This brief is part of the Insights @ Center for Emerging Markets, a publication focused on cutting-edge ideas and advice for global leaders about emerging markets.
By Aline Gatignon (Wharton School) & Laurence Capron (INSEAD)
In short: Aline Gatignon of the Wharton School and Laurence Capron of INSEAD examined how Natura, a leading Brazilian cosmetics company, achieved success by building a strong and collaborative business ecosystem. Faced with underdeveloped infrastructure, limited access to capital, and other institutional weaknesses common to developing countries, Natura adopted a unique strategy, fostering deep relationships with diverse stakeholders, including local communities, suppliers, NGOs, and government agencies. This strategy, focused on empowering communities and building trust, allowed Natura to overcome obstacles, achieve sustainable growth, and generate positive social impact. In light of these achievements, Natura's approach offers valuable lessons for other businesses seeking to thrive in similar environments.
Natura was founded in 1969 in Sao Paulo and quickly became a leader in the Brazilian cosmetics market. Rather than solely focusing on maximizing profits, Natura adopted a holistic approach, recognizing that its success was intertwined with the well-being of its stakeholders.
One of the key pillars of Natura's strategy was its direct sales model, specifically designed to empower women in a market with limited employment opportunities. Many of these women lacked formal education and financial resources. Natura built a vast network of over 1.2 million sales consultants, who became the backbone of the company's distribution network. It invested in financial literacy programs and offered access to micro-credit programs, enabling women to start their own businesses and improve their livelihoods. This empowerment model not only created a loyal and motivated sales force but also had a profound social impact on local communities.
Similarly, Natura faced challenges in sourcing raw materials, particularly from indigenous communities in the Amazon rainforest. Recognizing the importance of sustainable practices and fair trade, Natura actively engaged with these communities, investing in infrastructure development, education, and sustainable harvesting techniques. The company prioritized building long-term relationships based on trust and mutual benefit, ensuring that the communities were not only suppliers but also partners in its success.
Finally, the company recognized that it could leverage the expertise and local knowledge of NGOs to effectively address social and environmental challenges. By partnering with NGOs, Natura ensured that its investments in community development projects were aligned with local needs and priorities. Furthermore, Natura collaborated with the Brazilian government to develop certification programs for locally sourced ingredients, strengthening the overall framework for sustainable practices in the industry.
Managerial Implications
Natura exemplifies how businesses can achieve commercial success while addressing societal challenges, particularly in emerging markets. By investing in the well-being of suppliers and distributors, Natura fostered a more robust and equitable business environment. This approach, coupled with a commitment to empowering cross-sector partnerships with NGOs, government bodies, and local communities, led to more effective and sustainable solutions for addressing challenges including limited access to education and capital.
By prioritizing trust, fairness, and mutual benefit in its interactions with consultants and suppliers, the company created a strong sense of partnership, resulting in lower default rates, higher retention, and a more resilient supply chain. This emphasis on long-term relationships, driven by a deep-rooted commitment to social and environmental responsibility, contributed significantly to the company's success and brand reputation.
By integrating marginalized communities into its supply chain, the company tapped into previously inaccessible markets, generating economic development while gaining a competitive advantage. Furthermore, Natura's ethical practices and commitment to social responsibility enhanced its brand reputation and solidified its market leadership.
The case demonstrates one way that businesses can unlock new opportunities for growth in emerging markets by embracing collaboration, empowering stakeholders, and fostering a long-term vision for shared value creation.
Original Work
Gatignon, A., & Capron, L. 2023. The firm as an architect of polycentric governance: Building open institutional infrastructure in emerging markets. Strategic Management Journal, 44(1), 48-85.
Contact
If you are interested in learning more about this work, contact Professor Aline Gatignon at galine@wharton.upenn.edu.