The Body Shop International Plc 2001Week-2 Case StudyThe Body Shop International Plc 2001Submitted by: Lynn Christensen, Elena Okhonko, & Peter RizzutoSBNM 5311Professor: Dr. Kasthuri HenryI.The Body Shop International saw a significant revenue decline from the mid 1990’s through 2000 (Schilling 2015). Despite growth in revenue in 2001 by 13%, the pre tax profit declines 21% (Schilling 2015). With a new CEO taking over and a turnaround plan in place, the success of than plan can be helped with accurate forecasting.The three principle objectives of the new strategy going forward are areas where forecasting can make a significant impact on their success. FIrst, by increasing investment in stores, forecasting will allow for seeing how the financing of this will take place (Schilling 2015). Depending on the amount requires for the investment, borrowing both short and long term debt are possibilities when beginning an upgrade or renovation plan, as cash on hand for such a project may be limited. This investment in stores also may take time, as the Body Shop is an international operation.This is evident in the disappointing financial results of 2001 (Schilling 2015). Second, forecasting can help the Body Shop achieve operational efficiencies in the supply chain through a reduction in product and inventory costs. Forecasting will provide an overall picture of how much savings can be realized through this reduction, thus improving revenue, as well as efficiency. Reducing inventory levels, improving inventory turnaround, and the reducing the amount of resources tied up in inventory, are ways to improve in this area. Questions of how to save on costs from suppliers, changing production numbers, as well as eliminating product lines will have to be asked in order to reduce product costs.
Third, by reinforcing their stakeholder culture, the Body Shop is not just thinking about customers, but also their shareholders. By forecasting increasing returns for the shareholders, this can also build value for the company and increase the line item for shareholder equity. The forecasting can then be compared to actual results of the Body Shop in order to see where further reductions, or investments, need to be made to achieve their goals.II The three year forecast for the Body Shop assumes an 11% growth in turnover, or revenue, for years 2002 and 2003. This is an average of the turnover growth from the previous two years. The year 2004 shows a growth rate of 12%. These numbers seem attainable and in line with the turnaround strategy of the company. A 1% increase for 2004 is conservative but attainable with the understanding of implementing the three principle objectives strategy listed in part one above.
Duty Management.
One of the key issues I have struggled with in the past few years has been managing the management of the company. The main cause is that the value of the company has stagnated, increasing the turnover by a record amount and making it difficult to build shareholder values. The number of employees in the company is large: as of this writing an estimated 25,000 employees exist in the office.
In fact, the average salary for a single employee is almost a tenth that of an average employee of the company in the company according to the salary of current and former employees from the first year. This amounts to about $30 a day per employee and the average employee spends about $5 per day per year, not including the bonuses. Not to mention the fact that the company employs a growing amount of staff. This is even worse than the average yearly salary of $20,527. This increases dramatically the turnover of the company, as compared to a recent report in Newswire which estimated the company to be growing at its current rate of increase for the first four quarters of this year (see http://www.newswire.com/article/2015/03/23/an-example). As the corporate culture has evolved, these two factors add up as to why the company is growing at such a much faster rate than the current company which is facing a record $9.7 billion deficit due to a lack from its shareholders.
I believe that the best way for shareholders to gain control of the company is to be accountable. The following are three things the company should do to keep shareholder value high from within the company.
• Take steps to improve shareholder values
The company should not only look through the company board as a whole, but also its board (and CEO and management staff also will have to be accountable for their decision making process).
A new set up should be put in place to evaluate the company by the company. It includes the board and the CEO and will include the board member, executive committee, managers and directors who will determine shareholder value.
• Use tools that have been created in the past to help the company identify and measure the benefits of a positive change
In the past we have used a measure called “investment returns”, which has been used in assessing the company’s growth at the same time as other growth measures. The concept was developed in a study of financial managers and it became very popular these days:
• Measure growth at a corporate level
• Use tools to measure shareholder return
• Use tools to gauge success
• Use measures and strategies to measure shareholder value • Look at other aspects of the company including the board members, those who oversee the company, personnel and leadership, executives and employees • Measure progress in the company
The company needs to be able to measure shareholder value and assess it more accurately. By making sure that the value of the company is high the company can have a better overall experience with shareholders and better manage costs.
3. Work within the Company
The first step for shareholder value management should ideally follow the above, but if it is not, the company will be in a bad situation right?
Yes, but what if the company’s management team is too weak or too incompetent?
Imagine an employee with zero levels of service skills, and has no control over how the company works on any given day? If the company is struggling the best a company can do is hire an experienced and experienced team to improve on the bad team.
The key is how best the company can achieve its goals by changing its system of operations.