Value Chain Analysis of the bodyshop

Value Chain divides activities within a firm into two broad categories: primary activities and support activities. It highlights the explorations of internal analysis of a chain of business activities and explores the role and contribution of organization’s resources corresponding to primary and support activities in a cost-effective way to gain cost advantage (Lynch, 2000).

4.1 Procurement:

As for the Procurement in support activities, the Body Shop has developed long-term sustainable trading relationships with key suppliers and created a special purchasing programme-Community Trade. This programme trades with communities in needs around the world and receives ingredients and accessories directly from the developing countries. The Body Shop substantially benefits from the community trade since more raw materials can be found for inclusion in the best-selling products (The Body Shop Values Reporting, 2003). And the supply of raw materials would be cheaper and more stable. So the supply chain management in the Body Shop performs in a cost-effective way and better than its competitors. In addition, the Body Shop sets up guidelines to ensure its supplier to be compliance with ethical policies in purchasing decisions. The unique ethical consideration builds a very good image to its publics. Comparing with other competitor, the sustainable trading relationships with suppliers is the crucially important competence of the Body Shop and becomes a source of competitive advantage.

4.2 Outbound logistics

For the outbound logistics, the Body Shop distributed its products through both franchised and company-owned stores. So an important part of the Body Shop value chain is a large network of numerous franchises all over the world. Abroad franchises use the Body Shop’s brand name and sell high quality body care products to the valued customer. Over three-quarters of The Body Shop stores are franchised and it accounts for the majority of both sales and profits in business. It is a successful model in spreading its business quickly in Europe and US by franchising their stores (Hill and Jones, 1999). But extensive franchising also gets the Body Shop into problems. The franchising has grown too fast and lacked of strategic communications with the company head. Recent result of Social Audit also reflects that a substantial number of franchisees do not strongly relate themselves to Body Shop’s campaigns on human rights and environmental protection (Fenn, 2003). Though the social and environment issues are conveyed effectively but the equally important sales volume and marketing tactics fail in reaching the expected objectives these years. The most challenging thing for the Body Shop is how to balance its ethical principles and reasonable revenues for its franchises.

4.3. Marketing

Another key component of the value chain of the Body Shop was masterful sales promotion through selected media which is not in the conventional way. Competition in cosmetics retailing is intense, heavy input in marketing and sales is crucial to maintain the prominence of established brand names. The Body Shop has used the media masterfully as a major tool to promote sales. And strategic promoting its ethical and social stance also helps build brand image to great advantage. However, the Body Shop usually advertised indirectly and acted as an excellent communicator with customer, not through the company but through editorial coverage in magazine, newspapers and in-store presentations. Advertising in magazines are important to enhance sales volumes because any endorsement of a product by their editors is likely to stimulate sales significantly (Hill and Jones, 1999). And it greatly saves the cost of advertising compared to other ways through media such as TV and outdoor posters. And other promotion activities such as point-of-purchase and free gifts are also important, especially to the loyal heavy-users. So the Body Shop has unique channels to effectively communicate with customers rather than the traditional marketing techniques.

4.4. Sales:

On the other hand, besides the effectiveness of sales advertising the Body Shop has actively extended alternate distribution channel through its at home party-plan scheme to face up to the stiff competition. It proves to be an effective distribution channel for the company and attracts a large number of customers. Moreover, in today’s shrinking global community, it is essential to make innovation in sales to meet customer needs. The Body Shop has started direct selling in US by more importantly using Internet. Selling by internet not only increase its reach to larger consumer base but also provides new opportunities to improve its financial underperformance in recent years. Because on-line shop operates at low store overheads, particularly rental costs. But on-line selling also sends mixed signals to current and potential franchisees. People have started realising the power of direct selling through Internet in recent years and it may pose a threat to sales through franchise. (Hill and Jones, 1999)

4.5. Human Resource Management

One of the uniqueness of the HR in the Body Shop is that it integrates social and environmental principles into HR management system. Such as the inclusion of environmental responsibilities in job descriptions, day cares with children and even paid hours of work for local charities and community projects etc (Values Reporting: Individual Stakeholder Accounts for Employees, 2003). The Body Shop considers employees as company’s most critical asset, and employee not only performs the daily retailing work, but also fulfils the social and environmental responsibilities. And the shop also established the reward system through financial incentives to motivate the employees to improve the retailing performance as well as promoting social and environmental changes through campaigning and volunteering. Therefore, the general management views and culture are responsive to the needs of employees.

But some management problems are also obvious such as high employee turnover. High employee turnover may result in the additional costs for recruiting and training staffs and inconsistency in managing people. In addition, although the business has expanded all over the world, but strategies and policies embedded in strong personal values of founder Anita. The relationships with employees have been substantial barrier in being transferred internationally (Hill and Jones, 1999). How to effectively manage and control the regional business and quickly react to changing markets and competition became a great challenge for the Body Shop.

In summary, Value Chain Analysis implied that the internal core competencies of the Body Shop is the environmental green approach with regards to ethics and social responsibility, long-term sustainable relationship with suppliers, strong franchise network. And the noticing weakness is difficulties in managing and controlling the regional franchisees and high employee turnover.