Strategic Analysis of Body Shop's Expansion in the Australian Market

This report provides a comprehensive analysis of The Body Shop's strategic plan to expand its business operations into the Australian market. It begins with background information on The Body Shop, a British cosmetic company with a global presence, and highlights the importance of assessing the Australian business environment. The report employs a PESTEL analysis to evaluate the political, economic, social, technological, legal, and environmental factors that could impact the company's expansion. It then delves into an analysis of the business scenario, using Porter's Five Forces to assess the bargaining power of buyers and suppliers, the threat of new entrants and substitutes, and the intensity of rivalry. The report also includes statistical data on Australian consumer preferences for skincare products. The conclusion emphasizes the need for careful planning and strategic implementation for successful market entry. The report underscores the importance of considering both internal and external factors that may affect the company's growth and expansion in Australia, contributing valuable insights for strategic decision-making.

Expand the Body Shop company in
Australia

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................1
Back ground information of Body Shop.....................................................................................1
Business Environment in Australia.............................................................................................1
CONCLUSION................................................................................................................................6
RECOMMENDATION...................................................................................................................7
REFERENCES................................................................................................................................8

INTRODUCTION
The following report covers strategic planning of Body Shop which is planning to open
their new store in Australia. Apart from this, they are considering this nation as the major
opportunity which can be grabbed for business expansion and would lead to growth and
development. As there are several external factors present that resist the implementation of
foreign direct investment in another country. Therefore, it is very necessary to assess those
factors which can influence their strategies for opening up new store there. Several analytical
approaches will be adopted for identifying and eliminating aspects which can affect performance
of business.
Back ground information of Body Shop
Body Shop is a well-known Cosmetic company which has a British Origin and offers
wide range of products such as skin care, fragrances, hair care, make up, etc. The firm holds
more than 3,049 stores globally in around 66 different countries. It is a type of limited company
whose owner is a Brazilian cosmetic firm which is known as Natura. Earlier, it was owned by
Loreal and further it was acquired by Natura. The revenue which is generated by the company in
the financial year 2016-2017 was US $ 1.4 billion.
Business Environment in Australia
In order to determine the commercial scenario of the country it is very important to
perform analysis at macro level which is done with the help of PESTEL analysis. This approach
includes several factors which are discussed as below:
Political- It is regarded to be the most important factor which Body shop has to take care
of before establishing its store in Australia. There are several aspects which are required to focus
as it can hinder the expansion plan of business which might result in several disadvantages. It
mainly includes stability as well as reliability of various political authorised body which is very
necessary for starting a business at a new place (Bettis and et.al., 2014). Their role is considered
to be very essential in designing the shape of an economy that comprises of subsidies,
interventions, trade and competitive policy. Interventions can be related to several political
pressure which might affect particular market that results in downfall of certain companies.
With the unstable political scenario internal functioning of organisation also gets affected
that might include team conflicts, varied personal interest, cohesive projects that cannot be
managed by management of the company. Apart from that, stakeholders are considered to be
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those individuals who are needed to be obeyed mandatorily. Various decisions which are taken
by government shapes political defaults which impact legal presentations that are found in every
rules and laws of firm such as, employment laws, directives for consumer protection, designing
taxation policies, restrictions regarding trade or requirements for health and Safety aspects.
Economical- It includes several economic developments which is applicable at global as
well as national level. Apart from this, there are any factors that will affect the financial stability
of the business at the place where it is going to be set up. It includes aspects such as growth of an
economy, gross domestic product, gross national product, rate of interest, exchange rates,
taxation, etc. (Datta, Ailawadi and van Heerde, 2017). Apart from this, for establishing a store
various inventories are required for building up an effective infrastructure. On the other hand,
there are economic aspects which are needed to be in taken in consideration for providing an
impactful growth of business in Australia with regard to its favourable financial, economic and
monetary policies. Also, structure of associated capital market is very effective. There are several
facilities which are related to infrastructure and availability of production factors. These factors
are controlled by financial aspects of new business, like expansion plan of Body shop in market
of Australia. This industry is regarded to be resistant to economic recessions and increasing cost.
Social- This factor is related to several aspects such as composition of population and
demographics, distribution of income, social mobility, work, lifestyle and leisure time
management. Further, social factors are derived from consumer behaviour, attitude and beliefs
towards particular industry, brand or business. As industries which are related to skin care areas,
individuals now prefer organic products which are free from chemicals. Apart from this, buyers
are very price sensitive and wants product of standard quality (Ginter, Duncan and Swayne,
2018). Their attitude and behaviour is sensitive and gets affected due to experience of other
individuals. Therefore, word of mouth is considered to be very effective under this scenario
which needs to be controlled in order to get expected results. Also, people belonging to different
age group of demographical characteristics have different expectations and needs which is taken
into consideration for effective result.
Technological- It is considered to be a considerable factor that affects operational
tendency of business. With the commencement of globalisation, scope for advance technology
has been raised, as it helps to improve operational efficiency of performing processes in a
company. In today's scenario it is very important to complete all project on time to maintain its
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quality and several other aspects that are regarded to be very important for conducting
successful business.
There are many factors which are taken into consideration as technological aspect, as
Australian economy is very dynamic to every day inventions (Hill, 2017). It is very important to
cope up with the aspects that provides support to operational procedure of the company. With
obsolete planning of performing any task, efficiency of company decreases which will affect
their market position. Australia is regarded to be a technologically advanced nation where every
transportation runs with possessing effective inventions which focuses on delivering quality
product on time.
Legal- These factors are defined at many levels which includes regional, local, national
as well as multinational. It comprises of many legal standards which incorporate many rules that
are related to corporate governance, liability of producers, taxation as well as legislation for
labour and other regulations of investments (Krush, Sohi and Saini, 2015). Apart from this, it
also includes many procedures which are related to enforcement of claiming patent to protect the
uniqueness of product. As the legal structure of Australia is very strict there is a need to comply
with every rules and policies which has been derived for every company which is going to
establish in that locality. Apart from this, it is very important to keep up all documentation as
well as license which are required for operating a particular skin care company. Also, several
environmental permissions are needed to be taken for determining that products if company are
no threat to animals and human beings.
Environmental- This factor is related to surroundings where the company should be
established. It comprises of certain permissions which are associated with production processes
and environmental constraints. There are several opportunities which are needed to be grabbed in
order to provide products which are eco-friendly and the processes does not create any harm to
the society. Apart from this, there must be an easy availability of inventories which are required
for successful processing of final product (Morden, 2016). Also, economical accesses should be
effectively available which can lead to create sales of their commodities which are produced.
Logistic processes needs to be effective so that it can easily supply required raw material as well
as product on time. Body shop has to take care of opening up store at that place which has easy
access to every customer across the city and has an easy range of products.
Analysis of Business Scenario
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For analysing the business scenario it is very important assess every threat which is
possessed by every external factors in an economy. There are certain forces which are needed to
be taken in considerations for formulating strategies such as bargaining power of buyers and
suppliers; threats of substitute as well as new entrants and presence of rival. These factors are
regarded as most influential factor which is needed to be considered for improving the business
aspects of the company.
Bargaining power of Buyers- This is a low threat for body shop because they already
have a strong base of customers. Their target segment is generally those individuals who belongs
to upper class in a society and value product quality more in comparison to price they are paying
(Perreault, Cannon and McCarthy, 2015). This group prefers organic skin care products and
already have a bond of trust with the company which has resulted to retain them as loyal
customers. Therefore, there is no scope for bargaining for reduction in prices. Apart from this,
they introduce several discount offers for a limited time period in order to provide equal
opportunity to every kind of buyer who is interested for consuming their product.
Bargaining power of Suppliers- It can be considered as a high threat because being an
organic firm, it requires special quantity which are needed to be brought from several part of the
world and it requires special transportation facilities in order to bring specific material on time
and with no wastage. It is regarded as a high threat because due limited number of suppliers
available, they demand high supplying cost which affect cost effectiveness of business.
Threat of New Entrant- It is regarded to be a low threat because, new entrants faces
difficulty in establishing their business in a market where there are already well settled
competitors. As Body shop is a well-known skin care brand it does not require high advertising
activities as it but newly established firms needs a high promotional activities which is important
in order to attract large amount of customers for gaining some market share (Renz, 2016). Apart
from this, for starting a skin care regime business it requires a huge investment which makes it a
difficult decision for deciding several effective decisions.
Threat of Substitute- It moderate because there are several other brands who are
providing same kind of products with similar kind of ingredients an provides organic products
at affordable prices. Price sensitive customers tends to move towards these brands as they prefer
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to spend limited amount on skin care products which can provide them similar kind of
satisfaction level (Singh, 2018). Apart from this, Body Shop is still successful in holding up
great strength of loyal customers due to its effective brand image in market due to delivery of
extraordinary quality in products.
Presence of Rival- It is regarded as a high threat because there are other strong
competitors of Body Shop such as Loreal, Revlon and many more. These companies also possess
a strong base of customers across the world and provides similar kinds of product with a quality
label. With the introduction of various natural products, it has led to provide an intense
competition in the market (Steinbach and et.al., 2017). Every other firm is opting for
diversification strategy which is needed to be implemented from the effective expansion of
business and targeting various segments of customers in market.
Statistical Data determining the preference of customers in Australia while selecting a skin care
product
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Above statistical data determines that natives of Australia prefers to buy skin care
products which have more moisturising content as well as those which provide satisfaction in
accordance to money spend on them (Wirtz, Tuzovic and Kuppelwieser, 2014). It is very
necessary for Body shop to consider such type of information while formulating strategies for
selling the product.
CONCLUSION
It has been concluded that for establishing a business in another nation it requires a lot of
practices which are needed to be followed in order to implement effective strategies for gaining
advantage in that particular local market. This reports outlined analysis of various factors which
affect growth as well as expansion of Business in Australia. There are many external factors at
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Illustration 1: Statistical data for preferences of Customers
Source: Features consumers found important when buying skin care products in Australia in
2016, 2017

macro level that affects functioning of business activities which are involved in the
accomplishment of goals and objectives of the firm.
These aspects are political factors which are related to this scenario of Australia which is
stable and provides support for the expansion of their business in their country. Apart from this,
economical factors include all those trade policies and monetary related factors which can
support their financial stability, as their economy is very strong and provides an opportunity to
various business entities to invest for better growth perspective.
Social factors determines that natives of Australia are very choosy regarding products as
they prefer to buy those skin care regime which is eco-friendly and has no chemical substance in
it. Therefore, it is very essential for Body shop to advertise themselves as completely organic
products company. Also, Technological factor plays an essential role in supporting their
operational area in the country. Being technically advanced country it provides several new
inventions which can be adopted for better manufacturing process and would lead to serve
several benefits such as increase in effectiveness and efficiency. With the use of state of the art
technology one can deliver quality product which can create a competitive advance in market
and would lead to serve many benefits for them. Mainly, there will be an increase in customers
and their sales would get maximised. Legal structure of Australia is very strict as there is a need
to take several permissions before establishing any skin care product business and there is a
requirement of keeping up several documents and licenses or a better productivity.
Environmental factor plays a crucial role for opening up stores of Body Shop in a country and
there are several factors which are taken into consideration. Brand should focus on the
accessibility of the store in a city which must be within the reach of every resident living in that
particular city. This would lead to provide them an advantage over other competitors.
RECOMMENDATION
There can be several suggestions which can be provided to Body Shop for implementing
a successful business in Australia:
 New Segment must be targeted like, younger generation of every gender. As it would
lead to increase their base of customers.
 Apart from this, franchises can also be given to other suppliers in order to build up a
strong base in the country.
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 Social Media Techniques can be used for effective promotions which would lead to grab
a larger audience at a great level. Also, it would minimise their effort and every
promoting strategy can be applied instantly.
 Apart from this, access to the online store must be given to become popular in market and
for attracting buyers who prefers to buy products at online stores.
 Sales Promotional strategies can be applied for attracting potential customers like,
include providing discounts for a specific time period.
TIME PLAN
Activities /
weeks
1 2 3 4 5 6 7 8 9 10 11 12
Preparing brief
outline
Assessing and
determining
suitable methods
Collection of
data via
secondary
sources
Analysing and
summarizing
data set for
evaluating
feasibility
Preparation of
graphs and charts
for better
understanding
about target
market
Drawing
conclusion
Giving
recommendations
related to
expansion
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REFERENCES
Books and Journals
Bettis, R. and et.al., 2014. Quantitative empirical analysis in strategic management. Strategic
Management Journal. 35(7). pp.949-953.
Datta, H., Ailawadi, K. L. and van Heerde, H. J., 2017. How well does consumer-based brand
equity align with sales-based brand equity and marketing-mix response? Journal of
Marketing. 81(3). pp.1-20.
Hill, T., 2017. Manufacturing strategy: the strategic management of the manufacturing function.
Macmillan International Higher Education.
Krush, M. T., Sohi, R. S. and Saini, A., 2015. Dispersion of marketing capabilities: impact on
marketing’s influence and business unit outcomes. Journal of the Academy of Marketing
Science. 43(1). pp.32-51.
Morden, T., 2016. Principles of strategic management. Routledge.
Perreault, W. D., Cannon, J. P. and McCarthy, E. J., 2015. Essentials of marketing: A marketing
strategy planning approach. McGraw-Hill Education.
Renz, D. O., 2016. The Jossey-Bass handbook of nonprofit leadership and management. John
Wiley & Sons.
Singh, S.K., 2018. Relationship Marketing in Competitive World an Essential Strategy. GST
Simplified Tax System: Challenges and Remedies. 1(1). pp.390-349.
Steinbach, A. L. and et.al., 2017. Top management team incentive heterogeneity, strategic
investment behaviour, and performance: A contingency theory of incentive alignment.
Strategic Management Journal. 38(8). pp.1701-1720.
Wirtz, J., Tuzovic, S. and G. Kuppelwieser, V., 2014. The role of marketing in today's
enterprises. Journal of Service Management. 25(2). pp. 171-194.
Online
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Features consumers found important when buying skin care products in Australia in 2016. 2017.
[online]. Available Through<https://www.statista.com/statistics/701404/australia-
important-features-when-buying-skin-care-products/>
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