The Body Shop strategy

On March 26th 1976 a young lady of 33 by the name of Anita Roddick who had a deep rooted passion for environmental activism and no prior business knowledge decided to open a small store in Brighton by the name of The Body Shop selling natural based, self mixed beauty produce that she had discovered from her travels throughout the South Pacific and Africa.

Her main aim at the time was to support her husband who was travelling around America and their 2 young children.

With the advice to try and earn £300 a week from Gordon her husband she set about The Body Shop’s raise to global fame and influence.

With just 25 hand mixed products in her Brighton store in 1976 and each product having 5 different bottle sizes to simply bulk up the shops shelves she has managed to transform the organisation to be harbouring over 1,954 stores world wide today. (Mintel : 03)

The question has to be asked how has a woman with no prior business knowledge or education managed to achieve such a feat?

Is Business knowledge meaningless? Were Body Shop simply headless and happen to stumble along the correct path? Or has The Body Shop operated cleverly and adopted unique strategies to differentiate themselves away from the norm?

Throughout the following text we will discover the way in which The Body Shops historic strategy brought about its rise to world wide status and then later its decline.

We will see the way the company has adjusted its strategy to try and halt this.

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This will then be followed by the evaluation of how both Porters five forces and SWOT analysis models may account for their success and the way in which they deal with the esoteric aspect of the body shops way of doing business.

“Corporate Strategy is concerned with the overall purpose and scope of the organisation to meet the expectations of owners or major stakeholders and add value to the different parts of the enterprise” (Johnson, Scholes: 11)

Since the early days of The Body Shop its strategy has always been to stand out and be different from the rest, the company statement alone portrays this “The Body Shop International, A company with a difference” (Company Statement)

In fact The Body Shop was so different it was the first company to open up a new niche market with its natural based products.

This strategy of going against the motion of traditional business practices was fundamental toward the rise of Body Shop. The body Shop was and still is based on the following business ethics as shown in figure one.

In figure one we can see that The Body Shops aims differ substantially from most organisations in that it places emphasis on its ethical, social and environmental responsibility. This is shown by Anita Roddick saying: “I would rather be measured by how I treat weaker and frailer communities I trade with than by how great are my profits” (Body Shop international case Mintzberg, Quinn, Ghoshol : 99, 451)

Many companies simply do not operate on this level and this one stance alone that differentiates Body Shop from the rest of its market. Consumers are fully aware of companies’ desires to obtain the biggest profits at almost any legal cost to the environment or society. Anita opened The Body Shop at a time when Europe was becoming greener, organisations such as green peace were being founded, knowledge and media interest were also on the rise so a company promoting good environmental ethics that concerned consumers brought about a large interest in the company. Therefore timing was also a key component of their strategy and this is acknowledged by Anita “I am aware that success is more than a good idea. It is timing too. The Body Shop arrived just as Europe was going ‘green” (AnitaRoddick.com)

Another key component for the company was Anita Roddicks ability to handle the media. Since the beginning of Body Shop she has used the media as her major tool of strategy in her search for success. Ever since she opened her shop in Brighton next door to two Funeral companies and was sued for her ironic choice of name she has used the media masterfully and to great advantage.

The Body Shop never advertised in the conventional way. Usually advertising took place in an indirect way, not through the company but by word of mouth or through editorial coverage in magazines and newspapers.

Roddick herself estimates that she generated around 2 million pound a year of free publicity (Body Shop international case Mintzberg, Quinn, Ghoshol : 99, 453)

The press liked Anita and being forward with her opinions made her very quotable, in a sense they worked off each other.

For the consumer this lack of conventional marketing really went against the usual ways of the beauty and cosmetics industry. Over 85 percent of its costs are packaging and advertising, The Body Shop simply ignores this. Charles Revlon founder of Revlon said “In the store we sell hope, We are a dream machine” (Body Shop international case Mintzberg, Quinn, Ghoshol : 99, 453)

The Body Shop simply say “There are no magic potions, no miracle cures, no rejuvenating creams, skin care products can do nothing more than cleanse, polish and protects that’s it end of story!” (Body Shop international case Mintzberg, Quinn, Ghoshol : 99, 448)

This educates its consumers to know what to expect when purchasing Body Shop produce. No false hopes just the notion to simply to inform, usually via products labels, media.

However as the early nineties arrived this strategy came under threat. Questions arose regarding the authenticity of The Body Shop claims of using natural products. Body Shop stepped down from this stance and acknowledged that some ingredients were in fact synthetic preservatives. They also had to step down from the claim that they didn’t test their products on animals as they could not guarantee that this was the case with some third world suppliers. Instead they “Are against animal testing”

These cases along with becoming the victim of its own success with ever increasing competition in its market we have seen Body Shops power and sales decline.

Operating profits in the UK were just 4.9 Million with an operating profit margin of just 8.4% this was down by 57.0% since 1994 and the international profit margin was also down by 18.7% between 94-99. Shown in figure 2 (source: Mintel)

These results brought about a large stimulus for change of strategy. In 1999 The Body Shop underwent an organisational and management shake-up which intended to reposition the group and rejuvenate its performance.

Out went Anita Roddick and in came the likes of A. Bellamy (Executive Chairman), A Murray (Finance director) P. Saunders (Chief Executive Officer).

Their new strategy started to run itself round cutting costs and improving efficiency. No longer were they manufacturing their own goods as they began to outsource to cut company costs. By February 2000 they had sold its Littlehampton manufacturing business to COSi. (Mintel: 03)

It also saw of change of strategy regarding its marketing. They have moved from it stance against marketing and have now advertised through strategic advertising in select media and in terms of posters and billboards.

They are slowing down the fast global expansion of The Body Shop through franchising and building to place resources in existing stores and buy existing franchises. This falls into the strategy of tighter control, costs and working capital to increase the profitability and cash generation. Its appears that despite core competences remaining with regards to ethics and social responsibility, well on the outside at least, Body Shop are trying to steady themselves among the raising competition whilst still trying to differentiate their selves.

Theoretical and decision making models are a responsible way of accounting for an over view of the Body Shops success and Failure. I will discuss the following two frame works of SWOT (Design school, Mintzberg, Andrews) linked with the resource based ideology and Porters five forces (Positioning School, Porter: 85) we will over look the Body Shops Strategy by inserting the relative data into each frame work and then discussing it with reference to how the model deals with the esoteric aspects of body shops way of doing business.

“A swot analysis summarises the key issues from an analysis of the business environment and strategic capability of an organisation” (Johnson, Scholes: 190)

From SWOT analysis as written above a company is able to get an idea of its external environment and thus be able to exploit its competitors.

Looking in Figure three we can see the SWOT analysis for The Body Shop in its current state. The SWOT analysis is spilt into four sections of analysis Strengths, Weaknesses, Opportunities and Threats and from this we can see the some of the strategies that have taken the Body Shop forward yet we can also assume the factors that have held it back.

Take for example in the strengths section we can see most of the key historic and current strategies that have propelled Body Shop to its world wide status.

The focus on its strong ethical and environmental credentials as well as its franchising schemes is seen as its major strengths. These have been with the company since the start and the companies’ strong ethical and environmental stance can be seen as its core competency that raises the company above its competition.

The Weaknesses and threats in the analysis chart bring forth the concerns and challenges that face The Body Shop today.

Suffering from its earlier success it shows how the competition has increased. An earlier SWOT analysis would have contained more capital and expansion threats and weaknesses as they were a new company starting in a new niche market now as Body Shop become Mature and its market exposed many firms have joined the band wagon of going green and being environmentally friendly. Most natural beauty retailers such as boots, L’Oreal are against animal testing and competition of natural products is ever increasing with supermarkets now producing their own brands. So how The body Shop differentiates itself, manages its weaknesses and exploits its opportunities is a now dilemma that Body Shop must face.

“Five forces analysis is a means of identifying the forces which affect the level of competition in an industry” (Johnson, Scholes: 1998)

M. Porter sees competition “as the core of the success or failure of firms” (Wit, Meyer : 345) and that the essence of formulating competitive strategy is by relating a company to its environment (Porter: 3) Therefore he designed a frame workforce to that shows state of competition in an industry which is based around five forces. We can see these five forces and what they involve in figure 4.

As we can see it is in a rather simplified format regarding the amount of the detail it goes into. Porter actually goes into more depth and detail regarding his texts, therefore simplified models of the five forces are not as informative as it could possibly be so should be considered as a framework for further analysis.

However for use in the case of Body Shop and the word constraint it still can provide us with a useful knowledge of the environment that Body Shop is facing and how it accounts for it success and failings

Firstly considering the threat of substitution for Body Shop products we can consider this to be high. Body Shop is in direct competition with the beauty industry both natural and unnatural. As competition in its niche market increases substitution becomes a bigger threat. This is certainty is a hindrance to Body Shop currently. However the threat of substitutes has actually helped in this case, Porter asks the question of “whether or not a substitute poses the threat of obsolescence to a firms product or service, or actually provides a higher perceived benefit or value” (wit, meyer : 120) This covers the case of the Body Shop actually providing beauty products but actually only providing natural ones. This means that Body Shop in the case of this model have been able to add value by offering a natural alternative to typical ones, this has been one of the key factors of The Body Shops success. Therefore this section of the model accounts for both success and failure for the Body Shop.

The potential entrants force also provides an account of the success of the Body Shop. Porter states that the treat on entry is dependant on barriers to entry. Within the six major forces that affect the barriers we can account for the product differentiation of Body Shop acting as an entry barrier. During the 80’s Body Shop had established itself as the original and leading retailer of natural based cosmetics with a good brand image. This formed a consumer loyalty base and has acted as a deterrent for potential entrants, as building a brand up is very costly especially against the flow of success that the Body Shop were experiencing. “This barrier is perhaps the most important entry barrier for baby products, over the counter drugs, cosmetics” (Porter :9) All of which are connected also with the SWOT analysis of the firm.

However as the nineties came forth Body Shop suffered some damaging anti natural claims as well an apparent lack of ability to re-invent itself possibly saw the consumer become accustomed to Body Shop as well as possibly becoming down hearted with body shops reversal on some of its claims. Then seemed a good time for more competitors to try and enter the market. Larger cosmetics companies such as L’Oreal, Boots had resources to be able to defeat another major barrier of Porters in regards to distribution channels.

These competitors already had secure logical forms of distribution in terms for their numerous stores both nationally and globally. This gives them a substantial starting base to promote their selves within a new product market. Supermarkets are now also using distribution channels as a means of entering the natural cosmetics sectors. Both Asda and Sainsbury’s have their own ranges already as well a massive store base.