OE-12a
Company Name: Airbnb Inc.
Sample assignment and instructions page attached
8 pages long in APA format and no plagiarism
Guidelines:
- The final case study paper should cover an introduction (overview) of the company and its competitive landscape along with four other sections addressing organizational economic theory and concepts learned throughout the course.
- Each section should be 2.0 pages (4 sections X 2.0 pages = 8 pages).
- The evaluation of the final case study paper is based on how well students apply the course concepts and ideas to the company they have selected.
MG5615: Organizational Economics
Final Case Study Instructions
Choose a company to research. The company can be either a publicly-traded company or privately-owned, perhaps a company you are familiar with (but not your current employer). The key elements in choosing a good company for your case study are:
1) Is the company relatively easy to research? Is there plenty of available information on the inner-workings of the firm?
2) Is it a company you’re interested in and/or do you like their product or service? (This will make it more fun.)
3) Is the company newsworthy? (Perhaps they’ve had a stunning failure, legal issue or maybe they recently created a killer product everyone wants.)
Once you have picked a company, post your company to the final case study paper discussion forum – week 4. No two students can pick the same company and approval will be given on a first come-first assigned basis.
Note that for a large, multi-line or multi-product company, you may want to choose a single business line within the firm for your analysis. For example, with Apple, you would concentrate on their iPhone business only or with Google/Alphabet you would concentrate on just their driverless car project. You will find it much easier to focus your business analysis on one business line within a large diversified company.
Your final case study paper should be 6-8 pages and will consist of 5 sections (each about 1.5-2.0 pages).
The first section should be an overview of the company:
· What does the company do?
· What product or service does it offer?
· Where is it located?
· Who are its main competitors?
· What is the market structure (e.g. pure competition, monopoly, oligopoly, etc.)?
· How is it regulated?
This first section should provide a background or base-line understanding of the company in support of the rest of the paper.
For the remaining four sections, should include the following:
· A
demand analysis
illustrating the most applicable terms, concepts, or ideas in
Chapter 3
to include the following – consumer behavior (purchasing power and substitution effect), targeting, switching cost, positioning, price elasticity of demand (demand determinants), interpreting income and advertising elasticity.
· A
pricing analysis
illustrating the most applicable terms, concepts, or ideas in
Chapter 14
to include the following – value in use/value based pricing (product specifications, ease of use, service frequency, change order responsiveness, loyalty programs, and empathy in order processing), couponing, bundling, price discrimination, and price skimming versus full-cost pricing.
· A
“What they got wrong”
analysis detailing a strategy mistake using the course concepts.
· A
“What they got right”
analysis detailing a strategy win using the course concepts.
If you are having trouble addressing or finding enough information for any of the sections above, you can augment your analysis by articulating what you think the company should do. For example, if you can’t find any information on your company’s value based pricing, explain how you would price the product or service and why. This is Organizational (managerial) Economics; make some decisions on behalf of your company and support them using concepts and ideas from the course!
The goal of this paper is to illustrate that you understand the concepts covered in this course and that you can apply them to a real company.
Remember to document or source borrowed research using the standard APA citation style. Extensive quoting is not necessary (and not additive to your grade). Reference the source, but, to the extent possible, explain the concept or strategy in your own words. For example, if you find a great article on your company’s pricing strategy, explain the article and concepts in your own words and source it. Do not cut and paste long passages of text.
The paper should be 6-8 pages (or more) double-spaced, size 12 font Times New Roman, Calibri, or Cambria. The final paper is due on Sunday of Week 12.
RunningHead: THE BODY SHOP CASE
1
The Body Shop Case:
A Managerial Economics Final Case Study Paper
Pratima Tharval
New England College
THE BODY SHOP CASE 2
Abstract
The Body Shop Company deals in eco-friendly beauty products for both men and women. The
products are produced mainly from natural ingredients, which make the company work closely
with farmers in a bid to ensure they get natural supplies for their products. The company has
invested heavily in research, to come up with more natural beauty products, all which are
evidence-based. The company targets high income earners of the high social class, hence its
higher prices for products compared to competing companies. Some of the things it got right,
hence attracting loyal customers include dealing in a large range of products, creating a high
brand value, and having a large supplier network. Additionally, the company has aligned itself
with environmental protection guidelines and transparency, hence building a good image in the
society. Despite being a large retailer, some of the mistakes it made are set to encourage more
competition from other players in the market. Some of the mistakes include little investment in
advertisements, the franchise system which reduces the level of control of most of its outlets
form the top management and a limited number of retail outlets.
Keyword: demand analysis, price analysis, competition
THE BODY SHOP CASE 3
Overview
The Body Shop Company is a private beauty retailer company operating internationally,
which deals in natural and healthy beauty products for both male and female customers. It
manufactures and commercializes beauty, organic skin care and cosmetic products. The
company was initially founded by Anita Roddick in Brighton, UK, in 1976. It now has over
3,000 stores in over 60 countries, and still continues to grow. The company is dedicated towards
finding the best ethically sourced ingredients for its wide range of naturally inspired beauty
products. This means that the company works with farmers and suppliers, working on 100%
vegetarian basis, while at the same time taking a firm stance against animal testing. The
company continues to operate under the founder, Anita Roddick’s founding principles, as
expressed by its ‘Enrich Not Exploit’ commitment. The policy lays out the need for the company
to support local communities, maintain transparency and protect the environment during their
operations (Kent & Stone, 2007).
According to Kemna (2017), the Body Shop’s top competitor is Estee Lauder, which is
led by Fabrizio Freda, the CEO and president of the company. The Body Shop’s CEO on the
other hand is David Boynton. Other competitors across the globe include Alliance boots GmbH,
Bath & Body works LLC, Sephora USA inc, L’Occitane, Lush, Yves Rocher and Weleda. These
brands as well focus on environmental protection and natural ingredients, just like The Body
Shop. Maybelline New York, although not an obvious competitor, also positioned itself against
animal testing and environmental protection, posing the threat of being a possible competitor to
the company too. The Body Shop notably operates in a pure competition market structure.
THE BODY SHOP CASE 4
The body shop currently has more than 1200 products and has employed more than ten
thousand people in its various stores. The company’s leadership is geared towards juggling, in a
bid to effectively manage the business and effectively adapt to the stiff competition in the nature
of market in which it operates. The company has built its organization through employing very
strong staff and human resource. Its recruitment strategies are top notch, with the structure of the
company built up very tightly to ensure the entire organization works with the same goals and
process. The company’s headquarters are based in London, West Sussex, and Little Hampton. It
also has four main regions which are the Republic of Ireland, UK, America, Middle East,
Europe, South Africa, and Asia Pacific. Within the four regions, many of the international stores
of The Body Shop are set up under franchise arrangements (Kent & Stone, 2007).
Price Analysis
The Body Shop has a wide range of products and has different price tags for the various
products, with a focus on targeting the different social levels of potential customers in the
market. The main products in the market that I will cover are the bath and body care, fragrances,
skin care, men line and make up. Although the products are high quality, they are sold at low-
medium prices. The company therefore engages the low-medium price policy while still
enforcing strict quality control measures. The prices are set based on forces of demand and
supply, as well as through assessing the prices that the competing companies set for their goods,
before placing theirs slightly higher than that, to target the high-end customers. The strategy
ensures that the company is able to effectively compete with its main competitors, including
those that have employed low price strategies in order to conquer the market. Before the
company built its brand in the market in the past decades, it would sell its products at low prices,
employing a low-price strategy that boosted its initial market share. After gaining a large market
THE BODY SHOP CASE 5
share and discovering that its main target in the market was people with considerable income, it
raised its prices to the medium level, while still maintaining a few products with low prices that
low-income earners can afford (Chun, 2016).
At the end of the financial year 2018, the company posted revenues at 1.4 billion US
dollars (Chairunnisa et al, 2019). The company now targets women from the urban class and
cosmopolitan cities, who are health and beauty conscious. That is the main reason for the rise in
their prices, since its customers belong to the higher income group. Since the brand has
positioned itself effectively in the market as a natural care luxurious brand which caters for a
high-end section of the society, it has been able to maximize on profits greatly. It has also
recently included men in their target customer list and has been marketing their products widely.
Having created considerable customer loyalty for its products in the market, the company is able
to gather large amounts of money from its prices despite the rise in their pricing policy. Its target
group of customers also believes in purchasing higher price commodities, as they believe such
products are of better quality than the low-price ones provided by competing companies.
The strategy to target those that are appreciative of eco-friendly products, although their
range is high, has been so effective in placing the company as a top retailer. The company’s
nature of branding is ethical, which contributes to its high costs and high prices of products. The
brand has maintained premium prices for premium products, although it faces a lot of
competition even in the premium category (Chairunnisa et al, 2019). In order to compete with
rivals, the company has adopted a competitive pricing policy that keeps its products at par with
the prices rival brands set for their products.
THE BODY SHOP CASE 6
“What they got wrong” Analysis
There are a number of things that The Body Shop got wrong in its marketing strategy.
First, the company does very little advertising of its products. An advertisement is a clear way of
increasing the market share. People tend to make their decisions based on what they see on social
media, the internet and other advertising platforms, as they believe those are the new trends in
the market. Emerging companies that invest heavily in advertisements tend to pick quickly in the
market. There is no way people can know of the emerging trends that the company has adopted,
or its new products, except through the advertisement platform. It also enables people understand
the strengths and importance of the products being marketed, increasing sales (Chun, 2016). The
company’s competitors, including those that could not have come to the limelight like
Maybelline New York that advertised heavily are now beginning to gain ground in the market.
What people see on television for instance has great influence and is likely to make even loyal
customers decide to try new products they see on advertisements.
The second thing they got wrong in my opinion is the franchisee system, which limits the
level of control that proprietors have on all its stores. One of the things that place a company
high in the market radar is its leadership strategy, mission, and vision. A company that has a
strong connection with the top management tends to perform better in the market, as it closely
follows the guidelines put in place and the organizational culture. The franchisee system
encourages loss of organizational culture since employees at the bottom lack connection to the
top management. This reduces the level of trust customers have towards the organization,
especially when loopholes such as poor customer service are detected in some stores.
Sometimes, poor leadership may culminate in lack of motivation for the employees, which
THE BODY SHOP CASE 7
means that they do not perform well for the organization. Some may end up being absorbed by
competing companies and even leak the company’s strategies to competitors (Chun, 2016).
Additionally, the company got it wrong in having a limited number of retail outlets. This
reduced the company’s ability to reach everyone that is interested in their products (Kemna,
2017). Such a thing makes people that are willing to buy their products but unable to, to resolve
for purchasing a different company’s products, develop loyalty for the products and end up
encouraging other people to join them in purchasing the rival company’s products.
“What they got right” Analysis
To begin with, the company got it right when they went for a wide range of products, of
more than 1200 products. Customers like to have a choice for the products they purchase in the
market. A wide range of merchandise to choose from is therefore a good strategy for gaining a
large market share. The second strength is having a well-designed store layout and ambience,
which creates customer attraction (Kent & Stone, 2007). What is more, new customers are easily
able to identify the customer stores, which create loyalty.
The company’s high brand value is another thing they got right. It is viewed as a socially
responsible company especially because it is engaged in many philanthropic activities. People
also want to purchase from companies that are keen on conserving the environment (Chairunnisa
et al, 2019). Additionally, the company maintains good relations with its employees, making sure
to take good care of their welfare. That results in good customer service, which is key in
propelling the company further.
The company invested in a good supplier network, which also ensures that they have
enough raw materials for their commodities. Its step to ensure its products are from natural
THE BODY SHOP CASE 8
products is also a plus, as people are focused on using healthy care products. A good supply
network also ensures that the company gets cheap raw materials in constant supply, which
ensures that its stores are fully packed at all times, increasing the sales volume. What is more, the
company saves on transport costs by creating a wide network of suppliers, closer to all its stores
located globally (Chairunnisa et al, 2019).
Conclusion
Lastly, I believe that the bid to target higher income urban men and women is a good one
in positioning itself strongly in the market. People that are conscious of beauty and health
products are mainly from a high social background. Therefore, the ‘luxury natural care for the
body’ positioning of the company has ensured that it strongly builds itself in the market, as most
people interested in the products fall in that category. Essentially, such customers believe that
higher price commodities are of better quality. Consequently, the low-medium pricing policy is
best suited in ensuring the company remains a leader in the beauty industry.
THE BODY SHOP CASE 9
References
Kent, T., & Stone, D. (2007). The Body Shop and the role of design in retail
branding. International Journal of Retail & Distribution Management, 35(7), 531-543.
Kemna, L. (2017). The body shop Indonesia (Doctoral dissertation).
Chun, R. (2016). What holds ethical consumers to a cosmetics brand: The Body Shop
case. Business & Society, 55(4), 528-549.
Chairunnisa, S. S., Fahmi, I., & Jahroh, S. (2019). How Important Is Green Marketing Mix For
Consumer? Lesson From The Body Shop. Jurnal Manajemen, 23(2), 321-337.