Individual Natura case study preparation paper Whether Natura, the Brazilian beauty company, based on biodiversity of Brazil, should expand its business in Russian market is the critical issue of this case study. However, it is necessary to inspect pre-issue before we evaluate the international investment strategy. After reviewing whether the company is capable of dealing with globalization, we move on to measure the Natura’s international marketing strategy. Is Russian the best next step for Natura’s international foot for?
If yes, we propose the possible alternatives for entering this market by minimizing the political risk and operating risk. (1) Was the company ready to go globalization? Evaluating criteria as follows: * Organization structure culture Natura’s unique organization cultures are open-minded for opinion-expressing, transparent decision-making process, and intimacy with its stakeholders. The strong corporate value shared by every individual within this group make the expatriates from this company could convey the brand DNA in foreign market. * Brand visibility in global markets
Natura has a strong market position in Brazil, and continued building up the brand image in Latin American countries. However, it brand visibility is not strong enough in the rest of world and the brand image is weak in the European countries as well. * Global resourcing and distribution network The raw material, production, product development is all in Brazil. Natura has yet built up the global logistic network; therefore, the distribution cost and inventory management would be the major problem for the company while it steps out globally. Insufficient experience in expansion of global business,” dealing with different cultures, different social structure, and different consumer behaviors” Much of the international business experience of Natura is limited in Latin American countries. Although there is diversification in culture, consumer behaviors, the closed countries were easier to deal with the differences and minimize the marketing difficulties. However, for the rest of markets with totally different language, culture background, religion, regulations, Natura has no sufficient experience and knowledge to manage it. Sufficient talents in global management During this period, there have no sufficient managers with global vision and management expertise in Natura. Even though managers from other firms have the skill in running direct selling, they could not convey the company’s value and brand DNA. This shortage of human resource would be another obstacle for Natura’s globalization. Sub-conclusion: After analyzing Natura’s competences in globalization, we found that Natura was just at the beginning stage of globalization although it started its international business from 1982.
From the financial result, we still could find out that Natura had no prominent performance in foreign market. (2) Was the Russia is the best choice to next step in Globalization? Is Russian experience valuable to the Naura’s globalization? Assessment of Russian market * Bureaucratic system * Unawareness of product quality and unconcern about the environment and nature. * Russian was becoming familiar with the direct selling; therefore, the education cost for sales rep. and consumer would be relatively lower than other markets which have low acceptance in direct selling.
Assessment of Russian cosmetic and skin-care market * Consumer in Russia did not care about the natural products and knew nothing about Natura. They regarded the international famous brands and local brands. Natura lacked of brand image as strong as P&G or L’Oreal. * It took time to build up its own local network in stakeholders since there is no manager who can deliver the brand DNA knew the Russian market. * Mastering the delivery network in the Russian markets would be the potential problem for Natura. Natura would face the challenges in global logistic while its products were manufactured, shipped from Brazil. The shipping cost, inventory management, timeliness of products, ordering system within subsidiary in Russia and parent company would be the key issue to expand business in Russia. * The weather in Russia is totally different from Brazil. It would be a main concern that Russian would not like to trust a brand from Amazon region. * The local regulation in cosmetics and skin-care should also be taken into account. Sub-conclusion:
After assessing the key factors in entering Russian market, we can find that the Russian market is not mature enough to penetrate for Natura which was not equipped with sufficient experience in global business management and had a strong willing to preserve its brand DNA. Since Russian consumers were not respectful the nature and environment, the market did not attached to this brand DNA in that moment. Furthermore, due to the political situation and business environment, the experience in Russia could not duplicate or be applied after micro-adjustment in other western countries. 3) Following preceding question, if yes, what is the best entry strategy for the Russian market? If no, what is the best next step for Natura in globalization? Combined the assessments above, stepping in Russian market would not so urgent or profitable for Natura. For the international development, the best next step in globalization for Natura should focus on the grand American market. There are several main pros to implement this strategy, as follows: * USA market has the similar diversified ethnic background and furthermore, the Latin American is one of the main ethnic origins. American consumers are relatively mature in product knowledge and appreciate the natural skin-care product. Their pursuit in beauty is as vigorous as the consumer in Latin American. * The business model of direct selling in USA is mature and consumers used to shop products in mail ordering and direct selling. * Finally, the infrastructure of logistic in local market is consummate. * For Natura, it would be a big step in globalization if it could be successful in USA market. The success in USA market could build up the brand awareness and enhance its position in bio-diversity cosmetic and skin care product.
Still, there were cons to enter USA market, such as facing more fierce competition from other international companies and it would be required more CAPEX to invest in the grand market. If Natura take the Russian market as the must-be market, then we would recommend this company cooperate with the local leading company, Kalina, who had the strong retail network and knew the local market very well. Natura could use the franchise model to expand the Russian market and to build up its brand image and awareness through the Kalina’s advantages.
After Natura gaining experience and building up strong brand image, it could change its business model and enhance its brand DNA and values. Under this strategy, there exist some potential risks. For example, Natura had to make a completed regulation about the branding in order to preserve the consistency and its values. Natura had to keep tight connection with franchisee to learn more local experience and react to market needs. At the end of cooperation, it might have to pay higher price to buy back the franchising right if its products performed very well in Russia.