International Strategy of Natura

CONTENTS

Introduction……………………………………………………………………………………………………………….p.2

1. A strong home market…………………………………………………………………………………………..p.2

2. The fail of the expansion in Latin America………………………………………………………….p.2

3. Finding the good strategy………………………………………………………………………………..…..p.3

4. Natura’s environment today: Porter’s 5 forces analysis…………………………………….p.4

Conclusion…………………………………………………………………………………………………………………..p.5

Bibliography……………………………………………………………………………………………………………….p.6

Introduction

Natura is a Brazilian cosmetics company founded in 1969 in São Paulo by Antonio Luiz da Cunha Seabra. Natura promotes Brazilian beau ty rituals and has a strong commitment to the environment and sustainable development.  Today, Natura is pretty well perceived by customers in a very competitive market where some giants like Nivea or L’Oréal take many market shares. But it was not always the case as Natura faced several issues and challenges while trying to reach new markets outside of Brazil.

Indeed, until 1999, even if Natura was trying hard and had a really strong home country community, the company had some difficulties with its international expansion. Natura was not paying enough (if not at all) attention to its international operations. [pic 2]

So, we could ask how Natura became one of the world’s leader in the cosmetics industry despite some severe mistakes in its choices of international strategy.

From 1969 to 2010, we will study the different international strategies tested but not necessarily approved by Natura and which one(s) the company finally chose.

1. A strong home market

Born in Brazil, Natura has developed its home network by following the example of Avon. Indeed, the company uses a direct-selling method by door-to-door sales. If this method is time-consuming and costly, it still enables Natura to lower its marginal cost. The direct-selling method is not the only factor of success of Natura in its home country. Effectively, its competitive advantage also comes from the values the company shares which are the respect of the environment (no animal testing, for example), social responsibility, promotion of the well-being of women and strong relationship not only with the customers but also with its sales representatives.

Thanks to this successful business model, Natura’s revenue grew from about 40% each year from 1979 to 1989 and even became the market leader in Brazil since 2004.

2. The fail of the expansion in Latin America

Since its creation, the strategy of Natura is focusing on corporate social and environmental responsibility. In 2001, Natura was the first Brazilian company to adopt the Global Report Initiative. Then, as the company was doing very well in its home country there was no real economic necessity to go abroad. Nevertheless, Natura chose to expand its offer to several countries in Latin America and even in France. Its international expansion went as follow:

 [pic 3]

In 1982, Natura entered Chile. The company not only used the door-to-door selling method that works in Brazil but also made partnership with one local distributor at first and then a second a couple of years later. Then, Natura launched a new brand called Numina to be exported in Florida and Portugal.

As the home market was still doing very well and even increasing, Natura decided to enter Bolivia in 1988, Peru in 1992 and Argentina in 1994. For all these countries, Natura used the same direct method which means door-to-door sales thanks to representatives and partnerships with local distributors. However, Natura’s sales were not as high as expected. Indeed, there were very bad but the home market was doing so well that Natura has been able to cover this loss for several years.

Among the different challenges and issues the company faced in those Latin American countries there were the difference of language and the fact that people are not as used to buy by the intermediate of sales representatives than Brazilian people. Even if, Natura tried to react by launching new product lines in all those countries, the effort was not enough and most of all not adapted.

3. Finding the good strategy

The problems in Naturas’s Latin American markets was more the management style than the products. Indeed, exportations for Florida and Portugal stopped because there was no management at all for those countries. This is only in 1999 that some attention was accorded to the international operations. The company not only tried to create a strong relationship with its sales representatives but also came from a centralized model to a decentralized one. Effectively, before 1999, all the management and support activities (logistics, R&D, etc.) were centralized in Brazil. But facing all those problems in the other Latin American markets, the company decided, first, to open a distribution center in Argentina. This was the good decision to take and results came quickly. Sales in Argentina were finally making profit. And this is also due to the strategy of differentiation when the devaluation of currency took over Argentina and Natura kept its prices. This was a new start for Natura. Thanks to this lessons it learned in Argentina, Natura also changed its strategy in Peru by allowing more marketing, in Chile by hiring seasoned managers, in Bolivia by managing its distribution network.

...