The Body Shop

The Body Shop

The Body Shop Table of contents Introduction :2 Section A3 A comprehensive strategic analysis of the industry :3 Question 13 1)The external strategic analysis of The Body Shop3 1. 1° Synopsis of the beauty industry: Macroenvironement and trends3 1. 2° The competition: immediate industry and competitive environment5 1. 3°The key success factors of the beauty industry and The Body Shop7 1. 4) The SW(OT) analysis of The Body Shop8 Question 2:8 Applicability and effectiveness of new CEO Patrick Gournay’s strategies8

SECTION B10 Question 3:10 Vision and Mission10 Question 4:11 Financial and strategic objectives:11 Question 5:12 Corporate and business strategies12 Question 615 Balanced scorecard for The Body Shop15 References Introduction The cosmetic industry is one of the biggest industries in the world. The worldwide annual expenditures for cosmetics is estimated at U. S. $18 billion. There is a strong competition in this industry all over the world. To compete and obtain a competitive advantage, companies have to invest a lot.

They always have to innovate, to invest in advertising campaign in order to be known and to be successful. The Body Shop decided to be different, their products are natural, it is an ethical organisation, associated with environmental friendliness. But how The Body Shop takes part in the cosmetic industry? What are their vision and mission and what strategic directions should be recommended to the Body Shop in order to perform successfully in this industry? Section A A comprehensive strategic analysis of the industry Question 1

The cosmetic industry is a very aggressive and challenging market, in order to be more competitive and to gain market shares and customer loyalty, companies as The Body Shop have to understand their environment. After analysing the external environment (major trends of the industry, competitors and driving forces), the key success factors as well as the strategic issues will be evaluate, in order to provide a SWOT analysis. 1) The external strategic analysis of The Body Shop 1. 1° Synopsis of the beauty industry: Macroenvironement and trends

The PEST model in as interesting tool to understand and study all the components and trends that affect the beauty industry. This environment analysis permits us to understand the strategy of beauty brands as The Body Shop. To identify the importance of each components of the industry, it is necessary to quantify them. In the last column, O will represents “opportunity” however T will represent “threats”. Moreover, a number will be associated to see the impact of each element. PESTE model for the Body Shop |Importance of the regulations concerning the launching of new |T 5 | |Political environment (legislation and |products in the markets: (allergies…) | | |regulations) | | | | | | | | | | | | |Globalisation (driving force) |T8 | | | | | | |Strong local and foreign competition |T9 | | | | | | |Increase in prices | | | | |T6 | |Economic and international environments |Increase in the budget bound for beauty | | |(general economic conditions) | |O6 | | |Cosmetic industry: huge market | | | | | | |Alliance groups in the cosmetic industry to attract new customers |O8 | | |(driving force) | | | | |O7 | |Societal environement (societal values and |Growth of the free time: importance to take care of our body and |O6 | |lifestyles) |beauty | | | | | | | |Importance of well being | | | | |O8 | | |Importance of the beauty (driving force) | | | | |O8 | | |Be young and stay young | | | | |O8 | | |Ageing of the population (segmentation of products) (driving force) | | | | |O7 | | |New market for men (new products.. ) (driving force) | | | | | | | |Companies and customers have more and more social responsibility |O8 | | | | | | Different needs and preferences according to the countries and the | | | |skin differences |O7 | |Societal environement (societal values and | | | |lifestyles) |Important demand variations and fashion effects in terms of |O6 | | |cosmetics | | | | | | | |Growth of the worldwide market of cosmetics (driving force) | | | | |O6 | | | | | | | | | | | | | | | |T8 | | | | | | | | | | | | | | | |O7 | | | | | | |Use of internet to buy products (driving force) |O6 | | | | | | Rapid innovation (waterproof …) (driving force) | | | | |T7 | | |Need of strong technological capabilities | | |Technological environment | | | | |Strong marketing innovation (driving force) |T7 | | | | | | | | | | | |T8 | | | | | | |Respect the environment |O10 | | | | | |Environmental aspects |Sustainable development |O10 | | | | | | |Fair trade |O8 | | | | | | |Bio market and products (driving force) |O9 | | | | | |Environmental aspects |Ecology | | | | |O8 | After this analyse of the trends, components and driving forces of the industry, it is interesting to see the place of the competitors in the industry. 1. 2° the competition: immediate industry and competitive environment In order to understand the dynamism of The Body Shop, we have to understand the competitive structure of the cosmetic industry.

The “competitive structure” of this market and the “critical rules of the game set by the industry” can be explained by using the “Porter’s model of competitive forces” in the cosmetic market. The Porter’s model is composed by five forces, the nature and strengths of the competitive pressures associated with these five forces have to be examined force by force to identify the specific competitive pressure which each comprises and to decide whether these pressure constitute a strong or weak competitive force. (Hough, J et al: 2008:101). It permits us to establish how important the market is to current and potential competition. Porter ‘s model of competitive forces in the beauty market [pic] These forces are explicated in this table: |- High local and international competition | | | | | |- The Body Shop has to face the direct competition in the domestic and international markets | | | | | |- Face the numerous cheaper competitors | | | |Rivalry competition |- Lots of competitors as: supermarket, beauty institutes, hair dresser, perfumery … | | | | |HIGH |- Big brands with strong image: Dior, Yves St Laurent, Estee Lauder … | | | | | | | | | | | | | |Rivalry competition | | | | | |HIGH | | | |- Too much brands | | | | | |- Too difficult to obtain a brand image and customer loyalty | |Threats of new entrants | | |LOW |- Numerous regulations | | |- There are not really substitutes products but there are lots of others brands.. | | | | | |- The substitutes products will be : | |Threat of substitute products | | |HIGH |- Cheaper products, no name brands | | | | |- Products tested on animals | | | | | |- Non natural products | | | | | |- Imitative products | | | | |Bargaining power of suppliers |Their impacts are not too big | |MEDIUM | | | |- High expectation in terms of quality and services | |Bargaining power of buyers | | |HIGH |- New generation with internet, buyers can compare prices | After this analysis, we can follow with the key success factors of The Body Shop. 1. 3°the key success factors of the beauty industry and The Body Shop “Key success factors are the products attributes, competencies, competitive capabilities, and market achievements with the greatest impact on future competitive success in the marketplace. ” (Hough, J et al: 2008: 97) In order to succeed and to be competitive, The Body Shop has to manage key success factors. So we can say that cosmetics brands have: – To be innovative and to propose new products – To obtain global distribution capabilities To have strong e-commerce capabilities (friendly website…) and the possibility to buy online products – To have an excellent and famous branding image: customers could identify them to the brand and its values. – To be different – To maintain high level of quality and services in order to improve customer satisfaction and loyalty In the next part, we can realise a SWOT analysis to evaluate if The Body Shop meets these key success factors. 1. 4) The SW (OT) analysis of The Body Shop The SWOT analysis provides an overview of the firm’s situation and it is an essential component of crafting a strategy tightly matched to the company’s situation. (Hough, J et al: 2008: 138).

The SWOT analysis is composed by the strength, weaknesses, opportunities and threats. We have already done the opportunities and threats in the macroenvironment analysis that is why we just evaluate here the strengths and weaknesses of The Body Shop (internal environment). | | | |STRENGHTS |WEAKNESSES | | | | |Global business Lack of new products | | | | |Ethical business |To slow to get new market share | | | | |High social responsibility |Stores too old, need a new design | | | | |Respect of human rights |Unpopularity of the Body Shop in the city and in the business | | |community | |Present all over the world (in 47 countries) | | | |Lack of enthusiasm | |Anti animal testing practices | | | |Failure in different countries: ex France, USA.. |Good manufacturing and wholesale | | | |Big problems with franchises | |Reorganisation to the firm to a management group | | | |Lack of adaptation to the needs and preferences of overseas markets | |Importance of the environmental friendliness |(ex: USA) | | | | |Strong corporate culture in the firm ( involvement of the staffs in |Not a strong retailer | |the campaigns) | | |Important financial losses | |Products naturally made | | | |Products and concepts easily imitated | |Uniqueness of the products in term of its packaging | | | |Too much importance in launching environmental projects and too less| |Strong identity |in running business | | | | |Different suppliers from different ethnics and groups |Followers in cutting prices | | | | |A.

Roddick: ethical and strong leader |Prices more expensive than the other competitors | | | | |Importance of staff selection |Lack of advertising | Question 2 Applicability and effectiveness of new CEO Patrick Gournay’s strategies P. Gournay was a business man with experiences. He wanted to create a new strategy for The Body Shop in order to be a unique brand, different to the others. This strategy was focus on different point: – Be faster to launch new products (less than one year). – Redesign the stores to satisfy the customers and to improve the brand’ image. – Cut the number of products by 25%, to be focus on “heritage” products. – Acquisition with Cosmo Trading for ? 7 million to have more control on European operations – Restructuration New products with a strong Body Shop’ identity: Hemp, differentiated products – New leadership – Reclarify the mission and vision of the company: be a strong retailer – Outsource manufacturing and find manufacturing partners in each region – Cut administration costs – Decentralization in 4 main regions – Focus on customer satisfaction Even if some problems were still present in UK and USA, and if some periods were more critical than the others as Christmas for example, the P. Gournay’s 2000 strategy was a new life for The Body Shop. After some mistakes due to bad choices and a lack of experience in the cosmetic industry P. Gournay planed a real revolution in The Body Shop organisation.

In a result of this revolution, profits rose by ? 9 million to ? 271 million compared with the same period in 1999 and most of his objectives were achieved. These elements show a very good execution of his strategy. It is always easier to plan a strategy but the implementation of it relieve to strong efforts in leadership and management. The organisational changes that is to say the restructuration as well as the decentralization of the company were very good strategic changes. It permits to share the responsibilities and to involve more the employees in this new strategy. P. Gourmay is a strong leader, he had the capacity to believe in The Body Shop future and to be fast to react.

It understood the needs of the markets in creating new products as well as new services as home selling. He also wanted to be more customer oriented, improving the brand image thanks to the redesign of the shops and developing marketing tools as customer loyalty program in UK. Even if his lack of experience in the beauty industry was claimed, he was able to refocus the company to be a strong retailer. The results of his strategy have been done by better profits, share value and sales. Gourmay looks to be a good communicant, he explained numerous times his choices and the aim of his strategy, this step is important to create a strategy-supportive culture.

The applicability and effectiveness of his strategy have been recognized by analysts, by the business community but also by all the company. Section B Question 3 Vision and Mission • A mission statement focuses on current business activities — “who we are and what we do” The Body Shop is a global business, based on ethics, his products are known and famous for their naturally and because they are not tested on animals. The Body Shop is an organization with strong values and identity. The Body Shop was one of the first organization focuses on social responsibility and fair trade. The Body Shop offers natural cosmetics and personal care products. They have services as home selling and massages in their shops.

With ageing of population and the importance of well being nowadays, customers have strong expectations in terms of quality and excellence. The sustainable development is a recent value in our society and customers expect companies as The Body Shop to respect it. The Body Shop is a good retailer; it has manufacturing partners in each of his four region area. This organization has the capacity to create new 100% natural products and to be involved in social causes. • A strategic vision concerns a firm’s future business path — “where we are going” The Body Shop should gain market share and extend his leadership position in the cosmetic industry worldwide. They should be more famous and extend their brand awareness all over the world.

The Body Shop will follow with his ethical values and develop new products and services in order to be more competitive. In other words, The Body Shop has to create new opportunities to leverage their brand globally. To achieve these goals, The Body Shop has to pursue and to improve the broader corporate goals of profitable growth and continuous improvement. The Body Shop should: – Achieve world-class performance by attaining a strong competitive position in target markets. – Exceed customer expectations for quality and value. – Earn in excess of the cost of capital over a business cycle. These elements can be reaching thanks to: – The distinguished brand The heritage of integrity and teamwork. – The advanced skills – The special relationships that have long existed between the company and the employees, customers, dealers and other business partners around the world The Body Shop has to pursue his natural products based more on well being than beauty. They have to follow their politics about ethics and fair trade and stay oriented by the environmental friendliness. The Body Shop has to be focus on customer satisfaction. The management has to be more profits oriented and be more aggressive in order to survive. • Types of business , the body shop should be in: The Body Shop should open his shops to new customers.

Nowadays there is a new market with men and old people. They should segment their products and adapt them to new consumers’ needs and expectations. They also should create and develop a friendly website where customers could see all of their range of products and buy them online. Question 4: Financial and strategic objectives: Financial objectives: Outcomes focused on improving financial performance ? Achieve revenue growth of 10% per year This objective is important and it is achievable. Indeed, thanks to P. Gourmay they have reached very good performances in term of profits and sales. This objective will be the consequences of the new strategy implementation.

It also will be the results of a better customer satisfaction and brand awareness. This objective can be reach thanks to an internal growth as I said before but also thanks to an external growth. It will be interesting for The Body Shop to realize alliances with big actors of the cosmetic industry. ? Increase net profit margins from 2% to 4% As we can see in The Body Shop case, that during Christmas period they have interesting margins. This objective can be the results of scale economies, and costs reductions. Strategic objectives; Outcomes focused on improving long-term, competitive business position. Different strategic objectives could be developed: ? Have more attractive products than rivals Be more focus on customer satisfaction ? Gain customer loyalty ? be more innovative ? Gain recognition as a leader in natural products We are going to focus on 2 main objectives: ? be more focus on customer satisfaction This element is key point to ensure the future of the Body Shop, they have to be more customer oriented, to understand their needs and expectations. If customers are satisfied and feel considered, they will be naturally more loyal. As we know, a loyal customer is cheaper than a new customer. Different tools will be developed in the new strategy in order to reach this objective. Moreover, The Body Shop will have a new strategy to obtain new customers. Gain recognition as a leader in natural products The core competency of The Body Shop is his capacity to create natural products. To gain market share, they should use this element and work on it in order to be recognize as a leader in the natural cosmetics industry. This element will give to the Body Shop an excellent and famous branding image. The Body Shop will have an image of “specific” companies, with strong skills and know-how. Question 5 Corporate and business strategies In order to reach the financial and strategic objectives gave above, The Body Shop has to realise some actions to be more and more competitive during the five next years: The Body Shop has to follow his strategy of differentiation by launching natural Products with elements from all over the world. “The essence of a broad differentiation strategy is to be unique in ways that are valuable to a wide range of customers. ” (Hough, J et al: 2008: 152) To be very effective, The Body Shop has to study consumers ‘needs and behaviours to understand what they consider important, what they think has value and what they are willing to pay for. This buyers study will help them to create new products and services perfectly adapted to consumers’ expectations. It they follow this strategy and tried to be totally different, the consumers will accept to paid more and will be able to identify them to the brand.

This strategy needs also to have a strong corporate culture based on innovation, the human resources have a strategic role, they have to recruit creative employees. The employees have also to be trained in order to be innovative and creative. – Have a bigger brand awareness is necessary for the Body Shop. That is why they have to invest more in marketing. They already have a strong identity but they have to diffuse it thanks to new media opportunities. The communication is an important element, more advertising campaign will add value and increase brand awareness. A powerful world advertising campaign will be interesting. As the Body Shop is a brand with strong values and politics, they should realise a different campaign as “Benetton” has done few years ago.

In this campaign, they have to be different and to communicate about their natural products, that is to say their specific skills, their high quality and excellence. The campaign will be a “paper” campaign or a TV one, if the budget allows these expenditures. – As I said before, The Body Shop has to be customer oriented. They should realise a friendly website where customers will be able to see their range of products and services and where they would be able to buy online products. It will permit to customers to have good references and to be easily found on the world wide web. The website will permits to the organization to be more attractive and to attract a maximum of internet users. The organization should develop his customer loyalty programs all over the world. People like to be considerate as a specific customer and expect to have a “specific treatment”. The loyalty card encourages consumers to be loyal in order to receive presents and special offers. – They also could extend their services: Selling at home should be proposed in numerous countries. Customers love being the main interest of the companies. With this service they feel caring and have the feeling to have customized services. We have also seen that additional services as massages have increase the sales. People after having a nice moment want to buy the products used during this time.

The Body Shop should propose services as sauna and hammam for example. – The Body Shop should not stay a niche market. The new trends and lifestyles give them big opportunities. They should realise a segmentation of their products that is to say they should have specific products for men and old people for example. They have to innovate and to adapt them to the changes. – The Body Shop is already a global company but they should be present in other market as India, an emerging market. The beauty is an important value on this country, and the Indian beauty is known all over the world thanks to L’Oreal’s muse. This new market can ensure new sales and market shares, it is a new opportunity. The Body Shop should adopt a more aggressive strategy; the competition should not be underestimating. The company has to be more profit oriented. To reach their objectives, they can realise some alliance with a big brand as L’Oreal. Indeed, this alliance will permit them to shares their resources and capabilities in technology and innovation for example. It will help them to realise new products. – The creation of new products will also be strategic elements in specific period as Christmas. The Body Shop should realise limited products to give exclusivity to some customers. With specific range of products for this specific period, The Body Shop will improve his differentiation.

All these changes require strong involvement of the management and employees, The Body Shop has to be more reactive, and they have to adapt them of their environment: lifestyles etc. As Gourmay done, the company has to change its structure when it is not adapted in order to be profitable and to promote innovation in the company. The culture has to be supportive and be oriented on differentiation and creativity. The resources are necessary to invest on an advertising campaign for example, but these marketing tools can lead to an increase on sales, market share and profitability. The company has to think regionally and globally in order to be present in new market as emerging market.

The control is an important step, it is important to evaluate the actions done and to learn from the mistakes. The evaluation permits to have a continuous improvement, The Body Shop should be more control oriented. Question 6 Balanced scorecard for The Body Shop |THE BODY SHOP | |HEAD OFFICE | |MAIN OBJECTIVE: | |Increase their market share all over the world, be a leader in natural products and have a better brand awareness | FINANCIAL |CUSTOMERS |INTERNAL |LEARNING AND GROWTH | | | | | | |- Refocus on retailing |- Increase their satisfaction |- Reinvention of The Body Shop |- Training of employees to be | | | |brand |more creative and innovative | |- New market shares: |- New products and services | | | |Selling in new market: India |(massages.. |- New structure |-Profiling the staff | | | | | | |- Revenue growth of 10% per year |- Better adaptation to each |- New strategy, plans and |- New staff: recruitment | | |countries’ needs and preferences |leadership | | | | | |- Innovative culture | |- Increase of the share price |- Better communication |- Products line and distribution | | | | |channels rationalized | | |- Selling new products |- Customer retention | | | | | |- Decentralization of the | | |-Selling to new consumers |-Customer acquisition |management | | | | | | | |- Alliance with cosmetics |- Redesign the stores, better |- New values: quality and | | |companies: L’OREAL for example |brand image |excellence | | | | | | | | |- More customer information |- Regulatory control | | | | | | | | |- More prominently |- Be a good corporate citizen | | | | | | | | |- More loyalty programs | | | References – Hought, J. Arthur, A. Thompson, Jr. Strickland III, A. J & Gambie, J. E. 2008. Crafting and Executing Strategy. McGraw Hill International Edition. – Piercy, N. The Body Shop. A case for burial or rising from the grave? – The Body Shop values report. 2007.