Situation analysis

In order to better evaluate the company’s performance, strategy and market position; strategic analysis has been carried out that will help the company to identify its key strengths and the areas where the improvement are needed, in order to generate the desired result and outcomes.

SWOT analysis

Strengths

Natura has developed itself as a strong and valuable brand, having innovation as the key of its business. Apart from that, the company’s strongest category includes color cosmetics, skin care, fragrances, deodorants and bar soaps. Furthermore,the company’s business model and strong relationship with sale consultants are important characteristic that allowed the company to build a strong network of more than 1.5 million consultants.

Weaknesses

The sales of the company has declined sharply, followed by the largest economic recession. Since then, the company is struggling with its strategy to bring back the sales to the desired level. The market share of the company has also decreased significantly with adecline in its stock price.

Threats

The increasing competition and declining market share of the company have made it difficult for the company to sustain its position in the market. (Appendix 1). The competitors of Natura are growing at a much faster pace as compared to the performance of the company, which the company is struggling with,from the past few years. Furthermore the market of direct selling in Brazil is expected to decline even more in the following years.

Opportunities

The company has the potential to grow itself by utilizing the franchising system or by maximizing the multichannel strategies. Apart from that, the market size for the beauty and personal care in Brazil has grownin the time period of 2008 to 2015, making it more than twice in size. Furthermore, the grocery channel holds a great importance in the sales of beauty and personal care which can be explored in order to revive the sales.

Porter’s 5 forces

Bargaining power of buyers

Bargaining power of buyers is high in such industry due to an increased competition and accessibility of products from a number of manufacturers that have established their names in the market, making it challenging for the producers to quote prices above the market perception.

Bargaining power of suppliers

The bargaining power of supplier is comparatively low in such industry, mainly because of the increased supply of diverse products by both small and large scale manufacturers in the market.

Threat of new entrants

Threat of new entrants is quite high as the new players are entering the Brazilian market with strong global brands, making it challenging for the existing companies to cope up with them because of their strong market presences and global image.

Threat of substitute

Due to an increased competition in the market; the threat of substitute is quite high, as number of brands are coming up with similar products, making it difficult for existing companies to charge high prices because of an increased threat of being substituted.

Rivalry among existing players

Rivalry among the existing players is quite intensebecause the businesses are equally compatible and are selling products and services that are quite alike. Therefore, in order to maintain their positions in the market; the companies are expanding their channels to approach large number of consumers, leading to increased marketing cost. (Porter, 1979)

Strategic alternatives

 Alternative 1

The company should pursue both the strategies simultaneously i.e. multichannel and direct selling.

Pros

This will allow the company to expand its reach without compromising on its core capabilities and will help it in regaining the trust of its consultantswhile motivating them to carry out their operations, without worrying about their position and role in the company. Furthermore the company will be able to cope up with the changing dynamics of the business by being more easily assessable through various channels rather than relying on a single strategy.

Cons

This will increase the cost of the company by a significant margin, as the company will be carrying out both the strategies at the same time, which will demand an additional production, making it challenging for the company to equally satisfy the needs of all the channels while minimizing the cost of input. As an addition, the company holds little expertise and knowledge regarding the new emerging channels, as it previously relied mostly on direct selling networks, making the transition extremely challenging for the company.

Alternative 2

The company should invest in brand development and multichannel strategies through franchising system.

Pros

It will help in expanding the brand reach across different areas rapidly without any major investment and will motivate the partners to bring innovative ideas, mainly because of their own invested money. Furthermore it will allow the company to open multiple franchises at the same time and will provide it with a competitive advantage because of the local knowledge of the franchisees. Moreover, it will help the company in generating high financial returns for comparatively less risk.

Cons

The company will be required to invest high upfront cost in order to set up a new model. This will further demotivate the consultants by making them feel left out. In addition to this the company will have no or little control over the way franchisees operating their business,which will make it difficult to convince all the franchisees to works for the benefit of the company as a whole. Furthermore it will make it a lot harder for the company to innovate with franchising in comparison to its own outlets. (Shane, 2013)…..

 

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