Management perspectives and Future Strategies - Essay Example

Management perspectives and Future Strategies 1. Introduction: Originated in 1976 by the late British environmental and human rights campaigner Dame Anita Roddick, The Body Shop started its operation as a small outfit in Brighton. At the beginning it was selling just 25 products. Due to availability of fewer amounts of packages to deliver goods, customers were initially encouraged to recycle the old packages and initially there was a greater emphasis on natural ingredients that were morally sourced and cruelty-free. At present, the company has more than 300 products under their brand name and with the help of 2500 stores it has expanded its business all over the globe. It is well known as one of the first cosmetics brands to ban testing on animals, not only that, they are the first company to acquaint with Fair Trade to the beauty industry. It was considered as one of the leading player in the field of cosmetic industry who is pioneer of some unconventional thinking. In the year 2006, Roddick rather controversially sold The Body Shop to makeups giant L'Oréal for the handsome sum of £652m. Unfortunately, there was a huge difference in the way both of this company used to operate. One of the big differencesis, unlike the Body Shop, L'Oréal which is partly owned by Nestlé continues to test new ingredients on animals. (Chesters) Objective of the Paper: The paper is focusing on the company with an overall analysis of its mission and visionsits strength and weaknesses, its marketing mix etc.The paper is also analyze how various external and internal factors have a role to play in the strategy and performance of the company, what are its strategies and how they can modify the same in the future to get more operational and business profit without hampering the social values and business ethics and practices. 2. The Body Shop: mission and Vision : The organization is well known for its ethical values and corporate social responsibilities across the globe. The Body Shop was the first company to ban testing the effectiveness of their products on animal and at the same time adopted various innovating marketing and promotional strategies to reach a large number of customers. Roddick in his analysis has discussed upon various key points associated with the business policies of the company. In his analysis he has mentioned a statement given by Dame Anita Roddick, who was owner and founder of the organization. In her words as mentioned by Roddick “The business of business should not just be about money, it should be about responsibility. It should be about public good, not private greed” (Roddick). For this organization, wealth creation and profit maximization is not the ultimate objective as they want to reach out to more number of customers and at the same time also wanted to maintain the ecological balance and stability as well as wanted to play a major role in the development of the society. (Roddick) The mission statement of the company is one of the key parts of their 5 main values which are closely associated with their overall business policies. 3. Marketing Mix: For every organization, marketing mix is the key for the success. Marketing Mix can be defined as the set of controllable, tactical marketing outfits that every company mostly uses to yield a substantial amount of profit from the target market. Generally the marketing mix is divided into 4 different variables namely: product, price, promotion and place. Each of these 4 components has their own tools to contribute towards the development of the marketing strategy of every company. (Kotler, Armstrong & Cunningham, 67-68), As a company, The Body Shop has a wide range of product in their kitty to attract a large variety of customers across various niches. The company was started with 25 products only but slowly it has grown in size and by 2000 it has over 200 products under its brand. The main reason behind their great success in the early part was their innovative pricing and promotional strategy. To fulfill the value of each customer, after sale service and customer retention was the key of the company and the price set by they are more or less within the reach of the customer. Later on, although they have increased the price but the value of service and corporate social responsibility with eco-friendly approach helped them a lot to retain their entire customer base. 4. Overview of Business Strategy of ‘The Body Shop’ : If one analyze the business strategy of Body Shop it is very clear that the company is largely dependent on the Blue Ocean strategy. In fact they are the first one to use this concept in the field of cosmetic industry. The Business strategy of the company is more or less divided into three key segments and these are: following proper ethical approach, developing unique products to reach out to more number of customers and catch the untapped markets or niche markets and concentrating on after sales services and customer satisfactions. (Body Shop: UK) If one consider the value innovation part then it is very clear that The Body Shop is rely on its unmatched price and uncompromised quality to serve all kinds of customers across the segments. Roddick, the co-founder of the company has mentioned that as an organization, the Body Shop able to develop a specific market and a particular segment of customers who like CSR and values mentioned by the company. No other organization can offer such service or values to the customers for that same price like The Body Shop. (Charter and Polanski, 294) His statement can be considered as a key evidence of their value creation. Likewise, to reduce the cost of their product, the company decided not to use extensive advertisement campaign or any well-known brand ambassador to promote their product. As a matter of fact, without their aggressive promotional strategies they are able to spend 20 years in the market having a distinct customer base and being a well-known brand in the field of cosmetics industry. Kaplan (1995) in his review has mentioned that “The Body Shop, without "advertising," has managed since 1976 to achieve high visibility for its products andcorporate identity through effective manipulation of news organizations that keep thecorporation in the news” (Kaplan, 51). But as the time moves on, the company has started to face tough challenges from other players in the market who started to copy the business model adopted by them so successfully. Various new companies such as Bath and Body Works, Origins, and Lush presented the same ideas and started to capture the market once occupied by The Body Shop. Bath and Body works was the main competitors the Body Shop as they also started to present natural beauty products in the same market. Apart from that in 1990s, Origin also started to catch the customer eyes by using same kind of business strategy as The Body Shop ‘Protecting our Planets’ and in 1995, one another cosmetics company Lush has introduced their own ‘against animal testing campaign’ (Lush). Charter and Polonsky in their review have mentioned that there are number of evidences which suggested that till the year1990, approach taken by the Body Shop in marketing their product was a successful one. They largely focus on corporate social responsibility, maintaining ecological balance while production and also keen on after sales servicing. But later on, as the competition started to increase drastically, brand differentiation becomes a key part of the corporate strategy. So they forced to compromise on their old high standard which in a way started t hamper their business performance. (Charter and Polonsky, 287) Likewise, they have also mentioned that project green or any such green campaign is not any more sufficient enough for The Body Wash as from 1990 onwards the campaign is one of the most common process used by almost every organizations across the industries to attract new customers. (Charter and Polonsky, 294) To expand their business the company was more or less rely on the franchisee model As the owner of the company was a lady, and as it is belongs to the cosmetics industry majority (almost 90%) of the franchisees are women and they are motivated by the ideology followed by Anita Roddick in her career and that is to develop a strong Corporate Social Responsibility in constructing a significant difference in people's live and bring value to the world through their work. As the time moves on, there was a drastic change in the business figures as well as business process of the company. With the increasing competition, The Body Shop started to lose its customer base and their profit margins also started to come down year after year. The company, which was not rely upon advertisement and promotional activities started to use advertising as a way to promote their products to the customers. Innovations is slowly started to vanish from their operation and the profitability also started to come down slowly. McWilliams et al in their review have mentioned a theory of ‘resource-based-view-of-the-firm’. According to that theory, it was a proven fact that, Organizations, with advanced level of ecological act often had better financial performance. The theory was 100% applicable with The Body Shop, as in the early stage of operation when the company was more eco-friendly, the profit margin was very high.(McWilliams et al, 3-4) But after 2006, when The Body Shop has been combined with L’Oreal its sales show intensely declined and not only that, the overall business and promotional strategies of the L’Oréal harmfully impacted to client perception and pleasure in part of ecological accountability which is the main success line for the Body Shop (Milmo). 5. SWOT Analysis: Strengths: Brand Loyalty – As an organization, Body Shop is significantlyhooked on its brand reputation and brand value during its operation. In fact brand image is the main source for them to increase their sales volume. It is a proven fact that, on the basis of uniqueness of their products the organization was considered as one of the most ecologically friendly retailers. L’Oreal’s support – After the organization was taken over by the L’Oreal, the support provided by this big brand is of great help for the organization to increase its sales volume. Despite taken over by the L’Oreal, The Body Shop continue to function as an independent brand with more operational and marketing support from its bigger partner. Apart from that, L’Oreal’sknowledge of commercial and marketing also boost overall sales. Niche marketing – One of the key processes of Body Shop is targeting the niche market. As they are the only company not to test their products on animal with the help of ecological profile they were able to attract a large segment of customers who is rich in ethical issues. Charity support - Body Shop used to get involved in various charities and social wale fare by contributing some parts of money which they used to get from the sale of each product. It helps to enhance their profile as an organization who always keeps pace with their CSR activities. Weaknesses: Slow service – One of the key weaknesses associated with this organization is the slow service. Generally all the outlets of Body shop are located inside shopping malls and there are always huge crowd. Along with that, there are inadequate personnel in each of the outlet of Body shop which resultant into comparatively slower service for the customers. This is one of the key reasons behind loosing customer as many of them preferred to visit other retail outlets in central areas of the city for a faster service. Increasing operational cost- In the year of 2006, the company was confronted with operational loss. Now in recent years, the operational cost is increasing year by year, and due to inflation and slow economic growth, the volume of disposable income is coming down rapidly. This continuous trend of increasing operational cost, production and supply chain management cost is a big threat for the company. Opportunities: Product development – After the company was sold to L’Oreal’ in the year 2007, there is a vast opportunity for them to expand their product line even more by using advanced research and development strategy of the L’Oreal. Not only that by using the competenceof L’Oreal’, the Body shop can improve the quality of their existing product line. Capture new market: The continuous increase in the sale of male’s make up products and other body care productsspecifies that there is a growing demand of this specific niche market. Body shop can capture this large market with the help of variety of their existing products. Threats: Brands comparison – One of the key threats for the Body Shop is its association with L’Oreal, as it can prove to be harmful for Body Shop’s ecofriendly reputation. One must consider the fact that, the long lasting public perception of Body Shop as ethical can be altered as most of the time L’Oreal as an company do various tests on animals. Not only that the company is not that much highly eco-friendly in terms of its packaging and production style like the Body Shop. Competition –In modern times there are various organization started to enter the skin care market to capture the niche market. In fact, Body Shop expects more tough rivalry in countries like Canada if others (who alsoyields natural based products e.g. LUSH)choose to start their operation in the shopping center. 6. PESTLE Analysis: For success of every organization, various micro and macro-economic factors play an important role. Generally,PESTLE analysis delivers a review and critical analysis of six of the key macro factors of the modern world which have direct impact on the performance and decision making of any business. Like every other companies, performance of The Body Shop also affected by various political, economic, social technological, Legal and environment factors. Following are brief overview of how all these factors have their impact on The Body Shop. Political factors: There are number of political factors affecting the overall business performance of the company. One of the most important factors is the tax imposed by the government. One of the key political decisions which affect The Body Shop in the UK is the rate of tax charged by the government. This decision not only has the capability to touch the bottom line of the business in the form of corporation tax but also has the power to reduce the expense on cosmetic products. At present, the percentage of corporation tax in the UK has been dropped to stimulate economic activity (Armitstead et.al). Another key factors associated with the business performance is the interest rates. During 2010, the interest rates in the country were at its all-time low of 0.5% (Bank of England). A lower interest rate is generally a sign that the economy is doing well. All companies tend to feel more comfortable in a positive economic and political scenario in a country.This can be considered as a positive factor for firms such as The Body Shop who can now borrow large sum of money for the purposes of capital expansion, research and development and promotional activities at much lower rates than have been previously seen. (Armitstead et.al) Such borrowing may take place in the form of long term borrowings from banks or other financial institutions, or the company may choose to issue corporate bonds. Economical Factor: Present economic condition has a key role to play in the success or failure of The Body Shop. Following the commencement of the global financial crisis in 2007, the GDP was at -1% to make it a tough condition for the organization to survive. This was followed by even worse performance in 2009 with a -4% contraction. (World Bank). Although, there was a slight recovery in 2010 and 2011, others within the business press (BBC News) specify that the economy of the UK is not in a great shape and there is no such high level of growth opportunity for various highly competitive sectors in the nation. The economists also suggested a chance of "double dip" recession in the country. This kind of forecast can have a negative impact on the business performance of The Body Shop, which is heavily dependent on the economic condition for the growth of their business. The levels of unemployment have been growing in recent years with anincrease from 0.86m in 2007 to 1.53m in 2011. To combat all these difficulties there are some key economic changes implemented by the UK government. One important point is reduction in the Corporate Tax. The UK government has reduced the same from 28% to 23% in a span of 3 years (2010-2013). There is a high possibility that UK government might reduce its corporate taxes to 20% by the end of 2015, making it lower than other G 20 nations. This will help the company to expand their business. Lower tax rates are beneficial for corporations as it leaves more money in their hands for development and expansion. (Armitstead et.al) Socio-Cultural Model: There are many social and cultural changes taking place in the UK at present which used to have a great impact upon the performance of fashion retailers such as The Body Shop. In many cases, as representatives of a basically socio-cultural industry, the fashion business itself may be seen as a business which is affected by various kinds of socio cultural changes in a large way in comparison to other industries (Curtis). UK has changed a lot after the World War Tw, and become an increasingly culturally varied nation with an incursion of diverse cultures, races and ethnicities all contributing towards the socio-cultural backdrop social system (Shepherd). For The Body Shop, this change is a major one as various races and community used to have various choices so they need to incorporate various products under their offering which in a way increase their operating cost. Here increased cultural diversity can be seen as both a source of a competitive advantage yet also a potential source of conflict (Liff, et.al. 11). With the continuous development among the member nation of the EU along with that as more new nations started to get membership, there is high chance that the trends among the labour consumer market started to change drastically. Technological: There is little doubt that new technological developments have transformed the UK business environment, especially those operating in the retail sector. Key developments may be seen as those technologies which are internet or communications based in nature, such as the wide spread diffusion of broad band (Jobber). This advantage in the technology can be used by the companies such as Body shop to facilitate online sales and shift away from the traditional high street "place." Most important amongst these are developments which have allowed retailers to interact with customers using online social networking sites such as Facebook, YouTube and Twitter. These are now seen as key ingredients in the development of a successful marketing strategy (Zarrella) 7. Possible future Strategies: It is high time for the company to review its strategy and business policies to lash on the growing market opportunity initially in the UK and then outside. To achieve their old success it is important for The Body Shop to reestablished their old environment friendly image despite they are under the brand name of such a company which is not well known for the environment friendliness. To achieve their own success they have to establish a strong presence side by side their parent brand at modern world. In modern world, just to rely in CSR or environment friendly mode of promotion or to promote save animal campaign is not the best approach to reach out to huge potential customer base. As a matter of fact from 1980 onwards there are number of cosmetics brands following same line of promotional strategies. So to attract more customers, The Body Shop needs to use technology and other digital promotional strategies in more better way, using various social networking sites can be a great option for them to reach more number of customers. Another key strategy can be differentiating product line age and gender wise. To attract more customers, they can open some exclusives outlets for men where only men’s cosmetics will be available. Shops near offices or busy railway station area can be great option for them to attract new customer base. Dividing products according to the choice of the respective areas can also be a great strategy. In the UK and in many other countries, there are some areas well known for accommodation of high class people. The Body Shop can target those particular areas with high range and high class of products. This segmentation process can be helpful for them to manage customer effectively. Employing a holistic approach towards marketing, assuring fast service for all customers, ensuring proper corporate social responsibility, working on their old mission of saving nature and protecting animal and combine that with advanced promotional and advertising process is a way for success in this competitive world for The Body Shop. 8. Conclusion: Overall, it is important to make explicit that The Body Shop success was originated by a blue ocean strategy, which was based on the combination of the cosmetics industry and asset of values such as fair community trade and protecting the environment, which led them to be considered as a company with a high corporate social responsibility. Unfortunately, The Body Shop could not understand the dynamism required in a blueocean strategy in order to be a moving target for the competitors as well as keep evaluatingwhen it is the ideal “time to reach out for a new blue ocean” (Kim and Maubargne, 28). The step taken by the owner to sale the company is still an unclear one for the strategist as many analyst believes that this step hamper the reputation of the company which it able to earn with the environment friendly approach in its independent operational phase. On the other hand, according to other set of experts it is a great move as the company is still able to market its product under their own brand name, so to sailing this to L’Oreal was a master stroke. Body Shop now can take advantage of the better marketing and promotional strategies of L’Oréal to reach out to more customer and attract more niche market, can use their technology and set up to do further research and development on their existing product line to make those more advanced and more eco-friendly and can contribute to their CSR policy in a far better way. References 1. Arnold, Glen. Corporate Financial Management. Harlow: FT Prentice Hall.2008. Print 2. BBC News. UK interest rates kept at record low. 2014. Web. Accessed on 17.7.2014 from http://www.bbc.com/news/business-26463330 3. BoE Reports. Bank of England maintains bank rate at 0.5% and the size of the asset purchase program at £200 billion. 2010. Web; accessed on 17.7.2014 from http://www.bankofengland.co.uk/publications/news/2010/084.htm 4. Armitstead, Louise et.al. Budget 2012: Corporation tax cut will boost UK - but not enough. The Telegraph; 2012. Web; Accessed on 17.7.2014 http://www.telegraph.co.uk/finance/budget/9158950/Budget-2012-Corporation-tax-cut-will-boost-UK-but-not-enough.html 5. Charter, Martin. & Polonsky Michael J. Green Marketing: a global perspective on green marketing practice. United Kingdom: Greenleaf Publishing Limited. 1999. Print 6. Chesters, Anna. A brief history of The Body Shop. The Guardian. 2011. Web; accessed on 17.7.2014 7. Curtis, Eleanor, Fashion Retail.New York: John Wiley and Sons. 2007; Print 8. Kaplan Caren. A World without Boundaries: The Body Shop's Trans/National Geographic’s.Social Text: 13. 1995. Print. 9. Kim, W. Chan and Mauborgane, M. Renee. Blue Ocean Strategy, Harvard Business Review. 2005. Print, 10. Kotler, R. Philip., Armstrong, Gary, Cunningham, H. Peggy. Principles of Marketing. Toronto: Pearson Education Canada. 2005. Print 11. Liff, Sonia. Two routes to managing diversity: individual differences or social group characteristics. Employee Relations. 1997. Vol. 19. No. 1; pp. 11-26. 12. Lush online. Lush is Against Animal Testing. 2010. Web, accessed on 17.7.2014 http://www.lush.co.uk/articles/against-animal-testing/introduction_104-10051_10.html 13. McWilliams, Abigail et.al. Corporate Social Responsibility: Strategic Implications. Journal of Management Studies. 2006. Vol. 43, No. 1. Pp. 1-11 14. Milmo Cahal. Body Shop popularity plunges after L'Oreal. The Independent. 2006. Web; accessed on 17.7.2014 http://www.independent.co.uk/news/uk/this-britain/body-shops-popularity-plunges-after-loreal-sale-473599.html 15. Roddick, D. Anita. Company: The Body Shop. 2014. Web, accessed on 17.7.2014 http://www.thebodyshop.com/services/aboutus_company.aspx 16. Shepherd, Jessica. England's schools are becoming more diverse. 2010. Web; Accessed on 17.7.2014 17. “The economy is picking up and it looks like a stable recovery”. The Telegraph. 2013. Web. Accessed on 17.7.2014 from http://www.telegraph.co.uk/finance/economics/10263240/The-economy-is-picking-up-and-it-looks-like-a-stable-recovery.html 18. World Bank. GDP annual growth percentage. 2012. Web; Accessed on 17.7.2014 19. Zarrella, Dan. The social media marketing book, California: O'Reilly Media.2010. Print Read More