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Unit 5 Chapter 4 Closing Case
1. In most countries around the world, the beauty products industry is
dominated by a small set of multinational giants named in the case.
Why in Brazil none of them has emerged as a market leader?
Part of the reason for the continued success of Natura against multinational giants has been the
focus towards black women. As most of the Brazilian women are black, this is an obvious
advantage. Also, localized and motivated women are ultimately the driving force behind sales of
Natura. They are able to promote, sell, and receive feedback for the Natura brand leading to a
decrease in costs, an increase in brand recognition, and a better ability of the company to adapt
to the needs and desires of their loyal consumers. Furthermore, Brazilians have remained loyal
to the Natura brand in part due to the product makeup (no pun intended) with elements coming
from the Amazon forest and due to Natura being Brazil’s original cosmetics company. They set
out to capture their local market at a time when these large multinational companies were only
beginning to enter Latin America. Being the first company to corner a market is a huge initial
advantage. Add in Natura’s focus on their local demographic and their support of local sourcing
and protective practices, and it makes it very difficult for another company to come into the
market and convince a consumer who uses and enjoys Natura’s products to convert.
2. From a VRIO standpoint, what is behind Natura's enviable
performance?.
If we look at the VRIO framework introduced in the second half of this chapter, we can start to
structurally determine why Brazil has emerged as a market leader.
V- value adding resource- Similar to IBM in the the mid 20th century, Natura has continued to
meet the wants and needs of Brazilian women, adapting and improving their products to stay on
top. Because of this adaptation, they have stopped their value adding resources and capabilities
from becoming non-value adding assets.
R – rarity- A green Amazon plant based product and being a company that specifically targets
the demographic within their borders (one that many other cosmetic companies fail to do), they
have secured a reputation of being for the Brazilian people. They also prove that they are for the
overall well-being of these people and the Brazilian environment through their green and fair-
trade local approach to sourcing. Both of these factors are a rarity amongst cosmetic companies
that operate within the Brazilian market, giving Natura a competitive advantage.
I – imitability - Although Avon uses the same format, Natura’s sales have been far superior.
Given that parts of Brazil are extremely rural, the direct sales/delivery approach is an ingenious
way to reach those women who do not have easy access to a drug store. Had Natura taken
another approach to sales and delivery they could have missed out on an entire market, cutting
their sales and success.
O – organization - Natura had the organizational savvy to overtake skittish foreign competitors.
“Natura found itself at a distinct advantage, then, when most of the department stores and
pharmacies where so many of its competitors’ beauty products were sold succumbed to the
rampant inflation of the 1980s. Rising prices and tight exchange controls prompted most
international companies to leave Brazil or halt investments during what many referred to as the
‘lost decade.’” (And it benefits today from an 18% import duty on cosmetics in Brazil.) This,
along with their sales strategy, has kept Natura as a market leader because of their
organizational skills.
3. Beyond Latin America, which foreign markets should Natura first
enter? Will it be successful there?
An enticing opportunity for Natura would be in countries with a large and growing Muslim
population. Halal cosmetics (and their certification likely compatible with Natura’s practices) is a
$20 billion industry that is expected to double in size in five years. With animal-based products
and products with ethanol being considered impure and forbidden to use, Natura could really
make an impact in halal cosmetics. Also, the skin tone of Middle Eastern and many primarily-
Muslim populations is darker skinned which fares well with the Natura brand. Furthermore, the
Middle East and other regions where Islam is popular is known for its hospitality. Therefore,
using the direct-sales strategy that has propelled Natura to the top in Brazil could be an
excellent opportunity to make a big splash in the Middle East and beyond.
Will it be successful? If Natura can enter the these regions and make itself valuable, rare, hard
to imitate, and continue the organizational success it has experienced in Brazil then yes it has
