著名
Contents
1. Introduction of essay
2. Background of Body Shop
3. Historic and Current Strategies of Body Shop
4. Industry Analysis of Body Shop (Five Forces)
² Threat of new entrants
² The bargaining power of buyer
² The bargaining power of suppliers
² Competitive rivalry
² The threat of substitutes
5. Internal Analysis of Body Shop (Value Chain)
² Purchasing
² Production
² Distribution and Marketing
² Human Resource Management
6. Can Body Shop succeed in the future?
7. Future Strategy of Body Shop
8. Using Information to achieve strategic advantages
9. Conclusion
The Body Shop
Introduction of Body Shop
In my essay I first introduce the background of The Body Shop and
then outline key components of strategies of Body Shop in the past
28 years. To explain the competitive strategy of Body Shop, I
analyzed industrial environments by using the models of Porter’s
five forces to demonstrate the industry’s attractiveness. I will put
forward the current generic strategy the company. And then I will
use Value Chain to make an internal analysis to show how the Body
Shop acquires competitive advantages to succeed in the past 26
years. Then basing on the external and internal analysis of Body
Shop, I used Boston’s Portfolio to indicate the fact that the
company has lost its market share and to explain why it will not
succeed in the future. Furthermore, I will recommend the alternative
strategy the company should use in the future. Finally I discussed
how Body Shop uses information to generate its strategic advantages.
Background of the Body Shop
On 26th march 1976, the famous cosmetic shop, Body Shop was founded
by an offspring of Italian immigrants, Anita Roddick, at Brighton,
the south coast of England, primarily for the simple reason of
bringing up her children and supporting her husband’s dream for
visiting more countries on horseback.
All products of Body Shop including accessories, body and bath,
fragrance and so on are made from natural ingredients targeting at
different types of people including children, ladies as well as
gentlemen. all of which are attributed to the hardship of Anita
Riddick who visited various communities such as Kayapo Indians to
get more recipes of natural ingredients and chemists’ countless
tests in the laboratory.
The big difference between Body Shop and traditional cosmetic
companies is that Body Shop aims at making people be satisfied with
themselves including character, curiosity and imagination instead of
creating a false dream which can’t be attained and then frustrating
the customers that the traditional cosmetic companies usually do.
With the faiths in protecting the environment and caring for people,
the Body Shop had been ran successfully and expanded amazingly with
a high growth rate from a local shop to the well-known international
toiletries retailers group with 1500 franchises in 47 countries in
the past 29 years.
According to the theory of Henry Mintzberg, there are five
definitions of strategy. But I prefer the fourth one. “Strategy is a
perspective, its content consisting not just of a chosen position,
but of an ingrained way of perceiving the world. Strategy in this
respect is to the organization what personality is to the
individual” (Henry Mintzberg, 1999, The Strategy Process, P18). So
firstly we must know what is chosen position of Body Shop, and then
combining with the ways Body Shop has done for its products in the
market we can find the strategies of Body Shop in the past 28 years.
Historic and Current Strategies of Body Shop
At the beginning, the Body Shop was founded by Anita only for the
simple reason to support her husband’s expedition and raise
children. Hence at the stage of entrepreneurship, the intended
position is surviving which belongs to the first lever of strategy
in the hierarchy of business objectives. The way to survive is to
differentiate from traditional cosmetic product. So at the
beginning, the competitive strategy is differentiation. Anita made
countless efforts for differentiation such as using recycled bottles
and building up green-image of stores to show its environment
awareness, campaigning as medium of advertisement to attract
potential customers. As the company expanded further, Anita focused
more on environment and people, which gradually developed into five
core values as the Body Shop’s missions.“Against animal
testing；Activate self-esteem；Support community trade; Defend human
rights; Protect our planet” (www.theBody Shopinternational.com).
These five values provided the position Body Shop chose. “For the
Body Shop, care for people; care for the environment and concern for
animal rights are essential components in its business strategy”
(David Wheeler, Body Shop International-No time to waste). Under the
guidelines of its five core values, Body Shop combines the concepts
of running a business with social issues to form its own strategies
in the past 28 years. In addition to differentiation as its
strategy, Body Shop also focused on the cost. But the strategy is
still differentiation. The following are the key components of Body
Shop’s current strategy on the basis of five core values, which I
will explain in the internal analysis of Body Shop using the model
of Value Chain and Information Analysis.
1. Developing environment awareness-oriented Product to reach
differentiation.
2. Advocating Fair community trade to cut cost of raw materials
3. No Advertising Strategy through strong public campaign
involvement.
4. Focusing more on education of franchise and staff to improve
performance of company.
5. Launching a E-Commerce Model to regain its losing market
share
According to Michael E. Porter’s theory, “competitive strategy aims
to establish a profitable and sustainable position against the
forces that determine industry competition. Two central questions
underlie the choice of competitive strategy. The first is the
attractiveness of industries for long-term profitability”(Michael E.
Porter, 1985, “competitive advantage” P1). So I would like to use
Porter’s five forces to show the industry attractiveness of Body
Shop.
Industry Analysis of Body Shop (Five Forces)
l Threat of new entrants
Porter said that if the barriers to entry are low then new entrants
will be attracted by any rise in industry profitability (Gordon
Pearson, 1999). According to Body Shop, firstly, through 28 years
hardship, Body Shop established a strong image with good reputation
by the customers, so for the new entrant it is not easy to build up
a strong brand loyalty in short time. Besides, through advocating
Fair community trade, Body Shop formed good relationship with the
long-term suppliers of raw materials in the 3rd world countries,
which is more like a friendship than a partner in business
environment and can not be imitated by new entrant. In addition,
Body Shop share a developed distribution channel through its own
franchise system and appropriate technology of natural ingredients
against animal test, all of above set big barriers for new entrants.
On the contrary, the existing products of Body Shop are becoming
more and more homogeneous. For the reason that the natural
ingredients seem to be not the only core technology of Body Shop,
for instance the big competitors Bath&Body works, Garden Botanika
with huge resource had entered the cosmetic market in the middle of
90th with similar natural cosmetic products. Because of lack of
innovation in new product, designing, packing, from 1996 to 1998,
around 20 franchises canceled the contract with Body Shop in USA
which resulted in dramatically declining of market share of Body
Shop in USA.
l The bargaining power of buyer
The bargaining power of buyer seems to be strong. As for the
cosmetic product markets, although the Body Shop doesn’t concentrate
on youths, the majority of consumers are the young generations who
are more inclined to be changeable comparing with the old
generations and concern less on the environment and public issues.
So it becomes harder to attract them to buy the products of Body
Shop mainly because of the differentiation of the social issue.
They are more professional on technology so they could easily know
the information of the price and the new functions of other
competitor’s products. at the same time the buyer have nearly no
switching cost to change another cosmetic products. And nowadays the
products of other rivalry such as Baths body, Garden, Botanika have
little different functions of product at relatively cheaper price
and the products of Sainsbury are easier to accessible, so it is
more likely for them to change the products of Body Shop. In
conclusion the bargaining power of buyer is strong.
l The bargaining power of suppliers
According to the Body Shop, the bargaining power of suppliers is not
strong, for the following reasons. Firstly most of suppliers of Body
Shop come from 3rd world countries and they have limited partner in
this industry so that they did not have monopoly power in supplier
industry.
Secondly because the suppliers come from poor community, they have
expensive switching cost because Body Shop is not only the biggest
buyer of them but also contributed to the beneficence of their
community, so it is impossible for them to find other beneficent
buyer to cooperate with. It is two-win cooperation so that the
supplier would not be likely to destroy it.
So we can see the bargaining power of suppliers is not strong.
l Competitive rivalry
In the cosmetic market, it is obvious that because of high market
growth rate and profit, more competitors flocked to this profitable
market. For instance Bath&Body Works, Garden Botanika,H2O+ all
copied the strategy of Body Shop and entered in this market. The
sales of Bath&Body Works increased from 1.12 billion dollars in 1993
to 10 billion dollars in 1999.
Because this cosmetic industry belongs to mature industry, so the
total market share does not seem to increase rapidly. And to be
frankly, the functions of the cosmetic products are surprisingly
similar, so there is likely to be intense competition over market
share which usually results in the price wars intermittently making
the profit of this industry vulnerable.
All of above proved that the threat of competitive rivalry is
strong.
l The threat of substitutes
According to porter’s five forces, the threat of substitutes comes
mainly from relative price, technology and costs of switching
(Gordon Pearson, 1999). As for this point, the substitutes of Body
Shop’s products are the traditional cosmetic products without
focusing on environmental issue and being made of natural
ingredients. In the past, the threats of substitute are strong, but
nowadays it becomes a trend to use the cosmetic products being made
of natural ingredients and most cosmetic companies all provided this
kind of products such as P&G, so that we need not worry about the
threat of substitutes.
Till now, we finished the industry analysis of Body Shop; let us see
the Body Shop’s total business activities thoroughly and then we can
see how Body Shop accumulated its own competitive advantages through
each activities of Body Shop using Value Chain Model.
Internal Analysis of Body Shop (Value Chain)
I would like to use Porter’s Value Chain to analyze the competitive
advantages the Body Shop achieved. “Analysis for competitive
strategy looks at each activity in the value chain in order to
assess the value each activity added”(Gordon Pearson, 1999, Strategy
in action). Through value chain we can see the competitive
advantages of Body Shop from five important aspects.
Purchasing
Since Body Shop set up, Anita traveled around the world committing
her to help more traditional people mainly in 3rd world countries.
All the activities, in fact, help her to find more traditional
remedies and recipes of natural body-care products which should be
evolved from countless researches by R&D departments and incur vast
amount of money. At the same time if she find the location of
community being suitable for manufacturing the raw materials she
would like to invest to set up a new factory which could guarantee
the quality of product in the future. In this way Anita achieved
competitive advantage of lower cost and high quality.
Production
As for the production of Body Shop, from the outset of Body Shop
Anita used refilled bottle to fill in the new bottle and package is
the simple plastic bottle. This activity build up environment
protection image being differentiated from other cosmetic products,
which also has two implicit advantages, first is to cut the cost of
each product, second is to attract customers back to the shop.
At the same time Anita required many quality control processes to
test the new product without the test on the animals and used
greenhouse to filter the waste products. All of those are consistent
with core value of environmental and social issue of Body Shop and
induce customers to pay more for the value-premium.
All of these compose the competitive advantage of different product
focusing on environmental and social issue.
Distribution and Marketing
Let us see the distributions and marketing through using of
franchise systems. Body Shop cut its operations fee to the lowest
lever and made its distribution being accessible all over the world.
Simultaneously it occupied large market share in the world in short
time. And through the campaigning and public relationship Anita
formed a different style of promotion to attract the customers to
visit the Body Shop. “the publicity such campaigning attracted was
effectively a form of free advertising, potential customers became
involved- and people were drawn into the store”.( Paul Brown, 1996,
Anita Roddick and the Body Shop.) all of these enable Body Shop get
benefits from the low cost, wide distribution channel as well as
well-known brand image and good reputation.
Human Resource Management
Instead of improving the performance of company by increasing the
payment of employees, Body Shop input more in the education of
employee. In 1986, Anita founded a training school for all the
employees to teach them the information of products, the culture of
company as well as the faith of company from the aspects of social
and environmental issues. This kind of human resource development
makes the employees be familiar with the functions of each product
which increases the performance of their working performance and the
satisfaction of customers. “Meanwhile it proved to be a great
motivator and made people proud to work for the Body Shop” (1996,
Paul Brown, Anita Roddick and the Body Shop).
All of above human resource development endowed Body Shop with the
competitive advantage of Employees’ loyalty.
Basing on the Industrial and Value Chain analysis we could see the
generic strategy of Body Shop is differentiation and Body Shop
formed five competitive advantages.
² Low cost and high quality
² Different product focused on the environmental and social
issue
² Wide distribution channel
² Well-known brand image and good reputation
² Employees’ loyalty.
Can Body Shop succeed in the future?
Anita avows to the public that the key to the success of Body Shop
is to combine environment and social issue into its business in that
way her products could be differentiated from others. Undoubtedly
Body Shop achieved remarkable success in the 1990s with the faith in
five core value. However with the new entrant come into the cosmetic
industry and great changes took place in the value of new
generation, firstly low cost advantage of Body Shop cannot be
retained by the Body Shop became other cosmetic company provided
cheaper products. Then more cosmic company also provided the natural
cosmetic products and also contributed to society. From this point,
Body Shop cannot differentiate from others. Finally because of the
intense competition among increasing numbers of new entrants, Body
Shop lose much market share and became a “Problem Children”. Let us
see it clearly using Boston Consulting Group’s Portfolio Model.
The Boston’s Portfolio Model usually includes two dimensions, growth
rate of market and relative market share to evaluate. Just like the
following figure shows:
Relative Market Share
High Low
Past One
Star
Problem Children
10%
Cash Cows
Dogs
Low High
10 1 0.1
In the cosmetic industry with high growth rate, by the mid-1990s,
Body Shop belonged to “star” according to the Boston’s Portfolio.
However in the mid-1990s, many new entrants came into the cosmetic
industry and great changes took place in the value of new generation
as I analyzed in Porter’s five forces, which resulted in the loss of
market share of Body Shop. After the mid-1990s Body Shop gradually
became “Problem Children” and unprofitable as a result of their low
market share.
As a result, The Body can not remain its competitive advantages and
succeed in the future without any changes. I suggested that the
management of Body Shop could adopt the following recommendations in
addition to its current strategies.
Future Strategy of Body Shop
1. New product development focusing on customers
We can see that Body Shop shared high growth rate in the past 26
years. But with the new entrants entered this market, Body Shop
cannot rely on the environmental and social issue to differentiate
from other products. So the only way to survive for Body Shop is to
develop the new designing, packing as well as functions of products
to acquire advantage of differentiation.
As the chief executives reviews shows that “our strategy to develop
a consolidated global assortment. Recent launches included a new
hair care range; invent your scent, skin focus”. Only in this way
Body Shop can achieve competitive advantages through
differentiation.
2. Developing the E-Commerce model of marketing as the major
strategy
From the industry analysis, we can see that the major component of
market share in cosmetic industry, young generations care more about
the Information Technology instead of environmental and social
issues. When they came home, they used to open the computer and log
on the internet to find products they would like to buy, so when we
developed the elaborate E-commerce Model of Body Shop, we can get
more potential market share which other similar cosmetic companies
ignored and decrease the storage cost to the minimum. The case of
Dell Computer is a best model to imitate. Although the Body Shop has
already used E-Commerce to regain market share, I recommend strongly
to the management of Body Shop to use E-Commerce as the major
strategy in the future.
3. Establishing direct-selling model to its traditional stores
After 26 years’ hardship, Body Shop built up a well-known brand
image and strong coverage of press, so if Body Shop adopts the
Direct-selling model through telephone, fax or E-mail. Body Shop can
run successfully because most of consumers knew this brand and
believed in its high quality so they would like to buy the products
of Body Shop without going from home to the stores of Body Shop.
Normally most consumers buy the products through Direct-Selling for
its brand image and reputation because they can not see tangible
things. While Body Shop shares these two advantages so that Body
Shop can decrease the fee of operating a new store and it can also
set a barrier to new entrant of cosmetic industry for the new
entrant is lack of brand image and good reputation.
4. Setting up elaborate information system for specific
customer’s needs
According to Industrial Analysis of Five Force, with the development
of technology in cosmetics industry, there seems to be less and less
changes which can be done by these cosmetic companies, so to get
differentiation we could only focus on our customers. Because the
products of Body Shop suits for each stage of your life, so we could
design an elaborate information system for recording each customer’s
information. In this way we can see the effect of product on
specific customer and provide different suggestions such as whether
I need continue to use this product or switch to new one to try
according to specific situation.
In this way the company benefits from acquiring useful information
about the real effect of product to different types of persons which
could contribute to new product development in the future and
increasing of market share.
Using Information to achieve strategic advantages
1. Collect information of natural ingredients to differentiate
from competitors
At the outset of Body Shop, Anita started to collect plenty of
useful information about the natural ingredients all over the world
to develop her new product. Because in many poor communities or
extreme climate region, the local persons have no money to buy
modern cosmetic products to decorate themselves while remaining
charming appearance and healthy body, there should be some
traditional remedies and recipes. For instance Anita visited the
Polynesian where the skin of residents should be dry up and wrinkle
to get cocoa butter made from cocoa pods to retain its natural
moisture. (Paul Brown, 1996, Anita Roddick and the Body Shop)
All of above things enable Anita develop various types of the
products of Body Shop being differentiated from other similar
cosmetic products and to some extend save part of fee in R&D.
2. Using information to communicate with the public to
establish customer’s loyalty and build up the brand image and
reputation
Like traditional cosmetic company, Body Shop normally uses the
various medium such as leaflets, brochures, pamphlets to show its
product. But the big difference between the Body Shop and other
cosmetic company is that many of the propagandizing of Body Shop is
related with environmental and social issues which are the core vale
of Body Shop.
Meanwhile Anita has committed herself to campaigning for
environmental and social issues such as against animal testing,
support women movement. At the same time Body Shop established a
cooperation relationship with the international non-profit
organization, Greenpeace, in the activity of saving the whale. All
the Campaigning and public relationship in fact play the important
role of promotions especially in cosmetic industry where the
advertising constitutes major part of its cost.
All above communication to the public convinced the consumers the
Body Shop really cares about people as well as environmental issue.
As Anita Roddick said that “the Body Shop has never been just a
shop. It has always been a statement, a way of saying that you are a
caring customer.” In this way Body Shop established the loyalty of
customers and brand image of company.
3. Using information online to get more market share
As I mentioned in industry analysis, in the mid-1990 many new
entrants entered the market which resulted in loss of market share
of Body Shop in USA and Canada and Mexico. While Body shop succeeded
to regain more market share from internet as the leader of cosmetic
industry. Because on internet, The Body shop can know more about the
needs of potential customers and also do business with them directly
without additional operations fee for setting up a new store. “The
revamped site, the Body Shop.com, sells the 750 products available
in the stores. Designed by interactive agency AKQA, it replaces the
low-watt marketing of 40 or so body butters and other items the site
peddled before”.( Body Shop seeks Web rejuvenation). So in this
modern information method, Body Shop could keep up the position of
the leader in cosmetic industry.
Conclusion
In general, Body Shop developed in the1990s at rapid growth rate
from a small store to a well-known international cosmetic company by
faith of combining the business philosophy with environmental and
social issues. Because of its faith it was run successfully with
competitive advantages over other similar company. While due to the
changes of cosmetic industry Body Shop met a lot of problems which
defied the five competitive advantages.
To sustain the success Body Shop should develop new product and
provide one-to-one service to differentiate its production and at
the same time use the model of E-Commerce and Direct-Selling to get
larger market share.
References
1. Gordon Pearson, 1999, “strategy in action, strategic
thinking, understanding and practice.” Published by Financial Times
Prentice Hall
2. Paul Brown, 1996, “Anita Roddick and the Body Shop”
3. Mintzberg&Quinn, “The Strategy Process, international
edition” published by Prentice, Revised European Edition,1999
4. Michael E. Porter, “Competitive Strategy” with a new introduction
published by the Free Press, c1985
4. http://www.theBody Shop.com
6. “Body Shop seeks Web rejuvenation”, By: Oser, Kris, Advertising
Age, 00018899, 9/13/2004, Vol. 75, Issue 37 Oser, Kris, Advertising
Age, 00018899, 9/13/2004, Vol. 75, Issue 37
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