Corporate Strategy The Body Shop Essay Example

Corporate Strategy The Body Shop Essay Example Corporate Strategy The Body Shop Paper Corporate Strategy The Body Shop Paper The Body Shop (TBS) is an interesting and innovative international organisation. Their focus on core beliefs, press/advertising, management, supplier networks, training and treatment of staff are perhaps best practice. In this paper we will review the external environment, the financials of the business, conduct SWOT analysis and analyse its competitive stance from the Porter Five Forces Model. Our recommendations focus on retaining their core competencies and values, minimising financial risks, and opening up new opportunities in the future. These include mail order as well as the growing male market, and developing a CEO succession plan. Introduction The question for many businesses is whether they can operate successfully internationally and maintain integrity in a world of seemingly empty advertising claims. TBS has taken this challenge head-on. By selling only environmentally friendly recyclable or biodegradable products in minimalist packaging, they are practicing what they preach in a clearly identifiable way. Furthermore the way they develop new products by developing operations in third world countries (profits with principles) shows a commitment beyond most others who buy abroad solely for cost reasons. The article implies that they operate a best practice. Analysis will indicate whether this is the case and where any further opportunities lie. The External Environment The Hair-care market is fragmented in 1988 the total size of the UK market was à ¯Ã‚ ¿Ã‚ ½139M with the top five companies sharing 44%, the others 56%. The Shampoo market was similar 10-11 brands competed for half the market and 80-90 competed for the other half, with conditioner use growing. These products are highly advertised major brands in magazines and TV, leading to blurring of product lines to create new products e.g. conditioning shampoo. The market is segmented by price, target market age, function (health and hygiene, beauty products). Growth is mainly in upmarket product ranges mainly from women, with men on the rise. Supermarkets also have their own skincare ranges (30% of market) hair-care is being seen as a grocery item and is sold in family pack sizes. There is also growth in anti-ageing products minimising affects of wind, sun and polluted air. In 1986 the soap market peaked and was thought to be declining with bath oil/foam overtaking soap in 1987. Fruity soaps introduced by the Body Shop were imitated and pure fragrance-free brands like Simple and Pears and liquid soap were introduced. The latter had about 5% of the market then. The Body Shop is one of the few in colour cosmetics. Yves Rocher is main competitor to TBS which has a mail order focus and 1200 Beauty Centres worldwide. Financial Analysis Our financial summary (refer Appendix 1) is that there is generally good growth, however there are operational issues associated with the US market that require analysis and resolution. SWOT Analysis Introduction SWOT identifies the risks/opportunities of the position TBS is currently in refer Appendix 2 for the tabular summary: Strengths TBS overall has made good rising profits year over year, despite market forces. Its profitability comes from its leadership, the franchise system (lower cost of expansion for the company), rapid growth for the market for green products and the ability for competitors to enter a fragmented market with little direct competition. TBSs main competitive edge is its people and the way they are selected, trained and empowered to promote their products enthusiastically. TBS does not advertise. Rather, they depend on quality of product. Weaknesses The Body Shop is a small player in a fragmented market. Their products are easily imitated (although the natural ingredients make it logistically difficult) in fact most of ideas were copied from existing products and processes elsewhere in the world. The Managing Director in her bid to promote the company made enemies of prominent organisations that will not assist developing cooperative networks. In its efforts to enter the mainstream colour cosmetics sector of the market, has the company compromised its ideological stance? How will its loyal consumers regard this act will only unfold in the future. In some ways the Body Shop is trapped in its philosophical ideologies. The other markets sectors are only available by modifying their philosophy. Market wise the client base may age over time and the younger generation may not feel the same affinity towards all that the Body Shop stands for. A good example of this is Laura Ashley who failed to attract younger buyers to her clothes range and hence moved into home wares. Staking an almost holy claim on their environmental issues is fraught with danger should they falter allegations in 1989 regarding claims of Not tested on animals proved difficult but ultimately successful to defend (HREF3) and they did suffer share price ramifications during this time. A succession plan is required for Anita Roddick who is the face of the company. That successor will require similar skills and ideology mindset. Opportunities There are several opportunities to consider (refer Recommendations for discussion): 1) The growing younger market is health conscious and therefore demands products with this attribute. TBSs strategy is sound and should be continued. 2) Further expansion into the colour products is another areas that need to be considered, eg nails. 3) Development of TBS owned raw material facilities both locally and internationally. 4) Analysis, development and enhancement of the US market. 5) Strategies to tap into the emerging male cosmetic markets. 6) The development of its own stand in supermarkets where 30% of products are sold. 7) Mail order sales (case study is not clear whether this exists currently). Threats The major immediate threat to the company is its rival Yves Rocher. They produce and market similar products and have over 1200 stores. The recession is an external threat to TBS although it has performed above average so far despite it. The companys momentum is centred on the current leadership and the loss of Anita would be devastating. In summary their business is in a fairly strong position. Porter Five Forces Model Appendix 3 includes a summary table of the Porter model, which shows the competing forces of the beauty/cosmetics industry structure. Overall the areas are all moderate to high, however TBS has managed to ameliorate the major contingencies in each area to their advantage. Threat of New Entrants Low-moderate: TBS has key alliances with its suppliers, which make it hard to duplicate cost effectively, easily or quickly. Intensity of Rivalry High: However TBSs high brand identity, strong knowledge transfer to customers and low fixed cost and switching costs structure assist their triple bottom line. Bargaining Power of Buyers Moderate-High: Yet TBS enjoys high customer loyalty driven by value for money, product information, strong brand, and identifiable product differences vs. competitors. Threat of Substitutes High: Although customers are prevalent to substitute alternatives, TBSs strategies of as listed above diminish this likelihood significantly. Bargaining Power of Suppliers High: TBSs has lowered the bargaining power of suppliers by developing alliances with natural goods suppliers, benefiting the community as well as obtaining the necessary inputs required for their products. In summary, their strategies have been well crafted to execute their business in a highly competitive field. Key Success Factors (KSF) Consideration of KSFs as appropriate to the Hair-care and Beauty markets are as follows: * Strong recognizable brand required * Products must work as advertised * Natural ingredients increasingly highly marketable * Items easily available to purchase * A Product line from fingertips to fingernails * Friendly and informative customer service * Good press * Reliable supply of necessary goods * Value for money products TBS has most of these attributes, except perhaps somewhat limited distribution compared to products in department stores. Also TBS does not stock nail polish. This may be a deliberate strategic choice as they claim they are not in the beauty market or an issue of availability of natural product alternatives. Recommendations Recommendations are as follows: 1) Continue their current philosophy of product identification, natural ingredients, staff education, customer service and recycling -The growing younger market is health conscious and environmentally aware and therefore demands products with this attribute. Therefore TBSs strategy is sound and should be continued. 2) Further expand into the colour products, eg nails However this is contingent only if it can be done in situ with their core philosophies marketing to diversity of style rather than beauty. 3) Development of TBS owned raw material facilities both locally and internationally The question is whether their current resources are sustainable. Investing to ensure supply and management of their own fundamental core goods would assist consistency of supply. However, there are significant fixed cost implications. Also being tied to certain raw materials might stifle creativity/adaptability as new formulations and ingredients are discovered. The long-term business case needs further investigation. In the short term they should continue with their profit with principles philosophy. 4) Review of the US market opportunity A complete review of the US market and the conditions that have led to the à ¯Ã‚ ¿Ã‚ ½2M loss is required. Potentially the cultural differences of the US market high TV watching, mass-market advertising, and svelte packaging are expected norms. Reliance of word-of-mouth is less likely given a more conservative market overall. Perhaps TBS could leverage their community projects to have a higher profile in the press. Additionally, snappier packaging (using an industrial designer) with biodegradable/recyclable materials may attract more interest on the shelf. Cost/benefit analysis of these actions need further review. 5) Strategies to tap into the emerging male cosmetic markets Key alliances with surfing/outdoor lifestyle shops may be a first step. These could offer after activity natural aftershaves/crà ¯Ã‚ ¿Ã‚ ½mes/shampoos to suit the growing male market with a masculine emphasis. Additionally a larger male product selection in TBS stores could follow if successful. 6) The development of its own stand in supermarkets where 30% of products are sold. However customer service wont model the TBS stores and there may be some resistance given supermarkets have their own product range. Further, customers buying groceries generally are focused on minimising time in this task. For all these reasons this opportunity is not recommended. 7) Development of a mail-order catalogue given Yves Rochers success, mail order would appear to be a viable business venture. However it does diminish the hands-on demonstration and some aspects of the customer liaison benefits tied to TBS. Progress with care may require on-line customer assistance via web cam to work optimally. 8) Develop a leadership succession plan BTS needs to develop and train suitable candidates to take over Anitas lead at some point in the future. They need to have her ideology, mindset and press savvy. Conclusions The Body Shop is a formidable business that has put itself up to be counted against related industries that are less ethical and environmentally responsible. Fundamentally its position has gathered a momentum and empathy from customers who are looking for high quality, value for money goods that are ecologically sustainable. Staying true to this course, with a review of loss making markets and new opportunities in the male cosmetic markets and other fields should ensure their continued profitable performance.