Strategy Management Assignment

Disha Bedi

Table of ContentsI. INTRODUCTION........................................................................................................1II. STRATEGIC ANALYSIS.............................................................................................2

1. Vision................................................................................................................ 22. Mission statement.............................................................................................33. Core value.........................................................................................................34. Social Activism....................................................................................................45. Policy on Animal Testing...................................................................................56. Trade not Aid Program......................................................................................57. Unique Selling Point..........................................................................................58. Critical Success Factor......................................................................................6

III. SWOT Analysis.......................................................................................................6Strengths................................................................................................................. 6Weaknesses............................................................................................................7Opportunities..........................................................................................................8Threats.................................................................................................................... 9

IV. Porter’s 5 Forces...................................................................................................9Potential Entrants..................................................................................................10Buyers...................................................................................................................10Rivalry...................................................................................................................10Suppliers...............................................................................................................10Substitutes............................................................................................................10

V. Strategic Challenge and Issue..............................................................................10VI. Strategic Options and Future Strategy................................................................11VII. Implementation and Change Factors..................................................................11REFRENCE................................................................................................................12

I. INTRODUCTION

The Body Shop has been referred to as the second largest cosmetics brand all across the globe. The enterprise i.e. The Body Shop is headquartered in West Sussex (England). The organization was originated in the year 1976 by Ms Anita

1

Roddick.  The organization was engaged in production of various vegetables goods such as Foot Lotion, Body Butter, etc. In the subsequent years, the growth of the organization could be seen. The stocks of the organization were raised & approximately 1200 products were sold. The products line of the organization increased & many other products such as products for hair, foot, body, home were also added. In the year 2007, The Body Shop was regarded as one of the most vegetarian enterprise. In the year 2006, this organization was merged with L’oreal.

The Body Shop has many social as well as environmental issues all across the world. The body shop has been rendered to as a foundation which is a charitable trust & was originated in the year 1990. This organization refers to the first organization which was covered under the Cosmetics Standards. This company was the first enterprise which helped in breaking the entire market by not testing the products on the animals. In the year 1986, The Body Shop was termed with Greenpeace (Policy of Donations, 2006).

Based upon the various surveys as well as tests, it has been noticed that, The Body Shop refers to one of the organization which does not test its product on animals. The company carry forwards one of the most important program known as the Community Trade program. This is only cosmetic organization amongst the entire cosmetic industry which practice trade in a well defined manner. The program is applicable in 24 countries keeping in mind the 31 suppliers. By undertaking such type of program, approximately 15000 people were employed.  The major aim of this program is to employ as many people as possible. The number of stores of The Body Shop has been estimated to be approximately 2100 in number. The presence of The Body Shop could be seen in 55 countries. The organization i.e. The Body Shop operates its trade programs in approximately 24 countries.

II. STRATEGIC ANALYSIS

1. Vision

The owner of the company i.e. Anita Roddick states that, the beauty of our organization lies in the fact that we are one of the most planned & structured

2

organization who keeps a track of the following aspects such as what is to be done, how it is to be done, when it is to be, what should be done which makes us different as compared to the other cosmetic brands available in the market. One of the major visions of the organizations is that, “the way to look beautiful is to stay happy forever”. While making the products which are being used in the organization are being used from the nature’s house. The major constituent would refer to the ingredients from all over the globe. The products which are being offered to the (Murphy, 2010) customers would be quite effective & efficient which would enhance the existing beauty of the customer thereby, improving the beauty of the person. This helps the organization to be on the top amongst all the major competitors in the cosmetic industry i.e. Mac, Garnier, Lakme, Revlon, Maybelline, etc.

2. Mission statement

The mission statement of The Body Shop assumes that – “the enterprise would offer our customers one of the best products along with high levels of commitment attached to it” (Policy of Donations, 2006). The organization would operate in such an environment which would help in order to preserve the planet Earth. The Body Shop has set its levels of commitments & act upon the same in the most structured manner. Such type of commitments would be attached with the various types of principles, actions, and contributions in forms of charity either in cash or kind. Donations of any type would not be accepted as it would lead to various types of conflicts in the same. The organization i.e. Body Shop would channelize all its donations with the help of bug foundations, groups or institutions, etc. The committee would be operated along with the various types of donations.

3. Core value

The Core values of The Body Shop are as follows:

Against Animal Testing

3

“We comply with the very strict requirements of the Humane Cosmetics Standard. This standard is set by the British Union for the Abolition of Vivisection (BUAV) and is regarded as the highest standard for animal welfare in the cosmetics industry. Today, under the name of Cruelty Free International, they audit us regularly to ensure we comply. We also audit ourselves. Every two years we check our policies and compliances to ensure we're adhering to the latest animal-welfare guidelines.” –The Body Shop

Support Community Fair Trade“We make our products with love and care. We source some of the finest raw ingredients from the four corners of the globe. We harness the skills of artisan farmers and add our expertise to create effective products that are wonderful to use. We have 25 Community Fair Trade suppliers and we will be featuring more and more of them on this map in the coming months.” –The Body Shop

Activate Self Esteem“Our philosophy is that looking good stems directly from feeling good. Where legislation allows, we encourage our employees to learn new skills through our Learning is of Value to Everyone (LOVE) initiative. By funding a range of training courses, events and health treatments, we aim to enhance our staff's sense of wellbeing.” –The Body Shop

Defend Human Rights“We have always campaigned on issues close to our heart, where we believe we can make a real difference. Since 1994 we've helped to raise funds and global awareness of domestic violence. Since 2004, over £4m has been donated to local partners who fund the prevention, support and protection of abused women and children.” –The Body Shop

Protect the planet“We're committed to reducing our impact on the environment by reducing the energy we consume and generating less waste. We take full responsibility for the way we run our business. We're using our global network to help change attitudes around the world.” –The Body Shop

4

4. Social ActivismThe social activism dimension of the company first evidenced in 1986 when The Body Shop proposed an alliance with Greenpeace in the UK to save whales. Roddick began launching other promotions tied to social causes, with much public and media interest. The Body Shop regularly featured posters on shop windows and sponsorship of local charity and community events. Over time, Roddick blossomed into a full-time critic of business in general and the cosmetic industry in particular, criticizing what she considered the environmental insensitivity of the industry and traditional views of beauty, and aimed to change standard corporate practices Roddick said: "For me, campaigning and good business is also about putting forward solutions, not just opposing destructive practices or human rights abuses".

The Body Shop instituted pioneering social audits in the mid-1990s, and continues to support its valuessuch as Community Trade,  reflecting its avowed practice of trading with communities in need and giving them a fair price for natural ingredients or handcrafts they purchase from these often marginalized countries. The first Community Trade activity in 1987 was a footsie roller which was supplied by a small community in Southern India (today known as Teddy Exports) and still a key CT supplier. Since then, The Body Shop has found many trade partners in over 20 different countries that often are overlooked by the local as well as the global society.

5. Policy on Animal Testing

The Body Shop web site explains that the organization does not sell or use either finished products or ingredients that were tested on animals after 31 December 1990. In October 2009, The Body Shop was awarded a 'Lifetime Achievement Award' by the RSPCA in Britain, in recognition of its uncompromised policy which ensures ingredients are not tested by its suppliers.

6. Trade not Aid Program

5

The “Trade not Aid” program was started by the Body Shop in 1987 to help the people of the Third World countries through self sustenance programs. The most popular among those programs was the production of the Brazil nut oil by the Kayapo Indians of the Amazon basin in Brazil. This particular program was started sometime in 1991. The body Shop began working with the Kayapo Indians to harvest the Brazil nut oil which was used in one of the best selling products of the Body Shop, the Brazil nut hair conditioning. Similar projects were taken up in various other parts of the world such as New Mexico where the Pueblo Indians were associated with providing the Body Shop with Blue Corn.

7. Unique Selling Point

On the one hand, it deviates from its fellow cosmetics line with regard to its advertisements. It never made use of famous celebrities nor supermodels to endorse its products. Furthermore, the characteristics that its models posses are far from the stereotypical models or from the Western standards. If we are to access the Body Shop International’s website, as cited in this paper, we will find out that these models are black. From this we can derive that the pioneer of Body Shop ventures into something that is more than just business. There is politics behind. The cosmetic business is bound by principle. According to Glancey and McQuaid (2000), two essential factors make Body Shop to be distinct. First, the value of integrity defines its interaction with its customers, staff and suppliers. Second, it is the intense environmentalist philosophy of the business. Body Shop products are known for being naturally-made and environment-friendly. Thus, both the product and service compose Body Shop’s competitive advantage. An analysis on the Body Shop’s unique selling points shows that it actually overlaps with its competitive advantage. Its unique selling points define its competitive advantage.

8. Critical Success Factor

The organizational belief that Anita Roddick wants the Body Shop to live by is essential for the business’ performance. Body Shop has grown into a multinational

6

company. However, in Roddick’s perspective, she preferred her shop to be described as “global.” She believes that a global company functions because of values, whereas multinational ones “just trade.” Profit is not merely the motive of business. To be a “live, vibrant, and honorable” organization is what she believes as the function of business. The Body Shop’s organizational beliefs are strong, as they are strongly believed by its pioneers. They would even want to work with people or hire employees that share the same principle as theirs.

III. SWOT Analysis

Strengths Positive image – The Body Shop is a globally recognised and respected

brand, with an ethical and environmental ethos, as well as the pioneer of natural ingredient products that are bought from fair trade sources.

Well-known brand – The Body Shop brand is well established, particularly in the UK, and attracts a high level of customer recognition and loyalty.

Good fit with consumer demands – the company’s products are in step with current consumer trends, both for natural and organic products and for ethically sourced ranges.

Accessing new consumer bases – the expansion of The Body Shop’s on-line retail channel and home sales concept will widen its reach in several markets, most notably the US.

Single brand focus – with only one brand in the portfolio, the company can focus all its resources on the development and support of it.

High level of control – by using its own distribution channels, the company has full control over product shelf planning, pricing and promotions. It also enables the company to communicate directly with the customers, achieving greater impact in its marketing activities and more effective ways of collecting and acting on consumer feedback.

No dependence on retailers – as it uses only its own distribution channels, the company has been protected from the growing powers of mass retailers, which have been increasingly pressurising competing brands both in terms of retail pricing and wholesale rates.

7

Franchise retrieval – the move to bring certain franchises into company ownership, as has happened for various reasons in Hong Kong, Canada and the Netherlands, among others, will allow greater brand control.

Low-risk franchise strategy – franchising the lion’s share of its stores protects the company from the direct risk of poor regional or local performance.

Weaknesses Segmented promotional activity – marketing initiatives to date have

tended to be predominantly, although not exclusively, campaign-based. This has enforced the notion of the company’s products as being only for a niche segment of the market, and partly failed to attract new customers, despite it having started re-branding in 2004.

Limited reach of retail outlets – the core store-based distribution of the brand may be a weakness, especially in more developed markets where high street sales are being cannibalised by supermarket channels. It also limits the customer base by excluding potential consumers living far from its stores.

Dependent on mature markets – The Body Shop depends too much on the highly competitive and mature regions of Western Europe, in particular the UK, and North America, which together account for nearly 70% of sales. Even in its other major market, Asia Pacific, the company’s largest market is Japan and it is absent from China. 

Lack of innovation in growth areas – the company’s absence from more fast-growing products such as nourishers/anti-agers and firming/anti-cellulite body care, categories that are largely driven on technology-based innovation, has a limiting effect on the company’s growth potential.

Damage to image from L’Oréal deal – the company has recently been purchased by L’Oréal, a company not well known for its ethical stance. This move has damaged the brand credibility of The Body Shop with many consumers.

8

Opportunities Resources widened through L’Oréal – the recent takeover by cosmetics

and toiletries giant L’Oréal is likely to provide the company with significant new resources including technology know-how, development facilities and financial support enabling The Body Shop to compete more effectively.

Potential to widen geographic footprint – with the backing of L’Oréal, the company should be able to expand its operations geographically to include high-growth areas such as China and Brazil, markets where L’Oréal is already well established.

Developing markets – the company’s entry into the Russian market in 2005 and, more recently, the Indian market in 2006, indicate that the company is taking steps to move into faster growing emerging countries, and reduce its dependence on mature markets such as the UK and the US.

Massive positioning taps growing consumer base – a predicted consumer shift towards more premium products should benefit the company’s new “masstige” positioning in both developed and developing markets. 

Ethical stance continues to attract – the company’s ethical stance provides a strong channel for consumers interested in similar value-led activity, a segment of the consumer base that is growing in developed markets.

Non-store retail to further company’s reach – the planned strengthening of The Body Shop at Home direct selling arm and the Internet retail channel will help the company to widen the customer base and better exploit sales potential in developed markets.

Potential to increase sales through other retailers – increasing the company’s presence within large department stores would help to take The Body Shop out of its niche, and bring its products to a wider audience.

Threats L'Oréal backlash – a boycott by loyal consumers, believing that The Body

Shop has deserted its values by agreeing to being taken over by L’Oréal,

9

might still affect the company and create a backlash should the action intensify.

 Ethical positioning losing its uniqueness – another key threat to the company is the activities of other players. The Body Shop is an originator in terms of its sourcing and product development, but large manufacturers can follow at a distance, knowing their superior logistical networks will guarantee their success.

Large-scale competitors grab share – as a result, increasing market share from multinational players Procter & Gamble and Unilever continues to threaten The Body Shop’s share across all business segments.

Supply uncertainties – reliance on a number of small disadvantaged communities for the supply of certain ingredients and accessories puts the company at risk from regional crop failure, or market instability.

 Cut-price competition – increased competition from low-cost producers, such as pharmacy chains Boots Co and Superdrug, and multiple retailers Safeway, Tesco and Sainsbury, threatens to make The Body Shop’s products seem increasingly expensive.

Dependence on single brand – as the company is totally reliant on The Body Shop brand, if for some reason it were to encounter problems and face negative publicity; the effects could be long-lasting and severe.

Vulnerable to market downturns – The Body Shop’s price positioning is at the upper end of the mass market, which makes it more likely to be affected by economic slowdowns. Owing to its level of dependence on Western Europe and North America, sales could fall when there is a slowdown in these markets. 

IV. Porter’s 5 Forces

Potential EntrantsIt will never be impossible for a person to start a new chain similar to The Body Shop, but it would take considerable time and investment to compete directly with The Body Shop's products. It is very risky to create a new brand in a highly

10

competitive environment and it also requires a starting capital to buy products or create new ones in the area of natural beauty.

BuyersConsumers of beauty products are looking for the best prices but nevertheless have no idea of price negotiation. These beauty stores are retail stores with products at affordable prices.

RivalryThere are many competitors offering products similar to those of The Body Shop, in different price ranges. So this is a mature market with brands that are present for several years and have good reputations.

SuppliersThe Body Shop works with small suppliers, enabling them and check their raw material and their commitment to use only natural products. The brand also goes through community trade.

SubstitutesThe risk of the presence of substitution products is high. Consumers can also make themselves their products with natural ingredients easily accessible. Indeed, today's trend is home-made products and this could affect The Body Shop. There are also other natural products on the market as this is increasingly sought after by customers in the industry of beauty.

V. Strategic Challenge and Issue

L’Oréal is one of the biggest multinational companies operating in the Beauty and Cosmetics Industry reaching several different segments under well-known brands, such as Maybelline, L’Oréal Paris, Lancôme, Vichy, The Body Shop, among others. The diversity and complementary nature of their brands are a consequence of their commitment to enhance all forms of beauty and well-being, allowing them to capture the majority of this industry. The Body Shop was acquired by L’Oréal in March 2006. The Body Shop’s credibility and reputation derives essentially from its values -against animal testing, protect the planet, support community trade, defend

11

human rights and activate self-esteem. This acquisition received many criticisms at the time, due essentially to difference of values.

VI. Strategic Options and Future Strategy

Although L’Oréal had stated they had stopped testing on animals, several articles have claimed that these practices still remain, which was going against one of The Body Shop’s core values. Although the potential growth opportunities were easily visible, there was a concern regarding the possibility of The Body Shop losing their main competitive advantage: their strong ethical standards. However, the core The Body Shop team claimed that they “won't change The Body Shop's core values”, since The Body Shop would continue to operate independently. Instead, they claimed that L’Oréal was going to be the one transformed and influenced by their practices and values. At the time, there was a concern that consumers would switch for other natural and organic personal care products for ethical reasons. Although this acquisition was supposed to also allow L’Oréal to learn from The Body Shop about CSR, there is not much evidence about their behavior changing. Hence The Body Shop core team needs to devise on a strategy to maintain its core values, make their customers believe that they are still maintaining the core values, not letting the acquisition hamper The Body Shop’s ‘nature caring’ image and maintain the existing customers and acquire new customers with their original values and mission even after the acquisition.

VII. Implementation and Change Factors

Body Shop should ensure that the acquisition by L’Oréal would not dilute its ethical stance and that it would continue its position on anti-animal testing. They should continue to apply their animal testing policy. L’Oréal wanted to learn from Body Shop’s commitment to the environment and human rights in business. L’Oréal has displayed visionary leadership in wanting to be an authentic advocate and supporter of their values. The Body Shop’s values are part of their DNA. But having L’Oréal come in and say we like you, we like your ethics, we want to be part of you,

12

we want you to teach us things, and it is a gift for The Body Shop. L’Oréal would not be able to stop animal testing overnight, but this issue should be a part of its long-term plan to improve its image and also to make The body Shop live upto its image and not getting harmed due to the acquisition.

Meanwhile The body Shop should continue creating positive social change to live upto its values. Their value commitments should grow with the business changes. They should also strengthen the way their Values are embedded in their products and ingredients by adding new suppliers to our Community Trade programme, which ensures a fair deal for marginalised small-scale producers, through a greater commitment to animal protection and by taking a leading role in getting sustainable palm oil on the market, which helps protect local communities, rain forests and wildlife. The company should also maintain its 100% Vegetarian products status. The term “suitable for vegetarians” means that the products are free of any ingredients resulting from animal slaughter, such as gelatin or animal hair. Customers with strong vegetarian principles seek products that they can use without compromising their ethics, and The Body Shop should meet their need. Most of The Body Shop’s customers shop with them because of their Values, so they have a great responsibility to understand their concerns and preferences. Some of the customers request in-depth information about our Values, so The Body Shop website should contains regularly updated information. They should maintain a Values strategy to identify the areas where they make the greatest social and environmental impact. It will give the direction, and identify actions that they need to prioritize such as the increased efforts to be put into addressing their impacts on the environment.

REFRENCE www.thebodyshop.com http://en.wikipedia.org/wiki/The_Body_Shop The Body Shop Values Report "Dame Anita Roddick", Growing Business. Retrieved 9 December 2011. "L'Oreal buys Body Shop for £652m", The Independent (London). 17 March

2006. Retrieved 25 May 2010.

13

"Whats Wrong With The Body Shop?", Mcspotlight.org. 8 May 1997. Retrieved9 December 2011.

“Body Shop’s Shares Rise as its Ethical Rating Plummets,” www.ethicalconsumer.org, March 17, 2006.

“The Body Shop and L’Oréal: Why Can’t Big be Beautiful?”, Mark Goyder www.ethicalcorp.com, May 25, 2006.

“Dame Anita’s Radical Approach,” www.news.bbc.co.uk, July 17, 2003. “Body Shop Agrees L’Oréal Takeover,” www.news.bbc.co.uk, March 17, 2006. “The Body Shop Captures PETA Europe Prize,”

www.thebodyshopinternational.com, 2006. “Mixed Reaction to Body Shop Takeover,” Heather Tyler, www.stuff.co.nz,

March 21, 2006. “Body Shop Row Over Animal Testing,” www.news.bbc.co.uk, June 26, 2006. “Body Shop Defies Green Critics,” Nick Bevens, www.scotsman.com, October

14, 2006.

14