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The Multichannel Challenge at Natura in Beauty and Personal Case Solution & Answer

 The Multichannel Challenge at Natura in Beauty and Personal Case Solution 

Executive Summary

Natura; a Brazilian owned company; was founded in 1969. Since then, the company has significantly developed itself and has become Brazil’s second largest brand in the fragrances, cosmetics and toiletries market. For a further expansion in its customer reach; the company has shifted from a direct sales company to a multichannel company by including drugstores, physical stores and online catalogs to its current model. Despite of these efforts the result turned out to be quite disappointing for the company. The company has been struggling with its sales since 2014. In the time period of 2014 to 2016, the company was led by three different CEO’s with an aim to strategically transform the company and shift its focus more on reaching the end consumers directly through touch points and multiple channels rather than direct sales consultants. Therefore, in order to achieve a right balance between the direct selling and other multiple channels to market the brand, the company has recently appointed a new CEO “Joao Paulo Ferreira” with an aim to have success in the strong competition in the beauty and personal care products industry in Brazil.

In order to generate the desired results and outcomes; it is recommended that the company should opt for franchising models as it will help the company to increase its market presence rapidly without incurring any substantial investments. By doing so, the company will be able to gain a competitive edge in the market and will be able to sustain its position in the long run through expanding itself both internationally and domestically. (Boccia, 2017)

 By doing so, the company will be able to gain a competitive edge in the market over its competitors and will be able to sustain its position in the long run by allowing itself to expand both internationally and domestically, which will further help itin the generation of high returns.

SWOT Analysis

Strengths Weaknesses
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. 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 a decline in its stock price.

 

Threats Opportunities
The increasing competition and declining market share of the company have made it difficult for the company to sustain its position in the market. 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. 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 grown in 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.

Case Facts

Internal: Declining Market Share

As the case is mainly concerned with the declining market share of the firm in the industry. The market shares for Natura and its competitors are given in the following table. The trend could be visualized by the graph given in Appendix 1.

Company 2008 2009 2010 2011 2012 2013 2014 2015
Natura 13.6 14.2 14.9 13.8 13.2 12.4 11.4 11.1
Avon 8.8 9 8.8 7.8 7.2 6.4 5.8 5.7
Boticario 6.5 6.7 6.9 7.8 8.8 9.2 10 10.9

External: Highly Competitive Attractive Industry

External case facts can be summarized and evaluated using Porter’s 5 forces model. 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.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 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. 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 the existing players is quite intense because 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)………………..

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