Contemporary Business Issues

Table of Contents

Introduction...........................................................................................................1

Literature...............................................................................................................2

Evidence................................................................................................................4

Conclusion.............................................................................................................8

References.............................................................................................................9

Appendix 1...........................................................................................................13

Introduction
The following essay will cover several topics related to Strategic Creativity and its
importance by providing theoretical background and organizational evidence from The Body
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Shop as a cosmetic company, which produces skin and hair care products. The aim is to
support the analysis and conclusion of the subsequent question: “What is strategic creativity
and why is it so important to firm success? Provide organisational ‘evidence’ regarding the
difficulties and dangers of staying ahead of the competition”.

Similarly, this essay will discuss about how The Body Shop created a new market
space by applying a blue ocean strategy, how they did not realise the dynamic process of blue
ocean strategy and how they got trapped into the red ocean battle. Furthermore, to enlarge the
scope and comprehensiveness of the analysis, it will be linked management, economics and
human resources topics by adding the benefits of Corporate Social Responsibility (CSR) with
financial performance, employee goodwill due to intrinsic motivation.

Literature
First of all, it is essential to have a clear definition about blue and red ocean strategies.
A strategy is considered blue ocean when creates a new market space, making the
competition irrelevant, pursuing differentiation and low cost, both inclusive, whilst, in a red
ocean strategy, the company decides to compete in existing market space, trying to beat the
competition, deciding whether to get differentiation or low cost (Kim and Mauborgane 2004).
The creation of blue oceans is about driving costs down while simultaneously driving value
up for customers, which is called value innovation (Kim and Mauborgane 2005a) and it is not
only about technology innovation (Kim and Mauborgane 2004). Appendix 1 has more
information about blue and red oceans.

Basically, a blue ocean strategy was exceptionally well executed by The Body Shop
through social and value innovation. This strategy was based on a set of actions in a
particular time, as a result of implementing creativity in a strategic way that led them to
change the rules of the game and breaking the paradigm established in the cosmetic industry
(Kim and Mauborgane 2005b). Taking this into account, there might exist a link with
strategic thinking which, according to Stolovitch et al, after study and discuss several authors,
reached the conclusion that “strategic thinking involves thinking and acting within a certain
set of assumptions and potential action alternatives as well as challenging existing
assumptions and action alternatives, potentially leading to new and more appropriate ones”
(Stolovitch et al 2006, p. 610). It can be concluded that an important component of strategic
thinking is bringing new ideas to challenge assumptions. According to Woodman et al,
creativity is a valuable component of this idea generation process (1993 cited Dewett 2003).
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In addition, Hambrick and Mason echoed that top management teams are in charge of this
decision making process, considering barriers related to social and contextual factors that
may have an impact on generating new alternatives (1984 cited Dewett 2003). However,
other researchers have underestimated the creativity role at the strategic level since they
believe that originating a radical strategy to break a paradigm is the easiest part, and what
really matters is to implement the new strategy effectively through a cost-efficient way to
provide real value to the customers (Markides and Anderson 2006).

Therefore, strategic creativity might be defined as the outcome of an internal thought

process through which are reached new and better ways of doing something substantial in
terms of pursuing business goals, which, after being successfully implemented, could
potentially underpin a blue ocean strategy. Its importance is based on creating a significant
input for the innovation process (Dewett 2003) in order to get differentiation from your
competitors and be able to survive in an extremely changing world (Zhuang et al 1999).

As a result, due to The Body Shop success, competitors started to copy what The
Body Shop had done. New competitors came into its market space with exactly the same
strategy and values, and well-established companies incorporated the social awareness
variable as an added value to their brands.

It is argued that, after creating a blue ocean, The Body Shop “focused on mining that
new market space” (Kim and Mauborgane 2005b, p. 27) rather than start thinking of what
would be the next move, which led The Body Shop to, gradually, get trapped into the red
ocean. “The blue ocean strategy should not be a static process. It must be a dynamic one”
(Kim and Mauborgane 2005b, p. 27). Regarding to the difficulties of achieving strategic
creativity, Narang explained that an indiscernible mindset rejects and minimizes new ideas
and that a business should be aware of it in order to fight against it (Narang 2007).

On the other hand, The Body Shop corporate image was highly related to an
outstanding Corporate Social Responsibility (CSR). Although, Friedman echoed that CSR is
a misapplication of resources that could be invested in internal projects or given back to the
shareholders (Friedman 1970), it is also said that CSR might have an impact in the
company’s performance. Indeed, it has been echoed “improved employee and customer
goodwill as an important outcome of social responsibility” (McGuire et al 1988, p. 855).
Presumably, this increase of employee’s goodwill can be explained by Intrinsic Motivation,

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which is defined as “the doing of an activity for its inherent satisfactions”, without
considering external rewards as the main incentive (Ryan and Deci 2000, p. 72).
Additionally, a company with such a CSR, from the Agency theory perspective, will align
incentives between organizational and individual goals as long as they are also motivated by
CSR (Eisenhardt 1989).

Evidence
“The Body Shop, which was founded in 1976, created a whole new market space for
natural beauty products, rather than compete with large cosmetic companies” (Kim and
Mauborgane 2005). During 1980’s, there was no other cosmetic companies that came up with
ideas as The Body Shop had. They showed creativity without technology in their way of
doing business by introducing social awareness campaign, for instance, against animal
testing, fair community trade,and green campaign namely protecting the planet by using
natural ingredients in their products (The Body Shop 2010). The success of The Body Shop is
not about new technology but about aggressively exploiting existing technology to see the
marketplace differently and to serve the customer in an original manner (Kumar et al 2010).
In terms of value innovation, The Body Shop added benefits for customers in price
and quality, and also reducing its production cost. As Gordin Roddick, Co-Founder of The
Body Shop mentioned “We have built a market for ourselves, nobody else around who offers
the same quality for the same price as we do” (Charter and Polonsky 1999, p.294). This could
be considered as a support for value innovation concept. In reducing cost, it decided not to
use any advertisement or even celebrity endorser to promote their products. “The Body Shop,
without "advertising," has managed since 1976 to achieve high visibility for its products and
corporate identity through effective manipulation of news organizations that keep the
corporation in the news” (Kaplan 1995, p.51).

The graph below ideally illustrates some key elements that brought success to The
Body Shop and it shows differences between The Body Shop and the overall cosmetics
industry. The Body Shop created a completely different value curve to the cosmetics industry
(Kim and Mauborgne 1999).

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Figure 1. The Body Shop’s Value Curve

(Source: Innovation for sustainable development 2004)

However, The Body Shop finally faced one of the dangers of staying ahead from
competition. It was when the competitors moved into its market space. New cosmetic
companies, for example Bath and Body Works, Origins, and Lush presented the same ideas
and strategies as The Body Shop had since the 80’s. Bath and Body works, which were
established in 1990, were the main competitor since they also introduced natural beauty
products (Edmonton journal, 2008). Still in 1990, Origins was established and imitated The
Body Shop by having a very similar campaign which was ‘protecting our planet’ (Origins
2010) while in 1995, another cosmetic industry named Lush came up with its ‘against animal
testing’ campaign (Lush 2010).

“Evidence suggests, until the early 1990’s, The Body Shop approach to marketing had
been extremely successful but, in an increasingly competitive market when brand
differentiation is vital, compromises to the body shop stance in marketing were inevitable”
(Charter and Polonsky 1999, p.287). It was also revealed that, greenness is no longer
sufficient since it has become popular in the market (Charter and Polonsky 1999, 294). In this

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case, The Body Shop got stuck with their ‘green’ strategies and started to compete in the head
to head battle. The graph below shows the decline of its profit margins when competitors
moved into its market space.

TheBody Shop ProfitMargins

25

20

15

The Body Shop Profit

10 Margins

5
fitm
%
g
n
e
a
c p
ro

0
1987 1988 1989 1990 1991 1992 1993 1994 1995 1996
Figure 2. The Body Shop Profit Margins

(Source: Environmental Shareholder Value 1998)

Moreover, The Body Shop had to deal with the difficulties of staying ahead because it
was not able to produce creative and innovative ideas to create a different market space when
they got trapped in the red ocean. Consequently, it changed its long-standing strategy in
refusal to advertise by placed its first advertisement in Marie Claire Magazine in the late of
1994 which evidences the red ocean strategy adopted by The Body Shop (The Body Shop
International plc 2003). To make a clear review, this essay will provide The Body Shop’s
timeline.

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Figure 3. The Body Shop’s Timeline

(Source: See special references for timeline)

With regards to human resources, The Body Shop chose the franchisees by looking on
what their franchisees fit to the company’s standard. After that, The Body Shop will contact
their employees by sending newsletters and videos concentrating about The Body Shop
campaigns and achievements. For being franchisees, a turn-key system is the essential
solution that helps to controls retail which The Body Shop will provide shop fitting and
layout, staff training, financial and stock control systems for their franchisees. Moreover,
franchisees will be visited from company representatives to assist in management such as
sales promotion and training. Subsequently, franchisees have to write a report about their
sales, which it helps the company to monitor the result of product and trading (Burn 2001).
Due to the fact that The Body Shop is a cosmetic industry, about ninety per cent of The Body
Shop franchisees are women and they were motivated by Anita Rodick’s idea about a strong
Corporate Social Responsibility in making a difference in people's live and bring value to the
world through Body Shop (Kumar, Scheer, and Kotler 2010).

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Figure 4. The Body Shop’s sales

(Source: The Independent 2006)

According to Russo and Fouts (1997 cited McWilliams et al 2006) based on the
resource-based-view-of-the-firm theory, it has been tested that firm which has higher level of
environmental performance had better financial performance. Since 2006, The Body Shop
has been incorporated with L’Oreal and from the chart, it can be seen that its sales
performance dramatically declined after being a subsidiary of L’Oreal. Eventually, merging
with L’Oreal negatively impacted to customer perception and satisfaction in part of
environment responsibility which is the key value of Body Shop (Milmo 2006).

Conclusion
Overall, it is important to make explicit that The Body Shop success was originated
by a blue ocean strategy, which was based on the combination of the cosmetics industry and a
set of values such as fair community trade and protecting the environment, which led them to
be considered as a company with a high corporate social responsibility.

Unfortunately, The Body Shop could not understand the dynamism required in a blue
ocean strategy in order to be a moving target for the competitors as well as keep evaluating
when it is the ideal “time to reach out for a new blue ocean” (Kim and Maubargne 2005b, p.
28).

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Arguably, it might be noticed that The Body Shop could not recognize the relevance
of strategic creativity in the decision making process carried out by the top manager team. In
terms of human resources and economics, The Body Shop corporate social responsibility
played a fundamental role since it motivated the workforce as well as aligned their incentives
with the company goals.

References

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Alakeson, V. and Sherwin, C., 2004. Innovation for Sustainable Development, Forum for the
Future. Available from: http://www.forumforthefuture.org/files/Innovationforsd.pdf
[Accessed 1 December 2010]

Burn, P., 2001. Entrepreneurship and Small Business, New York: Palgrave Macmillan

Charter, M. And Polonsky M.J., 1999. Green Marketing: a global perspective on green
marketing practice. 2nd ed. United Kingdom: Greenleaf Publishing Limited

Dewett, T., 2003. Creativity and strategic management: Individual and group considerations
concerning decision alternatives in thetop management teams, Journal of Managerial
Psychology, 19 (2), 156-169.

Edmonton, 2008. Body Shop Aims to Boost Its Green Cred. The Edmonton Journal.
Available from: http://www.canada.com/edmontonjournal/news/business/story.html?
id=dd07b811-
5b91-4c7a-9503-68cb06a8b22e [Accessed 2 December 2010]

Eisenhardt, K.M., 1989. Agency Theory: An Assessment and Review, The Academy of
Management Review, 14 (1), 57-74.

Friedman, M., The Social Responsibility of Business is to Increase its Profits, The New York
Times Magazine, 13 September 1970.

Kaplan C., 1995 A World without Boundaries: The Body Shop's Trans/National
Geographics.
Social Text, 13, 45-66.

Kim, W.C and Mauborgane, M.R., 1999. Creating New Market Space. Harvard Business
Review, 83-93.

Kim, W.C. and Mauborgane, M.R., 2004. Blue Ocean Strategy, Harvard Business Review,
70-80

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Kim, W.C. and Mauborgane, M.R., 2005a. Blue Ocean Strategy: How to create uncontested
market space and make the competition irrelevant. Boston: Harvard Business School
Publishing Coorporation

Kim, W.C. and Mauborgane, M.R., 2005b. Value innovation: a leap into the blue ocean,
Journal of Business Strategy, 26, 26-28

Kumar, N. Scheer, L. and Kotler, P., 2010. From Market Driven to Market Driving,
European Management Journal Vol. 18, No. 2, pp. 130

Lush online, 2010. Lush is Against Animal Testing. Available from:

http://www.lush.co.uk/articles/against-animal-testing/introduction_104-10051_10.html
[Accessed 4 December 2010]

Markides, C.C., and Anderson, J., 2006. Creativity is not enough: ICT-enabled strategic
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McGuire, J.B., Sundgren, A. and Schneeweis, T., 1988. Corporate Social Responsibility and
Firm Financial Performance, Academyof Management Journal, 31 (4), 854-872

McWilliams, A., Siegel D.S., Wright, P.M., 2006. Corporate Social Responsibility: Strategic
Implications, Journal of Management Studies, 43 (1)

Milmo, C., 2006. Body Shop popularity plunges after L'Oreal, The independent, Available
from: http://www.independent.co.uk/news/uk/this-britain/body-shops-popularity-plunges-
after-loreal-sale-473599.html [Accessed 13 December 2010].

Narang, R., 2007. Barriers to innovation: The right attitude and metrics, Strategic Direction,
23 (4), 33-35.

Origins online, 2010. About origins. Available from:

http://www.origins.com/customer_service/aboutus.tmpl#/Landing [accessed 30 November
2010]

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Origins, 2010. Origins’ Commitment. Available from:

http://www.origins.co.uk/about_origins/our_commitment.tmpl?page=our_commitment
[accessed 30 November 2010

Ryan, R.M., and Deci, E.L., 2000. Self-Determination Theory and the Facilitation of Intrinsic
Motivation, Social Development, and Well-Being, American Pshycological Association, 55
(1), 68-78.

Schaltegger, S., and Figge, F., 1998. Environmental Shareholder Value. Centre of Economics
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Stolovitch, H.D., Pershing, J.A., and Keeps E.J., 2006. Handbook of human performance
technology: principles, practices, and potential. 3rd ed. San Fransisco: Pfeiffer

The Body Shop International plc, 2003. International Directory of Company. Available from:
http://www.encyclopedia.com/topic/The_Body_Shop_International_plc.aspx#1-
1G2:2845700026-full [Accessed 2December 2010]

The Body Shop Online, 2010. Available from:

http://www.thebodyshop.co.uk/_en/_gb/services/ aboutus_company.aspx (Accessed 10
November 2010)

The Body Shop Online, 2010. The Body Shop Campaign. Available from:
http://www.thebodyshop.co.uk/_en/_gb/values-campaigns/index.aspx (Accessed 10
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Zhuang, L., Williamson, D., and Carter M., 1999. Innovate or liquidate – are all organisations
convinced? A two-phased study into the innovation process, Management Decision 37 (1),
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BBC, 2002. The Body Shop profit slide continues.

http://news.bbc.co.uk/1/hi/business/2336065.stm [Accesed 7 December 2010]

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Origins online, 2010. About origins. Available from:

http://www.origins.com/customer_service/aboutus.tmpl#/Landing [accessed 30 November
2010]

Dearlove, D., 2005. Forever Blue. Business Strategy Review, 56-59 Available from:
http://www.blueoceanstrategy.com/abo/Links/Foreve_blue_Spring05.pdf [Accessed 5
December 2010]

Devinney, T.M., 2009. Is the Socially Responsible Corporation a Myth? The Good, the Bad,
and the Ugly of Corporate Social Responsibility, The Academy of Management Perspetives,
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Hartman, C.L., and Beck-Dudley, C.L., 1999. Marketing Strategies and the Search for Virtue:
A Case Analysis of The Body Shop, International, Journal of Business Ethics 20 (3), 249-
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Appendix 1

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Red Ocean Strategy Blue Ocen Strategy

Compete in existing market space Create uncontested market space

Beat the competition Make the competition irrelevant

Exploit existing demand Create and capture new demand

Make the value/cost trade-off Break the value/cost trade-off

Align the whole system of a company`s Align the whole system of a company`s
activities with its strateg choice of activities in pursuit of differentiation and low
differentiation or low cost cost

Source: 2004 Kim and Mauborgane, p. 76

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