Timeline: 1969: Foundation of Natura Cosmeticos 1974: Expansion of its distribution by using direct sales 1979: Guilherme Peirão Leal joined Natura as a partner, who was vital influence on Natura’s environmental initiatives and sustainable product line development. Launching their first line of products for men 1980: Natura reached 200 employees and 2,000 consultants 1980s: The company’s revenue increased by 30 times based on regional growth and product portfolio expansion, despite the economic crises that encumbered Brazil’s development. 1981:Launching of women’s cosmetics and fragrances. 1990: Natura had grown to 1,800 employees, with more than 50,000 consultants all over Brazil and sales of $180 million; Natura formalized its values in its “Reason for Being and Beliefs,” Product lines were designed to reflect those values. Early 1990’s: Natura stated that its reason for being was to create and sell products that would promote “well-being” and “being well.” 1992: Natura launched the “Truly Beautiful Woman” campaign 1993-1997: the company’s revenues grew by 5.5 times, and by 1997 Natura was the largest Brazilian cosmetics company with 3,000 employees and 145,000 consultants in Brazil and 10,000 consultants elsewhere in Latin America. 1995：Natura developed a program to enhance the quality of education in public schools and to promote adult literacy. 1998: Natura established all of the company’s financial reports in compliance with international standards and its board of directors, including independent members. 1999: Natura intended to enter new geographies, internationalization became part of the company’s strategy and shifted the direction of all initiatives. 2000: Natura became the leading cosmetics and toiletries company in Brazil, and was one of the most valuable five brands in the country. 2001: Natura inaugurated the Espaço Natura in Cajamar (São Paulo) to allow flexibility in production and to accommodate demand peaks, as well as modular expansion of its production lines with incremental investments. 2005: Natura started gradually substituting animal, mineral and synthetic raw materials with vegetable materials. 2006: Natura completely stopped animal testing 2007: The company had made considerable progress, succeeding in substituting animal fat and mineral oil with vegetable oil. 2008: Natura reached 930 products in its portfolio. Whoever is involved : Luiz Seabra: Founder Maurić io Bellora: Vice-president of international operations of the Brazilian cosmetics company Natura Guilherme Peirão Leal: A vital influence on Natura’s environmental initiatives and sustainable product line development. Pedro Passos: Production manager Alessandro Carlucci: sales director, one of the first executives to be sent abroad. Pedro Villares: director of operations for Latin America Problem to identifier: Was the US the right target? With the successful foothold in France, would markets in Europe – or perhaps Eastern Europe-- be more rewarding? And as China and India took strong actions to respond to the financial crisis, would they be more attractive over the next decade, despite Natura’s unfamiliarity with those consumers? (whether the company was ready to break into the United States, the largest and most complex market in the world. ) Bellora thought about his success in entering Mexico and France and wondered what lessons from these experiences would be of most benefit in entering the U.S. market. What marketing approach would be most effective to reach those consumers who would identify with Natura’s principles and beliefs? Could Natura position its brand best through the direct sales distribution model or should it follow the retail model recently tested in France? Root causes: - - - - - Founder of Natura wanted to realize his aspiration of building a better world based on harmony with oneself, with others, and with nature through his business. Which became the vision of Natura. When approaching countries that were more distant from Brazil, both culturally and competitively, the transposition of the Brazilian model was not an obvious path to success. The challenges and the consequences of success in entering US market would have an enormous impact on Natura’s employees, shareholders and founders. Internationalization was a part of the company’s strategy and the direction of all initiatives. Natura want to explore new avenues for growth and from the desire to expand the reach of the company’s culture to a broader public. Potential saturation of the domestic market. Natura sought to export much more than just its products: the company wanted to propagate its values and beliefs. Natura’s executives had great faith in the company’s vision and accepted the challenge to infuse it into new markets, despite the demands such a move would impose. Distinguished by these strong values and its success in the home market, Natura turned its attention to international expansion. Brazilian beauty market trend: Positive(Opportunities): Rapidly growing population; rising concern for personal health and beauty care; influence of the beholder’s cultural standards; the average purchasing power of women was increasing; cultural importance of self-image and population aging(anti-aging cosmetic lines); growth of market because of Innovation and the continual launching of new products; Negative(Challenge): the mixing of native indigenous peoples; living conditions in Brazil varied widely, and income disparities were significant; The diversity of climate directly influences customers’ needs and preferences for beauty products; Potential saturation of the domestic market; Despite the impressive growth rate and the country’s relatively high ranking in the global league, per capita spending was still low and implied further growth potential. Industry dynamics: - - - - Despite the impressive growth rate and the country’s relatively high ranking in the global league, per capita spending was still low and implied further growth potential The largest category, hair care, represented roughly one quarter of the market and was led by global giants Unilever, Procter & Gamble and L’Oréal. In the so-called core beauty categories, which included makeup, fragrance and skincare, Avon and Natura were among the top competitors. In the consolidated ranking, Natura was the leader Supermarkets were the leading distribution channel for CF&T, but were gradually losing share to direct sales, department stores and specialty retailers. Direct sales were second. The Brazilian CF&T market was facing an impressive growth. Despite the large number of participants in Brazil, it was a fairly concentrated market. Competitor of beauty industry in brazil - - There was a fairly concentrated market, with 15 companies accounting for 70 percent of industry sales. Natura’s primary local competitor was O Boticário, one of the biggest franchising success stories in Brazil, had transformed itself into the largest perfume and cosmetics franchise chain in the world. It operated in 21 countries, including Japan and the U.S. Fragrance was the leading segment of the company’s portfolio and received the largest share of research and marketing resources. The company’s appeal to nature was strictly marketing, however In contrast with Natura, it was not involved with the communities from which it extracted raw materials, and did not have programs dedicated to promoting social sustainability in those communities. Nivea, Avon, and O Boticario would be the main competitor of Natura, and they had achieved solid brand awareness in Brazil. Distinctive competencies: innovation, marketing or design. - - - They creatively use local resources combined with its unique philosophy. Natura’s channel of distribution is direct sales, which offers as a differential the customized service of beauty advisory, which facilitates the access to information regarding the products and increases the chances to sell. Natura maintain a good relationship their suppliers. They pay a premium price for their supplies; help the community to develop and sell other products or by-products; they help for supplier’s new business. (Which is not done by other companies.) Obtaining raw material from suppliers using sustainable methods and worked with certification organizations. The product of Natura is developed both for functionality and reflection of company’s social and environmental values and beliefs - - - - Special sales network Working with certification organizations；paying a premium price for supplies; forming a partnership between Natura and its suppliers; producing sustainable Natura worked to increase its market reputation by implementing best practices and putting in place a well-structured governance platform. (Natura established all of the company’s financial reports in compliance with international standards and its board of directors, including independent members.) Good corporate values, exemplified by their efforts to help the Amazonian communities to operate in a sustainable form.(They was the first Latin American company to issue its annual report in accordance with the Global Reporting Initiative (GRI) sustainability guidelines) A wide range of other product lines had also been developed over time, so that the company covered most segments of the market. Natura established their own research laboratories Natura succeeded in substituting animal fat and mineral oil with vegetable oil and completely stopped animal testing. Competitive advantages: economic advantages, relationships, processes and know-how. - - Natura was one of the most admired companies in Brazil and a leader in the domestic industry of cosmetics, fragrance and personal hygiene. Natura was a pioneer in basing its products on the biodiversity of Brazil in a sustainable fashion, and the company’s direct distribution sales force had influenced and improved the lives of thousands. Natura offers beauty consultancy to customers and be award the importance of cosmetics impact and relationship-oriented Direct sale their products which allowed the company to foster relationships and rapidly increase distribution at an extremely low cost. Outstanding human resources management, very low turnover rate. Processing efficient logistic system by working with transport companies and the national postal service Consumers empathized with Natura’s values and culture. Natura had developed an integrated strategy encompassing financial, social, and environmental responsibilities. Natura pay attention to sustainable development and social responsibility. They were always able to transfer their value to another culture. Wise decision maker. They always can make good strategy and lead Natura to face the challenge. Natura never stop to develop and exploit their competitive advantages to remain competitive in the market where they operate. Natura realign the company’s organization with its growing international presence. SWOT Strength: - - - Thanks to the experiences in developing successfully in countries which have different culture from Brazil, Natura was able to export its model The use of local resources combined with its unique philosophy; Short delivery time They have good products and are widespread accepted in Latin America and France Natura was facing double-digit growth in Brazil Natura voluntarily adhered to corporate governance practices beyond those required by Brazilian regulation, providing greater transparency and stronger shareholder rights. Natura realign the company’s organization with its growing international presence. Consumers empathized with Natura’s values and culture. Corporate values- they put an efforts to help the Amazonian communities to operate in a sustainable form. Processing a wide range of product lines which covered most segments of the market. Developing sustainable, ethical and socially responsible businesses which contributed a reliable public figure. Experience in providing products to a mixing of native indigenous peoples, which would be helpful for U.S marke. Natura pay attention to innovation, they had established research laboratories which worked to develop products derived from natural ingredients from the Brazilian rainforest to achieve well-being benefits. Excellent R&D team as they worked with universities and other research centers Local operations and local adaptions. Weakness: - Since Natura is paying a premium price to their suppliers and their products were basing on the biodiversity, they have very limited benefice Their main distribution channel was direct sales, but in U.S., it is not the main distribution channel. Natura had to make an effort to adapt product formulations, packaging and logistics Lack of experiences in U.S. Lack of a leader who is extremely knowledgeable about the region, to lead the operation - Only got one chance to be success in U.S market, so they have to make considerate decision. Which enhance the difficulty to find a right leader. Local operations and local adaptions. Opportunities: - - - - The U.S. CF&T market was the largest in the world, The rise of “natural consumerism” in the U.S. in 2006 The global enthusiasm for natural and organic products Success in US market would have an enormous impact on Natura’s employees, shareholders and founders. And it would be very helpful for their future expansion. US’s CF&T per capita consumption in 2006 is ranked at 5th, which is double of Brazilians. Global demand of abundant biodiversity in the formulation of cosmetics; “Brazilian-ness" became a global fever; Natura’s primary local competitor who exist in US already was not involved with the communities from which it extracted raw materials, and did not have programs dedicated to promoting social sustainability in those communities. Natura could difference their company by this point. Among the factors driving consumers toward natural products were effectiveness, health and environmental considerations, which conform to the uniqueness of Natura. American consumers were expressing wider political and social concerns through their purchases, and some of them agreed that it was important to buy ethical or socially responsible products Threat: - - - American is a very competitive market, even in Brazil there were several American CF&T company occupied huge market share already. Natura’s primary local competitor was O Boticário, who’s product positioning promoted the concept of a link with nature operated in 21 countries, including Japan and the U.S. The U.S. CF&T market was highly fragmented In U.S., discount stores were the leading distribution channel, followed by department stores and drugstores, which is unfamiliar to Natura Intense competition among retailers, low levels of brand loyalty, and aggressive expansion of major discounters exerted pressure on price and restricted returns for manufacturers. There was only few customers consent to pay a price premium for ethical or socially responsible products - - The consumption of its products is dependent on consumer’s purchasing power. As U.S. possessing the largest market share in CF&T global market, while their per capita consumption is only ranked at 5th Higher cost of entering and developing the market. Uniqueness Drive: - - - - - - Their association with Brazilian biodiversity and the ethical sourcing process for their ingredients. The way Natura approached relationships and the sense of community were singular, appealing to customers from virtually any cultural and socioeconomic background. (These points enhanced perceptions of Natura’s value). Natura was built upon the direct sales model, providing a key source of differentiation. “The strength of direct sales, with more than 1.6 million selfemployed salespeople, offers as a differential the customized service of beauty advisory, which facilitates the access to information regarding the products and increases the chances to sell. (Since in U.S., direct sales is not the main distribution channel, However, direct sales model is the key source of Natura’s differentiation. Natura could try a similar way in France to enter in U.S. by opening a flagship and then start the direct sales.) The value proposition and the mission statement of Natura attracted consumers across all price segments. Consumers’ appreciation of Natura's cultural associations and its regional heritage appeared to provide strong differentiation for the company’s brand globally. As Bellora said, Natura’s products have their own story, and their culture is reflected in every aspect of our relationships. That ends up attracting people who would not generally be attracted to direct sales. Natura’s products are not only for functionality, but also to reflect the company’s social and environmental values and beliefs. Natura was faithful to its principles of honesty and respect for consumers. Natura put a strong recruiting efforts in the commercial, operational and administrative divisions of the company. Finding the right people was Natura’s biggest challenge, but they did it very well. For example, when they entered Mexico, they hired a seasoned executive who spent time to understand their way of doing business and absorb our culture They maintained a constant focus on the dissemination of corporate culture, they highlighted the importance of cultural transfer and integration.(They put an effort to build a team who share the same value but still creative, the superior performance capabilities of Natura’s human capital makes company different) U.S. possessing the largest market share in CF&T global market, at the meantime, their per capita consumption is only ranked at 5 th. Compare to the other European companies, U.S. is a huge potential market to explore. China and India could be more attractive over the next decades. Even though they only have few CF&T per capita consumption, China still possess 4.3% market share, which is almost equal to UK’s market share. It’s to be noted that UK’s CF&T per capita consumption is 23 times greater than China’s. Hence, for China, India and U.S., the increase of per capita consumption could make a huge difference in market share. To reach those American consumers who would identify with Natura’s principles and beliefs, Natura could start by a joint venture or acquiring companies who share the same value, The Body Shop or Aveda for example. Since direct sales was always ranked at 5th in U.S., and they are not familiar to the market, it would be better if Natura don’t start direct sales at beginning, but follow the retail model tested in France, which could help Natura to transfer the company’s value and culture to their customers. As discount stores were the leading distribution channel, followed by department stores and pharmacies, Natura could test the market by distributing different class product in different channel. Local adaptations are super important. They still need to find a best way to transfer their value and culture to American customers As per exhibit 16, American age from 25 to 34 are more willing to pay for ethical or socially responsible goods, Natura could focus on this range, study and provide relevant products. Most of consumers think that effectiveness is the main motivators for the use of Natural personal care products, so if it is possible, establishing a research laboratory(can work with local laboratory instead of establishing by themselves) in U.S could be a good way to satisfy the demand of target population.