The Body Shop Case Study

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1. Introduction

Financial management (FM) and human resource management (HRM) are two crucial department of organization that helps in carrying out company’s operation effectively. This report is based on The Body shop which has been initiated at Brighton on 26 March 1976 and deal in various cosmetics, perfumes and skin care product. Market share of The Body shop amounts to 0.8% in 2022 with annual turnover of £408 million pounds (Market share of the body shop, 2023). This report will provide deeper insight about the FM and HRM strategies undertaken by The Body Shop. Further, it will also shed light on the financial position of the company and which assist in determining the viability of company.

2.0 Human Resource Strategies

Human resources strategies refer to all process and strategies that company understanding for effective working of company. These strategies aim identifying the needs of human resources within company, attracting top talent management, monitoring their performances and formulating adequate policies to retain talented employees. Three crucial human resources strategies involve strategic planning, development of workforce and managing employee’s performance (Lopez-Cabrales and Valle-Cabrera, 2020). Under strategies planning of the Body shop HR focuses on determining the exact number of employees that are required of carrying out business operation. To identify employee's requirement management focuses on carrying out evaluation of employees within the firm. They concentrate towards determine number of existing employees in the firm, rate of absenteeism and employee's turnover. This also includes analysis employees according to their capability which assist them in determining right position and work for each employ. This helps in improving satisfaction of employees and helps in effectively carrying out business operations.

2.1 HRM strategy of The Body shop

For managing human resources prominently The Body Shop forms and implements several strategies related to recruitment, training & development etc. Recruitment is the process that involves identification of individual, screening, short listing, selecting and retaining talented employees within firm (Human resources strategies of the body shop, 2023). This process aims at identifying best candidate that can carry out operations of organization in most effective and efficient manner. Recruitment process includes analysing requirement of employees, creating job description, screening of application, selecting, orientation, placement and effective training and development program. The recruitment strategy of Body shop is different from other as they follow ‘Open hiring ‘strategies. In this strategies candidate that has applied first for job will be hired without any background check. For selecting employees, firm has established three parameters that need to be cleared by employees. Parameters of employees’ selections are as follows:

• Under first parameters, candidate will be evaluated based on their eligibility to work within country.
• These parameters include testing employees based on their physical capabilities. This involves determining employee’s abilities to stand for eight long hours in a day.
• Last parameter includes identifying candidate’s potential to lift more than 50 pounds of weights.

Training and development rewards are related to creating awareness among employees related to their responsibility and duties. This session has been conducted by firm to enhance existing skills and aim at developing new skills of employees. Body shop provides training and development session to employees at regular intervals. Company is focuses on improving listening, self-awareness and questioning skills of workers. For determining existing skill and capability of employees, each worker is asked to rate themselves according to their skills.

2.2 Strengths and Weakness of HRM strategy of the Body Shop

In the context of recruitment, employee’s need to qualify all these parameters is selected without checking their background. Company follows this recruitment strategy with motive of providing employment to unemployed individuals and persons without any experience (Azizi et al, 2021). Firm believes that person that once involve in criminal or unethical activities should be given opportunity to changes their life which is the reason behind not checking background of any candidate. However, implementing these strategies may result in acquiring employees that not efficient for firm. Employees’ loyalty and effectiveness could not be understood by using open hiring strategies.

Training activity helps in determining existing skills and capability of worker and assist in identifying training requirement. Under this reward each employee was asked to share the skills and techniques which they want to acquire for fulfilling their personal goals. At the end of the training session, a reflective session has been conducted that includes sharing opinions and experience of each employee regarding the session. This helps in determining the effectiveness and efficiency of training session and areas that need to be improved (Cici and Mardikaningsih, 2022). The training session conducted by body shop are effective and helps in effectively achieving organizational objective. However, body shop training session, less focus towards personal goals of individual and concentrate towards developing skills that will help in achieving organizational gaols.

3.0 FM Strategies

Financial management refer to planning, managing and controlling financial resources of organisation. FM helps in taking crucial decision regarding capitals structure, sources of fund, controlling finance and maximizing profit of firm. Various financial management strategies involve capital structure planning, dividend planning, working capital planning and investment planning. 

3.1 Financial Management Strategies of The Body Shop

To determine the financial position of the company, various ratios have been calculated that helps in determining profitability, solvency and liquidity position of firm (Financial management strategies of the body shop, 2020). Financial statement analysis of the body shop is as follows:

Profitability ratios

 Gross profit Ratio

Particular	Formula	Amount
Gross profit	212
Total Sales	408
Gross profit ratio	(GP/Sales) *100	52%

Form the analysis it has been identified that company is having appropriate amount of profit in 2022. The ideal ratio of gross profit is 50% to 70% which firm should focus on improving its profit. Body shop should focus on attaining economies of scale that assist in reducing cost and results in improving overall profitability position.

Return on Equity

Particulars	Formula	Amount
Net income	71
Equity	284
Return on Equity	(Net income/ equity) *100	25%

It has been identified form the ration that company is efficiently working towards converting its equity financing into profit (Krzywdzinski and Jo, 2022). Firm is having high return on equity that ensure efficiency of firm in using its funds.

Liquidity ratio

Current ratio

Particulars	Formula	Amount
Current assets	214
Current liabilities	245
Current Ratio	CA / CL	0.87

From the analysis it has been depicted that company liquidity position is not appropriate. Ideal current ratio lies between 1- 2.5 which indicate that company will face difficulty at the time of paying its liabilities. To improve its current ration, Firm should identify asset that are not generating enough revenue and should sell them (Chanias, Myers and Hess, 2019). Marketing strategies of firm should be revised that helps in improving sales and overall liquidity position.

Quick assets ratio

Particulars	Formula	Amount
Quick assets	149
Current liabilities	245
Quick assets ratio	QA/CL	0.60

Company’s quick ratio is 0.60 that indicate that company’s efficiency in paying out all its liabilities is not effective (Shin et al, 2020). Firm should focus on increasing its sales that will assist in improving cash flow and eventually results in enhancing quick assets ratio. Adequate inventory management techniques should be used by firm that will assist in optimum investment towards inventory and firm will have sufficient fund to pay off its liabilities.

Interest coverage ratio

Particulars	Formula	Amount
EBIT	71
Interest	8
Interest coverage ratio	EBIT/Interest	8.45

The company is having high interest coverage ratio that indicate company is efficient enough in paying off its interest liabilities (Jihadi et al, 2021). This also described that body shop could opt for debt financing at the time of raising additional capital.

Debt to assets ratio

Particulars	Formula	Amount
Total debt	48
Total assets	332
Debt to assets ratio	TD/TA	0.14

From the analysis it has been identified that company is having low debt to assets ratio which indicate firm can pay off its liabilities by selling of its assets. Firm is having low risk and is financial stable, but this also described that firm is not using resources optimally in generating revenue.

Efficiency ratio

Assets Turnover ratio

Particulars	Formula	Amount
Net sales	408
Average total assets	466
Assets turnover ratio	Net sales/ ATA	0.87

It has been identified that assets turnover ratio above 1 is considered as optimum, comparatively body shop is having low assets turnover ratio. This indicates company is not effectively using its assets in generation of revenue (Dance, and Imade, 2019). For improving ratio, firm should focus on selling assets that are not productive and focus ion leasing new assets rather than purchasing.

Inventory turnover ratio

Particulars	Formula	Amount
Net sales	408
Average inventory	90
Inventory turnover ratio	Net sales/ Average inventory	4.53

It has been identified that firm inventory turnover ratio of company is not effective which indicate inefficiency of firm towards increasing its sales. Firm should invest towards its marketing strategies that will assist in attracting more customers and helps in increasing its sales. Firm should focus on revising pricing strategies and try to identify measures by which cost could be reduced and assist in enhancing sales of firm.

4.0 Evaluation of Strategies

If you're exploring HRM or FM strategies and need an assignment for help, our academic experts can guide you through case-specific analysis like The Body Shop's approach. Whether it's recruitment strategy or financial ratios, we offer structured support that boosts your grades while deepening your understanding of organizational functions.

Analysing which strategy of The Body Shop is better

Form the above analysis it has been identified that firm’s HR strategies are more effective than financial strategies. HRM strategies used by company have potential to attract and retain employees within the firm (Hasanaj and Kuqi, 2019). It has been identified that firm’s sales are not sufficient which leads to lower quick asset, current assert and inventory turnover ratio. This stipulates that company’s liquidity, efficiency and solvency position is not effective indicating low efficiency of FM strategies.

5.0 Conclusion

It has been identified form report that human resources and financial management strategies plays an important role in deciding overall position of company. The body shop is using open hiring strategies that involve hiring employees that has first approach to company without any background check. It has been identified that company is having firm’s liquidity; solvency and profitability position is not adequate which indicate ineffective financial management strategies.

6.0 Reference

Books and Journals

• Azizi, M.R., Atlasi, R., Ziapour, A., Abbas, J. and Naemi, R., 2021. Innovative human resource management strategies during the COVID-19 pandemic: A systematic narrative review approach. Heliyon, 7(6).
• Chanias, S., Myers, M.D. and Hess, T., 2019. Digital transformation strategy making in pre-digital organizations: The case of a financial services provider. The Journal of Strategic Information Systems, 28(1), pp.17-33.
• Cici, C. and Mardikaningsih, R., 2022. PengaruhKepribadian Merek, Pengalaman Merek, dan Cinta Merek The Body Shop terhadapLoyalitas Merek. Journal of Trends Economics and Accounting Research, 2(4), pp.93-99.
• Dance, M. and Imade, S., 2019. Financial ratio analysis in predicting financial conditions distress in Indonesia Stock Exchange. Russian Journal of Agricultural and Socio-Economic Sciences, 86(2), pp.155-165.
• Hasanaj, P. and Kuqi, B., 2019. Analysis of financial statements. Humanities and Social Science Research, 2(2), pp.p17-p17.
• Jihadi, M., Vilantika, E., Hashemi, S.M., Arifin, Z., Bachtiar, Y. and Sholichah, F., 2021. The effect of liquidity, leverage, and profitability on firm value: Empirical evidence from Indonesia. Journal of Asian Finance, Economics and Business, 8(3), pp.423-431.
• Krzywdzinski, M. and Jo, H.J., 2022. Skill formation, automation and governance: comparing German and Korean automotive manufacturers in Central-Eastern Europe. critical perspectives on international business, 18(1), pp.115-136.
• Lopez-Cabrales, A. and Valle-Cabrera, R., 2020. Sustainable HRM strategies and employment relationships as drivers of the triple bottom line. Human resource management review, 30(3), p.100689.
• Shin, D., Garmendia, A., Ali, M., Konrad, A.M. and Madinabeitia-Olabarria, D., 2020. HRM systems and employee affective commitment: The role of employee gender. Gender in Management: An International Journal, 35(2), pp.189-210.

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• Financial management strategies of the body shop. 2020. Online. Available through: < https://ivypanda.com/essays/the-body-shop-financial-strategies/ >
• Human resources strategies of the body shop. 2023. Online. Available through: < https://www.thebodyshop.com/en-gb/about-us/open-hiring/a/a00060 >
• Market share of the body shop. 2023. Online Available through: < https://www.globaldata.com/media/retail/aurelius-acquisition-highlights-potential-body-shop-bounce-back-says-globaldata/#:~:text=Indeed%2C%20amid%20the%20pandemic%2C%20The,to%20remain%20flat%20in%202023.>