Body Shop Case Study
Body Shop Case Study
Using the classification introduced in the class presentation, The Body Shop may be recognized as a LOB/product division leadership company that has unique products and operates at the international level, mainly in the developed countries with large consumer markets.
For The Body Shop entering the new markets is the next stage in the development.
However, there are no assigned country managers and the key managerial decisions are taken in the UK. Through franchisees the new products and product knowledge are made available worldwide.
Despite the global scale of activities much control is still concentrated in the UK due to the parent company’s culture that The Body Shop’s founders were building for many years.
According to the case study, by 1991 The Body Shop became a company that had stores in 38 countries. In 1988 the company entered the U.S. cosmetics market by opening the first 12 stores in the East Coast. The goal was to maintain the growth, because the sales in the United Kingdom grew very slowly. From 1984 to 1991 the number of outlets in the other countries increased eightfold and was equal to 406 in 1991. Even though there were only 173 stores in the United Kingdom, they brought 63% of the turnover.
Moreover, judging from the case study, one may presume that Anita and Gordon Roddick were the central figures in the company and it was they who defined further development of the company as a product division leadership company. They were not concerned about the investors’ views of The Body Shop. Moreover, Anita Roddick had been involved in the creation of the new products until in 1990 a laboratory was opened. Anita Roddick also had a very strict control over the franchising process and carried out the final interviews herself. Licensing a large number of franchisees meant that The Body Shop could focus on the development of the new products and the company’s global vision.
Undoubtedly, by expanding overseas The Body Shop wanted to pursue scale economies in the other countries. 70% of Body Shop products were supplied by outside contractors. Some raw materials were brought from the exotic countries such India, Nepal, etc. One facility was built in Glasgow and another one was built in the USA when The Body Shop entered the U.S. cosmetics market.
In conclusion, the described above approaches to the sales, control and outsourcing made The Body Shop a product division leadership company with a strong center in the United Kingdom. When the company entered the US market and faced some fundamental problems, the founders of the company understood that not having managers that specialize in the local markets and having no flexibility in the global strategy was harmful for the company.
The Body Shop tried to introduce a very unusual business strategy, therefore the “constituencies” were very treated differently in comparison with the other companies:
Shareholders and franchisees were supposed to contribute to the global vision of the company.
The Body Shop was established in 1976 and focused on selling the natural products in the relaxed shop environment. As it is written in the case study, “the company was an extension of Anita Roddick’s personal philosophy and convictions”. Her key customers were environmentally-conscious people. Therefore, the company did not want “to lie” to the customers. On each product customers could read the detailed description of the ingredients and in the stores there was a unique environment full of “honesty, excitement and fun”.
Secondly, Anita Roddick tried to make The Body Shop “the force of a social change” and help the employees improve their qualifications, help the people in the developing countries and protect the environment. The Body Shop cooperated with the largest environmental organizations such as Greenpeace and Friends of the Earth. In addition, a special Environmental Projects Department was created in order to make the social campaigns more effective and make sure that The Body Shop’s products and practices were environmentally friendly.
In addition to the environmental campaigning, community activity was also of great importance for The Body Shop. A Community Care Department was created and its goal was to motivate the franchisees do something good for the communities in which they engage with the customers. One of the large campaigns in which The Body Shop participated was the Trade Not Aid initiative that helped the people in the developing countries to find jobs. Usually these jobs were provided in the production facilities that were supplying raw materials to The Body Shop.
On the contrary, shareholders and franchisees were less important and Anita Roddick thought that their purpose was to contribute to the global vision of the company. There was a very strict control of the franchisees. It was difficult to get a franchise from The Body Shop due to the large number of applications. Nevertheless, despite the concentration of control in the headquarters, 90% of the stores were the result of the franchising program. Moreover, The Body Shop provided franchises mainly to the women, because the company believed that the business practices could be enhanced if they were driven “by the feminine principles”. Anita Roddick also participated in the franchisee selection and often carried out the last round of interviews herself. After the franchisee was selected, he or she had to participate in the trainings on product knowledge and other job related issues.
In terms of the shareholders, they could not influence the decisions taken by Anita Roddick and her partners. In 1986 The Body went public and its shares were sold really well in the London Stock Exchange. However, Anita Roddick referred to the investors as “speculators” and continued to push her ideas even though her company became a large company that required a lot of resources for entering the new local markets. Nevertheless, such an attitude toward the shareholders did not stop the inventors from investing into The Body Shop.
In order to be successful in the U.S. market, The Body Shop should do the following:
Take a more traditional approach in terms of advertising, because in the USA advertising still has a very large impact on the business practices.
Open stores in the public places where the Americans usually prefer to go shopping
Make the franchises more flexible in different regions of the world including the USA in order to reach economies of scale, meet the local needs and transfer knowledge from the headquarters to the local level.
Build supporting organizational capabilities in order to introduce the changes in the business practices more effectively.
The Body Shop always invested relatively little money in advertising. The main goal was to create a shop environment and a range of products that would attract the customers without the need to advertise the brand. However, in the USA this approach did not work and hindered the ambitious growth plans. The Body Shop was going to open 1,500 shop openings by 1995, but it was impossible in the USA to raise brand-awareness without media advertising. Moreover, there were many similar “green” brands, so The Body Shop would need to spend more money on advertising in order to differentiate the products and compete for the customers. Indeed, Anita Roddick herself acknowledged that were no companies that would succeed in the USA without promotion and she said she would need “to become slightly more eccentric and theatrical to get [her] point across”. Which method – advertising or earning attention without advertising - is more effective in retail business depends on many factors. Nevertheless in both cases a company has to pay a price for attracting attention. Some retailers in the USA that do not use a lot of advertising are Spanx, Lululemon, Zara, Levi’s. These companies rely on the word-of-mouth campaigns and social media and invest a lot of resources into the shop design and location in order to attract attention of the customers. Therefore there should be a mixed advertising strategy that will help The Body Shop to promote its values and products through the different communication channels. In any case, the company will have to increase expenses related to the store operations.
Moreover, The Body Shop should open the new stores in the malls where the American customers usually go shopping. The company did not have any experience of opening the stores in the shopping malls and Anita Roddick hesitated if The Body Shop was good enough to compete against the other retailers. However, taking into account the buying habits of the Americans and ambitious development plans that The Body Shop has the option of opening the stores in the malls is the most rational one, although there are many competitors.
In order to compete successfully, the top-management should realize that the company outgrew its historical strategy and there should be new approaches that will correspond to the global context. One of the goals for The Body Shop should be providing more flexibility to the franchises and the managers that are responsible for the regional markets. The entry strategy in the USA showed that the customers and employees were not as responsive and loyal as in Europe. The Body Shop should make some changes in the business strategy that will be tailored to the local conditions. In particular, the company should adjust the decision-making practices, administrative systems and communication channels in order to get a competitive advantage in the U.S. market.
