Executive Summary
The Body Shop is an English personal care and cosmetics brand that was established in 1976 with a clear social mission to avoid products that are produced unethically or tested on animals. Over the years, this company has successfully developed into a chain of brand-owned and franchised stores across the globe. At the beginning of the 2000s, it was purchased by a transnational corporation L’Oréal, but the cooperation between the two brands was unsuccessful, leading to The Body Shop’s sales decreasing by 6% in 2017. During the same year, L’Oréal sold The Body Shop to a Brazilian natural cosmetics giant Natura. Unlike L’Oréal, Natura embraced The Body Shops’ roots and vision for social sustainability and chose a brand management strategy that highlights these features. Some recommendations for the Body Shop include focusing on scaling rather than growth and establishing new strategic partnerships with local communities and governments.
Findings
The Body Shop began as an entrepreneurial endeavor that has grown into a successful multinational business. The Body Shop is a beauty company that was established by Anita Roddick (“About us,” n.d.). The idea behind the brand’s image was to sell beauty products that were sourced ethically and were not tested on animals (Hope, 2017). Roddick’s entrepreneurial endeavor began as an ambidextrous organization because, in 1976, little attention was given to how the cosmetic products were manufactured and where the raw materials were sourced from. Initially, it was one small shop in Brighton, which later expanded to several shops across England and overseas, some of which were owned by The Body Shop, while others were franchised.
Currently, it is owned by a Brazilian natural cosmetics brand Natura. The Natura & Co Group also owns several other brands, not all of which are focused on social responsibility, for example, Avon. However, Natura’s brand and its vision are focused on developing and selling ecologically friendly products. Initially established as a local shop, this company has grown to become one of the largest beauty brands globally. In 2017, L’Oréal decided to sell this brand to a Brazilian natural cosmetics brand. After Natura acquired The Body Shop, they announced the change of the company’s focus towards sustainability and purpose-driven business practices (Rao, 2019). Hence, the main growth management challenge that The Body Shop’s management currently faces is the ability to balance the brand’s focus on manufacturing products for the body using sustainable practices and L’Oréal’s desire to widen the range of products and alter production techniques.
Product Range Expansion
The first step that the new management has announced is the expansion of The Body Shop’s best-seller, Shea Butter. The new range of products will include items for hair, while previously, Shea Butter was offered in the form of body lotions only (Rao, 2019). Additionally, the supply management practices will change since the ingredients of the existing range will change. However, the management plans to maintain a partnership with the Tungteiya Women’s Association in Northern Ghana, which is an important element of the Body Shop’s mission (Rao, 2019). Therefore, the new management of this company has selected a product development strategy as its way of enabling the growth of The Body Shop.
Shops
Currently, online shopping accounts for 30% of The Body Shop’s sales, and this share will most likely increase in the future (Rao, 2019). To address this, the management has decided to launch a new store strategy and launch in-store events that would highlight The Body Shop’s social mission. For example, for International Women’s Day, they invited several female speakers to participate in events in large US cities (Rao, 2019). Hence, The Body Shop clearly wants to attract more customers to its stores while simultaneously highlighting the value proposition of this brand, which is its sustainability.
The concept of value proposition is important in this case because The Body Shop does not merely offer products for body and hair care. They sell items that were manufactured using the raw materials gathered in impoverished regions. From this perspective, The Body Shop’s operations help support these communities by providing them opportunities and access to the Western markets. Hence, The Body Shop’s value proposition is that by buying its products, the customers also support the communities of people who live in areas where poverty is common. By adding the element of events and speaker panels to the shopping experience, The Body Shop can further support its value proposition because the customers will receive not only products but also education and new insights when visiting these shops. Apart from this, Slavin (2017) states that the Body Shop has set a target to power all of its stores using only sustainable energy. Therefore, the company will approach the management of its locations differently.
Brand Image
According to Rao (2019), after the acquisition, the management decided to focus on “the brand ethos and storytelling” instead of heavy advertisement of the new products (para. 2). This is because The Body Shop has always built its business by sourcing products from underprivileged communities. For example, the resources for Shea Butter are supplied by villagers from Africa. An obvious issue with this approach, however, is the potential for expansion since, previously, The Body Shop relied on 640 women for their shea butter supply (Rao, 2019). If The Body Shop wanted to expand, these small suppliers would have to invest in increasing their production capacity, or The Body Shop would have to look for other communities who can produce the shea butter ingredients. Reverting to a standard supply chain management approach and purchasing raw materials from several large suppliers would be detrimental to The Body Shop’s image. Despite these potential difficulties showing the consumers that this brand is socially conscious is the current strategy of The Body Shop.
Discussion
Upon the acquisition of The Body Shop by a transnational corporation, the brand faced the issue of balancing its growth with its ethical and sustainability values. For example, The Body Shop always sourced its raw materials from underprivileged communities, for instance, female villagers from Ghana (Rao, 2019). However, with the new strategy and development of new product lines, The Body Shop would need more supplies, which would mean the need to modify the existing supply chain. This has to be done while maintaining partnerships with communities where the materials are produced because this is part of The Body Shop’s brand image.
Examples of other brands that also partner with underprivileged communities can help The Body Shop resolve this dilemma. The management of a sustainable dried banana producer Barnana faced a similar problem when expanding its operations. Barnana became popular in the US, but they used supplies of bananas and other fruit from North American farmers, mostly individual growers (Dann, 2020). Hence, upon expansion, Barnana created a support program, where they helped these farmers expand their operations and grow more crops, as well as engage new farmers in the area to apply for the program. Barnana offered assistance and financial support, which became a suitable incentive for the farmers who wanted to continue supplying this company (Dann, 2020). This example shows that sustainability serves a great cause, but management should be ready to face challenges with scaling the production once the business grows. Similar issues may obstruct The Body Shop from expanding its product range while maintaining its brand image and partnerships with underprivileged communities.
Conclusion
In summary, the Body Shop’s case study is a good example of an entrepreneurial endeavor with a social mission, which was acquired by a transnational organization’s subsidiary. Under L’Oréal, The Body Shop has failed to succeed, which can be attributed to the different corporate cultures of the two organizations. However, Natura’s mission and vision align more closely with those of The Body Shop. The findings suggest that the new management has decided to expand the organization’s product range and emphasize its social mission as a new marketing strategy. Hence, The Body Shop’s social mission is supported and further expanded. However, the product development strategy may become a problem because of the souring and supply chain management since The Body Shop uses local communities as their suppliers.
Critical Evaluation
First and foremost, it is vital to discuss the Body Shop’s acquisition by Natura as an important step in organizational management. Prior to this acquisition, the Body Shop had several shops selling the brand’s product range; some of them were owned by franchisees (“About us,” n.d.). The Body Shop was an ambidextrous organization, as defined by O’Reilly and Tushman (2004) since it caused a real disruption in the industry of personal care products. The management’s strategy of partnering with local communities in Africa to procure raw materials for production has set the Body Shop apart from other brands that were using the standard supply chain management models and purchased their raw materials in bulk from large companies.
Considering the current attention that corporate managers pay towards the Corporate Social Responsibility (CSR) strategy, the Body Shop has been able to successfully use the trends of both the present and the future, in line with an ambidextrous organization’s description (O’Reilly & Tushman, 2004). However, being acquired by a large corporate organization, it is possible that the Body Shop may struggle to continue the pursuit of innovation. An alternative would be to avoid the acquisition and continue managing The Body Shop as a sole proprietor of this brand. This would put some restrictions on the company’s ability to grow since Natura has access to substantial financial and other resources, unlike the Body Shop. Moreover, prior to Natura, the Body Shop was owned by L’Oréal for several years, which has proven to be unsuccessful. Hence, although it is best for The Body Shop to operate as an independent organization with its own corporate culture and values, the goal of growing the brand requires having strategic partnerships and access to resources.
The concept of corporate culture has been one of the essential components of business discussed in class because it relates to the way that companies are managed on different levels. For the Body Shop, considering its social activism roots, the best type of corporate culture would be adhocracy, which is focused on innovation and freedom (White, 2020). Natura, however, appears to have a market culture that is more competitive and oriented toward sales. This can cause some tensions between the management of the main organization and the Body Shop. Moreover, considering that The Body Shop is an ambidextrous organization, the shift of focus towards the market culture may become a serious obstruction to innovation. An alternative to shifting the corporate culture is to allow The Body Shop’s managers, who have been with the organization since its establishment, to develop their own strategies, visions, and values and implement them within the business, according to Slavin (2017), there are managers who had worked for this business before it was acquired by L’Oréal.
The second issue highlighted in this case study is the Body Shop’s brand image and the ability to uphold it after the acquisition. A typical The Body Shop customer was an environmentally and socially conscious individual who researched the products they purchased to ensure that those are sourced ethically. This differentiates these customers from those purchasing mass-market products, which are usually manufactured in bulk and sourced based on the best prices and not the environmental impact of the raw materials. Hence, Natura’s ability to uphold this image of the Body Shop has become pivotal for marketing and sales.
Arguably, the decision to enhance the Body Shop’s brand image as a conscious one has been successful. Natura chose to reinforce the Body Shop’s mission by showing the customers the actual women who created the raw materials for this brand, as was discussed in the case study. Alternatively to this, they could have chosen to find a new point of focus for the CSR of the Body Shop, such as the eco-friendly raw materials that they use to produce these personal care products. In that case, the management’s focus should be on explaining the benefit of these ecologically friendly raw materials and how they could both solve the consumer’s problem and not harm the environment. However, the social aspect of the Body Shop’s mission appears more meaningful, especially considering that the Body Shop is a smaller brand and large companies, including L’Oréal and Garnier, have been launching their own eco-friendly lines. If The Body Shop was to select this strategy as well, they would risk losing to the large transnational organizations, which can place their products in many stores and communicate the value of their eco-friendly care products to consumers, unlike the Body Shop.
Despite these alternatives and recommendations, Natura’s approach to managing The Body Shop appears adequate. Moreover, according to Slavin (2017), the strategy presented by Natura was appraised by the staff members because they had a “sense the brand will be able to return to its activist roots after 10 “challenging” years with the French cosmetics giant” (para. 3). This decision highlights the fact that it is difficult to manage a socially responsible brand using the approaches that work for corporate businesses. Hence, if The Body Shop were to stay with L’Oréal, the former brand’s image as a pro-activist and conscious cosmetics company would be destroyed, defeating the purpose of cooperating with local communities and using natural ingredients.
Recommendations
Sourcing
The “critical evaluation” part of this report supports the idea that Natura’s decisions regarding the changes in the product line and brand image of the Body Shop have been adequate and should help maintain the heritage of the Body Shop. However, one important issue that follows the acquisition and the expansion of the product range is the ability to source raw materials ethically while expanding the production capacities. Although Natura claims to continue the Body Shop’s partnerships with the local communities, the company will have to invest in helping the small local suppliers expand their capacity for harvesting. Hence, a full-scale supply chain development strategy is needed to connect the increasing demand, product development, and the capacity of small raw material producers.
Corporate Culture
The history of The Body Shop being owned by L’Oréal has shown that the alignment of the corporate culture between the two brands was impossible, which caused the former to lose 6% of its sales in 2016 (Slavin, 2017). By definition, the corporate culture is a set of beliefs and values that guide the work of the leadership and the employees, and it is often implied rather than stated clearly (White, 2020). With L’Oréal, the focus was on reaching the set targets and determining what a consumer needs, while a true ambidextrous organization must innovate and show consumers new opportunities and possibilities. Hence, the corporate culture recommendation is for the Body Shop to continue pursuing the vision of the brand established by Rodrick in 1976 and operate as an ethical and sustainable brand.
Strategy
Under the Ansoff matrix, Natura has chosen to use the product development strategy and introduce several different items with the Body Shop’s signature ingredient, Shea Butter (Fortin, 2017). However, alternatively, they can choose to test the market development and diversification strategies as well. Although the Body Shop operates in several countries across the world, it can continue to open new shops more actively. Moreover, considering the consumer changes during the pandemic, the company can focus on developing its website and opening online shops in the markets it has not explored yet. This will also help address the supply chain struggles that were previously disused because, under this strategy, The Body Shop uses its existing products but sells it in markets that it has not entered yet.
Alternatively, the diversification strategy implies a combination of entering new markets and developing new products, which is also suitable for the Body Shop. Considering that The Body Shop relies on partnerships with small local producers, it can test out a business model where it establishes stores in a new state and partners with local farmers and growers to purchase raw materials from them. One downside of this model is the economies of scale because the company will not be able to benefit from purchasing large quantities of raw materials. Hence, the Body Shop would have to use premium pricing for the products produced using materials sourced locally. Although this is a complex strategy, it supports the ambidextrous nature of this organization as well as its social mission and corporate culture.
Implementation
The implementation process of the recommendations outlined above will require adjustments to the approach that The Body Shop’s management has taken towards development, a review of the supply chain, and a focus on new markets. Evidently, the Body Shop should focus on scaling its production capacities and stores. Scaling, unlike growth, implies the increase of the revenue without a proportionate increase of the resources the organization spends to achieve it (White, 2020). The best path to achieving this is with the economy of scale, where suppliers of products offer lower prices to companies that purchase goods in bulk. This is not the case for The Body Shop since this organization works with small suppliers from communities in Africa. Hence, they do not possess large-scale production capacities.
On the other hand, The Body Shop has access to the financial resources provided by Natura, which would allow facilitate the scaling. Considering the case study of a sustainable dried banana producer Barnana, the best option for The Body Shop is to focus on scaling by enhancing the partnerships with small local producers and providing them access to capital as well as encouraging new producers from the same area to grow and harvest the crops that The Body Shop needs (Dann, 2020). This would require more time and effort when compared to the traditional scaling process. However, the Body Shop would maintain its image as a sustainable brand.
Considering the entrepreneurial lifecycle, the Body Shop is still at the growth stage since Natura is trying to change what L’Oréal attempted to implement at this company and focus on CSR and brand image. Hence, the Body Shop is still testing new strategies such as talk panels at its stores and using renewable energy as a power source, among others. At this stage, it is essential to produce goods at maximum capacity since the demand from the customers typically exceeds the supply. However, this gives the Body Shop the ability to innovate and try out new approaches to business management. One strategy that the Body Shop can use at this stage is forming strategic alliances, for example, with other sustainable companies or local governments in Africa. The former approach will help the Body Shop host events and other activities with other sustainable brands, which will help market its products. The latter can be an opportunity to establish a new model of managing relationships with suppliers, considering the Body Shop’s unique supply chain. Therefore, since the Body Shop is currently at the stage of growth, the management should take advantage of the potential to explore new opportunities, innovate, and establish strategic partnerships.
The changes to the company’s strategy under the Ansoff Matrix are the most complex in terms of implementation. The easier one is to focus on opening new stores in different countries to expand the Body Shop’s market reach.
Theory of Change Management
Naturally, the changes discussed above cannot be implemented without some resistance from the organization since it is an established system. To complete the change process, the management has to use the three-step approach of “unfreezing, change, and refreeze” to prepare the employees for a change (White, 2020, p. 58). This model implies that the leaders do not merely introduce new business models and expect the employees to follow. Instead, they create the urgency for these changes, formulate a vision, set goals and outline tasks, and finally evaluate the implementation process to determine if any adjustments are needed.
References
About us. (n.d.). Web.
Dann, J. B. (2020). Barnana: Adventures in upcycling. Harvard Business Review. Web.
Fortin, F. (2017). Ansoff matrix essentials. CreateSpace Independent Publishing Platform.
Hope, K. (2017). The Body Shop: What went wrong? BBC. Web.
O’Reilly, C. A. & Tushman, M. (2004). The ambidextrous organization. Harvard Business Review. Web.
Slavin, T. (2017). Exclusive: ‘Under Natura The Body Shop will return to its activist roots’. Reuters. Web.
Rao, P. (2019). The Body Shop is tapping its activist roots with updated product and store initiatives. Glossy. Web.
White, D. G. (2020). Disrupting corporate culture: How cognitive science alters accepted beliefs about culture and culture change and its impact on leaders and change agents. Productivity Press.