Natura Cosmetic Company Review

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Introduction

The Natura cosmetic company is one of the world’s renowned cosmetic companies. Its range of products is supplied to end users such as salons, plastic surgeons and also aestheticians who work at private level. The company was established in 1969 by Luis Seabra and operated as a small shop and laboratory for cosmetic products. The company is headquartered in Sao Paulo, Brazil (Dupré, 2005). The company deals in products used for skin care and rejuvenation. The company’s products are manufactured based on the health information of how substances react and interact and how such substances impact on the skin. The company boasts of products that are free from superfluous chemicals, artificial fragrances, and also additives such as preservative substances.

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The Natura Company produces in large scale and enjoys economies of scale. The company has since started operating on global scale and its products are well positioned to compete with similar products manufactured by other multinational corporations both local and foreign. The company is still focused on further expansion in order to increase its market share both locally and in the international market. In view of this, the company is targeting new market segments where it plans to introduce its new and existing products (Dupré, 2005).

Evaluation of Natura Cosmetic Company

Clarity of international competitive focus

Natura Cosmetic Company has put in substantial efforts to increase its international presence within the cosmetics industry. The global cosmetic industry is already occupied by big multinational corporations, which are the major competitors of Natura Cosmetics (Betton, 2007). Such multinational corporations include the Avon Company, Unilever, Proctor & Gamble, and Johnson & Johnson. Natura Cosmetics has to come up with strategies to favourably compete with these well established cosmetics companies whose products are well positioned in the global market segments.

It is important to note that the multinational competitors of Natura Cosmetics have wide client bases and hence have large profit margins. Research and Development forms a vital part of any successful corporation (Marshall Cavendish Corporation, 2007) Therefore, in order to compete with these multinational corporations, Natura Cosmetics relies greatly on its Research and Development activities; it is through Research and Development that the company carries out its innovation, development and establishment of new products in the market; Research and Development is the best and reliable strategy to come up with innovations (Welfens, 1998). This therefore, implies that the company spends substantial amount of its revenues in Research and Development. This is a strategy used by the company to produce new band of products that is supposed to give it competitive advantages over its global competitors besides those at domestic level.

Natura’s first attempts to operate in the international market experienced some failures due to the fact that the top executive management was not yet armed with the necessary information concerning the international market for cosmetic products. For instance, the company withdrew some of its initial operations established in Chile and other countries like Portugal due to poor performance. The executive leadership realized that they needed to conduct a thorough research about the industry markets in the targeted nations in order to decide on the appropriate entry strategy. However, the company has put in place strategies it believes helps it reposition its products in the world market; the strategies it uses include building brand equity, development of a large network of consultants, mastering the most appropriate logistic and effective distribution which are some of the most successful strategies used by other bug corporations (Rosenbloom, 2002); besides it considers launching its new products in its new target markets.

Effectiveness of relationship strategy

Relationship strategy is cognizant of the fact that the main concern of marketing is to move from engaging into singular transactions in which the company engages customers on the basis of one at a time. In this case, relationship marketing is concerned with building strong relationships with the existing customers. Relationship strategy requires the union of customer service, ensuring quality and doing through marketing. The main aim of the company to use the relationship strategy is to ensure it retains customers, product benefits, increased customer contacts and improved services to both new and existing customers (Hansen, 2000).

It is important to note that customers prefer have variety of new and improved products are constantly introduced in the market to widen their choice alternatives (Nieuwenhuizen, 2009). Natura Cosmetics has succeeded with this strategy through constantly working to give its customers new and enhanced products. For instance, for the period from 2001 to 2005, the company managed to reformulate its products portfolio so that it enhanced and introduced new products amounting to 153 annually. This strategy has been effective since it saw the company increase both sales and profit margins.

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Natura delivers products to its customers using very efficient and effective means. It uses an automated system that ensures orders and deliveries are made in time and with precision. For instance, in case an order is put, the stock management system instantly shows the status of the order to the company’s sales representative after which the vertical warehouse, through an automated system, gets the raw materials and completed products from the shelves and transmits orders for manufacturing to the production lines. Within a framework of twenty four hours, orders are robotically examined, crammed and labelled to be finally delivered to the home of the company’s sales representative. This is another relationship strategy that has been very effective for the company since the clients get their order delivered without delay. The company has therefore increased its reputation and the number of loyal customers (Schmid, 2008). In clarifying this point, it will be appropriate to mention that, despite the many international competitors within the cosmetic industry (Alon, 2003), Natura got an average of forty thousand daily in the year 2005. It managed to satisfy ninety eight percent of the order which went to different Brazilian Municipalities.

Quality of the organization’s management

Organizational management is a very important component part of a corporate organization’s success, especially at international level. Organization’s management does not only focus on the core business of an organization, but also covers the employees and structures of the organizations. The main aim of this process is to ensure that the core businesses of the organization are carried out in line with the company’s main goals and objectives as set out in the strategic plan and policies (Griffin 2007).

Human resources are the main drivers of a company’s core business and successful achievement of goals and objectives (Thierauf, 1999). Natura Cosmetics puts a great value on its human resources. Besides, the company’s human resources are compost of personnel with great wealth of experience and commitment. This is one of the reasons the company has been able to increase its performance both financially and at corporate level. The company has also ensured that it meets less cost on human resources by adopting the use of autonomous sales representatives whom it pays on commission depending on personal performance of each representative. In order to ensure that the sales representatives achieve their best, the company trains the sales representatives to ensure they are able to effectively deal with their clients as they sell the company’s differentiated products; this ensures that the company does not only ensure that the products reach the end users, but also makes sure the sales representatives are well equipped to provide quality services to customers who are interested in buying the products (Kumar, 2004).

Again, the operations within the company are structured in such a way that each department and each employee or staff is charged with particular responsibilities. This is in line with division of labour within any corporate organization and has the effects of achieving high and quality performances (Snider, 2003). For instance, there are people who are responsible for offering motivations and insights to the company and providing an appropriate approach which is holistic to all level of management and operations within the company. Besides, there are also those who are perform the task of facilitating internationalization of the company and there are also people who are directly involved in the production process.

Culture of learning & innovation

Learning new skills and ability to develop new products or modify the existing products is very important for the company (DuBrin, 2009). The culture of learning and innovations ensures that the quality of the company’s products and its service delivery system of high and reliable (Hill & Jones 2009). Natura’s products development and manufacturing requires a lot of innovation and continuous acquisition of new skills and knowledge. This is necessitated by the high rate at which new products are introduced in the market by other industry players (Applewhite, 1991).

Natura trains its personnel and ensures frequent innovations through its well established Research and Development programs. Before entering a new market, the representatives of Natura Cosmetics ensure they first learn the new market structure and understand the appropriate strategy to enter the market; this strategy is most important for any form of business targeting new markets. This allow for efficient planning (Botten, 2007). The strengthening of the company’s culture of learning followed a series of failure the companied experienced as it initially started expanding into new international markets.

The company is described to use practices that are environmentally sustainable; this involves ensuring that the whole process of extracting the necessary raw materials from their natural habitat to final product do not cause any form of environmental degradation. This is attributed to its culture of learning in which the staffs involved in the production process learn about environmental sustainability and integrate such knowledge into the production process. Learning about the possible social challenges also forms an integral part of the company’s success. It is crucial that every corporate organization uses environmentally sustainable approaches in there core business (Kambarangwe, 2009)

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Natura Cosmetics has also the culture of learning from its own mistakes. This implies that it never takes its mistakes and failures negatively, but instead learn from them and use them as a means of acquiring new knowledge. It is argued that mistakes provide opportunity to learn appropriate strategies for business and helps avoid any related mistake in future (Griffiths, 2009). For instance, during its first attempt to go international, it learnt that it made a serious mistake by impulsively getting into an agreement with a local company in Chile to help distribute its products; the mistake was repeated in Florida and Portugal. It terminated its operations and embarked on a well developed framework within which it would start its international operations; learning through research, the company has managed to enter and position itself in the new and emerging international markets.

Presence in the new international market and the alternative approaches

Presence in the new international market

One of the most prominent features of business entities is that they always work towards operating on global scale (Alkhafaji, 1995). Natura is significantly established in the international market competes favourably with other established multinational corporations. Its establishment in the international market was made gradually for a period of twenty years. The company representatives did a thorough research besides making foreign trips abroad in order to gain understanding of how the international market is structured, how it functions and the trend of products in the industry.

The strategies that the company uses to access new international market include introduction of new products and or modification of existing products through the process of innovation; these are some of the most appropriate strategies for new markets (Rogers 2001). To ensure that it protects the whole process from competitors, Natura patents its new products in every region where it operates. Besides, the company has several agents in numerous countries. The agents help the company to penetrate the new markets, some of which are dominated by competitors.

Natura’s alternative approaches to direct selling

Natura Cosmetics has always relied very much on direct sales through its sales consultants and agents located both in the domestic and the international market; this is because direct sales maximize profits (Roberts, 1999). While there are several alternatives available to the company, direct sales have proven to be effective for the company since the consultants are engaged with customers on face-to-face basis. Because of its large scale production, the company needs to have more aggressive alternatives that can either complement or replace the direct sales business model. The most appropriate alternative approaches include:

  1. Relationship approach: with this approach, the company does not simply attempt at creating instant sales, but it focuses on establishing a valuable and long lasting relationship with the customers. The benefit of this approach is that it helps the company to create loyal and regular customers for its products. In this case, the company will also be able to work with few sales representatives and hence cut on its operational costs. Moreover, the company does not have to go out looking for the clients, but once the a good working relationship has been established, the customers simply place their orders for the type and amount of products they need; for instance, the company got daily orders of forty thousand in 2005 because of the sustainable relationships it created with the end users of its varied products (Varey, 2002).
  2. Marketing mix: A market mix includes means by which a corporate organization can communicate and give information about its products to both existing and potential customers. The company can alternatively establish a market mix that it should use in positioning its differentiated products in the global market. Through this alternative, the company will be able to give sufficient information to both existing and potential customers. The market mix should incorporate relevant promotional techniques that will make its products to be distinct in the industry market globally (Slatter, 1977).
  3. Market research: market research is very important in understanding the needs of the customers, the strategies and presence of competitors in the market and the trend of how the products move in the industry market. After thorough market research, the company will always be able to know exactly what the end users really need which other players in the industry are not meeting. In this case, the Natura will be able to provide what the customers actually need in the market; the result of this is that the customers will look for the product themselves instead of being approached by the company’s sales consultants who may persuade them to buy what they are not in need of.
  4. Online approach: online approach is one of the most efficient means of doing sales, especially when the company involved multinational. Natura Cosmetics Company should also adopt the use of internet to sell its products in the international market. Online sales can be made efficient by using online advertisement in which email messages are sent to many potential buyers who may want to place orders through online. In fact this will save the company on the cost of retaining many sales consultants and hence increase its profit margins; besides, this will increase the rate of stock turnover (Richard, 2004).
  5. Customer evangelism: In this case, a customer buys the company’s products, trusts and believes in it and then goes as far as recommending it to other customers. This implies that the customer gets emotionally attached to the company’s products subsequently remaining loyal to the company even when some mistakes arise. This can take place even through the internet (Kaushik, 2009).
  6. Natura Cosmetics can also have a strong distribution channel through which its products move to the final end user. This involves having reputable distributors and suppliers along its supply chain. The company can offer attractive incentives to its suppliers in order to encourage more sales; one of the advantages that this has is that the company will be able to concentrated most of its resources into its core business, which is the production of cosmetic products (Jolly, 2002).

Key target markets in Western Europe

It is noteworthy that the western European market for cosmetics is expanding at a fast rate. This owes to the fact the consumers of cosmetic products are increasing tremendously and has attracted many cosmetic products. This has offered incentives note only to Natura cosmetics Company, but also to other global industry players. Despite the bottle neck competition in the cosmetics industry, Natura believes that its products are of high quality and will attract as many end users as possible.

Natura Cosmetics Company plans to use its direct sales business model in its new Western European market segments. The key target markets in Western Europe are the United Kingdom, France and Germany. The cosmetic markets in both Germany and France are the fastest growing markets in the whole of European market. This can be attributed to several factors, but one of the most prominent one is that in the entire European Union countries, there are no proper regulations in place for the organic and natural cosmetics. The fact is also that the Western European market provides for consumers who do not have sufficient information on what constitute natural organic cosmetics and the normal cosmetic products. This gives Natura Cosmetics an upper hand since its products are natural. Besides, the markets are full of other industry players, inspite of the fact that there is rapid growth. This fact means that the new entrants like Natura Cosmetics need to adopt the strategies that are based on product differentiation and product positioning in order to attain significant market share. Natura has this advantage because its products are highly differentiated besides having a very effective direct sales business model.

The Western European markets are segmented according to product categories such as natural skin care, natural hair care, natural oral care, natural color cosmetics and other natural cosmetic products that may be newly introduced into the market. What will facilitate the sales of company’s products is the fact that the natural and organic cosmetics are increasingly becoming more accessible by end users due to the increasing number of concept stores. However, the competition is set to be high due to the numerous manufacturers who are opening their retail stores in the countries (Cherunilam, 2007).

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There are certain factors that might have led to the growth of Western European’s cosmetic markets. One of these factors is that consumers of cosmetic products are increasing becoming aware of the dangers associated with paraben and other synthetic products in the cosmetic and toiletries. In fact, there are organizations concerned with consumers’ plight; these organizations advice new entrants into the Western European cosmetic markets to sensitize consumers about natural and organic cosmetic products. The advantage of this is that the companies in such products, like Natura Cosmetics, have high chances of increasing sales and hence profit margins.

United Kingdom offers a good market for cosmetic products. Within the United Kingdom the new products have been launched for such consumer segments as children and babies, grooming for men, teens and professionals. The natural and organic cosmetic products are being launched within private labels by supermarket; moreover, the same products are being sold under private labels such as drugstores, discounters and organic food vendor. Even though private labels are being launched in the United Kingdom, they are most successful in German markets where their market share is 10 percent of the overall sales of natural and organic cosmetics (Creighton & Knight, 2004).

As much as Natura aims to get into the Western European cosmetic markets, there are competitors who are also are also attracted by the incentives in the region. These competitors have already established cosmetic brands like Korres, The Organic Pharmacy and Aveda. Nonetheless, natural cosmetics are mostly successful in Germany where they command a market share of 5 percent.

Likely difficulties Natura Cosmetics will encounter in the key Western Europe Market

Even though the cosmetic products markets are growing rapidly in Western European countries, there are a number of challenges arising within that industry segment. In it is appropriate to note, first, that the recent economic slowdown affected most businesses in the region and therefore reduced economic activities in the industry as a whole. The effects were also experienced by individual consumers who responded by focusing on spending on basic goods. This implies that the company will have to use a substantial amount of resources in order to do engage in marketing communication that will persuade the consumers on the supremacy of its products.

One of the major characteristics of the consumers of cosmetic products with the Western European cosmetic market is that they are not well informed about the nature of natural and organic cosmetic products. This shows that the customers need to be enlightened about these types of products to help them make informed choices in the cosmetic product market. Natura Cosmetics will have to spend part of its finances on enlightening the consumers in order to make sales. This will be difficult since other cosmetics companies will also undertake their enlightenment activities. The resultant out come will be a bottle neck competition in which every company will want to achieve the most possible sales for their products. Due to this, Natura Cosmetics will find it difficult to effectively apply its direct sales model since the consumers are not yet well informed about the natural and organic products. This means the company must incorporate other strategies to ensure the customers buy its products. These strategies may include the use of free samples, promotions, discounts on all its products

It is also important to note that there are also many cosmetic companies using the same business model of direct sales. This means tight competition and use of more financial resources for Natura Cosmetics. So, in order to remain highly competitive and also ensure it enjoys some competitive advantage, Natura Cosmetics must come up with other marketing strategies. This has extra financial implication since it has to spend some more money in coming up with supplementary strategies to the direct sales business model.

Moreover, the company will have to work with more sales consultants in order to thorough penetrate the new markets since its products are not yet well positioned in the new market segments. Natura Cosmetics may have to recruit new sales consultants from within the Western European regions; this is because transporting sales consultants from outside the region may prove to be very expensive for the company; most importantly, its only sales consultants from the region who have the most understanding of the market trends and the culture of the Western European consultants. But since the company plans to use direct sales, it will be difficult for the sales executive to use the model in supplying the products since they are not yet familiar with company’s products and modes of operations. It will therefore be important for Natura Cosmetics to train the fresh consultants in order to familiarize them with the products and also tutor them of how the company operates. Again, direct sales business model requires that the company make new leads within the market. However, coming up with these leads and maintaining them is significantly difficult and requires investment of huge some of money as discussed earlier before. In addition, the sustainability of the leads depends on the commitment of sales consultants of the company, who may not be reliable given that they are most likely to shift to other companies offering the same products. In this case, the sales consultants will move with his or her new clients to the new companies.

The effects of management, planning and control of French market

The management, planning and control of French market are not likely to present much challenges Natura Cosmetics. This owes to the fact that the company has enough experience in international trade and therefore understands ways of adapting to any change in the industrial cosmetic business environment. The company depends so much on market research which it conducts before getting into any new international market; this enables it to put in proper entry strategies that are appropriate and in compliance with the business policies guiding the new markets; the company has the strategy of sending its representatives to study the business environment in its targeted new markets before making any move to position its products.

However, since the government is either directly or indirectly involved in market system, it is probable that the company will be faced with new challenges. The fact is that managed, planned and controlled market does not function freely and sometimes prices are not purely subject to natural economic forces. This may lead to reduced profit margins due to restrictions that may be placed by the government. Besides, the government decides to impose import duties on cosmetic products; should happen to be the case, then the company’s product, alongside others, are likely to be more expensive and hence scare away potential consumers. In this case, the company is likely to experience more operational costs which definitely impacts negatively on its profit margins; however, it is important to note that the company still has the incentives to enter the French market since other multinational cosmetics corporations are already operating in the French market (Malhotra, 2004).

Summary

The Natura cosmetic company is one of the world’s most established cosmetic companies. Its assortment of products is supplied to customers such as salons, plastic surgeons and also aestheticians who work at private level. The company was established in 1969 by Luis Seabra and operated as a small shop and laboratory for cosmetic products. The company is headquartered in Sao Paulo, Brazil. The company manufactures and distributes products used for skin care and rejuvenation. The company already operates on a global scale and still has plans to expand its global presence to other international markets where its products are not yet positioned (Dupré, 2005).

Natura’s first effort to operate in the global market experienced some disappointments due to the fact the top executive board members was not yet armed with the necessary information concerning the international market for cosmetic products. They realized that they needed to conduct a thorough research about the industry markets in the targeted nations in order to choose on the appropriate entrance strategy into the new markets. In order to succeed, the company adopts the use of relationship strategy. The advantage of this strategy to the company is that it is cognizant of the fact that the main concern of marketing is to move from engaging into singular transactions in which the company engages customers on the basis of one at a time.

The functions within the corporation are planned in such a way that each division and each member of the staff is charged to perform particular tasks. For example, there are personnel who are responsible for giving inspirations and insights to the company and providing an apposite approach which is holistic to all levels of management and operations within the corporation. Above and beyond, there are also those who perform the task of facilitating internationalization of the company and there are also people who are directly involved in the production process. In its culture and learning, Natura trains its personnel and ensures frequent improvements through its well established Research and Development programs. Prior to entering a new market segments, the representatives of Natura Cosmetics first learn the new market structure and comprehend the suitable approach to enter the new market.

The strengthening of the company’s culture of learning followed a series of failure the companied experienced as it initially started expanding into new international markets The company has other varied approaches that it can use an alternative to direct sales business model. It can use relationship strategy, opportunistic strategy and using marketing through well designed and integrated market mix. Besides, the company has plans to enter the Western European markets through there are certain challenges that it is likely to encounter. Nonetheless, the company is also likely to face certain challenges in the managed, planned and controlled French market.

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