The Body Shop Study Case
Executive Summary
The Body Shop International PLC has been facing a myriad of issues in the late 1990s. At its creation, the body shop has seen tremendous growth and success. The company thrived to bring a new revolutionary business model and was extremely successful. But after those successful years in the early 1990s, the competition became fierce as new entrants came and absorbed parts of the market. This led to declining sales and profits for the company as they were not able to differentiate themselves from the new competition. The founder of The Body Shop PLC, Anita Roddick, who was the previous Chief Executive Officer, decided to step down and handed over the position to Patrick Gournay. The new CEO implemented a new strategy and direction for the Body Shop. The new initiatives were to have a focused product strategy, a more efficient supply chain, and to reinforce stakeholder culture.
In order to solve the problems faces by the company, we modeled the company’s financial need by providing a forecast of the company’s income statement and balance sheet for years 2002, 2003 and 2004. In order to forecast the different changes we used the percentage of sales forecasting method. Moreover, to come up with accurate financial forecasting we undertook sensitivity analysis on several key financial variables that we know are of importance in the company’s future financial state. These included cost of goods sold, growth rate, operating expenses, inventories, restructuring costs, and dividends. Based on these forecasts and due to this growth, we then concluded that external financing is needed to implement the strategies of the company. The funds needed over the next three years decreased due to the fact we were able to cut operational expenses by closing non-profitable product lines, which in return reduced overhead costs.
Assumptions are an essential component to effectively forecast the financial statements of The Body Shop International PLC. Our assumptions
The Body Shop International PLC has been facing a myriad of issues in the late 1990s. At its creation, the body shop has seen tremendous growth and success. The company thrived to bring a new revolutionary business model and was extremely successful. But after those successful years in the early 1990s, the competition became fierce as new entrants came and absorbed parts of the market. This led to declining sales and profits for the company as they were not able to differentiate themselves from the new competition. The founder of The Body Shop PLC, Anita Roddick, who was the previous Chief Executive Officer, decided to step down and handed over the position to Patrick Gournay. The new CEO implemented a new strategy and direction for the Body Shop. The new initiatives were to have a focused product strategy, a more efficient supply chain, and to reinforce stakeholder culture.
In order to solve the problems faces by the company, we modeled the company’s financial need by providing a forecast of the company’s income statement and balance sheet for years 2002, 2003 and 2004. In order to forecast the different changes we used the percentage of sales forecasting method. Moreover, to come up with accurate financial forecasting we undertook sensitivity analysis on several key financial variables that we know are of importance in the company’s future financial state. These included cost of goods sold, growth rate, operating expenses, inventories, restructuring costs, and dividends. Based on these forecasts and due to this growth, we then concluded that external financing is needed to implement the strategies of the company. The funds needed over the next three years decreased due to the fact we were able to cut operational expenses by closing non-profitable product lines, which in return reduced overhead costs.
Assumptions are an essential component to effectively forecast the financial statements of The Body Shop International PLC. Our assumptions