CASE STUDY REHEARSAL: NATURA

Group: Alexandre MatheusFernanda FerreiraMartha RomoMyrza MunizSecles Souza

Rio de Janeiro, 21st July, 2008

Marketing in Complex Contexts

Profs. Delane Botelho & Jonathan Speier

Background Facts/Symptoms

Opportunity Statement

Alternatives

Evaluation of Alternatives

Recommended Solution

Background Facts/Symptoms

Entry outcomes CountriesMode of entry used

Success Brazil Greenfield through Direct-sales

Success through partnership with local distributors

Argentina, Bolivia, Peru and Chile

Piggyback exporting

Success with hybrid model

Mexico Greenfield through direct sales and store chain

Success with owned retail store

France (Paris) Greenfield operations

Failure Portugal and USA (Florida)

Direct exporting

Opportunity Statement

A) Natura is evaluating whether Russia should be its next step towards global expansion.

B) The next place and mode of entry that Natura should consider in order to expand to other countries, if Russia is not chosen.

Opportunities

Alternatives of Opportunity A

Alternative 1: Greenfield operations with direct sales – same as Brazil

Alternative 2: Piggyback exporting

Alternative 3: Greenfield operations with hybrid model (direct sales + store chain)

Alternative 4: Greenfield operations with owned retail store

Opportunity A: Entering Russia

Alternative 5: not entering Russia

Evaluation of Alternatives from Opportunity A

Alternatives Advantages Disadvantages Outcomes

Alternative 1A:

Greenfield operations with

direct sales

- Natura has the necessary expertise - It is the company’s core value- Direct Sales is in fast pace in Russia

- Huge time consuming- This strategy didn’t work for some countries

Alternative 2A:

Piggyback exporting

-A partnership is something that Natura’s executives are considering when trying to go global- Less costly- Direct Sales is in fast pace in Russia

- A partner, even one with strong direct-sales expertise might not share Natura’s values and beliefs-Combination of two brands can destroy Natura’s one

Alternative 3A:

Greenfield operations with hybrid model

- High control of the operations- High penetration - Direct Sales is in fast pace in Russia- High exposure – disseminates the brand

- High costs when adopting direct sales + store- Difficulty in finding staff - Risky

Alternative 4A:

Greenfield operations with

owned retail store

- High control of the operations- High penetration- High exposure – disseminates the brand- Fit to the way Russians are used to buy their cosmetics and toiletries

- Not Natura’s core value - Risky

Evaluating Alternatives: Entering Russia

Alternatives Advantages Disadvantages Outcomes

Alternative 5A:

not entering Russia

- Possibility to spend the money in better investments- More time to study the Russian market in order to enter later on- Avoid the risk of investing with not enough information

- Postpone the possibility to go global soon in a country where the market is growing in fast pace- The financial indicators point Russia as a promising market (very similar to Brazil regarding the main drivers – fragrance, cosmetics and toiletries

Common features - Russia: cosmetic & toiletries market in fast growth

- Russians know nothing about Brazil- Russia: has strong bureaucratic obstacles/ poor legislation in product quality/counterfeiting- Tough competition and high costs- Language, climate and geographic distance- Russia: not concerned about environmental issues – against Natura’s core value

Alternatives of Opportunity B

no

no

no

No: USA, Japan, France

Yes: UK

Yes: USA, Japan, France and UK

N/A

N/A

N/A

N/A

Does the demographic collected data suggest that we should enter this cluster?

Does psychographic data (such as cultural, ethnic or religious) confirm that this cluster encompasses the core values* of the brand?

Would government regulations for cosmetic products in this cluster make Natura change its

production standards?

Does this country present a high sales of C&T ?

Does the country have enough infrastructure to support our market entrance turning it into a

feasible operation?

Does this country have a direct sales culture in cosmetics?

Enter the market with direct sales of Natura’s products

No entry at this moment

No: Russia and China

No

Alternative 1: Greenfield operations with direct sales – same as Brazil

Alternative 2: Piggyback exporting

Alternative 3: Greenfield operations with hybrid model (direct sales + store chain)

Alternative 4: Greenfield operations with owned retail store

Alternative 5: not entering UK

Opportunity B: Entering UK

Evaluation of Alternatives of Opportunity B

Alternatives Advantages Disadvantages Outcomes

Alternative 1B:

Greenfield operations with

direct sales

- Natura has the necessary expertise - It is the company’s core value- High Direct Sales acceptance

- Huge time and cost consuming- This strategy didn’t work for some countries

Alternative 2B:

Piggyback exporting

-A partnership is something that Natura’s executives are considering when trying to go global- Less costly- High Direct Sales acceptance

- A partner, even one with strong direct-sales expertise might not share Natura’s values and beliefs-Combination of two brands can destroy Natura’s one

Alternative 3B:

Greenfield operations with hybrid model

- High control of the operations- High penetration - High Direct Sales acceptance- High exposure – disseminates the brand- Less logistics costs: shipment France + UK

- High costs when adopting direct sales + store- Risky

Alternative 4B:

Greenfield operations with

owned retail store

- High control of the operations- High penetration- High exposure – disseminates the brand

- Not Natura’s core value - High risk and cost

Evaluating Alternatives: Entering UK

Alternatives Advantages Disadvantages Outcomes

Alternative 5B:

not entering UK

- Possibility to spend the money in better investments- More time to study the Russian market in order to enter later on- Avoid the risk of investing with not enough information

-Postpone the possibility to go global soon in a country where the market is growing in fast pace- the financial indicators point Russia as a promising market (very similar to Brazil regarding the main Drivers – fragrance, cosmetics and toiletries

Common features - Language- Geographic distance when compared to Russia- UK: 5th major C&T market, detaining 5% of the global sales in the category- UK: 0.5% of GDP per capita is spent on C&T

-Tough competition and high costs

Recommended Solution

Since the case does not provide us with enough demographic data, Natura should not enter Russia, since Russian market does not cope with the company’s environmental positioning and the cultural barriers seem hard to trespass.

Considering the scarce data available, we recommend as the next step towards global expansion, entering UK, with a hybrid model: through Greenfield operation and store chain – ALTERNATIVE 3B

Although costly and risky, UK has a strong C&T market, as well as a strong direct-sales culture. Shipments to UK would less costly to Natura, once the products can come together with the French orders.

“Natura’s decision-making process combines: financial, philosophical and emotional components envisioning a balanced value creation to shareholders, society and environment.”