The Body Shop Company: Strategic Analysis 1

The Body Shop Company: Strategic Analysis

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 The Body Shop Company: Strategic Analysis 2

Table of Contents

Introduction........................................................................................................................3

SWOT Analysis..............................................................................................................4

Porter’s 5 Forces Model................................................................................................6

The VRIO Model...........................................................................................................6

The Body Shop: Corporate Strategy................................................................................6

Strategic Analysis.............................................................................................................11

Recommendations............................................................................................................14

Conclusion........................................................................................................................14

References.........................................................................................................................16

APPENDIX:......................................................................................................................19
 The Body Shop Company: Strategic Analysis 3

Introduction

This paper employs appropriate strategic managerial tools to evaluate the strategic

position of The Body Shop Company. The company has fairly performed well, with a 1.7% rise

in sales in 2018 to £797.5m from the previous year(Fleischmann, Ferber, & Henrich, 2006). It is

also enjoying a large market share served in 66 countries and over 3249 stores globally. The

paper particularly employs the company’s SWOT analysis to unveil the informed performance of

the company. The paper is structured as follows. It preliminarily begins by describing the profile

of the company in question, giving such details as the nature of business it conducts, the date it

was founded as well as other basic descriptive details. Secondly, the paper evaluates the

company’s current strategy based on the SWOT analysis of the firm. Thirdly, the paper discusses

the performance of the currently employed strategy in terms of such aspects as sales trends,

profits, and market share. Fourthly, this work unveils how the company competes, whether it is

oriented towards differentiation focus or cost focus strategies. It also discusses how the strategic

direction of the company is related to growth, innovation or global expansion. Based on SWOT,

this paper then votes as to whether the strategy is suitable or is not. Following is an evaluation of

the potential for recent government changes to affect the strategy in place. Any implications of

Brexit and the retarding UK economy are also evaluated. The work culminates in a

recommendation of any likely strategic improvements. Lastly, the work ends in a conclusion that

sums up the entire text.

 The Body Shop Company: Strategic Analysis 4

The Body Shop International(McGregor, 2016), whose trade name is The Body Shop, is a

British company that deals in cosmetics, perfume and skin care. The company was founded in

the year 1976 by Dame Anita Roddick. The company’s vision and mission is to dedicate their

business towards social and environmental change. Presently, the company has a range of about

1000 products selling in established stores. Globally, the company has over 3050 stores fully

owned or franchised across 66 countries. The firm is situated in East Croydon as well as

Littlehampton in West Sussex. The Company was owned by a French cosmetics company:

L’Ore`al between 2006-2017, after which it was wholly acquired by Natura(Holcomb & Hutton,

2016), a Brazilian company dealing in the same industry. The company defines itself as

committed to be the world’s most ethical and sustainable business. The company particularly

stands against animal testing, and has thus launched campaigns within the UK, the European

Union recently, and also aims to do the same with the UN. The firm terms the practice as cruel,

showing its priority for ethics and sustainability(Wycherley, 2002) in the industry. The British

founded cosmetics company continues to operate in many countries across the planet’s

continents. They have presence in UK, Belgium, Australia, South Africa, Japan, Denmark, Chile,

India, Italy, Mexico, and Canada among other countries in every continent across the globe.

SWOT Analysis

In conducting a SWOT analysis(Chun, 2016), this section identifies the inherent strengths

of the company, its weaknesses, as well as the external environment factors that pose threats as

well as opportunities.

Strengths

o The internal factors that body Shop Company has as strengths include its compliance to

ethics, green economy, as well as sustainable practices.

 The Body Shop Company: Strategic Analysis 5

o The company’s franchising strategy

o The company also has a substantial market presence, having presence in over 66

countries in the world as a vastly diversified business and hence has the benefit of a broad

market access(Kotler & Zeithaml, 2000).

o The company has enjoyed good growing profits for many years in a row and thus the

advantage of financial capability as well as resource capacity.

o The Body Shop (TBS) Limited also enjoys the strength of the current strong management

intent which is seeking to re-position the company as it was in its activist days within the

industry.

Weaknesses

o Loss of focus due to the over-commitment to the environment and animal protection.

o Opportunities for the company include their access to broader markets than its

competitors, and bearing in mind that the firm belongs to the largest cosmetic company

on the planet(Peter & Olson, 1999).

o Pricing. The cosmetics chain charges premiums for its products which yet do not much

modern products and has thus lost substantial market share.

Opportunities

o Opportunities include that the growing millennial population that is health conscious,

matching the nature of the products of TBS. The firm also stands a good ground of

expansion into the “colour products”.

Threats

o The company’s biggest threat is competition from modern industry players.

 The Body Shop Company: Strategic Analysis 6

o TBS has failed to attract the modern customer.

Porter’s 5 Forces Model

Porter defined a framework for strategic analysis and which shows the five challenges

that any firm faces. In the case of The Body Shop, the following factors are crucial. The

company faces threats of new market entrants(Robertson, 2012) who are seemingly drawing the

bigger market share away from the company. The Cosmetics chain also suffers industrial rivalry

such as by brands like Yves Rocher and Lush which have claimed a large share of the industry’s

market. Yves produces similar products as TBS, and has a good presence in the market with up

to 1200 stores. In accordance to Porter’s model, the company also suffers the challenge of buyer

bargaining power. There being emergent brands with modern and trending products offered at

less prices, the company is at risk.

The VRIO Model

In the perspective of the VRIO model(Cardeal, 2012), The Beauty Shop’s position is as

follows. In the sense of value, based on its products prices, the brand is certainly valuable hence

a competitive edge for the brand. Its products are relatively rare, based on their environmental

value. The company’s products however are easily imitable and hence the firm has only a

temporary competitive advantage.

The Body Shop: Corporate Strategy

The international organisation, TBS, is currently embarked on growth-orientated

diversification strategy. The organization’s management has in recent days implemented growth-

oriented diversification(Fleischmann et al., 2006) strategies in which it has established presence

 The Body Shop Company: Strategic Analysis 7

in more countries globally. In fact, in the early 2019, the company has also established its

presence in Serbia, after it had just entered new global markets in Bangladesh, Slovenia, and

Cyprus in the year 2017; and Chile in 2016 (Inagami, Cohen, Finch, & Asch, 2006). The

corporate strategy of the cosmetics company is well manifested in the aggressive global

expansion, having established facilities in 9 new countries within a span of 7 years (2012-2019).

The Body Shop has particularly been empowered to engage in the global growth

diversification strategy by its inherent financial stability and profitability as observed over the

years. The financial grounding of the company must have served as a significant enabling factor

for the resource-intensive strategy. The entrance of the company into new countries across the

globe has been characteristic of its healthy business conduct in the recent years. Other

opportunities exist and which the company has been exploiting in its global expansions. These

include that multiple states and individuals as well as non-governmental organizations are

advocating for green business practices. Therefore, TBS, being a champion of green and

sustainable business practices(Chun, 2016) driven by a strong sense of social responsibility has

been a great asset for the penetration into new markets since the potential markets already

“invite” such merchants who have care for the natural environment. The growth strategy under

implementation in the company is a strategic move that the management has embarked on in a

bid to strain the seemingly expanding efforts of competitors(Kotler & Zeithaml, 2000). To keep

its name as the trending and loudest in the industry against such competitors as Lush, the

company has had to respond by attacking new grounds where they can stand tall as a superior

cosmetics company and to make-up for any unhealthy effects of the cutthroat competition in

ancient markets.
 The Body Shop Company: Strategic Analysis 8

The company’s current globalisation strategy is a calculated response to restore business

performance after the previously noted challenges in obtaining sustainable returns(Martin,

Knopoff, & Beckman, 2006). Nevertheless, other than correcting this noted weakness in its

business, the growth strategy is also positively exploiting the vast capacity of Natura: the world’s

biggest cosmetics company and owner of TBS. However, the strategy has not only been straight,

easy and non-challenging the company has also suffered a higher cost of operating multiple

shops worldwide, in a globe where different governments offer different tariffs amidst the face of

differing tastes and stiff competition from resident and “louder” native firms. The additional

(managerial and operating) cost due to large volume of international operation is also suspect for

the decline in turnover in the year 2016(Burritt & Lehman, 1995).

The strategy is reportedly performing well in most of the operating markets. Its trend of

sales stands out and is commendable. TBS has had rising sales most of the time, showing a

preference for the company’s products. In a recent research, it was identified that 64% of

customers are very willing to pay for products that are compliant to ethics(Kent & Stone, 2007).

The company has also enjoyed rising sales courtesy of its online multilevel marketing network

that lets the company operate beyond its physical facilities. The internet based marketing has

been dabbed: The Body Shop at home. The online marketing channel comprises of numerous

distributors and consultants who recruit people and market the product in multiple countries yet

virtually. The expansion strategy has undeniably enjoyed a resultant positive rise in sales volume

and revenues.

The company has enjoyed a long time of a substantial market share for many years.

Having been so aggressive in expanding their operations across the world, the company has

assuredly gotten hold of a large global market share(Fleischmann et al., 2006). Nonetheless, the
 The Body Shop Company: Strategic Analysis 9

Body Shop at home networking channel has also earned the company so much more market

reach where individuals recruit people as both consumers and network marketers for a benefit of

personal discounts of up to 25% and commissions of 25% for individuals promoting the activity.

At present, the company is actively operating physical presence in over 66 countries across the

world(Inagami et al., 2006) in all continents. This translates to about 33% of all the entire global

market. As a result, it is expected that the company can only have possession and command over

a substantial market in the world. The internet based multilevel marketing activity that serves

participants as a way of generating personal income has also been a sustainable way of

facilitating wider market reach in the world. This implies that the firm has a higher market reach

than its current physical locations count.

Nonetheless, the globalisation strategy has not just worked without hitches here and

there. Rather, the cosmetics commander has also struggled with present challenges in the

industry(Burritt & Lehman, 1995). Developments in technology such as e-commerce which is

seemingly unstoppable and popular is a serious challenge for the retailing cosmetics company.

This challenge and the increasing number of shops which all muscle on the same territory inhibit

tranquillity of business alike. The economic forces of demand and supply(Guerras-Martin &

Ronda-Pupo, 2016) in cases like these come no effect and as expected, a rise in the number of

sellers amidst a constancy in the size of the market leads to possibly declining sales volume per

seller, given the other factors are held constant and so buyers can freely switch between

products. In this situation, The Body Shop has found a number of its ventures suffering a loss of

market holding to new entrants and existing competitors who provide similar

products(Management and Strategic Studies Center, 2012). The cost of running multiple shops

also posits an operational as managerial challenges. Indeed, it is unlikely that one can ever
 The Body Shop Company: Strategic Analysis 10

underestimate the complexity of managing global ventures. There exist numerous and yet tough

managerial and operational challenges when it comes to the running of business ventures in

disparate global locations. These arise from challenges such as variations in culture from place to

place, the difference in government policies, different patterns of consumption amongst other

contemporary challenges in global markets(Robertson, 2012). The cosmetics chain can therefore

attribute several challenges in its markets across the world as resultant of the strategic move of

expansion.

The company’s strategic focus deserves congratulations courtesy of the organization’s

profits that have fairly grown over the years. In a background marked by an exponential growth

of new businesses and a paradigm shift in business models where retailers have moved online to

sell on e-commerce platforms to satisfy the current preferences of buyers, it is only expansion of

activity that could have earned this relatively “ageing” company a positive trend in profits(Kotler

& Zeithaml, 2000). In the present era, buyers have so many alternatives within the comfort of

their handsets such that they need not stick to a single brand or retailer branch. With the bigger

portion of markets switching to online shop stores, it is likely that an industry player can easily

run out of market as customers shift away to global premium brands available over the internet.

The expansion strategy of TBS has therefore warranted the continued profitability for the

company, enjoying returns “away from home(Inagami et al., 2006).” Had the company not

engaged the global markets, the overwhelming threats in the industry as identified by SWOT and

Porter’s 5 forces model would have crunched its capacity to earn profits.

The Cosmetics Chain company has effectively used a differentiation focus(Strategy,

1963) as its marketing strategy over the years. The organization has done so by continuing in the

production of unique cosmetic and toiletry products that are distinguished by their orientation
 The Body Shop Company: Strategic Analysis 11

towards production of premium environment friendly products that aim at sustainable business

practice. In its campaigns, The Body Shop(Robertson, 2012) has previously proclaimed the

abolition of animal testing, as a brand and in the entire UK cosmetics industry. The brand is

recognized as an activist brand for ethics and sustainability in the cosmetics industry. TBS thus

only produces, markets and sells products that are compliant to the features highlighted in the

company’s core values. By doing so, the firm has attracted numerous buyers and

acknowledgement by other bodies: state and non-state bodies. This has therefore been a unique

competitive factor for the company attracting buyers that have a preference for quality and

environmentally friendly products.

Strategic Analysis

The ANSOFF Matrix

The strategic direction of the cosmetics chain is closely intertwined with growth. The

company’s globalization strategy has been clearly expanding the firm’s operations all over the

world and hence ensuring a continued growth of the company. Specifically, the company has not

only been committed to growth but has intentionally engaged international expansion where it

has expanded logarithmically.

 The Body Shop Company: Strategic Analysis 12

Figure 1: ANSOFF Matrix(Schawel, Billing, Schawel, & Billing, 2009)

The ANSOFF Matrix(Hussain, Khattak, Rizwan, & Latif, 2013) shown above is crucial

for the identification of the relation of the organization’s strategic direction to growth,

innovation, as well as international expansion. The Body Shop has been clearly aggressive in its

market development efforts. The cosmetics chain has particularly focused on penetrating new

markets(Kotler & Zeithaml, 2000) to increase its marketing efforts. This is a common strategy

employed by multiple business since it banks on the benefits that include less risks as well as

enjoying the benefit of the already established products rather than making new products. By

using this marketing strategy, the company has achieved growth in operations and in its market

reach. The firm’s marketing strategy has also included market penetration efforts which has led

to a growth of operations and global expansion.

 The Body Shop Company: Strategic Analysis 13

The company’s corporate globalization strategy(Robertson, 2012) is admittedly suitable

for its special situation. The cosmetics chain has been enjoying positive results from its

expansion to overseas locations and can only keep doing so. Nonetheless, based on the firm’s

SWOT analysis(Rumelt, Schendel, & Teece, 1991), the firm is justified in implementing its

strategy since it also has a substantial capacity to do so. The strategy is considerably feasible

particularly due to the legal backing it enjoys. Being acknowledged as a sustainable champion,

there is sufficient legal as well political feasibility for the strategy in any new market the brand

moves to. The financial wellbeing of the organization that provides sufficient capacity to expand

globally is the needful economic feasibility of the strategy. Nonetheless, the company’s

management possesses the capacity to drive the companies on its feet across the globe; hence

further approving the expansion(Kotler & Zeithaml, 2000) efforts already noted. Having

opportunities of acceptability as a sustainable and eco-compliant company, the brand is

warranted to continue implementing its expansion strategy. As seen, globalization is a suitable

strategic focus for the Body Shop.

Recent government changes are some of the present concerns that the company must also

give attention to. For instance, the UK government’s state agencies for the conservation of the

environment and the conduct of sustainable business have been so aggressive in advocating for

sustainability in the various industries in the industries(Wycherley, 2002). This has also been

vibrant and widely adopted in more countries across the world where TBS also operates as well

as by global agencies like the UNEP. These developments have the potential to affect the

cosmetics chain, but they are only likely to do so positively. TBS is already a highly ethical

business which is also currently aggressive to reassure its ethical practice. The company must

harness these campaigns to their advantage as well as turn it into a competitive advantage against
 The Body Shop Company: Strategic Analysis 14

industry rivals. Brexit as well as UK’s slow economic growth imply bad economic times for the

company. however, the company must take on any initiatives to facilitate their business in the

midst of economic recession to rise over the looming stagnation in the region’s

economy(Wycherley, 2002). An advantage, however, is that the chain has business presence in

other markets overseas which would support each other.

Recommendations

The Body Shop, even though has been doing well, needs to make some strategic

improvement to up their game. Specifically, the management must perform redemptive activity

to save the cosmetics chain from the damage it got from L’Oreal’s ownership. Business

consultants have complained that the brand had slightly lost its trajectory under the previous

ownership. This will be necessary to restore the old faded trust. Nonetheless, the company must

embrace innovation to keep up with market trends. Online sources consisting of customer

reviews claim that the brand is presently not as fashionable as the times dictate. It must therefore

add innovation to its product development marketing strategy. An emphasis on innovation would

grant the firm a distinguished competitive position against rivals. The company must also

enhance its products value as to enhance the value proposition, decrease likelihood of imitation

and enhance competitiveness. The firm must also revise its prices to match the perceived value

by buyers and to match current industry prices. Most importantly, the company must not over-

focus on environment conservation such that its cosmetics efforts subside.

Conclusion

The Body Shop is a British-founded cosmetics chain currently committed to a

globalisation strategy implementation. The strategy’s implementation has granted the firm

cognizable benefits in performance such as the growth of sales as well as profits. The company
 The Body Shop Company: Strategic Analysis 15

has gotten hold of a substantial market share and fairly competes with an orientation to

differentiation focus. It’s strategic direction highlights product development and market

penetration as the prevalent marketing strategies. The strategy is suitable for the company.

However, in consideration to existing challenges and prevailing developments in the market, the

company must now take up on strategic innovation focus to improve products and match market

trends.
 The Body Shop Company: Strategic Analysis 16

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 The Body Shop Company: Strategic Analysis 19

APPENDIX:

Appendix 1

Figure 1: ANSOFF Matrix(Schawel, Billing, Schawel, & Billing, 2009)........................12