The Body Shop International Plc 2001

Week-2 Case Study

The Body Shop International Plc 2001

Submitted by: Lynn Christensen, Elena Okhonko, & Peter Rizzuto

SBNM 5311

Professor: Dr. Kasthuri Henry

I.

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.

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