The Success Of A Natura Cosmetics
|✅ Paper Type: Free Essay||✅ Subject: Marketing|
|✅ Wordcount: 4358 words||✅ Published: 8th May 2017|
In order to analyze the success of a Natura cosmetics, there are many factors to be mentioned. In my opinion, two main reasons which should be listed are the effectiveness of relationship between Natura and organizations relating to its operation and its learning, innovation activities.
Firstly, it is not difficult to realize that Natura’s relationship strategy works very effectively. According to the case study, this company’s main operations including production, logistics and research and development are situated in Sao Paulo. When there is a new order, the stock status will be checked immediately by the stock management system. In no more than one day from the purchase order, the finished products are delivered to the sales representative’s home. With 26 delivery partners as well as postal service, Natural’s products will be transported to its representatives no longer than six days in spite of far destinations (Natura case study). Clearly, in order to ensure the quality of the products and good services for the customers, the connection between separate parts in a whole group must be strong. It requires all bodies to have to cooperate and contribute to the effectiveness of the common duties. One concentration of Natura’s relationship strategy is on sales representatives. They are seen as the company’s consultants who are well-trained, autonomous female salespersons and mostly are housewives having good relationship with potential customers such as friends, office staff, independent professionalsâ€¦ One special thing here is that Natura does not have to pay direct employment costs for this force. This method will help the company save a large amount of money to invest in other activities. Also it will encourage Natura to expand its market without being worried about reducing profit margins. Using this way, the advantages will belong to not only Natura but also sales force. They do not receive a direct salary amount but the commission for sold products is the highest in the industry, which including 30% margin of end consumer prices and premium prices (Natura case study). Obviously, this way is based on the ability to sell products of each sales representative and it creates motivation for them to try more because of themselves as well as the company. Another strength of its management is organizational cultural. Openness, transparency and respects for its stakeholders ( Natura case study) are the words to describe this operating environment. They are ready to give challenge to middle management who are believed to be ambitious and highly qualified. This force is able to take great and out of imagination success for the company. Additionally, the policy for new talents is positive. Natura wants to fulfill both from inside and outside sources. They takes time to develop potential talents and headhunt as well. As a result, the manager force will be diversified. With customers, Natura has a such different approach. A customer going to Natura means that she is buying belief . The company does not talk about market demands but captures their emotions, feelings. By this way, when a customer sees an advertisement of Natura, she will think that this product is born for her, and Natura helps her have a better life through selling it. It is impossible to deny the effectiveness of this marketing philosophy. About the quality of products, Natura persuades customers by using natural and sustainable ingredients. For example, Ekos product line comprises of Brazilian berries and plants, such as guarana, brazil nuts, mate verde and cocoaâ€¦( Natura case study). In recent years, cosmetics consumers mostly believe that products extracted from the nature will have good effects on the skin and no side-effect. With information about materials from reserves in the rainforests and savannahs, clearly Ekos is easier to be appreciated from the public. One important thing of Natura’s relationship strategy is to participate in environmental issues. This action demonstrates that Natura not only operates to make profits but contributes to the development of society as well. Otherwise, it will bring positive image in public for the company and create its good connection with the customers, government. Such activities, such as Rainforest Education and Recovery Project, Rio de Janeiro Botanical Gardensâ€¦ are specific examples of maintaining garden and regenerating damaged forest ecosystems (Natura case study).
Secondly, Natura’s operational pathway is the process of learning and innovation. Staring from a small laboratory and cosmetics store, the company made a bid step in the market by studying the experience of Avon-
the then leader in the world. In 1974, Natura decided to operate following direct sales model. The result of this strategy was the expansion at low to moderate cost. With a new company, learning from successful and well-known brand name is very important and this gives useful lessons for Natura at that time. Besides, the success of Natura also comes from its innovation and product development. Every year, the company spent about 2.9% annual net revenues in research and development (R&D) to launch and improve approximately 153 products (Natura case study). Natura also buys patents, technology from research centers in Brazil and outside. Their concentration is placed on skin care and environment-friendly products.
In conclusion, effective relationship strategy as well as learning and innovation activities are two main factors of the success of Natura internationally.
Task 2: using relevant theoretical models – and with examples from the case study- evaluate the company’s internationalization strategy in the period 1982 – 2005.
In the period 1982 – 2005, it has seen the development of Natura in cosmetics international market. Along with the expansion into different areas from the near to the far, this company changed the operational strategies gradually and more effectively. It demonstrates that the company’s market commitment as well as internationalization level has increased simultaneously in this period. As a result, in order to assess Natura’s internationalization strategy from 1982 to 2005, I decide to choose the Uppsala model which emphasizes increasing commitment towards abroad market when the firm’s experience goes up (Svend Hollensen, 2007).
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In the year1982, it saw the first endeavor of Natura to distribute its products to foreign customers. The company used an independent distributor in Chile. However, the result for this action was terrible. The operation was stopped after it operated in a short term. The reason for this failure is that Natura did not have careful preparation. Clearly going international is an important issue for any firms which want to develop. One of the most vital conditions for success is that the company should have a proper plan and it must come from its actual demand. At this time, Natura’s expansion abroad was driven by impulse. (Natura’s case study). Maybe it could not create enough motivation for working attitude and successful ambition. The second cause is that the company had no enough information about the market (Natura’s case study). Knowledge such as politics, culture, distance differences between markets â€¦ always should be obtained by the firms in the case they really need to succeed. Additionally, personnel and financial problems happened when the company went to Portugal and Florida. And lessons due to lack of experience was given to Natura. Accordingly, market commitment or internationalization level in this situation is rather low.
Until the 1990s, Natura’s action of going abroad occurred again. Contrast with the last time, the company planned carefully. And this time, a great advantage of the Government policy favored to development way of Natura. Brazil and other South and Central American nations took favorable change in politics and macroeconomics. With potential markets of Natura such as, Mexico, Argentinaâ€¦ were attempting to cooperate commercially with Brazil and their economy were growing positively. Besides that, the attitude of high appreciation of beauty and better understanding of cosmetics has made an increase in demand for beauty products. It can not be denied that many favorable conditions have come to Natura (Natura case study). From this time, the success of the company in various markets has gone. Three specific examples for effective internationalization strategy are Argentina, French and Mexico. Argentina and Brazil are two nations in the same Latin America area. The geographic distance between them is not so far. And Natura took the first step to this market in 1994 but until 2001 the large mark occurred. In December 2001, this economy was thrown into crisis because of currency devaluation of about 40%. While its competitors tried to go up prices, Natura kept it stable. The company has just increased it only when local salary changed in the better way (Natura case study) and this information was announced publicly to the customers. By reducing cost and remaining price, the company got good impression on Argentinean market and help the process of building the brand here. The strategy brought the “win situation” for Natura. In three years later, there was a growth of six- factor revenue which is a wonderful number. The main method that the company applied to sell products in Argentina in this period is direct selling through sales consultants force. The number of consultants went up nearly three times from 7000 in 2002 to 20000 in 2005. Obviously, Natura has got good result with participation strategy into Argentinean market. The second one should be mentioned in internationalization strategy of Natura is France. It can be said that from Argentina to France there is a development of both geographic diversification, internationalization and market commitment. The distance from France to Brazil is much larger than that of the remainder. Actually, located in two different continents, there is not same characteristics in the beauty product custom. Hence, Seabra said that “France has historically been a source of knowledge and raw material for our products as well as a source of inspiration”. About the way of sales, Natura discontinued using traditional model which is direct sales and changed to retail store. It is an increase in size of investment in marketing and organization. In stead of a point of sales, in 2005 the company designed a two – storey flagship store where are used for sampling products, promotion events and is seen as displacement place of Natura’s belief and vision (Natura case study). This is an evidence to show the company’s market commitment is on upward. Another point is the change in Natura’s product packaging and size. Making its products suitable for the host market’s demand demonstrates effort to occupy the market share and internationalize.
Moving to Mexican market, it has seen a more progressive step in the strategy of Natura. And it seems to have leapfrog stage here. In the year 2003 which is prior of two years compared to the time of entrant in France, Natura came backs to the nearer market with many similar characteristics of economy, demographics and passion for beauty products (Natura case study). In Mexico, the company developed the experience in France to a new model – “hybrid model”. Building Natura’s House, it can combine the strengths of both direct sales model and store chain. Here sales representatives can interchange experience, be trained professional skills, keep in touch with brand and even receive sample. Also in this country, the company takes an initiative in new marketing tools. An example of this is “magalogue”. This combination between magazine and catalogue is applied to give Natura’s products and special offerings, articles about health and beauty problem. So, in comparison with French market, Natura’s investment in Mexico takes more attempt. Change from a store chain to Natura’s House is an example. It requires both market-specific knowledge and general knowledge. And resources should be employed more efficiently, especially human resource. All these elements explain that there is an upward trend of market commitment, internationalization when Natura enters Mexican market.
Generally, Natura’s internationalization strategy was successful in the period 1990s to 2005, but ineffective in the year 1980s.
Task 3: using relevant theory, argue the case either for against Natura adopting a model (or models) of international market entry that differs from the direct sales/ distribution model employed.
Coming back to international cosmetics market since the year 1990s, Natura has gradually succeeded with several adjustment of market entry policies. Two specific evidences are “Maison Natura” in France and “Casa Natura” in Mexico. These models show that the level of geographic diversification, market commitment and internationalization (The Uppsala internationalization model) of Natura has increased as well as their international market entry method has changed in comparison with direct sales model ever -used. Moreover, in order to go international more dramatically, Natura should employ an appropriate market entry strategy. In my opinion, it can be “Hierarchical model” with resident sales representatives in foreign target market.
Firstly, it should be mentioned the direct sales model that Natura used to employ to provide products to its customers. The current demand for the company’s cosmetics are met through the force of 483000 active sales representatives in Brazil and 36000 agents abroad, who are well-trained and flexible consultants . And mostly orders from customers are placed via Web and telephones.
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However, with French market of which Paris has been known as a holy city of fashion and beauty products, to attract much attention from the public, Natura innovated its traditional way. The company decided to open a two-storey flagship store which was called as “Maison Natura” in 2005. This store takes the duty of more than a point of sales, where can be seen to display Natura’s belief and vision. Also here samples are given to customers or promotion events happen (Natura case study). There is an improvement in the way Natura enters to the market and persuades potential buyers. With this retail store, Natura has to spend more investment than its direct distribution. It is for the organization, marketing and even personnelâ€¦For example, the company had to build a store and make it become a place served for many purposes. It is so different from a call centre which can only receive purchase orders. Besides that, to adapt to this competitive environment, Natura modified its products’ packaging and size. It can not be denied these activities were able to help Natura get a foothold in France. And the reasons were that the company prepared carefully market specific knowledge and made market commitment. From that, Natura seems to be more suitable for an international market entry model which requires more responsibility and competence.
And about Mexican market, it is still another increase in market commitment as well as internationalization. However, there is leapfrog stage herein. The distance from Mexico to Brazil is smaller than that of France and the time of entering Mexican market is sooner two years (2003) but internationalization process goes up. Having some advantages of similar characteristics of economy, demographics, passion for cosmetics, Natural also faced the issue of late participation (Natura case study). Hence, in order to get success, it seemed to request the company to adjust a new strategy. The solution given was that Natura House which has strengths of both pure direct sales model and retail store. There sales consultants can help each other with experience and it can be place for exhibitions, training speeches or product testing, offerings. Clearly, advantage of direct sales model which is the strong relationship between end user and sales representative, and those of retail chain which are close relationship among sales consultants and multi-purpose place are combined. Not only the company invested in finance to establish this “hybrid model” at large towns and areas with many buildings, but also at Natura House, new marketing tools were employed at the first time to remind the public about the company’s brand (Natura case study). For example, the company tried issuing “magalogue”. By this way, Natura could supply both its product, special offerings and health, cosmetics articles as well. It can be considered that Natura’s attempts of organizational and marketing change demonstrates their ambition to get a step into Mexican cosmetics market and occupy a certain market share. Also the approach was done professionally step by step. Importantly, it did differ from direct sales model Natura used to use.
Far from these two markets, in the following years, the company wants to attack new potential large ones, such as the UK, the US, Russia and so on. Only in the United States, in 2004, the value of sales of cosmetics and toiletries in 2004 was 45.6 billions US$, made up 19.7% of total market share. Or In United Kingdom and Russia, the numbers were 11.6 billions US$ (5%) and 6.4 billions US$ (2.8%) respectively (table 1 of Natura case study). However, with these countries, the main retail channel methods are not the same with Brazil. While in Brazil, sales through direct sales gained the remarkable proportion of 27.4% in 2004, in Western Europe, that percentage was only 4.7%. In these regions, the most common methods are different each others. ( Table 2 of Natura case study).
From the factors which have already mentioned, in my opinion Natura should move to apply a new international market entry – Hierarchical mode. With current conditions, it can open resident sales representatives in the host country. Rather similar to models employed in France and Mexico, the company can build a place of many functions served for sales and marketing activities. These can be a showroom, an information centre for customers, after-sales service centre, a training centre for sales consultants, a place for sample receivingâ€¦ Sales and service department should be located in the host countries because it will be easier to know thoroughly about local passion and demand in comparison with doing from distance. When being familiar with local market, Natura can open sales subsidiaries. At this business office method, the company can be take tax advantage but it must take more responsibilities and autonomy. Besides, research and development, production, marketing departments are still situated in Brazil. It seems to be face a large amount of difficulties to change abroad assumed that other conditions do not change.
Task 4: Natura’s production facilities are located in Brazil. Assess whether this decision is correct in terms of strategy and logistics & distribution – given the company’s portfolio of domestic, regional and international markets.
Since the establishment in 1969, Natura has experienced different growth periods. First period from 1969 to1981, the company tried to build the brand and take expansion in domestic market. In 1982, Natura signed a contract with an independent distributor in Chile in order to expand abroad. However, this plan failed financially. Until the 1990s, once again Natura went internationally according to the open policy of the government and has got success step by step. Although Natura has changed their activities dramatically compared to the foundation time, production facilities has still situated in Brazil. One issue is given is that this decision is suitable for the development of Natura in following years?
Firstly, with current situation, in my view placing all production facilities in Brazil is a reasonable decision. Brazil is the place where Natura was born. As a result, the company’s products are manufactured usually have characteristics suitable for Brazilian demand. So along with the development of this brand, a stable market share in Brazil has been occupied. For any companies, they will penetrate into foreign markets once gaining or becoming familiar with its home market. This will be a strong basis for the company to attack another. About Natura, its Brazilian market share in 2003 was 11.3%, positioned the second leading cosmetics and toiletries company in Brazil (Table 3 of Natura case study). Moreover, this country has a large advantage of material sources of production for the company. In recent years, Natura has focused their operation on the products using sustainable ingredients. And Brazil’s diversity is a profuse supply source. Fulfilling these natural materials for the production in the home country, clearly the company has bigger advantages over its competitors. They can save cost of transportation, import tax and preferential policies for domestic companies to use inside materials. Additionally, the traditional markets of this company are Argentina, Mexico, and so on. These countries are not far from Brazil and most of them are in the same area with many similar characteristics. So production facilities in Brazil and using active sales representatives force to distribute the products to the customers in these nations may not create serious problems of transportation cost. Another reason to support for production facilities in Brazil is the effectiveness of the current operations. When a customer place an order, in 24 next hours finished product is made to be transported to the sales representative’s home. It is due to the close cooperation among different department and automated system. Immediately after having a new order, the stock status is checked by the stock management system, and materials are collected to production facilities. Final steps are packaging and labeling. Total time for the whole process is no more than one day. After that, with 26 delivery partner, products are delivered to its representative within 2 days in Sao Paulo or no longer than 6 days for far destinations (Natura case study). It can be said that the operational process works actually efficiently to ensure delivery plan. This punctuality has supported placing production facilities in the origin country of products.
From these points, that Natura’s beauty products are manufactured in Brazil is appropriate. However, this decision will continue to be agreed in the future when plan of making Natura brand become commonplace with global audience? First problem can occur when moving production abroad is the cost. Compared to most of other countries in the same South American area and Europe, labor cost here is much cheaper. One of the reasons is that their population is the fifth leading in the world and still young or in labor ages (Wikipedia information). If Natura choose a country which labor price is high, finished product’s price will increase dramatically and the competitiveness will decrease. In addition, begin operating at a new location, there are two ways for material issue. The first solution is to find the new source. However, it is not simple to carry out because main ingredients for the company’s cosmetics are from the nature, especially from Brazil’s biodiversity. The second one is to transport materials from Brazil to the manufacture place. Maybe it is an impractical solution due to a large amount of disadvantages. It can be denied that transportation as well as import tax will make it go up. It also can result from import policy which procedures or regulations in the host country do not encourage to import such materials. Also Natura should take into account the origin country of products. It is not true that all customers evaluate equally with the same brand but different production places It is considered frequently that the customer have preference for the products from well-known nations for high technology and long term tradition of this kind of commodities. As a result, when deciding to choose a new manufacture location, the managers need to investigate the customer’s desire. About distribution network, currently Natura still uses direct sales model through active sales representative force. They are seen as Natura’s consultant who are mainly well trained housewives and receive orders via Web and calls (Natura case study). So the company does not have to pay direct employment cost but high commission for every product sold. With current conditions this retail channel still works efficiently. But if there is a change in production facilities, it is still good? Last but not least, logistics issue can meet obstacles in the case of moving manufacture location abroad if that policy there is still close. It can come from various regulations about import – export documents or the quality of transportation system is modern enough to support Natura’a activities or inventory, storage problems, packaging and so on. Nowadays to get high profits, generally multinational companies invest in developing country, but they have to accept certain risks related to low quality of logistics. Hence, Natura ought to consider the ability of goods to move between nations.
In conclusion, with current affecting factors, Natura seems to keep production facility situate in Brazil. In the far future, along with long term strategy and improvement outside, a change maybe reasonable if they are supportive.
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