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The Body Shop International presents the case of a company whose business model strength initially relied on its Corporate Social Responsibility (CSR), but that afterwards faced problems and challenges, due to mismanagement of internal resources, stakeholder’s conflicts, and the unawareness of external changes. The model created advantages but also limited growth, as the organization was not prepared for expansion due to the lack of corporate structure required for a global strategy.
Anita Roddick believes in the power of businesses and in the use of success as a force of social change, therefore Body initial mission was to make profit with principles, that is, being especially responsible for employees, society, Third World development and the environment. This innovative, radical and daring approach became Body Shops competitive advantage (Strategic Corporate Social Responsibility); and according to this strategy defined a unique marketing approach: desirable and environmental products, moderated prices and relaxed shop environment in order to attract and educate customers (humanistic, environmental conscious).
CSR “pay offs” to Body Shop were clearly appreciated through the 80s when it grew 50% yearly; media attention and customer awareness resulted in boost sales, shop openings, increases in stock value, etc. Exhibit 1 shows Body Shop’s stakeholders and the strategic outcome or value created by the companys CSR behavior by means of the centrality, specificity, voluntarism and visibility of its actions.
Special emphasis and success were obtained in the Visibility dimension, as Body Shop was not always able to practice its social vision, but always was very good at promoting it.
Anita is a great PR (“loud and quotable”) and during her management always made sure the firm gained recognition from internal and external stakeholders. Other keys for Body Shop’s success were Anita’s leadership, charisma, influence and management style; very convenient for an Entrepreneurship venture. She created a corporate culture based on communication, informality and “break the rules” mentality that resulted in employee’s loyalty, commitment and productivity. Nevertheless, at the beginning of the 90s Body Shop seemed to have lost its magic growth formula.
The main problems faced by the company were its inability to align and prioritize stakeholder’s interests, as well as its lack of agility and flexibility to evolve and adapt to external changes. One of the main causes was the companys low Proactivity. An initial opportunity was pursued by Body Shop due to its leader believes, vision, anecdotic and lucky events, but afterwards the company was never able to plan its behavior in anticipation of emerging trends and threats (competition, globalization, expansion) and therefore leverage its first mover advantage in the CSR field.
Body Shop’s principal conflict of interest was with Franchises, one of its main partners and stakeholders. The company adopted this model of expansion which was initially appropriate due to its low risk (“self financing”), but failed in improving and controlling the network. Headquarters was not capable of implementing a control system over franchises, critical during an expansion stage, although a strict and time consuming selection was made.
Some franchises were becoming unhappy, not aligned with the company’s principles and unmotivated with the business and the concept. Some expressed concern about Anita’s ethical and political blowups, but the bottom line was they were not profitable and felt they didn’t received support and attention from headquarters. This was especially the case of independent franchises, which to date still represent 29% of the shops, who complained they were discriminated in favor of company owned ones.
Body Shop is subcontracting its main asset (relationship with customers) to franchises, so they must align them. They contribute with important start up investments and royalties (5%), as well as with their knowledge and expertise about customers and markets. Vertical integration (buying back unmotivated franchises) is an alternative, but the basic problem will not be solved until they can regain control over the network and exercise legitimate authority over them, by means of implementing rules, standards, and hierarchies (Bureaucracy).
Conflicts also started with other stakeholders, such as customers, investors, and even employees (complacency), mainly due to Anita’s increasingly political actions. Body Shop’s brand and image started to deteriorate as consequence of public debates about the company’s 100% natural products, best practices, thirst for publicity, hypocritical attitude and populist campaigning. That is, the company’s real CSR intentions were questioned and there was a tendency to believe Body Shop expressed social concern just for selling.
Potentially, customers could be lost and sales affected, as well as shareholders interests in terms of value creation (dividends, capital gains). Anita was over focusing on social activism and was indifferent to businesses bottom line: Profitability. Some of the key issues not addressed correctly by the company were their unawareness of industry changes and competitor’s reaction, as well as their failure in preparing an international expansion.
Premium competitors such as Aveda, Lush and Origins began offering natural products, exercising pressure over Body Shop, who was not successfully innovating anymore and whose products were starting to be perceived as “low end with premium price”. The company’s decision to expand internationally was a sensible one due to economies of scale (it was depending to much on the UK) and scope and to position itself as a global player in the cosmetic industry with the best CSR practices.
However, they neither performed detailed market researches nor prepared the organization’s structure for such an expansion. The U. S. market was a different one, with a diverse consumer base less concerned with environmental issues but product and price driven, less brand loyal and in where there was a tough competition, especially through advertisement; a bigger and less controllable market with few common characteristics with the English one. The Body Shop has two alternatives for international expansion: full penetration in the U.
S. market with previous market segmentation, offering tailored products and services through convenient channels (gain support and capture malls) or a strategy of light penetration in the U. S. combined with focus in other potential foreign ventures, although not with the same size as the American one (Asia Pacific, Continental Europe, etc). In each case, Body Shop must train intensively to local staff, keep their values, refine their marketing strategy locally (strong advertisement in U. S. arket for example), meet local regulatory demands and continuously monitor and control implementations. In order to successfully transit to the next stage of its organizational life cycle, the “Collective Stage”, Body Shop should have changed its Roddicks centered organization, in were decision making was only a matter of its leaders. An informal organization was suitable when having few shops; size increase and global expansion demands a formal organization with defined control systems, strict accountability, increased bureaucracy and suitable information technology for information flow.
A regional structure with decentralized decision making is necessary for gaining international advantage by means of national responsiveness (Multinational Corporation) and future global integration (Global Corporation). Knowledge transfer, headquarters planning, formalization and global teams coordination are key elements. Finally, leadership changes are necessary in order to avoid the organization dependency on Anita and to bring refreshing ideas and industrys best practices.
Once a company is public, it needs to operate in its shareholders benefit, so focus should be profits over passion, and agency problems should be avoided, although founder’s legacy and best practices should be kept. Adrian Bellamy, an ex director who entered the company through a joint venture, is the actual CEO of the Body Shop, after the Roddicks stepped down due to investor pressures. Actually Anita is a consultant, and Bellamy should use Anita’s knowledge and expertise in marketing and product development issues in favor of the company; let her continue travel and innovate!
Body Shop should maintain its CSR advantage but also refocus its efforts in product development and retailing (franchises), taking into account characteristics of individual markets (adaptive vs. global). Cost reductions, new product launches and packaging, extension of successful ranges, promotions, refreshing store formats, new channels of distribution (Internet), I/T systems support (actually implementing SAP), are some suggested actions in order to re position the brand as one offering “credible products at affordable prices”.
Will Body Shop achieve Sustainable Growth? Anita’s legacy (CSR, innovation), together with good business management could make the company return to the success path. Although managing stakeholders relationships is not an easy and straightforward task, the company has still an important network of key partners (franchises) and a brand with global reach, within a sector (personal care) with potential and in were there are still opportunities for expansion.