w02 1c BodyShop

Slide1: 

1/2002

Body Shop: 

Body Shop Why has the Body Shop been successful? To what extent is the Body Shop a new business paradigm? Or just business as we know it? What are the key aspects of Anita Roddick’s leadership of the Body Shop? Is the Body Shop’s current growth sustainable? In the UK? Outside the UK? What will the Body Shop need to do to succeed in the US?

The Body Shop’s Social Action Business Model: 

The Body Shop’s Social Action Business Model Roddick believes in social action, her leadership creates & articulates the business & social vision Vision: Shared & understood by all employees Roddick’s voice & hands are central to success Informal, Roddick-centered value organization The social action paradigm also fuels growth Employee loyalty Customer preferences The social action paradigm uses many conventional business skills The Body Shop has a web of capabilities that creates value & is difficult to imitate

Body Shop Web of Capabilities & Actions: 

Body Shop Web of Capabilities & Actions

Growth Issues: 

Growth Issues Is the Body Shop’s profitability “fundamental” or “growth-driven”? UK same-store, constant-$ sales: Up 1% 1990-1991 Overall sales/outlet trends? Concern: Unhappy franchisees, hard to attract new franchises

Growth Issues: 

Growth Issues Rapid expansion often drives short-term success Failure is common once reach expansion limits Unless firm creates fundamental business capabilities Examples: USOP (failure) v. Tyco (success, so far) Body Shop: Business model appears to have fundamental strength, but concerns are emerging Key issue: The capability web creates both advantages & limits to growth At what size & global span will they out-pace their Roddick-centered organizational limits?

Global Growth: 

Global Growth How successful has the Body Shop really been outside the UK?

Body Shop Growth, 1984-1991: 

Body Shop Growth, 1984-1991 But sales/outlet much higher at home Sales/outlet ~leveling off Faster outlet growth abroad

Global Issues: 

Global Issues Overall global patterns raise concerns What can we tell by looking more closely at individual markets?

Body Shop Global Units, 1991:Entry Year : 

Body Shop Global Units, 1991: Entry Year Expansion pattern from UK: => Europe => British heritage nations => Middle East => Tourist islands => US => non-UK Asia

Body Shop Global Units, 1991:# of Stores: 

Body Shop Global Units, 1991: # of Stores # of stores: Home country dominates Commonwealth countries strong US already # 3 only 2 exits France weak despite early entry Mainly a few stores/country, suited to informal organization

Issue: What non-UK markets are most likely to succeed, given the Body Shop’s 1991 business model?: 

Issue: What non-UK markets are most likely to succeed, given the Body Shop’s 1991 business model? Demand characteristics consistent with Body Shop capabilities Within Body Shop’s organizational scope Low competition

U.S. Market Challenges: 

U.S. Market Challenges The value combination needs tailoring for the U.S. Vision, FDA, litigation, ad mentality, mall culture, … Mall retailers & cosmetic companies will imitate “natural” products Different “value combinations” can create similar products Different approach to same market: Product-driven rather than social-driven Example: Benetton v. The Gap & The Limited U.S. is bigger than traditional Body Shop foreign expansion

Hard Candy - Dineh Mohajerwww.hardcandy.com: 

Hard Candy - Dineh Mohajer www.hardcandy.com Founded 1995 by 22-year-old Michigan pre-med student Became cosmetic industry trend setter -- products reflecting an ultra-hip image inspired by music, fashion & street style -- multi-coloured nail-varnishes with names like Sky, Bubblegum, & Pussy-Cat, complete with matching plastic rings. Soon encountered distribution problems. Sold ~2000 to Louis Vuitton Moet Hennessey (LVMH) Hard Candy products now available at Bloomingdales, Neiman Marcus, Macy's, Nordstrom, Sephora & other exclusive stores. Mohajer appears to be involved still 2001: Introduced Motorola cell face-plates

Key U.S. Issues for The Body Shop: 

Key U.S. Issues for The Body Shop Segmentation issues How many consumers value the product? How many consumers value the Body Shop values? There may be enough market space for both models Preemption concern: Will one mall support both a Body Shop & a Bath & Body Works? If not, need to move quickly to capture malls Organizational issues: How can the Body Shop offer quick hands on support for a U.S. network? Requires U.S.-based staff with Body Shop values Heavy cross-Atlantic training requirements Initial growth is possible, but U.S. growth eventually will surpass Body Shop’s hands-on requirements

Body Shop at the Organizational Cross-Roads: 

Body Shop at the Organizational Cross-Roads 1992: Roddick- centered organizational model Expansion goal?

Post-Case Trends: 

Post-Case Trends

Body Shop Regional Store Growth, 1991-2001: 

Body Shop Regional Store Growth, 1991-2001 Largest number at home (suited to hands on corporate involvement in stores), greatest growth in Asia-Pacific (latest entry)

Body Shop Regional Sales/Store, 2001: 

Body Shop Regional Sales/Store, 2001 Lowest sales/store at home (home market saturated), highest in Asia (sustainable?)

Body Shop ROS & Employee Trends, 1984-2001: 

Body Shop ROS & Employee Trends, 1984-2001 Company is too big for informal organization

The Body Shop v. Intimate Brands (Bath & Body Works, Victoria’s Secret), 1988-2001: 

The Body Shop v. Intimate Brands (Bath & Body Works, Victoria’s Secret), 1988-2001

Follow-Up: 

Follow-Up Company image 1993: Won libel suit against negative claims on UK TV 1997: 28th top brand in the world (Interbrand survey) 1998: FT ranks Body Shop 27th most-respected global co. Organization 1998: ROS & price down, new CEO (Patrick Gournay, exDanone) Growth limits, competition causing stress in model 1998: Bellamy Retail Group took over US management after Bath & Body Works (Intimate Brands/Victoria’s Secrect) surpassed Body Shop in US -- Body Shop retook control in 2001 Tension: Local management v. hands on corporate influence 1999: Restructuring -- Sold mfg, focus on retail 2000-2001: Attempting Body Shop Digital on-line site 2002: Anita & Gordon Roddick selling Body Shop At limits of organizational model

Body Shop Themes: 

Body Shop Themes Business vision  Social vision Emergent strategy: Problem => Solution Global strategy: Tension between local tailoring & corporate coordination Web of inter-related capabilities Basis of profitability, initially deters imitation Creates limits to expansion Ultimately, competitive models emerge Business dynamics: Either change the model when you reach its limits or exit

Next: B&N - Amazon: 

Next: B&N - Amazon Group caucus during the break

Barnes & Noble vs. Amazon.com: 

Barnes & Noble vs. Amazon.com Group caucus Assess current financials Assess the B&N & Amazon web sites: www.Amazon.com & www.bn.com Also assess Amazon’s “service” sites (e.g., ToysRUs.com, Borders.com) Questions (2002 perspective) Who has been most successful so far, B&N or Amazon? Group 1: What should Amazon do now? Groups 2 & 3: What should Barnes & Noble do now? Group 2: From Barnes & Noble corporate view? Group 3: From BN.com view? Bonus question: What should Borders do now?