The Body Shop: Financial Strategies

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Table of Contents

Introduction
Prospects of Financial Forecasting
Estimation of Sales Level
Company’s Debt
Sensitivity Analysis
Conclusion
Work Cited

Introduction

The Body Shop Company is a vivid example of how a small store can turn into one of the world’s largest retailers. Anna Roddick, the head of this corporation, is an acknowledged and talented organizer who managed to make a world-famous brand from her enterprise. One of the areas that deserve attention is the financial work of the company since this aspect of the activity, as a rule, is hidden from prying eyes but plays almost the main role in the process of structuring production and sales.

Therefore, as an analysis of the company’s financial policy, it is possible to build several assumptions regarding the effectiveness of the used strategies and to estimate the real performance indicators. The basis is the case by Bruner et al. who studied the financial strategies of the company and its strengths and weaknesses in detail.

Prospects of Financial Forecasting

To discuss the effectiveness of management strategies, it can be assumed that the financial forecasting that was typical for The Body Shop in the late 20th century was the only true strategy. According to Bruner et al., Mrs. Roddick used a hybrid of two common methods of forecasting – T-account and percentage-of-sales (121). Both of these approaches brought quite much profit as the dividends of the company were substantial, and the losses were insignificant. Moreover, there always was a possibility to accurately predict the potential success of a particular investment or a restructuring of the working strategy since competent forecasting made it possible to successfully calculate possible variants.

The end of the 20th century was the time when it was quite difficult to occupy the niche of sales because the competition was very high, and the lack of innovative resources did not allow many companies to become leaders and overcome competition. However, judging by the success of The Body Shop, the management chose one of the most optimal ways of development. Perhaps, it is not just the calculations but also a successful marketing campaign. Nevertheless, the forecasting used by Mrs. Roddick was certainly one of the most successful mechanisms for the growth of the company.

Estimation of Sales Level

Another assumption that can be made is as follows: a constant assessment of the level of sales helped the leadership of the corporation achieve significant success in attracting customers. As Bruner et al. claim, expenses are also a part of the company’s financial analysis since it is also a type of monetary operation (122). However, together with costs, it is essential to pay attention to not only projections and costs but also current demand. Because Mrs. Roddick and her employees adhered to the sound business policy, the corporation became world-famous. It can be explained by the fact that relevant conclusions were timely made based on the indicators of consumer demand and interest.

Thus, the calculations help to understand the current sales volume and compare it with the previous one, converting the result into percentages (Bruner et al., 122). In case negative dynamics is observed, that is, a decrease in indicators, appropriate measures should be taken. Accordingly, the assessment of the sales level is a significant component of financial policy and can become a very useful mechanism for any enterprise performance evaluation.

Company’s Debt

It is possible to assume an impossible thing: if The Body Shop had not had money debt, it would have become one of the leaders in the world much faster and more confidently. However, despite the seeming logic of this statement, it would hardly have been possible. According to Bruner et al., there are specific mechanisms to calculate debts, and they can be adjusted to one particular indicator (125). Nevertheless, firstly, the debt of the corporation is a documented fact, and secondly, the absence of debt would not mean that money would be spent directly on the promotion of the company. Therefore, this assumption is highly controversial and ambiguous.

Sensitivity Analysis

The analysis confirms that the financial performance of the company under consideration was quite successful, and a positive trend was observed, that is, slow but steady growth in profits. The volume of excess cache constantly changed, and it is possible to surely conclude that the growth rate was not a constant variable and depended on various factors. Accordingly, together with the production growth, EFN also grew, which was quite a logical and understandable process since the increase in production inevitably required the strengthening of positions in the market, the purchase of new raw materials, etc. From year to year, the sales ratio constantly increased, which allows speaking about the success of the current fiscal policy.

Perhaps, the growth rate was not very fast. Nevertheless, stable progress is the confirmation of the right chosen course and the qualifications of the economists working for the company and calculating its potentially beneficial opportunities.

Conclusion

Thus, not all assumptions concerning the activities of The Body Shop can be confirmed, and the relevant documentary evidence is useful. The assessment of the corporation’s work is completely positive. Sensitivity analysis revealed a particular correlation between the increase in profits and the growth of EFN.

Work Cited

Bruner, R. F., et al. The Body Shop International Plc 2001: An Introduction to Financial Modeling. Darden Business Publishing, 2001.

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