Global Business 3rd Edition by Mike Peng

Exercise 7

Consumers in remote areas of emerging economies have limited opportunities to buy global brands, and even fewer opportunities to connect to the supply chains of MNEs. Direct sales companies such as Avon are growing their markets and profits by tapping the potential of buyers and sellers at the base of the pyramid. An estimated one billion consumers, between the poorest of the poor and the rising middle class, spend up to one-third of their income on personal care items, electronics, and snack food. These consumers often differ greatly in interests and behaviors from consumers in urban centers. By working in direct sales, millions of women are gaining skills and experience as micro-entrepreneurs, and while doing so, are changing social norms and ideas of global beauty.
Direct sales companies employ more than two million people in Brazil. A team of researchers took an in-depth look at women who work in direct sales in the municipality of Ponta de Pedras, on Marajó Island in the remote lower Amazon. This local economy revolves largely around seasonal agricultural production of the açaí fruit, with almost no job opportunities for women before MNE direct sales companies entered the marketplace. Traveling to homes by canoe and by road, the women sell beauty products from US-based Avon and the more expensive Brazilbased Natura, and inexpensive household goods and clothing from the Brazilian catalog company Hermes. In an area with approximately 12,000-13,000 female residents, Avon has around 175 direct sales representatives, Hermes counts around 200, and Natura has between 15 and 20.
The MNE direct sales companies overcome roadblocks by leveraging the representatives' keen awareness of local consumer tastes, brand preferences, and complex local business norms and practices. The representatives disseminate information about new products and translate product information into terms that are relevant to their customers. To be effective, they identify meaningful segments, within which they exercise some flexibility in suppressing or promoting differences between the global brands and the local products. Almost all of the women consider their work "successful" if they are able to make a small profit or break even. Most direct sales representatives earn on average 80 reais (approximately $35) per order, which they typically send in once a month or every other month. For direct sales representatives in Ponta de Pedras, the income they earn is not meant to support their family, but it is a crucial secondary income over which they have sole control. They use this money to provide clothing for their children and to purchase new products for themselves, which can translate into a sense of empowerment and an enhanced role in the family and community. Soon after building their initial network, many representatives start to represent other companies. Since the economy revolves around the agricultural season, there is also a season for increased sales. This seasonal cycle is one of their most difficult challenges. The only way to make any sales in Ponta de Pedras is to offer informal credit, typically allowing customers to pay up front for one-half or one-third of the cost, and then pay the remaining amount owed at a later date. As the local Avon coordinator stated, "If she doesn't sell on credit, she's not going to sell anything. All of her products will stay with her."
Product catalogs and television commercials promote the glamour of the cosmetics and beauty products in Brazil, but some representatives and customers have very little exposure to television, print media and the Internet, or urban lifestyles. The identification with values and brands falls along a continuum from global to local. This identification is affected by the levels of exposure to media, the degree of urban-rural circulation, and the patterns of urban-rural communication. Building from their community roots, the sales representatives create a channel for discussing the relevant differences between local, traditional products and modern, global consumer brands. Local values can be expressed with the simultaneous identification of global and local standards. For example, perfumes, colognes, soaps, and lotions are the most popular beauty products in Ponta de Pedras, and most residents purchase these products from both Avon and Natura representatives. Smelling good is culturally very important in the Amazon, coinciding with other practices such as frequent bathing- on average, three to four times per day. Make-up and cosmetics, on the other hand, do not connect nearly as much with local values, but wearing makeup is an index of identification with global beauty standards.
The direct sales representatives play a bridging role between local and global ideals of beauty and fashion. Through interpersonal discussions, these female entrepreneurs form and leverage a successful system in which customers can simultaneously identify with global ideals of beauty and femininity, and express their locally based differences, ideals, and values. This system is more dynamic, interactive, and customized than what traditional, store-based retailing offers. Overall, the direct sales networks in remote areas reconcile local and global values on beauty and femininity for customers, create stronger brand relationships to the benefit of the MNEs, and help to improve the income and quality of life of the many individuals involved.
Case Discussion Questions :
What are some of the "rules of game" affecting an Avon representative in the remote Amazon?