[pic][pic][pic][pic]The first question that usually proposed for this case study is in regards to the revenue issue; What was the cause of the lack of growth in revenue during the late 90's? The 2nd question deals with the rapid growth in 2001; What was the cause of the rapid increase in sales in 2001 and what were the negative impacts of the rapid growth.
Issues surrounding the lack of growth in revenue:
In the early to mid 90's, the revenue growth for Body Shop was at least 20% each year. But by the late 1990's, the revenue growth fell to 8%. Body Shop was able to grow at a fast pace early in the decade because of the lack of competition. But by the end of the decade, the competition grew fierce. Another reason for the slow growth in the late 90's was the over expansion in the previous years. Almost every mall in America (and shopping street in Britain) had a Body Shop. How would the Body Shop forecast earnings so they would not be blind-sided by another decline in OIBT?
This case study is very simple and straight-forward. It usually is one of the first cases presented in class, as it is the first case in the book because it is the easiest.
Because of the lack of revenue growth, Anita Roddick (founder of the Body Shop) was forced to step-down from the CEO position. The fresh management team, assembled by the new CEO Patrick Gournay, was able to increase revenue by 13% in their first year (2001). However, in their attempt to grow the revenue, they lost 21% in their OIBT. The major reason why this occurred was because of a lack of forecasting through the use of financial modeling.
Key Aspects of the Body Shop Case Study (based on implied assumptions) 1. Because the hybrid method of financial forecasting is used, the cost of goods sold as a...