist of four production and fragrances, other facilities include a nursery, restaurant, shop and a activities substance. Besides, the production of some products is outsourced to an authorized. Additionally, the manufacture of Natura found in Brazil that has strong and greatly network distribution in home and international. And the R&D centre is one of the primary & most advanced of its kind in Latin America, so that it is not hard for transport to other neighbor countries. In other words, if the Natura develops manufacture in international countries as Argentina or Mexico, it'll handles the high costs and shipper problems currently.
Secondly, Natura considers to culture and consumer habit. Brazil is South America's most influential cultural and biggest democracies. The changes on political and macroeconomic in Brazil and other South and Central North american countries causes more understanding and focus on beauty and learn how to use beauty products. . A large of the middle class society mainly entails in professions such as retailing, civil services and other skilled occupations. And Brazilian middle class has a predictable preference for beauty and other luxuries however when going shopping, they has more consciousness of status than middle class North Americans and Europeans with the idea to ordinarily provide others.
Additionally, the monetary policies as taxes regulations have been motivated toward development of trade and investment. The export oriented market sectors will be exempted from non- tariff barriers with the reason to include more bonuses to exports, then the import tasks have been condensed sharply. They are good things for Characteristics to export method and creation facilities location in the house platform. Besides, some materials for production of Natura's products are outsourced, so imports of recycleables are exempted from regular tariffs.
Lastly, for communication, it is important for Natura doing business and direct selling their products. At present, technology qualifications is developing which is out-performed other South America and Latin American countries with the telecommunication procedures. In Brazil, it is tenth in the number of broadband reference to the fifth major mobile market in the world, and about 40% internet usage is designed for e-commerce which is expected to develop exponentially in the forthcoming years. Additionally, telephone is considered for the higher and the middle-income course. As a result, these are advantages for Natura for taking order and offering their product effectively.
However, in the future, the Natura can target to their expansion and building produce in overseas countries as French because "the decision to start in Paris was both rational and an psychological move. France has historically been a source of knowledge and uncooked material for our products as well as a source of inspiration" (Natura Plastic)
The record has analyzed and assessed of certain aspects of the Natura Company's international development, its functions and products. Inside the scope of the study, Natura Aesthetic is a successful example of international market development and international development, it has turned into a leading makeup products company in international market. However, the business is facing with very seriously competitive in the cosmetic makeup products field market domestically and internationally. Further, the company should make advancements in its current products and the method of international market admittance and decision of strategies. It's important for Natura to boost its marketing strategy, advertising and promotion and distribution stations which enables the business to consider the best gain and opportunities of an ecological competition.
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