3. Analyses
3.1 PEST Analysis (Appendix 6.3)
The Body Shop in many ways affected by each of political levels of (Local, National and Global) environment. For example, Local government controls the price of property the same as rent hence it effects the store occupancy costs. The Global environment is also very important, especially when company wants to expand to foreign markets and should consider the country’s policies. There were lots of new opportunities to expand in the beginning of 90s to East European Countries as well as to Asia and Middle East. This explains the steadily gross of profit in the middle 90s. (Financial Information, )
The banks have a direct influence on the company as providers of loans, mortgages and as investors in businesses. Also national governments have a big influence with taxation: VAT and duty on import/export. In this case it can limit expansion of the market abroad. According to the Company Profile – Body Shop Plc, one of the factors that explain the decline in profit year-to-year is the negative impact of the weak Euro exchange rate. Obviously the international trading organizations (e.g. EFTA, WTO) have their part of influence as well.
In the last decades social changes in an inequality of income in the countries of Eastern Europe therefore more consumers. When the company exports their goods, they need to make sure about cross-cultural issues like language, so that consumer can understand what he buys and how to use the product.
Cultural shock is another thing, which some time can be absolutely unpredictable and lead to the crash of business. As Adrian Bellamy, Executive Chairman proves us telling - “We had the 11 September tragedy which destroyed one of our stores and seriously impacted trading especially in the USA; and we had weak economies in the USA and parts of Asia and Europe.”
As a result of technological progress businesses are affected on all levels, which make it more efficient, fast and convenient within internal work of companies and external in approaching your clients.
The Body Shop Direct allows you to purchase product with the help of Internet.
3.2 Porter’s Five Forces analysis (Appendix 4)
Companies such as Boots Co., Safeway’s Nutri-therapy, Bath & Body Works and Estee Lauder’s Aveda just recently they were potential entries, as far as today they are already present competitors. They very quickly catch up with technology and became strong competitors within 2-3 years, exactly when The Body Shop’s profit started to decline (See Appendix 6.1).
- Potential Entrants - High
The barriers for a new entry are too low: product development is relatively easy, large retail stores can price products at a discount and make them more available to the customers through greater use of distribution channels. The Body Shop failed in this aspect because expanding operations though different distribution channels was a risk to their franchise shops (Company Profile – Body Shop Plc). There could be one difficulty, it is – brand development and reputation, which takes time. On the other hand, there are many companies like Procter & Gamble, Nivea, who already have brand development and reputation plus financial basis to catch up in developing and producing new environmentally friendly products. Moreover, their products are popular anyway.
There is a big quantity of suppliers and wide spread of raw materials that indicates that there is big choice and competition within them. Therefore the bargaining power of suppliers is low.
There could be several kinds of substitutes. Firstly, any Beauty Salons what provide people, with alternative to cosmetics, service and often are providers of particular companies. Secondly, there are big retailers – Tesco Plc, Sainsbury’s Plc, who can compete on almost the same product but low price. At last, there are high quality niche players – Chanel, Clarins, Clinique etc. Their price is almost the same as The Body Shop, but quality and prestige is much higher.
Bargaining power of buyers is low, because of the big amount of consumers and customers (including franchising).
3.3 Stakeholders Analysis (Appendix 6.5)
Stakeholder is self-explanatory table.
Category A:
Customers - consumers, who have plenty of choices and do not pay lots of attention, and therefore have low power.
Category B
Employees have high interest, because they depend from the employer, who gives them their wages.
Franchises interested, how stable is the company who supplies them with the goods and control the prices, so how much profit they can make.
Suppliers interested in how much they can sell and on what price.
Category C
Trade Unions, they are satisfied if the employees do not complain.
Institution shareholders satisfied as far as they get interest from their investment.
Category D
Shareholders have high power and interest.
Owners - Anita and Gordon Roddick
Banks deciding whether to invest in the company or not.
4.0 Conclusion
Positive aspects of the company are that it managed to successfully introduce and develop natural products for the mass market. Moreover, The Body Shop gave people different prospective of thinking about environment and health care. The negative aspect of the company is that it failed innovate new products and justify a higher price for the brand. In addition, it expanded externally at the time, and is now facing tough competition from all major retail stores.
5.0 Recommendations
In the future they have to concentrate on target market and to shrink operations to a niche player. Concentrate on locations where sales are higher and close operations which are running at a loss. Have to develop new products in order to be ahead of the competition and improve the company’s margins. To cut down their product line in order to cut research and development costs.
6.1 Appendix
* The Body Shop International PLC Annual Reports and Accounts 2002
6.2 Appendix
- The Body Shop International PLC Annual Reports and Accounts 2002
6.3 Appendix
PEST Analysis
6.4 Appendix
Porter’s Five Forces Analysis
6.5 Appendix
Stakeholders Analysis
7.0 Bibliography
The Body Shop International Plc, Annual Report and Accounts 2002,
Company profile - Body Shop Plc, 07/2002, (30/10/2002)
Company profiles: leading companies – The Body Shop International Plc, 05/2002, (30/10/2002)
Capon, C., Understanding Organisational Context, 2000, Pearson Education Limited.
Sloman, J., Economics for business, 1998, p. 341
