International market analysis for Natura cosmetics

International food commercialize analysis for Natura cosmeticsNatura ornamentals beau monde was founded in 1969 as a nice laboratory and cosmetics shop in Sao Paulo, brazil-nut tree by Luis Seabra and it is the indus hand over leader in the cosmetics, fragrances and personal hygiene grocery. Natura Comp whatever offers a climb range of crossings with solutions for consumers various needs, regardless(prenominal) of age. It intromits overlaps for the side of meat and body, hair cargon and treatment crossroads, excite-up, fragrances, bath products, sun protection products, vocal hygiene products and product lines for children. In 1974, the society decided to fol scratch base portion out in gross revenue mathematical operation and the outline tout ensembleowed to continue magnification at low to stylerate price. Then it becomes the industry leader in station bargain, portentous even the giant the Avon Company. In 1982, it started its world-wideization offsh oot when it arrived in Chile. sextuplet years later, it added the Bolivian commercialise. In 1994, it decided to pursue a b atomic number 18-ass world(prenominal)istic business and opened in genus Argentina market. Besides, at the start-off of the 1990s, the come with focalizati wizd on their stakeholders race, defined its beliefs and values. Thus, a recent annual report indicates that the familys direct gross sales in the region will prep atomic number 18 a turnover in the revise of US$ 500 cardinal in 2012In the report, it is analyzed and consulted for the Natura Cosmetics overseas development as nearly as the relationship strategy, international strategy, breeding and innovation, and the familys portfolio of domestic, regional and international market. expression ANALYSISNaturaYou work as an analyst for a specialist consultancy and crap been tasked with producing an assessment of certain aspects of the Natura organizations international development, as set give away in the episode think over Natura Cosmetic.In your answer to the foursome tasks set out below you be required toevaluate the information contained within the slipperiness study provided and pull reference to relevant theoretical concepts/ roomls derived from the lecture course of study and/or your reading of recommended academic texts.You must not try to access, or include in your assignment, information or analysis d stabbingn from any separatewise resources than those noted above. You are permitted, however, to visit the Natura Companys website (see casing study) in localizeing to familiarize yourself with the company, its operations and products.Task 1In his analysis of companies, that are palmy (internationally), Perlmutter identifiesEffectiveness of an organizations relationship strategy andLearning innovationAs some(prenominal) profound factors. utilise examples from the reference study assess to what fulfilment Natura supports Perlmutters theory. -Firstly, Johnson and Scholes (199310) state that Strategy is the direction and scope of an organization over the foresightful term ideally which matches its resources to the changing environment and in particular its market, customers or clients so as to meet stakeholder expectations. Stakeholder analysis aims to discover the stakeholders who are touch by the results of the companys project with the results success depending on the cooperation in the midst of the stakeholder and the project. It is principal(prenominal) to recognize all stakeholders for the mapping of identifying their success criteria and turning these into woodland goals. It brings out the interests of the stakeholders and compares them to the purpose of the project. It relates each stakeholder to the project at hand, and points out potential conflicts to assign a level of risk or challenges to the projects success. It also helps identify existing relationships between stakeholders that erect be influence d on build corporation and potential provideships to except champion the effort. And there are three types of stakeholders which available in Natura Cosmetic Co. Internal stakeholders they include employees and managers. The company has employees and management team effectiveness with driveway their company as a big family. The organizational conclusion of Natura is characterized by its openness, transparency and respect for its stakeholders. The managers always care how to make stakeholders interest and occupy in order to make its operation effectiveness. Middle management is everlastingly challenged and empowered to assume unsanded projects and loftier goals. Besides, their employees are important internal stakeholders of southwestward with high skills and experiences. They like a shot work with customers, so the company needs to activate them. Moreover, the company usually has strategy for refreshed talents who are developed in-ho work or hired from the outside, creat ing a diversified group of managers.Connected stakeholders shareholders, customers, and suppliers. Shareholders are important because they are directly holding the share and they commit voting rightfulness in businesss activities. They can buy their share or vote to transfer Naturas management if the company is not exhaustively in business, or questioning treating them, and and so it directs influence on their profits and interest in investment. In contrast, if the company is good performance, shareholders will get profits So, good relationship with shareholders is necessary for Natura to develop their business. Additionally, customers are the most important stakeholders because the company is not operating and survive without them. The company has various of customers as mall and swiftness class customer segments, some(prenominal)(prenominal) female and male, even children, and they always make products to satisfy various of customers needs. In order to get profits, the c ompany base on customers using services, so their services should be high quality to serve, to keep and attract customers. At the customers end, Naturas products are based on the upbeat concept, which refers to the harmonious, pleasant relationship between starself and hotshots body, combined with the concept of rewarding, empathetic relationships with opposites and with character Thus, the company believes this approach has contributed to streng and soing relationships along the value chain. Moreover, in order to serve the customers needs, the company has sale wildness and consultant system. The relationships with the sales oblige are carefully maintained and the Naturas contract on sales allows consultants to target orders at any time and to pull more(prenominal) than unrivalled order within the same(p) sales cycle Additionally, suppliers are one of machine-accessible stakeholder to help Natura doing business effectively. Operating in cosmetic market, Natura is requi red to become the best quality of products as premium, high-margin cosmetics, personal care products, perfumes, creams or make up Thus, it needs to have the best quality of ingredients, dim poppycock, so how to make close relationship with suppliers is important. Beside the self-produced material, the company has produced near products as soap bars, products containing aerosols which are outsourced to a triplet party. The company buys its novel materials from diverse suppliers, umpteen of which have been partners with Natura for over 20 years. So good relationship with suppliers is essential for the company to operate and perform their business.External stakeholders competitors (Avon, or some early(a) multinational companies), government or social community each the company must pay tax for government, so they are outdoor(a) stakeholder that the family should have good relationship. Besides, competitors in the market are so important that the firm needs to center on to compete in the market and to get strong position in the cosmetics market. Additionally, Natura produces cosmetics products that influence directly on the customers sur baptistryness, as results, the company needs steering on the health community and build strong relationship with each other in order to get more successful in operation business. any of them are affected directly and indirectly to operations of the company, so focusing on them is very important for the company to achieve success in business because they have sufficient power to influence managements choice of strategy.In other side of Naturas operation business, they also focus on the key factor of learning and innovation. Learning is about work, work is about learning, and both are social. The social world is a rich resource, not a distraction (Brown Gray, 1995 Stamps, 1997 Wenger, 1996b). tally to Lave Wenger (1991), it is believed that social practice is the prime, generative phenomenon, and learning is one o f its characteristics. Thus learning should be analyzed as an implicit in(p) part of the social practice in which it is occurring. Learning is not barely a transfer of knowledge, but a process of building fellow feeling (Galagan, 1993). In the case of Natura, the company applies both learning and innovation for improving their products and their performance in business, competition in the cosmetic market and international market. It is innovated and developed the products in house on a continuous basis. The company has research and development con midpoint in brazil nut and abroad, it acquires patents and technology from universities and RD centre for innovating and improving their products. It also has the timeline for the creation and commercialization a new product ranges which is from six months to five years, and the timeline depends on the degree of innovation.Task 2Using relevant theoretical models and with examples from the case study evaluate the companys internatio nalisation strategy in the period 1982 2005.-Natura Cosmetics decides to go international market by set about landing field primary research, traveling abroad that leads to explore and understand antithetic markets, trends and strategies internationally. Johanson Vahlne (1977) defined internationalization as a process in which the companies in stages increase their international interest. They claimed that internationalization is the product of a series of incremental closes. In other words, internationalization can be a process by which the companies both increase their awareness of the direct and indirect influences of international exploits on their future establish and conduct proceeding with other countries (Beamish, 1990). Then an international strategy is a strategy through with(predicate) which the firm sells its goods or services outside its domestic market (Hill 378). One of the primary reasons for implementing an international strategy is that international mark ets yield potential new opportunities. Moreover, for internationalization theories, it focuses on internationalization in meshs, by which the company has different relationships not only with customers but also with other actions in the environments. According to Hollensen, S. (2007), there are some theories of internationalization as the traditional market approach, emotional state cycle concept for international flip, the Uppsala internationalization model and the internationalization cost approach, dunnings electric approach, the interlock approach or the difference between pagan infinite and psychic outperformTraditional sell approach It focuses on the companys nerve competences combined with opportunities in the opposed environment (Penrose, 1959 Prahalad and Hamel, 1990). It leads the company to induce a compensating advantage in order to overcome the cost of orthogonalness, and consequently identification of technological and merchandise skills are the key el ements in successful inappropriate ledger entry (Kindleberger, 1969 Hymer, 1976).Life cycle concept of international trade According to Vernons Product Cycle Hypothesis (1966), the companies go through an trade phase before switching commencement ceremony to market seeking unknown direct investment (FDI), and so to cost lie FDI. The technology and marketing factors combine in order to explain standardization that drives location decisions. This venture is that producers in in advance(p) countries are closer to the markets than producers elsewhere consequently the first production facilities for these products will be in the advanced countries. For the standardized products, the less developed countries may offer competitive advantages as production 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 company faces with unknown markets, incomplete informat ion, and organism in a state of constant quantity incertitude, the company develops in outside(prenominal) markets by being a process which evolves by increments. The model suggests a sequential pattern of entry into successive foreign markets, coupled with progressive deepening of commitment to each market. According to this model, the company tends to intensify their commitment towards foreign markets as their experience grows, and psychic distance which attempts to conceptualize and measure the cultural distance between countries and markets (Hollensen, S. (2007)).The internationalization/ effect cost approach Buckley and Casson (1976) ballooned the choice to include licensing as a means of reaching customers abroad, in other words, licensing can reach customers abroad. However, in the perspective the multinational company would usually prefer to internalize transactions via direct equity investment rather than license its capability. The international involves two interdepend ent decisions as regarding location and mode of control and it is related to transaction cost theory. The internationalization and transaction cost (TC) perspective are both concerned with the minimization of TC and the conditions underlying market failure.Dunnings eclectic approach Dunning (1988) discussed the importance of locational variables in foreign investment decisions. The eclectic means that a full explanation of the transnational activities of the companies needs to draw on several(prenominal) strands of economic theory. According to the model, the propensity of the company to engage itself in international production increases if three conditions if ownership advantages, locational advantages and internationalization advantages are being satisfied.The network approach It means the international firm cannot be analyzed as an isolated actor it has to be viewed in relation to other actors in the international environment. According to Johanson and Mattson, the relationships of the company within a domestic network can be used as connections to other networks in other countries.The different between cultural distance and psychic distance According to Hollensen (2007), cultural distance refers to the big cultural level of a arena and is defined as the degree to which cultural values in one country are different from those in another country. And psychic distance is defined as the individual managers perception of the differences between the groundwork and the foreign market and it is a highly subjective interpretation of reality.In the circumstance, Natura goes international through an agreement with an freelancer distributor in Chile in 1982. Based on traditional marketing approach, the company audits their resources which are core competence and provide diaphanousive competitive advantages. All the resources of Natura, such as financial, RD skills, knowledge, experiences, sales and statistical distribution channel or sale force are valuable, hard to copy, exploited and they are sources of core competences and competitive advantages in foreign environment. Beside, marketing capability has its greatest impact on the innovative widening for the firm that has a strong resources and competences. Natura has strong RD which means the company with a strong RD base is the ones with the most to gain from a strong marketing capability. Furthermore, the most important determinant of its performance is the interaction of marketing and RD capabilities. And RD is one of the best internal factors which bring opportunities for Natura to do business in new market. For example, the company acquires patents and technology from universities and research centers in Brazil and abroad, and then they focus particular research efforts on skin care products and on the sustainable use of ingredients from Brazils biodiversity, launching their product lines. Besides, the employees are responsible for the local operation that means Natura has also stron g human resources. Moreover, in the 1990s, the semi governmental and macro economic changes in Brazil and other southernmost and Central American countries and other Latin American countries experience growth rates and try to develop their commercial tines with Brazil, as a result, Natura decides to expand their business internationally. Additionally, avocation slew announce, it creates a procession uniform trend in smasher concepts and demands in the region which leads a cultural emphasis on bag and a better understanding of how to use beauty products. Further, Natura identifies the technology and marketing skills on foreign market, such as in Argentina, the company tries to reduce risk, looks the ways to decrease cost and put advertisements in the major magazines stating, and then they build the good relationship with social pact (suppliers, employees and customers) Besides, Natura builds brand equity, promptly developing a sizable network of consultants, managing and p romoting their productivity as fountainhead as mastering logisticals and distribution. (CEO, Alessandro Carlucci, quoted in the Harvard Business School case study Natura Global Beaty Made in Brazil, Sept, 2006).According to Uppsala model, Johanson and Wiedersheim-Paul (1975) distinguish between four different modes of entering an international market, where the stages represent higher degrees of international involvement or market commitmentNo regular export activities trade via independent representativesEstablishment of a foreign sale subsidiary orthogonal production or manufacturing unitsThe enterprises passes from one stage to another as it progressively acquires international experience. The internationalization process evolves between the development and knowledge of foreign markets and the growing commitment of its resources in the market. The Uppsala model is supported by many studies which have shown both small and large enterprises passing through distinct and gradual st ages during the development of their international affairs (Johanson and Vahlne, 1990 Oviatt and Phillips-McDougall, 1994).From the case, during 1970s and 1980s, the Brazilian cosmetics and toiletries market is relatively closed to imports, and competitors are mostly multinational companies who manufactured mass market products locally, but some US based companies face with the instable political and hyperinflation in Brazil. As a result, until the early 1990s, it facilitates the growth of companies as Natura that are developing 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 competitor in the direct sales segment of Natura is Avon, and the company also competes global consumer products giants as Unilever, or Johnson Johnson The Brazilian cosmetics and toiletries market is one of the largest and most developed in Latin America, so the compa ny faces with increasing competitive environment. That leads Natura to stimulate their capacity for developing more technological advanced products and products tailored to the requirements of a broad range of consumers. They focus on their product development and marketing strategies as marketing and advertising campaigns, or sales channel, and then they also target products for target consumers.From 1982, Natura decides to expand their business internationally that starts in Chile, and expand more in other South, Central American countries, Latin American countries, such as Mexico, Argentina Natura uses direct selling and retail network or agents for distribute products in foreign markets. For example, in 2003, the company creates Naturas house concept that sale representatives 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 is the place that can be seen as a middle grou nd between a double-dyed(a) direct selling model and a store chain. At the same time, the company has to introduce new marketing tools for developing their brand and rising consumers awareness. In French market, Natura opens a two storey flagship store in April 2005. The store is designed to be used as a place where Naturas beliefs and vision can be displayed. However, the store opens that means the company has to adopt a new sales model, and Paris store marked the first time that Natura devotes to the direct sale model, has opened a retail store.Thus, the Naturas expansion of international operation still deals with problems and it is difficult to control and manage their operations international markets.Task 3Using relevant theory, argue the case either for or against Natura adopting a mode (or modes) of international market entry that differ(s) from the direct sales/distribution model employed.In international market entry, export is the most common mode which is typically used in initial entry and gradually evolves towards foreign based operations. It is organized in a variety of ways that depends on the number and type of intermediaries. In establishing export channels, the company has to decide that functions will be the responsibility of outer agents and that will be handled by the company itself. (Hollensen, 2007). In the export mode, companies face two channel options as export directly to customers abroad or export indirectly with the help of an intermediary (Peng and York, 2001). As the direct mode is the most common path to companies internationalization and well-addressed in the extant literature, that focus on indirect means to internationalize. Indirect paths to internationalization are those whereby small firms are involved in exporting, sourcing or distribution agreements with intermediary companies who manage, on their behalf, the transaction, sale or service with overseas companies (Fletcher, 2004). And cooperative export involves collabor ative agreements with other companies that concerning the performance of exporting functions.In the case of Natura, the company bases on sale representative and uses 26 different delivery companies as well as the Brazilian postal services to transport products to it representatives. The company is through a nationwide network of 483,000 active sales representatives in Brazil and 36,000 agents in other countries. The agent represents an exporting company and sells to sweepingrs and retailers in the importation country. Direct selling is defined as the sale of a consumer product or service, person-to-person, away from a fixed retail location, marketed through independent sales representatives. The sale representatives are also referred to as consultants, distributors or other titles. Naturas sale representatives are well trained, autonomous female salespersons with a no exclusivity contract, and the company has relationship with sales forces that mainly comprises middle class housew ives selling to their friends, independent professionals, secretaries and staff personnel at all kinds of companies leveraging their in company contacts and maids selling to colleagues or employers. Natura concentrates on sales and sales force that allows consultants to place orders at any time and to place more than one order within the same sales cycle, with the company adapting its logistics and distribution arrangements and costs to meet requirement. (Natura Cosmetics). Natura uses agents and sale representatives in international market which cover old geographic areas and have subagents assisting them. And its model is familiar with the local market, customs and conventions then have existing business contacts and employ foreign national. Additionally, the company uses agents that have a direct incentive to sell through wither burster or product margin, however, since the remuneration is tied to sales, it leads to reluctant to devote much(prenominal) time and effort towards developing a market for a new products. Moreover, the company can be lack of control and manage the market feedback and their operation, if the agent is performing well and develops the market it risks being replaced by a subsidiary of the principal. (Hollensen, 2007)Thus, in the long term strategy, the company needs to learn any new entry mode decision. For more expansion in foreign market, Natura needs to focus on foreign sales, branch/sales and production subsidiary mode. Although its subsidiary mode is high initial detonator for investment, high risk and also taxation problem, it is suitable for the company to full control and manages of their operation and reduces the transport costs. It means that the company will lots keep a central marketing function at their home base, but sometimes a local marketing function can be included in the sale subsidiary. When the activities of sales are performed, all foreign orders are channeled through the subsidiary that than sells to thei r buyers at normal wholesale or retail prices (Hollensen, 2007). Other reason for Natura chooses sale subsidiary is that the company may take advantage of tax in the foreign market where income tax is low. In addition, this mode eliminates the possibility that a national partner gets a free ride, and acquires market knowledge directly as sales subsidiary. And sale subsidiary is the possibility of transferring greater autonomy and responsibility to these submits that is being close to customers. It is also accessed to raw materials and labor as production subsidiary, excretory product of duties as production subsidiary and market access as sale subsidiary.Task 4Naturas production facilities are located in Brazil. treasure whether this decision is correct in terms of strategy and logistic distribution given the companys portfolio of domestic, regional and international markets.Naturas production facilities are located in Brazil that is correct decision in terms of strategy and log istic distribution for the companys portfolio of domestic, regional and international market. Based on 12C framework, it is used to identify and evaluate the key strategic challenges that Natura can be faced in foreign market for cosmetic products. The 12C framework includes the issues of culture/consumer behavior, channels, commitment, currency, communication, capacity to pay, caveats, contractual obligations, consumption, choices, concentration and country. The 12C is a tool which is used to identify the constraints when the company enters a new international markets. Each C will individually be used to evaluate the companys strategies. Then it is the way for Natura find out opportunities and challenges for their decision in term of strategy, logistic and distribution in expanding internationally. In the case of Natura, it is considered the C of country, cultural, commitment and communication.Firstly, the companys home base is Brazil which is the largest market in Latin America a nd the worlds fifth most popular country. Beside, the GDP of Brazil is the worlds tenth-largest economy. So it is an increasingly attractive market for all business and one of the worlds fastest growing economies. And Brazil has also abundant natural resources with 4.6 billion hectares of planted forest mainly located in the South. In the case of Natura, it is good for the company production facilities located in Brazil and their raw materials. The companys main operations are concentrated in an integrated production, logistics and RD centre situated on the outskirts of Sao Paulo where units for cosmetics, shampoos, consist of four production and fragrances, other facilities include a nursery, restaurant, shop and a sports compound. Besides, the manufacture of some products is outsourced to a third party. Additionally, the manufacture of Natura located in Brazil that has strong and widely network distribution in domestic and international. And the RD centre is one of the biggest an d most advanced of its kind in Latin America, so it is easy for transportation to other neighbor countries. In other words, if the Natura builds manufacture in foreign countries as Argentina or Mexico, it will deals with the high costs and shipper problems at the present.Secondly, Natura considers to culture and consumer behavior. Brazil is South Americas most influential cultural and biggest democracies. The changes on political and macroeconomic in Brazil and other South and Central American countries leads to more understanding and emphasis on beauty and know how to use beauty products. . A large of the middle class population mainly involves in professions such as retailing, civil services and other skilled occupations. And Brazilian middle class has a predictable taste for beauty and other luxuries but when going shopping, they has more consciousness of status than middle class North Americans and Europeans with the concept to ordinarily serve others.Additionally, the economic policies as tax laws have been encouraged toward development of trade and investment. The export oriented industries will be exempted from non- tariff barriers with the purpose to add more incentives to exports, then the import duties have been condensed sharply. These are good things for Nature to export mode and production facilities location in the home base. Besides, some materials for production of Naturas products are outsourced, so imports of raw materials are exempted from usual tariffs.Lastly, for communication, it is important for Natura doing business and direct selling their products. At present, technology background is developing and is out-performed other South America and Latin American countries with the telecommunication policies. In Brazil, it is tenth in the number of broadband connection with the fifth largest mobile market in the world, and approximately 40% internet usage is for e-commerce which is expected to grow exponentially in the forthcoming years. More over, telephone is taken into account for the higher and the middle-income class. As a result, these are advantages for Natura to take order and selling their product effectively.However, in the future, the Natura can focus to their expansion and building manufacture in foreign countries as French because the decision to open in Paris was both rational and an emotional move. France has historically been a source of knowledge and raw material for our products as well as a source of warmth (Natura Cosmetic)CONCLUSIONThe report has analyzed and assessed of certain aspects of the Natura Companys international development, its operations and products. indoors the scope of this study, Natura Cosmetic has been a successful example of international market expansion and international development, it has become a leading cosmetics company in international market. However, the company is facing with seriously competitive in the cosmetics field market domestically and internationally. Further , the company should make emendments in its current product lines and the mode of international market entry and decision of strategies. It is necessary for Natura to improve its marketing strategy, advertising and promotion and distribution channels which enables the company to take the best advantage and opportunities of a sustainable competition.