This assignments contains a strategic analysis of The Body Shops internationalization.
The Body Shop International Plc has been established in 1976 by Anita Roddick, as the first ethical beauty company to pioneer “a new kind of sustainable business.” (The Body Shop International Plc., 2015) Within a short period, it became a worldwide successful enterprise. Today, The Body Shop is a leader in the movement for creating an ethic of social responsibility among corporations and is one of the most controversial players within that movement. This essay describes the company’s development, from opening the first shop, over its internationalization process, up to the acquisition by L’Oréal.
Therefore, some theoretical background in strategic international management will be explained. With the help of Porters Five Forces, changes within The Body Shops competitive environment will be discussed. By looking at the modes of entering foreign markets, as well as timing strategies, The Body Shops internationalization will be analyzed. Can the OLI-framework answer why the company has engaged in international markets in a certain way?
Especially after entering the U.S. market, the company faced some major challenges. The EPRG model will be applied, to see if those changed the way the company was managed. In 2005 The Body Shop went through a major repositioning, which ended up in the acquisition by L’Oréal. The latest part of this essay will describe the reasons and analyze the strategic position of The Body Shop before the takeover.
Table of Contents
1 Introduction
2 Theoretical Background
2.1 Strategic Management
2.1.1 SWOT Analysis
2.1.2 Competitive Forces
2.2 Internationalization Strategies
2.2.1 Eclectic Paradigm / OLI-Framework
2.2.2 EPRG-Model
2.2.3 Global Timing Strategies
2.2.4 Country-specific timing strategies
2.2.5 Modes of Entry
2.2.6 Franchising
3 The Body Shop
3.1 History
3.2 Strategy
3.3 Competitive Environment
3.3.1 Threat of new Entrants
3.3.2 Bargaining Power of Suppliers
3.3.3 Bargaining Power of Buyers
3.3.4 Threat of Substitute Products or Services
3.3.5 Rivalry Among Existing Competitors
3.4 Internationalization Strategy
3.4.1 Timing
3.4.2 Modes of Entry (applying the OLI-paradigm)
3.4.3 Challenges in the U.S.-market
3.4.4 Identifying The Body Shops Leadership Conception (applying the EPRG-model)
3.5 Reasons for the companies repositioning in 2005
3.5.1 Strength
3.5.2 Weaknesses
3.5.3 Opportunities
3.5.4 Threats
4 Conclusion
Research Objectives and Focus Areas
This paper examines the internationalization strategy of The Body Shop, tracing its development from its inception in 1976 to its acquisition by L'Oréal in 2006. The research investigates how the company utilized strategic management frameworks and internationalization theories to expand its global footprint, while identifying the significant challenges encountered, particularly during its entry into the U.S. market.
- Application of Porter’s Five Forces to analyze shifts in the competitive environment.
- Evaluation of market entry modes and the role of the franchise model.
- Assessment of internationalization strategies using the OLI-framework and EPRG-model.
- Analysis of the strategic impact of the company's "profit with principles" philosophy.
- Investigation into the causes of the 2005 corporate repositioning and the subsequent L'Oréal takeover.
Excerpt from the Book
3.3.1 Threat of new Entrants
Incumbents like L’Oréal, Nivea, Shiseido, Elizabeth Arden and Max Factor have remarkably long staying power in the beauty industry. Most of these companies exist more than 100 years. Since the start of The Body Shop in 1978, many new entrants have emerged. Not only from the natural side, also luxury firms such as Chanel, Dior, Ralph Lauren, and Yves St. Laurent started to offer cosmetic products. Nowadays, two consumer goods giants, Procter & Gamble and Unilever, pose the most significant threats. As their traditional products mature, they increasingly pouring resources into their beauty divisions. But even if many new companies have entered the industry, incumbents managed to generate higher barriers during the last decades, especially for new companies that are trying to upscale their business to a global level. For example, an unequal access to distribution channels is affecting the industry: Changes in consumer behavior, help no-frills retail chains such as Wal-Mart gain bargaining power, at the expense of fashionable department stores. Wal-Mart only wants to deal with a handful of big suppliers, which plays into the strength of incumbents like L’Oréal and P&G. It can be said that selling costs in department stores are much higher, while sales are declining. Furthermore, retail space, especially in the US market, is almost exclusively controlled by shopping malls, where most of the trading is done. Incumbents of the retail industry have a big advantage here, as they can rent a huge amount of shops at the same time. For example, Bath & Body Works by Leslie Wexner, who opened 100 stores within just 18 month after The Body Shop entered the U.S. market. A placement of a Bath & Body Works store in a mal usually precluded The Body Shop from entering the same mall. TBS focused on opening its shops in urban areas. Lately the company invested in innovating its shops designs, to differentiate the shopping experience specifically by adding more customer value, e.g. by offering beauty services, massages etc.
Summary of Chapters
1 Introduction: Provides an overview of The Body Shop’s history as a pioneer in ethical beauty and outlines the research scope, including theoretical frameworks and the company's trajectory leading to its acquisition.
2 Theoretical Background: Introduces core management theories, including SWOT analysis, Porter's Five Forces, the OLI-framework, and the EPRG-model, used as the analytical lens for the study.
3 The Body Shop: Details the company’s history, core values, and competitive environment, followed by a specific analysis of its internationalization strategies, U.S. market challenges, and the factors leading to the 2005 repositioning.
4 Conclusion: Synthesizes the findings, concluding that while The Body Shop was a first-mover, it faced massive competition and strategic failures in the U.S. due to an initially rigid ethnocentric management approach, which were partially corrected by a shift toward a region-centric model prior to the takeover.
Keywords
The Body Shop, Internationalization Strategy, OLI-Framework, EPRG-Model, Franchising, Ethical Beauty, Porter's Five Forces, Strategic Management, Market Entry, U.S. Market, Retail, L'Oréal, Corporate Social Responsibility, Competitive Environment, First-Mover Advantage.
Frequently Asked Questions
What is the core subject of this publication?
The paper focuses on the internationalization and strategic development of The Body Shop from its foundation until its acquisition by L'Oréal in 2006.
What are the primary themes addressed in the work?
Key themes include international business strategy, the effectiveness of the franchise model, the impact of ethical values on brand strategy, and the difficulties of adapting to foreign competitive landscapes.
What is the central research objective?
The goal is to analyze how The Body Shop entered and operated in foreign markets and to evaluate why its strategic approach evolved over time, especially in response to increased competition.
Which scientific methods are applied?
The author uses established management frameworks, specifically Porter’s Five Forces, Dunning's OLI-Framework, the EPRG-Model, and a SWOT analysis to dissect the company's performance.
What topics are covered in the main body?
The main sections cover strategic management theories, the specific history and strategy of The Body Shop, an in-depth look at competitive forces, entry modes, and the critical assessment of the U.S. market expansion.
Which keywords define this research?
The study is characterized by terms like internationalization strategy, OLI-framework, franchising, and ethical business management within the cosmetics industry.
Why did the U.S. market expansion present such significant challenges?
The U.S. market was problematic due to an initial lack of cultural adaptation, aggressive copycat competitors like Bath & Body Works, and an ethnocentric management style that failed to empower local subsidiaries.
How did the EPRG-model help explain the company's leadership issues?
The model identified that the company initially operated with a rigid ethnocentric approach, which meant that strategies developed in the U.K. were applied globally without sufficient consideration for local market differences.
What was the strategic significance of the 2005 repositioning?
The 2005 repositioning involved shifting toward a region-centric model, decentralizing management, and outsourcing manufacturing to improve margins and responsiveness to local competition before the sale to L'Oréal.
- Quote paper
- Anonym (Author), 2017, International Relations. Internationalization Strategy of "The Body Shop", Munich, GRIN Verlag, https://www.grin.com/document/376004
