Contemporary Business Issues

Table of Contents

Introduction...........................................................................................................................................2

Literature...............................................................................................................................................2

Evidence................................................................................................................................................4

Conclusion.............................................................................................................................................8

References...........................................................................................................................................10

Appendix 1..........................................................................................................................................14

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Contemporary Business Issues

Introduction

The following essay will cover several topics related to Strategic Creativity and its

importance by providing theoretical background and organizational evidence from The Body

Shop as a cosmetic company, which produces skin and hair care products. The aim is to

support the analysis and conclusion of the subsequent question: “What is strategic creativity

and why is it so important to firm success? Provide organisational ‘evidence’ regarding the

difficulties and dangers of staying ahead of the competition”.

Similarly, this essay will discuss about how The Body Shop created a new market

space by applying a blue ocean strategy, how they did not realise the dynamic process of blue

ocean strategy and how they got trapped into the red ocean battle. Furthermore, to enlarge the

scope and comprehensiveness of the analysis, it will be linked management, economics and

human resources topics by adding the benefits of Corporate Social Responsibility (CSR) with

financial performance, employee goodwill due to intrinsic motivation.

Literature

First of all, it is essential to have a clear definition about blue and red ocean strategies.

A strategy is considered blue ocean when creates a new market space, making the

competition irrelevant, pursuing differentiation and low cost, both inclusive, whilst, in a red

ocean strategy, the company decides to compete in existing market space, trying to beat the

competition, deciding whether to get differentiation or low cost (Kim and Mauborgane 2004).

The creation of blue oceans is about driving costs down while simultaneously driving value

up for customers, which is called value innovation (Kim and Mauborgane 2005a) and it is not

only about technology innovation (Kim and Mauborgane 2004). Appendix 1 has more

information about blue and red oceans.

Basically, a blue ocean strategy was exceptionally well executed by The Body Shop

through social and value innovation. This strategy was based on a set of actions in a

particular time, as a result of implementing creativity in a strategic way that led them to

change the rules of the game and breaking the paradigm established in the cosmetic industry

(Kim and Mauborgane 2005b). Taking this into account, there might exist a link with

strategic thinking which, according to Stolovitch et al, after study and discuss several authors,

reached the conclusion that “strategic thinking involves thinking and acting within a certain

set of assumptions and potential action alternatives as well as challenging existing

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assumptions and action alternatives, potentially leading to new and more appropriate ones”

(Stolovitch et al 2006, p. 610). It can be concluded that an important component of strategic

thinking is bringing new ideas to challenge assumptions. According to Woodman et al,

creativity is a valuable component of this idea generation process (1993 cited Dewett 2003).

In addition, Hambrick and Mason echoed that top management teams are in charge of this

decision making process, considering barriers related to social and contextual factors that

may have an impact on generating new alternatives (1984 cited Dewett 2003). However,

other researchers have underestimated the creativity role at the strategic level since they

believe that originating a radical strategy to break a paradigm is the easiest part, and what

really matters is to implement the new strategy effectively through a cost-efficient way to

provide real value to the customers (Markides and Anderson 2006).

Therefore, strategic creativity might be defined as the outcome of an internal thought

process through which are reached new and better ways of doing something substantial in

terms of pursuing business goals, which, after being successfully implemented, could

potentially underpin a blue ocean strategy. Its importance is based on creating a significant

input for the innovation process (Dewett 2003) in order to get differentiation from your

competitors and be able to survive in an extremely changing world (Zhuang et al 1999).

As a result, due to The Body Shop success, competitors started to copy what The

Body Shop had done. New competitors came into its market space with exactly the same

strategy and values, and well-established companies incorporated the social awareness

variable as an added value to their brands.

It is argued that, after creating a blue ocean, The Body Shop “focused on mining that

new market space” (Kim and Mauborgane 2005b, p. 27) rather than start thinking of what

would be the next move, which led The Body Shop to, gradually, get trapped into the red

ocean. “The blue ocean strategy should not be a static process. It must be a dynamic one”

(Kim and Mauborgane 2005b, p. 27). Regarding to the difficulties of achieving strategic

creativity, Narang explained that an indiscernible mindset rejects and minimizes new ideas

and that a business should be aware of it in order to fight against it (Narang 2007).

On the other hand, The Body Shop corporate image was highly related to an

outstanding Corporate Social Responsibility (CSR). Although, Friedman echoed that CSR is

a misapplication of resources that could be invested in internal projects or given back to the 3

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shareholders (Friedman 1970), it is also said that CSR might have an impact in the

company’s performance. Indeed, it has been echoed “improved employee and customer

goodwill as an important outcome of social responsibility” (McGuire et al 1988, p. 855).

Presumably, this increase of employee’s goodwill can be explained by Intrinsic Motivation,

which is defined as “the doing of an activity for its inherent satisfactions”, without

considering external rewards as the main incentive (Ryan and Deci 2000, p. 72).

Additionally, a company with such a CSR, from the Agency theory perspective, will align

incentives between organizational and individual goals as long as they are also motivated by

CSR (Eisenhardt 1989).

Evidence

“The Body Shop, which was founded in 1976, created a whole new market space for

natural beauty products, rather than compete with large cosmetic companies” (Kim and

Mauborgane 2005). During 1980’s, there was no other cosmetic companies that came up with

ideas as The Body Shop had. They showed creativity without technology in their way of

doing business by introducing social awareness campaign, for instance, against animal

testing, fair community trade,and green campaign namely protecting the planet by using

natural ingredients in their products (The Body Shop 2010). The success of The Body Shop is

not about new technology but about aggressively exploiting existing technology to see the

marketplace differently and to serve the customer in an original manner (Kumar et al 2010). 

In terms of value innovation, The Body Shop added benefits for customers in price

and quality, and also reducing its production cost. As Gordin Roddick, Co-Founder of The

Body Shop mentioned “We have built a market for ourselves, nobody else around who offers

the same quality for the same price as we do” (Charter and Polonsky 1999, p.294). This could

be considered as a support for value innovation concept. In reducing cost, it decided not to

use any advertisement or even celebrity endorser to promote their products. “The Body Shop,

without "advertising," has managed since 1976 to achieve high visibility for its products and

corporate identity through effective manipulation of news organizations that keep the

corporation in the news” (Kaplan 1995, p.51).

The graph below ideally illustrates some key elements that brought success to The

Body Shop and it shows differences between The Body Shop and the overall cosmetics

industry. The Body Shop created a completely different value curve to the cosmetics industry

(Kim and Mauborgne 1999). 4

Contemporary Business Issues

Figure 1. The Body Shop’s Value Curve

(Source: Innovation for sustainable development 2004)

However, The Body Shop finally faced one of the dangers of staying ahead from

competition. It was when the competitors moved into its market space. New cosmetic

companies, for example Bath and Body Works, Origins, and Lush presented the same ideas

and strategies as The Body Shop had since the 80’s. Bath and Body works, which were

established in 1990, were the main competitor since they also introduced natural beauty

products (Edmonton journal, 2008). Still in 1990, Origins was established and imitated The

Body Shop by having a very similar campaign which was ‘protecting our planet’ (Origins

2010) while in 1995, another cosmetic industry named Lush came up with its ‘against animal

testing’ campaign (Lush 2010).

“Evidence suggests, until the early 1990’s, The Body Shop approach to marketing had

been extremely successful but, in an increasingly competitive market when brand

differentiation is vital, compromises to the body shop stance in marketing were inevitable”

(Charter and Polonsky 1999, p.287). It was also revealed that, greenness is no longer

sufficient since it has become popular in the market (Charter and Polonsky 1999, 294). In this

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case, The Body Shop got stuck with their ‘green’ strategies and started to compete in the head

to head battle. The graph below shows the decline of its profit margins when competitors

moved into its market space.

Figure 2. The Body Shop Profit Margins

(Source: Environmental Shareholder Value 1998)

Moreover, The Body Shop had to deal with the difficulties of staying ahead because it

was not able to produce creative and innovative ideas to create a different market space when

they got trapped in the red ocean. Consequently, it changed its long-standing strategy in

refusal to advertise by placed its first advertisement in Marie Claire Magazine in the late of

1994 which evidences the red ocean strategy adopted by The Body Shop (The Body Shop

International plc 2003). To make a clear review, this essay will provide The Body Shop’s

timeline.

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Figure 3. The Body Shop’s Timeline

(Source: See special references for timeline)

With regards to human resources, The Body Shop chose the franchisees by looking on

what their franchisees fit to the company’s standard. After that, The Body Shop will contact

their employees by sending newsletters and videos concentrating about The Body Shop

campaigns and achievements. For being franchisees, a turn-key system is the essential

solution that helps to controls retail which The Body Shop will provide shop fitting and

layout, staff training, financial and stock control systems for their franchisees. Moreover,

franchisees will be visited from company representatives to assist in management such as

sales promotion and training. Subsequently, franchisees have to write a report about their

sales, which it helps the company to monitor the result of product and trading (Burn 2001).

Due to the fact that The Body Shop is a cosmetic industry, about ninety per cent of The Body

Shop franchisees are women and they were motivated by Anita Rodick’s idea about a strong

Corporate Social Responsibility in making a difference in people's live and bring value to the

world through Body Shop (Kumar, Scheer, and Kotler 2010). 

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Figure 4. The Body Shop’s sales

(Source: The Independent 2006)

According to Russo and Fouts (1997 cited McWilliams et al 2006) based on the

resource-based-view-of-the-firm theory, it has been tested that firm which has higher level of

environmental performance had better financial performance. Since 2006, The Body Shop

has been incorporated with L’Oreal and from the chart, it can be seen that its sales

performance dramatically declined after being a subsidiary of L’Oreal. Eventually, merging

with L’Oreal negatively impacted to customer perception and satisfaction in part of

environment responsibility which is the key value of Body Shop (Milmo 2006).

Conclusion

Overall, it is important to make explicit that The Body Shop success was originated

by a blue ocean strategy, which was based on the combination of the cosmetics industry and a

set of values such as fair community trade and protecting the environment, which led them to

be considered as a company with a high corporate social responsibility.

Unfortunately, The Body Shop could not understand the dynamism required in a blue

ocean strategy in order to be a moving target for the competitors as well as keep evaluating

when it is the ideal “time to reach out for a new blue ocean” (Kim and Maubargne 2005b, p.

28).

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Arguably, it might be noticed that The Body Shop could not recognize the relevance

of strategic creativity in the decision making process carried out by the top manager team. In

terms of human resources and economics, The Body Shop corporate social responsibility

played a fundamental role since it motivated the workforce as well as aligned their incentives

with the company goals.

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References

Alakeson, V. and Sherwin, C., 2004. Innovation for Sustainable Development, Forum for the Future. Available from: http://www.forumforthefuture.org/files/Innovationforsd.pdf [Accessed 1 December 2010]

Burn, P., 2001. Entrepreneurship and Small Business, New York: Palgrave Macmillan

Charter, M. And Polonsky M.J., 1999. Green Marketing: a global perspective on green marketing practice. 2nd ed. United Kingdom: Greenleaf Publishing Limited

Dewett, T., 2003. Creativity and strategic management: Individual and group considerationsconcerning decision alternatives in thetop management teams, Journal of Managerial Psychology, 19 (2), 156-169.

Edmonton, 2008. Body Shop Aims to Boost Its Green Cred. The Edmonton Journal. Available from: http://www.canada.com/edmontonjournal/news/business/story.html?id=dd07b811- 5b91-4c7a-9503-68cb06a8b22e [Accessed 2 December 2010]

Eisenhardt, K.M., 1989. Agency Theory: An Assessment and Review, The Academy of Management Review, 14 (1), 57-74.

Friedman, M., The Social Responsibility of Business is to Increase its Profits, The New York Times Magazine, 13 September 1970.

Kaplan C., 1995 A World without Boundaries: The Body Shop's Trans/National Geographics. Social Text, 13, 45-66. 

Kim, W.C and Mauborgane, M.R., 1999. Creating New Market Space. Harvard Business Review, 83-93.

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Kim, W.C. and Mauborgane, M.R., 2004. Blue Ocean Strategy, Harvard Business Review, 70-80

Kim, W.C. and Mauborgane, M.R., 2005a. Blue Ocean Strategy: How to create uncontested market space and make the competition irrelevant. Boston: Harvard Business School Publishing Coorporation

Kim, W.C. and Mauborgane, M.R., 2005b. Value innovation: a leap into the blue ocean, Journal of Business Strategy, 26, 26-28

Kumar, N. Scheer, L. and Kotler, P., 2010. From Market Driven to Market Driving, European Management Journal Vol. 18, No. 2, pp. 130

Lush online, 2010. Lush is Against Animal Testing. Available from: http://www.lush.co.uk/articles/against-animal-testing/introduction_104-10051_10.html [Accessed 4 December 2010]

Markides, C.C., and Anderson, J., 2006. Creativity is not enough: ICT-enabled strategic innovation. European Journal of Innovation Management, 9 (2), 129-148

McGuire, J.B., Sundgren, A. and Schneeweis, T., 1988. Corporate Social Responsibility and Firm Financial Performance, Academyof Management Journal, 31 (4), 854-872

McWilliams, A., Siegel D.S., Wright, P.M., 2006. Corporate Social Responsibility: Strategic Implications, Journal of Management Studies, 43 (1)

Milmo, C., 2006. Body Shop popularity plunges after L'Oreal, The independent, Available from: http://www.independent.co.uk/news/uk/this-britain/body-shops-popularity-plunges-after-loreal-sale-473599.html [Accessed 13 December 2010].

Narang, R., 2007. Barriers to innovation: The right attitude and metrics, Strategic Direction, 23 (4), 33-35.

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Origins online, 2010. About origins. Available from: http://www.origins.com/customer_service/aboutus.tmpl#/Landing [accessed 30 November 2010]

Origins, 2010. Origins’ Commitment. Available from: http://www.origins.co.uk/about_origins/our_commitment.tmpl?page=our_commitment [accessed 30 November 2010

Ryan, R.M., and Deci, E.L., 2000. Self-Determination Theory and the Facilitation of Intrinsic Motivation, Social Development, and Well-Being, American Pshycological Association, 55 (1), 68-78.

Schaltegger, S., and Figge, F., 1998. Environmental Shareholder Value. Centre of Economics and Business Administration, University of Basel and Bank Sarasin, 54

Stolovitch, H.D., Pershing, J.A., and Keeps E.J., 2006. Handbook of human performance technology: principles, practices, and potential. 3rd ed. San Fransisco: Pfeiffer

The Body Shop International plc, 2003. International Directory of Company. Available from: http://www.encyclopedia.com/topic/The_Body_Shop_International_plc.aspx#1-1G2:2845700026-full [Accessed 2December 2010]

The Body Shop Online, 2010. Available from: http://www.thebodyshop.co.uk/_en/_gb/services/ aboutus_company.aspx (Accessed 10 November 2010)

The Body Shop Online, 2010. The Body Shop Campaign. Available from: http://www.thebodyshop.co.uk/_en/_gb/values-campaigns/index.aspx (Accessed 10 November 2010)

Zhuang, L., Williamson, D., and Carter M., 1999. Innovate or liquidate – are all organisations convinced? A two-phased study into the innovation process, Management Decision 37 (1), 57-71

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References for The Body Shop Timeline

BBC, 2002. The Body Shop profit slide continues.

http://news.bbc.co.uk/1/hi/business/2336065.stm [Accesed 7 December 2010]

Origins online, 2010. About origins. Available from:

http://www.origins.com/customer_service/aboutus.tmpl#/Landing [accessed 30 November

2010]

Dearlove, D., 2005. Forever Blue. Business Strategy Review, 56-59 Available from:

http://www.blueoceanstrategy.com/abo/Links/Foreve_blue_Spring05.pdf [Accessed 5

December 2010]

Devinney, T.M., 2009. Is the Socially Responsible Corporation a Myth? The Good, the Bad,

and the Ugly of Corporate Social Responsibility, The Academy of Management Perspetives,

44-56

Hartman, C.L., and Beck-Dudley, C.L., 1999. Marketing Strategies and the Search for Virtue:

A Case Analysis of The Body Shop, International, Journal of Business Ethics 20 (3), 249-

263.

Roy, S., and Ghosh, L., 2008. “Business as unusal, a case study on The Body Shop, Journal

of Applied Case Research.

The Body Shop Online, 2010. The Body Shop History. Available from:

http://www.thebodyshop.com/_en/_ww/services/aboutus_history.aspx [Accessed 4 December

2010]

The Body Shop International plc, 2003. International Directory of Company. Available from:

http://www.encyclopedia.com/topic/The_Body_Shop_International_plc.aspx#1-

1G2:2845700026-full [Accessed 2December 2010]

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Appendix 1

Red Ocean Strategy Blue Ocen Strategy

Compete in existing market space Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture new demand

Make the value/cost trade-off Break the value/cost trade-off

Align the whole system of a company`s activities with its strateg choice of differentiation or low cost

Align the whole system of a company`s activities in pursuit of differentiation and low cost

Source: 2004 Kim and Mauborgane, p. 76

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