Analyzing the Business Environment of Portugal for Coty Inc. FDI

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Student ID Number
(Do not include student
name as anonymous
marking is implemented)
GAL17441402
Programme Title Business Organisations and Environments in a Global
Context
Module Title Business Organisations and Environments in a Global
Context
Module Code (listed on
Moodle and in LTAFP) QAB020C410A
Module Convenor Hamid Khan
Coursework Title
Academic Declaration:
Students are reminded that the electronic copy of their essay may be checked, at
any point during their degree, with Turnitin or other plagiarism detection software
for plagiarised material.
Word Count 2597 Date
Submitted 16/12/2018

REFLECTIVE WORK:
This an improved report of the previous work that was offered as a Resit. The previously
submitted work lacks specific information and focuses on the selected subject and country. there
was a lack of statistical data and information that could support in having clear and concise
information about the business environment of Portugal. The previous report does not provide
precise information regarding the business environment in Portugal in relation to foreign direct
investment. The tools of environmental analysis did not applied effectively. The pestle analysis
was not specifically related to the targeted country and similarly, Porter's five forces were not
clearly evaluated to support the proper evaluation and result. It has also lacked the use of
relevant data and examples to support and justify analysis.
From doing this Resit work, I have clearly understood how to apply different tools and
techniques for analyzing the business environment. I have learned the value of applying PESTLE
and Porter's five force model. The Pestle analysis has supported in identifying the macro
environmental factors within Portugal that may affect the business expansion of Coty Inc
through FDI. The porter's analysis has supported in identifying the internal industry factors that
could affect the competitiveness of Coty Inc in Portugal.
The assessor's feedback has supported me in having an understanding of my knowledge and
abilities to perform a systematic business environment analysis. Through this, I have identified
several areas where I need to develop. Now, I have a clear understanding of how to apply
different tools and techniques to analyze the business environment that would support me in my
future academic and professional career.

EXPANSION OF COTY INC. COMPANY IN PORTUGAL
Coty, Inc. is a business beauty company with its headquarters in New York City but it has
also many subsidiaries in different states worldwide. The subsidiaries help the company in the
manufacturing of its products, marketing, and even distributing to consumers and the market.
Coty, Inc. deals with products such as consumer beauty, luxury, and professional beauty (Datta,
2018). It has the objective of making the beauty industry to have an impact worldwide because
of the type of products it produces. On another parallel, most of the products meet the needs of
the consumers hence creating a pull in demand which in turn makes the company expand its
branches. The company uses beauty in all its channels to make profits and expand its branches
countrywide. It will expand its business activities to Portugal because of the trust it had created
in the type of products such as health and beauty which are always in need from the consumers.
The analytical tools that I will use are the following: Pestle and Porter’s Five Forces.
THE BUSINESS ENVIRONMENT IN PORTUGAL
There are continued changes in the economic environment of Portugal for instance, a
shift in demand and supply, favorable tax rates and favorable government policies. This makes
the Company extend its subsidiary offices on the basis of the comparison made pertaining
historical factors, subjective management in the economic sector, and related revenue
compensation by the government in case a company incurs a loss during its operations. The
derivatives account for goodwill and significant impact on the wellness of the company and
Portugal as a whole (Nunes and Sarmento, 2010). This is because of the post-employment
opportunities that the country expects the company to supposedly create for its people hence
raising the living standards and gross domestic product of the citizens. The factors impact the

company in the sense that, it feels to have received a warm welcome and thereby an enabling
environment in its operations.
Coty Inc. is considered a global beauty company and this creates a challenging
environment from other beauty companies that deal with the same brands especially in Portugal.
Coty Inc., therefore, was able to develop a division subsidiary company by the name Well
Prestige Products Portugal SA, which works under the stiff competition and challenging
environment (Coty, 2019). Under the terms and conditions of the subsidiary, the company
delivers its products to various shops and to consumers through online and one to one strategies
by giving discounts depending on the quantity of purchase made. The discounts created in the
market results in negative pricing impacts which are created as a result of the strain to adapt to
the stiff competition environment and maximizing the company's profits.
The operational environment of Portugal is risky in the sense that, there is a price for
products keeps on shifting because of currency fluctuations. Consequently, political risks such as
political instability experienced in East and Middle Europe pose a threat to the operationalization
of the business. Notwithstanding reputational and regulatory measures, the working environment
is really risky and challenging but the company puts all its efforts to ensure that is felt globally in
terms of meeting the expectations of customers and expanding its branches to market all its
brands. It respects all the reputations set and the regulatory measures imposed by the Portugal
government hence becoming probable and easy to maintain its position depending on the
interests and trust of people.
Portugal’s Foreign Direct investment is another enabling business phenomenon which
strengths the activities relating to investment. From recent statistics, Portugal has created free

zones to allow investments from foreign countries and also offers citizenship which is
bureaucratically earned (Santos, E., 2018, 174)). The implication behind this perspective is clear
that, for one to earn the citizenship there is a fixed sum of money paid to ensure that there is a
renewal of the ownership of the companies in Portugal. It is ranked first worldwide in Solar
investment and this supports foreign direct investment which is an enabling environment for any
company that will wish to invest the country. At the same time, it takes the second position in the
foreign direct investment programs and this can be seen from the strategies it employs in most of
its products.
Table1. Foreign direct investment in Portugal for three consecutive years
[Source: CEIC, 2019]
In collaboration with foreign direct investment policies, the company ascertains the potential to
carry out its activities hence making Portugal a shining nation in terms of foreign investment.
Statistics indicate that FDI in Portugal is increased during the last three consecutive years.
Portugal stands out as the largest country that supports investment hence making it appropriate
for investors to develop trust when investing despite the fears from the economic crisis. Coty Inc

can gain the advantage of the increased opportunities of FDI in Portugal to expand its business in
the country (Santos, E., 2018, 186). Countries like Germany, Portugal, and the US has great
policies for FDI protection.
Transaction
transparency
0
1
2
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8
Germany
Portugal
United States
Graph: Country’s comparison with Portugal protection of investors.
PESTLE AND PORTER’S FIVE FORCES ANALYSIS FOR COTY INC. IN PORTUGAL
The pestle is a set of business analysis tools that are used by many organizations to identify
challenges in the macro competitive environment of their businesses. Pestle tools are regarded as
the best and strategic methods because they assist organizations to carry out their operations
when identifying any weaknesses (Hamilton, L. and Webster, P., 2018, 112). For instance, Coty
Inc. Company makes use of the tool to identify the competitive forces that hinder its operation
outside the internal problems. It identifies problems that originate from outside the company’s
management. On the other hand, Porter’s five forces analysis comprises of the tools that are used
to analyze power situations within an organization for instance power relations before the

replacement of some management or external and the internal threats that may lead to
disorganization of an organization.
PESTLE ANALYSIS
Coty Inc. Company can ravish the problems that affect its operations by using the Pestle analysis
tool which looks at the external forces that hinder its progress (Hamilton, L. and Webster, P.,
2018, 119). For instance, environmental factors are the most outstanding features that determine
the demand and supply of the company's products. Pestle, therefore, takes a deep look at factors
such as political instability, strict government policies, economic factors, to mention but a few.
On the same parallel, pestle analysis tool provides a window through which the needs of
consumers are taken into consideration to ensure that they have the capability to purchase the
products. Discounts bear the best analogy to explain the principle in the sense that, consumers
are allowed to get the beauty products at a cheaper price.
Looking at the social, economic and political environment, it is easier to plan on the right
strategies that can be used to influence consumers to buy products. Pestle, therefore, allows the
company to introduce experts in order to look at factors that will assist the business to thrive and
hence making it easier for growth. The economic environment in Portugal particularly the
fluctuation of currency is a threat to the progress of Coty Inc. Company’s business. Pestle helps
to predict the changes and how the brands should be distributed to people in different zones and
different geographical areas. In another approach, it looks at the factors that affect the buyer’s
decision and then taking a step further to improve the conditions so that when one side of the
front succeeds, the other follows the same approach hence making it easy to comply with the
changes at any given time.

The political aspect from Pestle's point of view illustrates that politics plays a vital role in
determining the type of political market of any organization. Portugal government defines
employment laws, tax policies, and how they affect the competitive business environment. Laws
of the state have an interplay and effect on the business in the sense that, they explain trade
controls and how the policies and regulations need to be intertwined to result in a healthy
environment. Coty Inc. Company experiences some challenges when trying to work in close
consideration to the laws although, to some extent, the state offers incentives which also boost its
performance and operations.
 Political: the liberal policies of government support easy FDI in Portugal however, the
company needs to pay certain taxes like IVA, IRC, and IRS and local tax that may affect
its business in the country.
 Economic: The increase in VAT and reduction in the purchasing power of consumers
could reduce the demand for beauty products and cosmetics in Portugal. Economic crisis
and recession may also affect FDI in Portugal (Claro, 2013). There is high
unemployment; moreover, a state allows a foreign country to predispose its investments
because of the belief that its citizens will get employment opportunities. Coty Inc.,
therefore, will work in relation to creating employment opportunities for Portugal's local
citizens before considering the other group.
 Social: the current situation of economic crisis such as inequality of distribution of
wealth and income in the country and decline in public confidence in the markets could
negatively affect the product demand (Williams and Figueiredo, 2011).

 Technological: the technological advancements can support Coty Inc in expanding its
business in Portugal as the Portuguese people are technology friendly and use digital
technology to purchase products and services.
 Environmental: the country is focused to reduce energy consumption, people are more
environmentally aware, and thus Coty Inc should develop a sustainable product for
successfully entering into Portugal market (Claro, 2013).
 Legal: A business with subsidiary branches like the case of Coty Inc. has the authenticity
to study the country's laws in order to understand rules, policies, and regulations that
need to be met in order to smoothly run a business. the laws and regulations such as
minimum salary could affect the profitability of the company in Portuguese.
PORTER’S FIVE FORCES ANALYSIS
The tool is specific to power that is, it comprises of five forces that assist to determine internal
and external power situation that may be threatening or favorable to a business (Hamilton, L. and
Webster, P., 2018, 124). Coty Inc. looks at this by inputting its efforts to see how power is
balanced between these different situations. The balance of power can be explored five
perspectives starting from the supplier, buyer, threat of the new entrants such as the foreign
direct investment measures, a threat from competitive organizations, and the threat from the rules
and regulations legal institutions. The company experienced all this when extending the business
to Portugal.
Using Porter's five forces, the company is allowed to seek expertise who have a vast experience
in marketing and advertising so that they can employ the five forces and determine where there is
imbalance so that effective strategies can be implemented.

Figure 1: Porter's Five Force Model
[Source: Darabos, 2013]
 Buyer’s power: the bargaining power of buyers is very high in the industry. the
availability of a large number of competitors provides a large number of alternatives to
the customers in the industry (Ponte and Afonso, 2017).
 Suppliers’s power: the supplier power encompasses the number of suppliers that
distribute the beauty products, their uniqueness, and the ability to communicate with
customers on the type of products they are supplying. The supplier power is high in
beauty and personal care industry. The dominant suppliers can decrease the profit margin
of the company.
 Threat of new entrants: there is a high threat of new entrants that bring innovation in
the personal care or beauty products. It puts pressure on the company to lower its price
and increase the quality of its products to provide a value proposition to the customers.

 Threat of substitute: the threat of substitute is low in the industry and does not affect the
company. The home remedies and homemade beauty products are the only substitutes for
beauty and personal care products (Łopaciuk, and Łoboda, 2013).
 Competitive rivalry: there are several existing brands in the Portugal market such as
Divine and Benamor that creates great competition for Coty Inc in the market.
APPLICATION OF APPROPRIATE DATA
Coty Inc. Company has integrated its business focusing on opening and expanding more
businesses worldwide not only the division that is underway in Portugal (Datta, Y., 2018, 201).
For instance, the fiscal 2018 policy equips the Company with the accessibility to observe other
subsidiaries in most of the important geographical places. Studies conducted in 2018 depict that,
the company has various segments that help it to successfully advertise its brands in order to
merge with the expected portfolio. The analytical perspective culminates from the emerging
markets that have consistent sources or growth as illustrated in the fiscal policy of 2018.
There are key retailers in the market who create a tough competition which affects the business
environment. Competition experienced is a threat to the fact that it does not leverage with the
expected Portfolio. However, the changes could not be effectively initiated because the
competition was not favorable especially to cut the costs of management and to address
challenges in the economic environment. It was therefore not easy to sell, buy, or manufacture
different brands in a seamless environment. The situation will implicitly affect customers
because their demands need to be met. Despite the challenges, the subsidiary created helped the
company to comply with the existing policies created by the government of Portugal.

Consequently, the strategic interest of Portugal on foreign investment enables the company to
fully forward thrash its operations hence implicating the success of its objectives.
Further, the company connects with other retailers so that there can be more extensions with the
logical explanation of increases the purchases and profits. The company has plans that need to be
implemented into the synergies of selling and supply chain which includes meeting the laws of
the country as outlined in the fiscal policy of 2020. The anticipation is clear from the figures
estimated for instance, in the fiscal year of 2017, there was a synergy of 20 percent increase
worldwide as compared to an increase made in 2018 by 50 percent. The targets made in 2020
have not been clearly defined but there is a clear explanation from the analytical juxtapositions
which culminate the solutions to the existing competitive market structure which threatens the
expansion of the beauty business.
The targets set in the year 2018 as illuminated in the fiscal policy led to the termination of at
least 14 brands which were reported in the two outstanding segments namely, the beauty and
luxury (Datta, Y., 2018, 180). The resulting of the above emerged from the competition in
powers of different collocation and problems experienced from the social, ecological, economic
and political dispensations which threaten the operations of the Coty Inc. Company. On the same
approach, the transactions from the diversities and new brand licenses related to the assets of
beauty and luxury products which were previously banned led to the negative consequences
which are later addressed from the incentives and benefits from the Portugal government to
extend its products in different subsidiaries.
In conclusion, the rationalization in Coty Inc. Company in Portugal aims at beauty products
which include expanding the business and creating an environment that can support its products