Can There Be Certainty? Essay Sample
This essay will explore how successful The Body Shop is, based on its growth strategy. I will be focusing on the following areas: – where they began, where they operate now, to what extent they have grown, the adopted strategies, the effectiveness of the strategies, and their future plans. There are many methods in which a business can take to achieve more growth, some of these are gained through competitive advantage, economies of scale and economic growth. A company could improve its efficiency by using different production methods i.e. lean production, which is where costs are reduced and quality is improved of a product.
Firstly, we will outline the definition of growth strategy, a strategy is a plan for how to produce an objective, it includes the financial, production and personnel resources required (Source: A-Z Economics and Business handbook), A growth strategy refers to an organisational plan that takes into account new global realities such as operating in a new global market place. (Source: www.times100.co.uk). Another definition of growth strategy is that it seeks competitive advantage with strategic moves that are highly interdependent across countries (Source: www.marketingpower.com). For the purpose of the essay, we will go with the second definition.
If a business doesn’t grow, it can plan for the future, to reduce certainty and increase confidence in decision-making. However, planning for the future maybe difficult due to shifts and changes in trends. They could also adopt different strategies such as market penetration, market development, product development and diversification. All of these strategies would assist the Body Shop in achieving growth.
Anita Roddick had established the first store of Body Shop in 1976, 6 months later a second store had opened. In 1978, The Body Shop began to expand overseas, making a franchise in Germany. By 1984, it became a public limited company. Up to the year 2000, The Body Shop has aided in campaigns that involved saving whales, helping Romanian orphans and funding healthcare projects. The Body Shop wants to get larger and increase sales and profits.
The Body Shop sells a variety of goods. It is mainly products categorized as skin care, hair, health care, and fragrances that are sold by the company. They are one of very few companies that specialize in selling these kinds of products on a global level and through this they have created a niche market, this helps them in gaining more success, as competition is limited within the markets they operate in.
The Body Shop was one of the first retailers to offer make-over services free of charge by their trained beauty consultants located in each of their outlets. This shows that The Body Shop is willing to increase custom by showing what they offer for free, as they are attracting customers to buy goods by showing that they have free services.
Franchises are legal agreements by which local businesses are allowed to setup using the name, logo, and trading methods of a well-known company. (Source: Nuffield Economics & Business)
The Body Shop’s franchising strategy had allowed rapid growth of the company to commence from early years, this has lead to the company producing over 1980 stores, showing an increase by 1979 from when its first store had opened in 1976, showing that they have been successful in growing to what they have become. The Body Shop have grown so large that they operate in 50 markets at present (Source: Item 1), they have been able to do this by introducing new products, diversifying and other schemes such as ‘invent your scent’, which allows the consumer to select to fragrances and mix them into one product. Franchising has also helped them in entering new markets, as more franchises are being bought in different countries, they are expanding into new markets.
From the 1986 save the whale campaign onwards, the company has been against animal testing, and therefore only use natural ingredients in the products they sell, this gives them a competitive advantage and aids them in creating a positive image for the company. By using natural ingredients rather than testing products on animals the company is saving money as if they were to test on animals, they would have to buy the animals and equipment to carry out the tests. (Source: Item 2)
In 2003, The Body Shop had given up on a refill programme, as only 1 per cent of Body Shop customers used the service, this shows that The Body Shop has weakness in doing research, as subsequent to dropping the refill programme, they adopted another involving recycled bottles. (Source: Item 3)
It can be argued that the ethics of The Body Shop are more important than their profits, as they are selling goods that are costing them more to produce, due to their environmentally friendly image. However, using their environmental friendly image to produce costly goods could be their unique selling point, if they didn’t have this image they would be similar to companies such as Boots plc.
In 2001, The Body Shop had taken the opportunity of gaining a supply deal with Norfolk Essential Oils, the deal was part of a community trade programme to promote fair trade for farmers worldwide. This shows that The Body Shop has taken opportunities to encourage fair trade, this shows that taking opportunities such as this, helps them gain more success and gain more customers who see this as a positive factor boosting their reputation. (Source: Item 4)
In 2003, competition was upping their game and had increased there market share, resulting in a decrease of the market share of The Body Shop, this shows that their aim to grow was put to a halt, therefore they have not been fully successful with their growth strategy. (Source: Item 6)
Using franchises to grow has been a very successful strategy for The Body Shop, as figures in Item 5 show that from 2000 to 2004 the number of stores under the brand, have increased greatly, in 2000 they had 1,730 stores this increased by 277, as in 2004 they had 2,007 stores. When a new franchise of The Body Shop is opened a contract is made, which contains rules, such as the franchisee having to pay a lump sum fee and an annual payment based on a percentage of the turnover. Franchisees benefit as all the advertising is done by the franchisor. The Franchisor of The Body Shop benefits because it is operating in widely diversified markets (50 markets) without the need to have expertise and knowledge on economies it operates in.
The franchisor can expand operations without having to find large amounts of capital for investment. Another reason behind the success of The Body Shop is their ethos in wanting to continuously grow (Source: Item 5) and reap full benefits of being a global brand. Their success rate can be supported by their annual turnover from 2000 to 2004 (Source: Item 7), their turnover has increased from 330.1 to 381.1 (UK sterling, million), both the turnover and the number of stores increases greatly over the period of 5 years indicating that they have been successful in growing to the point which has enabled them to increase the number of stores and turnover. Increases in Profits and market share have allowed them to spend more on research and development, this has allowed them to produce goods that have taken them into new markets.
The Body shop have entered a niche market, this is what makes them different to companies such as Boots and allows them to compete on higher levels. The Body Shop has increased their market share, making it harder on competing companies. Entering so many markets has given the opportunity to operate on many stages, and sell a variety of goods. Their environmentally friendly has given them a competitive advantage, as they have achieved a unique selling point in spending more on the cost of production on products to ensure they are environmentally friendly.
For The Body Shop to further their success, they could introduce an award card for customers to save points, which would allow them access to discounts, vouchers and other promotions. They could also uphold their reputation through constant advertising and willingness in offering quality products with natural ingredients. Additionally they could focus on lean production to cut costs and improve the quality of products.
In conclusion to this essay The Body Shop has been very successful with its growth strategy. As a company they have realized the opportunities for growth, assessed these opportunities and taken them. They have been successful in entering 50 markets, some of which are niche markets and introducing new goods and services, which have been successfully advertised. In my opinion The Body Shop has been very successful with its growth strategy.