We are going to show a three years forecast for The Body Shop International; it consists of three main objectives:
• To enhance The Body Shop brand through a focused product strategy and increased investments in stores;
• To achieve operational efficiencies in the supply chain by reducing product and inventory costs;
• To reinforce the stakeholders culture.
We extrapolate each account using the percentage of sales of year 2001 to have a first look on the evolution of the financial statements regarding to sales’ growth. We choose to use the percentage of sales of the most recent year to try to fit best the actual situation of the society.
This choice didn’t restrict our analysis of the society because in parallel we used a sensitivity analysis to see the accounts susceptible to have a direct impact on the benefits. Thanks to this sensitivity analysis we were also able to see the impact of a significant upward or downward in a particular account.
Because we decided to extrapolate each account regarding to the percentage of sales we had to make an assumption on the sales growth. To compute this number we first looked the growth from 1999 to 2001 (8.7% from 1999 to 2000 and 13.3% from 2000 to 2001) and we decided to apply a growth rate of 12%. Patrick Gournay (CEO) indicates in the first part of the case study that the newly implement strategy would produce improved results but we decided first to do a prudent prediction. Once again thanks to the sensitivity analysis we could do predictions on the impact of a higher or lower growth rate on the benefits.
Of course, because all the accounts were linked with the sales, they all increased by 12%. This wasn’t a very realistic situation so we decided to modify some of them to fits more with reality:
-Restructuring costs: we set it to GBP 0 from 2002 to 2004. Indeed these costs in 2000 and 2001 were related to the sale of manufacturing plants in Littlehampton, England,... [continues]
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