Main Issues and Solutions for the Natura: Expanding Beyond Latin America - Case Study Example

Main Issues and solutions for the case "Natura: Expanding Beyond Latin America" with application of the concept "Internationalisation Pattern" Contents Contents 2 Main Problems 3 Possible Solutions 4 Best Solution and argumentation 5 Concept Application 6 Main Problems The challenges faced by Natura are related to their inability to enter the international market. Related to this, following are the main areas of consideration. Low R&D Investment: - Studies have shown that personal care product industry is driven by innovation and hence, lack of research and development work would act as a strong resistance to growth. Apart from that, due to low investments in the field of research and development, the company was failing to move at par with the competitors as well as to identify the needs of consumers precisely. Therefore, with the research and development activities, a company would be able to bring constant innovation and that will help them to compete at the highest level Poor Distribution Strategy: - The Company failed to implement a proper distribution strategy and as a result of that, distribution of products was not up to the mark. The appointment of distributors was not done properly as they were failing to adopt the culture and value of the company. The company always wanted to showcase their values and culture but unfortunately due to substandard distribution, it was failing to make a mark for them in the overseas market. High Sales Force Turnover: - In some countries, there were high attrition rate among the sales force, which resulted in heavy financial losses. One of the possible causes of high attrition rate is due to lose HR policy. The remuneration and other benefits offered by the firm is another cause of high attrition rate. As a result of the high attrition rate, the company was also failing to meet the desired sales volumes and was incurring financial loss. Change in Demographics: - Another disappointing factor, which is also beyond the control of the company, is the changing demographics. The products are meant for the young population and the company mainly targets population within 15-45 age bracket. However, aging population in certain countries is a cause of apprehension for the firm. Possible Solutions Some of the possible solutions for the aforementioned challenges are recommended below: - Market Research Activities: - The Company should engage in market research activities so as to attain deeper insights into the market. Apart from that, in-depth market research activities will allow the company to recognize the market trends. As mentioned previously, innovation has been a key driver of this industry and thus, without research and development activities, it is literally difficult for the companies to incorporate or enhance innovation. Furthermore, with research and development activities, the company will be able to come up with new products and services that will enable the, to remain competitive and satisfy the dynamic demand of consumers. Option of Considering Foreign Direct Investment: - The evaluation of the case has made it evident that the company is failing to make a mark for themselves in the international market due to improper distribution. The distributors are failing to adopt the values and principles of the company and as a result of that, the company is unable to exhibit their values to the international audience. Therefore, the company is strongly recommended to consider the option of foreign direct investment or to establish a wholly owned subsidiary. This approach will not only provide the company with greater control, but at the same time, the company will be able to portray its values and principles. Strong Employment Policy/recruitment Process: - The Company is also suggested to strengthen their current employment policy as well as the recruitment process, given that this will enable them to draw in efficient employees. This can be achieved through better screening process and by putting other efficient recruitment processes into practice. In addition, the company is also strongly recommended to look into its remuneration and benefits offering to the employees. With more benefits and competitive pay package, the probability of high attrition will greatly reduce. Best Solution and argumentation The market research activity is one of the crucial tasks of a company that is seeking growth. Without market research, a company will remain unaware of the market incidents. The company will also have the opportunity to identify minute needs of the customers. Innovation will be automatically driven if research and development activities are carried out in an appropriate manner. Nonetheless, the problem is that only research and development activity will not help the company to serve its purpose of doing business in the international market. Although market research will be a key requirement, it cannot act as the only function that will take the company towards fulfilling its objectives. Rather, various other activities are required to make the organization successfully function in the international market. In the last section, the company was also recommended to bring about changes in the existing recruitment process and policies so as to ensure greater transparency and strengthen the employment rule. This would allow the company to reduce the attrition rates because with tight policies, it would not be easy for the employees to leave the organization whenever they want. In this context, bond signing with employees can be a wise idea but at the same time the company must disclose all the terms and condition to the employees in detail for avoiding any confusion. Although, it still does not guarantee a zero employee turnover, but will obviously reduce the rate. Furthermore, the reduction in employee turnover does ascertain that the sales volume will be high. There might be a case where despite low attrition, the sales figures are declining due to lack of skills and expertise of the candidates. Therefore, from the above discussion, it is evident that the company needs to make other efforts in order to ensure success in the foreign markets. The last strategy advocated to the firm is related to the option of considering foreign direct investment. The case has already shown that the company is failing to exhibit their control over operations in the overseas market and at the same time, their values and principles are not being visible to the audience, thereby making no contribution to Natura’s visibility. As a result of that, there are high possibilities of reputation damage and loss of trust. Thus, foreign direct investment in the intended country is a good option. Some of the key benefits to the firm for adopting foreign direct investment strategy are as follows: - 1. Natura will gain the opportunity of exercising better control over the operations in overseas market. Alongside that, they will be able to showcase their values and principles effectively. 2. The profit realization will be more due to the absence of any third party or intermediary. The case also raised questions pertaining to the choice of country and whether direct sales strategy would be appropriate or not. The analysis of the case as well as various alternatives has made it evident that France is the most potential market for Natura. Although, there are few established players operate in the French market, but the huge market size is one of the positive factors for Natura. Furthermore, it has been also observed that French people are highest spenders of cosmetics, fragrances and toiletries. They nearly spend around US$230 per person in a year for buying cosmetics, fragrances and toiletries. In addition, apart from L’Oreal’ which holds 10.4% share of market, there are no other big player, which again is a great opportunity for a firm like Natura having good market reputation. The industry in france is also growing at a rate of 7% hence, entering the French market is a viable option for the firm. The direct selling market is also growing in France, for example, companies such as Cosmence have been extremely successful with direct selling. Hence, Natura is also recommended to operate with their traditional marketing form which is direct selling. However, there are strong requirements of advertisements as the case has made it clear that French people are more sensitive with sensory marketing. Therefore, it is strongly recommended that the company must focus on therapeutic scents and product design. The management of overseas operation will be much easier with FDI as the company will have greater control. A well defined organizational structure will be the key towards efficient management of operation hence the company is also recommended to ensure proper organizational hierarchy management. Concept Application Natura has been constantly seeking internationalisation and is considering the same to be an integral part of business. The company believes that internationalization is one of the suitable tools, which will allow the firm to grow in size as well as experience financial development. In the home country, drivers of the company have been the brand name and brand value coupled with quality service and products that the company has been offering since the last 40 years. Similarly, in the international market, the company is actively trying to make optimum utilization of the resources as well as offer customers with quality experience. However, the company needs to develop a core competency in order to get the desired results. This is because it will be practically impossible for the firm to compete in the overseas market in the presence of highly established players. The core competency can be achieved in the form of better service; and by targeting mass customers with the incorporation of a price strategy that is affordable to customers. Majority of the established players caters to the premium segment and as a result of that, targeting mass segment will be beneficial for the firm. Entering a new country invariably requires high-end market research, which can be costly. So, in order to minimize the cost, the company should focus more on the secondary data. The process of internationalization will be smoother for the company through this approach. This approach will also help Natura to remain cost effective. Read More