Strategic International Business Management Report for Natura

This report provides a strategic analysis of Natura Brasil's international business management, focusing on its expansion strategies. It begins by outlining Natura's core business, its position within the cosmetic industry, and the criteria it uses to select countries for expansion, highlighting its current operations in various countries like Brazil, Argentina, and Mexico. The report then identifies Bangladesh as a potential market, conducting a PESTEL analysis to evaluate the political, economic, social, technological, environmental, and legal factors influencing business operations in the country. A 5-Forces model is applied to assess the competitive intensity of the cosmetic industry in Bangladesh, followed by an application of the VRIO framework to analyze Natura's resources and capabilities. Finally, the report evaluates various modes of entry available to Natura, recommending the most suitable strategy for successful international expansion into Bangladesh, supported by the analyses conducted throughout the report.

Running head: STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
Strategic International Management

STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
2
Table of Contents
Introduction.................................................................................................................................................3
TASK 1:......................................................................................................................................................3
The company’s core business and the industry to which it belongs.........................................................3
Cosmetic industry in Brazil.....................................................................................................................3
Identify and explain the general criteria used by the company to select these countries to expand.........4
TASK 2:......................................................................................................................................................5
Using the company’s country selection criteria as identified in Task 1c, Identify a country that the
company does not currently operate in....................................................................................................6
TASK 3:......................................................................................................................................................8
5-Forces model to critically analyze the competitive intensity of the industrial environment of the
company in your chosen country market.................................................................................................8
TASK 4: Application of the VRIO framework..........................................................................................10
Task 5:.......................................................................................................................................................11
Modes of entry available to the company and recommend – with justification based on the findings of
your analyses in Tasks 2, 3 & 4.............................................................................................................11
The most suitable mode of entry that will enable this strategic international expansion to be a success
for the company.....................................................................................................................................13
References.................................................................................................................................................14

STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
3
Introduction
This report will assess modes of entry available to the company. It also demonstrates the suitable
mode of entry that would enable this strategic international expansion and success for the
company. This report also illustrates the company’s core business and the industry to which it
belongs. It also explains the general criteria used by the company to select these countries to
expand. This report also assess 5-Forces model to critically analyze the competitive intensity of
the industrial environment of the company in Bangladesh.
TASK 1:
The company’s core business and the industry to which it belongs
Natura Brasil is the one of leading manufacturer of a cosmetic and prominent leader in the direct
sales field. It has employed more than 7000 workforces in seven nations such as France,
Argentina, Peru, Mexico and Chile, and Colombia. The sustainable development has been
guiding the principle of the company since it was developed in the year of 1969. An enthusiasm
for customer relations may lead the corporation for adopting the direct sales because it is the key
commercial approach. In current times, there are over 1,421,000 consultants in which 1,175,000
consultants from Brazil and 246,000 are from abroad. It promotes the value of the company and
products to the consumers (Natura., 2018).
Cosmetic industry in Brazil
The utilization of cosmetics in Brazil per capita is very nearest to what Natura see in places like
the Argentina and Australian. The Brazilian people are very modern, however, market saturation
and inflation will begin to affect the industry strongly in the near future. Moreover, Brazilian has
a great interest in personal care products and beauty. The outlay in innovation with new products
in sale and marketing should assurance a favorable growth over the next few time periods

STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
4
(Natural cosmetic industry trend, 2018).
The company’s position in its domestic market
Natura arrives at over 100 millions of consumers and is available in 58.5% of Brazilian homes.
In current time, Natura is the largest corporation in the perfumery, personal hygiene and
cosmetic industry in Brazil. The brand is the leader in preference of consumers with 44%. In the
previous five years, sales network of the company has expanded with net revenues that grow an
average of 13% a year (Natural cosmetic industry trend, 2018).
The other countries in which Natura currently operates
Countries Mode of entry Years
Brazil Joint venture 1969
Chile Joint venture 1982
Argentina Joint venture 1994
Mexico Joint venture 2005
France Joint venture 2012
Colombia Joint venture 2015
Peru Joint venture 2017
Identify and explain the general criteria used by the company to select these countries to
expand
Under the condition, Natura goes international via an agreement with the independent distributor
in Chile in 1982. As per the traditional marketing strategy, the company can audit their resources
that have core capability and offer distinctive competitive benefits. All the resources related to
Natura like financial, research and development skills, experiences, knowledge, and sales and

STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
5
distribution channel. Furthermore, sales representatives are valuable, hart to intimate, exploited
and they are key sources of core capabilities with competitive benefits in the international
market. Moreover, marketing capability has its higher impact on the innovative result for the
company that has strong competence and resources (Eriksson, et. al, 2015).
Moreover, Natura has tough R&D that indicates a corporation has strong research and
development base that has gained from strong marketing capability. Moreover, the key
determinant of its performance is the communication of marketing with research and
development competencies. The R&D is the key internal factor that creates the opportunities for
Natura to perform business in the new market (Ang, Benischke, and Doh, 2015). For illustration,
a corporation acquires the technology with patents from the research center and universities in
abroad and Brazil. It focuses on particular research efforts on skin care products and on the
appropriate use of ingredients acquired from the biodiversity of Brazil and launching the line of
product. Along with this, workforces are accountable for a local operation that indicates Natura
has strong human resources. From the year of 1982, Natura decides to enlarge their business
globally that initiates in Chile and expand more in central American nations, other south, and
Latin American nations like Mexico, and Argentina (Hennart, Sheng, and Pimenta, 2015).
Natura practices direct selling and retail network with agents for allocating the products in the
international marketplace. For illustration, in the year of 2003, the company has created Natura’s
house concept where sales representative would be in touch with the brand and can meet each
other, be trained, and exchange experience through exhibitions and speeches and test the
products (Laufs, and Schwens, 2014). Moreover, it is the places that could be demonstrated as a
middle group amid pure direct selling model and store chain.
TASK 2:

STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
6
Using the company’s country selection criteria as identified in Task 1c, Identify a country
that the company does not currently operate in
From the above analysis, it is found that Natura deals in different nations but, it does not deal in
Bangladesh. Hence, it can expand their business in Bangladesh for acquiring more profits and
growth.
PESTEL analysis of the country’s macro-environmental factors
POLITICAL FACTORS
There are certain political factors that should consider by Natura while entering into Bangladesh.
There are different rules, regulation and government policies made by the government in terms
of enlarging their business such as environmental regulation, tax policy, and trade restriction and
tariffs. The company has to pay 30% of profit to the tax rate that is high between all tax rates as
the company tax rate. It may decline the overall profitability of a corporation. In addition, as per
the norms of government, a company has to transform 30% of the land sector into green land for
making atmosphere eco-friendly (Boellis, et. al., 2016). It creates higher expenses for the
corporation. The corporation has to bear charges to cross the state border and buying the raw
materials and the release the finished products.
ECONOMIC FACTORS
The buying power of the potential buyer and the cost of the company is influenced by different
economic factors. There are certain economic factors such as inflation rate, and interest rate. The
inflationary time has unfavorably influenced the corporation as the raw material and machinery
have to buy at the higher rate. The rate of interest on the company loan is 12% and the Natura
has to pay a high amount of tax per year (Hollender, Zapkau, and Schwens, 2017).
SOCIAL FACTORS

STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
7
The demographic and cultural concept is a form of social factor. These factors may influence the
need of customers and the size of the potential market. There are certain social factors such as
environment norms, health consciousness, and emphasis on safety. Maintaining the safety of
customers, Natura should develop the social responsibility policies such as using chemicals that
protect the skin and are bit expensive as compared to other chemicals. It should also keep the
environmental norms where it can convert their 30% of land into the green tea and also practiced
the eco-friendly paper with the intention of packaging (Meyer, et. al., 2018). The corporation can
focus on the safety of workforces and can offer insurance policy of employees with minimum 1
million with an annual premium of 5000/-.
TECHNOLOGICAL FACTORS
There are certain technological factors like research and development, and technology’s effect on
the firm’s offering. The company will have to spend a high amount on research and development
of the product in the potential time period due to getting competitive benefits from expanding
their business into the Bangladesh nation. It should also develop the product that cannot be easily
copied by competitors. Thus, Natura should continue the investment in research and
development practiced for keeping a business hold in the market. The gains in the research and
development cost would influence the offering of the company as the cost of the product will
increase with the gains in the cost of research and development (Ojala, 2015).
Legal factor
There are certain legal factors such as consumer protection low, employee safety act, and health
and safety laws in Bangladesh that needs to consider for Natura while expanding the business
into this nation.
Environmental factor

STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
8
In Bangladesh, there are different environmental protection policies such as pollution protection
act and animal protection act that can affect the Natura to expand their business in this nation.
The implication (suggestions) of these macro-environmental factors for the company
Natura should focus on considering environmental policies for expanding their business into
Bangladesh. It can also consider the tax policies with CSR policies to influence the customers
towards the business of Bangladesh. Natura can also use advanced technology with research and
development for expanding their business into Bangladesh country (Coeurderoy, and Murray,
2014).
TASK 3:
5-Forces model to critically analyze the competitive intensity of the industrial environment
of the company in your chosen country market
The threat of new entry
The cosmetic industry has a minimum threat of new entrants due to several factors. The first key
factor is a large cost of entry. Building a unique cosmetic product needs a high amount of
resources with respect to research development and the actual manufacturing procedure
(Forsgren, and Johanson, 2014). There are certain cosmetic corporations that access the expertise
and funds required to perform significantly. Another factor that discourages the entry into this
industry is large competition available in the industry. Moreover, there are large competitors who
have high market share that can decline the profitability of Natura in the cosmetic industry
(Tulung, 2017).
Bargaining power of customers
The cosmetic industry has the high bargaining power of consumer due to intense competition
with the availability of cosmetic product from different manufacturers. Since, these products

STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
9
have high substitutes hence it is possible for consumers to force manufacturers to decline their
price of product via purchasing from their key market participants. It is challenging which
manufacturer of cosmetic product faces in across the world (Anderson, and Sutherland, 2015).
Bargaining power of suppliers
There is a high amount of market participants and the high supply of different products to the
market. There are certain cosmetic products that are built by different companies in the cosmetic
industry. Because of the larger supply, a consumer has the power to persuade the market prices
as compared to suppliers (Stoian, Rialp, and Dimitratos, 2017).
Threat of substitutes
Under the cosmetic industry, there is a large number of key market participants of Natura.
Hence, the company has a great threat from substitute’s products. When manufactures trade their
products at a higher rate or when the products are of low superiority, then customers are
competent to buy substitutes from different rivalry who are available in the cosmetic industry.
This is essential for the competitors in the cosmetic to become creative when they are to deal
with a challenge regarding the threat of substitutes (Hernández, and Nieto, 2015).
Barriers to entry and exit
Barriers to exit involve high development with high research expenses. Because of high expenses
related to building cosmetic products, it is complex for companies to leave the industry without
attaining the costs for production. There are different equipment and machines practiced in
building cosmetic products and arraying these at a reasonable market value is complex. Thus,
there is a barrier from the exit in the cosmetic industry (Game, and Apfelthaler, 2016).
Seller and buyer concentration

STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
10
The seller focuses on building nations and emerging atmosphere is relatively low. There are
certain companies that have dealt into developing a product, which attains the particular
requirements of this market segment (Bai, Krishna, and Ma, 2017). For attaining the long-term
profitability, new market entrants should emphasize on this neglected segment of the population.
The high seller emphasizes on developing nations, which leads to high rivalry and overall
bargain in profitability for Natura in the cosmetic industry (Buckley, and Ghauri, 2015).
TASK 4: Application of the VRIO framework
Resource/capability Value Rarity
Costly to
imitate
Organization
Value
creation
Proficient talent/
labor
Yes-Add to
services
No-training No-could be
adapted
Yes Parity
High-quality
ingredients
Yes-Add to
value
No Yes-
expensive
Yes Parity
Natura process
standardization
Yes-faster
service
No-other in
industry
Yes-
business
process
reforms
Yes-
consistency
Parity
Supplier relations
organic and locally
sourced
Yes Yes yes Yes Sustainable
benefits
Brand/Reputation-
word of mouth
Yes-
strengthens
perception
Yes-unique
brand
Yes-high
effort to
develop
Yes-increases
perceived
value
Sustainable
benefits

STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
11
As per the VRIO, Natura is engaged in attaining the desired performance as per the green
products, decision making for lowering expenses and emphasizing on its customers. It uses smart
decision making for minimizing the expenses and emphasizing on its customers. It also
implements green products and some of these plants from the Amazon sector where it buys from
indigenous communities (Musso, and Francioni, 2014). It demonstrates that the nation has good
ethics and considers it in corporate social responsibility. It is analyzed that Avon i.e. competitors
of Natura have over 37,000 workforces as compared to other employees. It saves money on cost.
Furthermore, employees of Natura are known for going the extra mile and due to direct sales, it
can take cost benefits rather than using key market participants. Salesforce of Natura is also in
touch with their end users to understand them what it is the needs and wants of customers. The
company also engages in the ideas and development of products. These all play a vital role in the
achievement of Natura (Lebedev, et. al., 2015).
Beyond Latin America, Natura can enter into global markets in nations like the United States,
Central America, and Africa. Natura is a green corporation that emphasizes on needs of its end
users. In all of these nations, Natura will be competent to use their atmospheres to be unified into
new green products. These nations have different kinds of people who belong from different
cultures, ethnicities that Natura is known for emphasizing on particular requirements (Bernard,
Grazzi, and Tomasi, 2015).
Task 5:
Modes of entry available to the company and recommend – with justification based on the
findings of your analyses in Tasks 2, 3 & 4
Green Field Investment

STRATEGIC INTERNATIONAL BUSINESS MANAGEMENT
12
The organization can use the Greenfield investment as it is a type of direct investment tool by
which it would be capable of established their operation in the foreign country. The
organizations that choose greenfield investment would be capable to get benefits related to the
tax breaks to government form of the particular organization. Moreover, Greenfield investment
considers the high risk that includes huge amount but Unilever will not consider such issues
because it has their established name in the Indian market.
Acquisition
The acquisition is the way that is effective for those organizations that have their existing
business in the same country. The acquisition is a significant method of entry at the international
market. In addition, it is examined that most of the organization are practicing acquisition. The
acquisition trend is increased because it is the method to obtain higher benefits. Moreover, the
market share could be affected by the entry methods. The acquisition could support to eliminate
the risk of the organization in the least time and cost.
Joint venture
The joint venture is also another method that aid to make the relationship between two parties in
which they would be able to obtain higher revenue in limited time and cost. Joint venture enables
the organization to take many advantages like cost profits, loss, and cost allocation.
Franchising
Franchising is the well-known business approach that is practiced for operating business
approach. Franchising is a contractual agreement that facilities to the franchisor to sell products
and services. Moreover, retailer allocates their goods and services in the specified market. If
entrepreneurs purchase any franchise they could be capable to obtain many advantages like tools,