Essay

Essay

Essay

To what extent has competition in this industry increased? (2.5 marks) Body Shop

The Body Shop International PLC is another case of a company with tremendous growth in the first years of development to slower growth and financial problems later on. The inability to sustain high growth is typical for companies entering their mature phase of market exploration where usually competitors are catching up; the consumer is looking for new products and is harder to find new markets. It is very hard to maintain revenue growth of 20 percent in manufacturing-internationaling industry because the production, distribution and maintenance of shops require a lot of cash as well as investment in research and development. The initial investment has been paid off, but poring additional money into the business with big expectations is very risky.

The forecasting analysis and the assumptions and variations are raising the issue of source of new funds that the management of The Body Shop International should provide for the upcoming years. As a financing decision the management has a few options to solve the problem - issue of new stock, increasing the debt load, selling some additional assets or combination of these options. My personal recommendations to the CEO of The Body Shop are to reduce or eliminate dividends and use the extra cash to pay the debt. That might decrease the share price of the company, which eliminate the merits of issuing new stock. The issue of new share is still an option if the management believes that the funds will be enough for the funding the financial needs of the company.

What role has culture played in inception and growth of Body Shop (2.5 marks) Structure can facilitate or stunt the growth of a company.

The Body Shop International PLC is another case of a company with tremendous growth in the first years of development to slower growth and financial problems later on. The inability to sustain high growth is typical for companies entering their mature phase of market exploration where usually competitors are catching up; the consumer is looking for new products and is harder to find new markets. It is very hard to maintain revenue growth of 20 percent in manufacturing-internationaling industry because the production, distribution and maintenance of shops require a lot of cash as well as investment in research and development. The initial investment has been paid off, but poring additional money into the business with big expectations is very risky.

While forecasting the future financial statements we have to take in consideration that the company had some problems in the past few years and it has a lot of debt (debt-to-equity ratio is 0.76). The company has to pay parts in its long-term debt in near years that will shorten the operational cash. The notes under the financial statements show a sale of manufacturing capacity and restructuring cost which may lead to slowing in production and sales. On the other hand, company that size is investing in supply chain development ...