Decision Focus This case describes the challenges faced by the Bata Management in the wake of changing market trends in the form of increased competition from the local players as well as the constantly increasing threat of Chinese imports. Bata had traditionally targeted the lower middle and middle class segments of the society and was now considering changes in its strategy to be able able to surviv survivee in the market market.. The MD of Bata was considering the efforts necessary to realign Bata Pakistan’s manufacturing, outsourcing, distribution and brand strategy in the light of increased local competition and Chinese imports.
Company History Thee Bata Th Bata shoe shoe orga organi niza zati tion on was was orig origin inal ally ly esta establ blis ishe hed d by Th Thom omas as Bata Bata in 18! 18! in Czechoslovakia. "t came to #akistan in 1!$ and was initially to produce leather boots for the army. "t established its first plant in Batapur and in later years Bata e%panded and established another factory known as Makara Branch in Multan in 18! when the leather industry was on a boom and was second in e%ports after te%tile. The Makara &actory was more capital intensive and had incorporated direct e'uipment in(ection which allowed Bata to produce on a large scale with the help of )*+ employees. employees. &ollowing &ollowing years were even more flourishing flourishing for Bata as it had ac'uired a fully subsidiary known as "nternational Tannery and "ndustries ,"T"- which allowed Bata to produce +++++ s'uare feet of finished leather per month. "n $++$ Bata had Bata had two plants/ ))$$ employees and sales turnover of 0 $.) billion. To grow even further Bata had diversification and had got into rubber tubes business but price wars resulted in losses and Bata had to 'uit the tire business. Bata used three distribution channels retail/ wholesale and government and e%port.
PROBLEMS
Reduced market share A lack of advertisement and head to head competition meant BATA having to forego its market share and conversely a reduction in net sales by 5%.
Price wars BATA was facing a tough call from its competitors both local and the Chinese market. The ever changing footwear trends and the rapid change
in market became a spiraling problem for the company.
The company
was involved in a serious price war with its competitors.
Improper adertisements BATA was lacking proper advertisement campaign to promote its footwear product in the market. This lead to the consumers being attracted towards their competitors who advertised more frequently than BATA •
Dissatis!ed customers The company lacked the ability to innovate and bring new styles and trends to the market unlike its competitors who thought on dierent frontiers. Therefore this caused much dissatisfaction from its customers because they did not get the product variety that they were after.
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Hi"h attrition rate BATA faced a high attrition rate. !mployees lacked motivation and training and therefore quickly left the company. Their salaries were also low and
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therefore they left the company in search of higher pays. #nions The unions played a big role in the industry and had a strong foothold. This was an even bigger problem the company faced. Po$itica$ insta%i$ity The change in government posed a lot of political instability for BATA. The advent of a new government every time meant changing ta"es and taris that the company had to comply with every time.
S&O' (na$ysis Strengths
Weaknesses
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2argest
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marketing organization in world 3evolutionizing the production processes Men4s 5 Children4s shoes contributes to
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footwear
manufacturing
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!8.6 of total sales Brand "mage 3easonable 'uality products at reasonable #rice 7iversity of product line ationwide retail network ,9lign production 5 distribution- 5 accessible &ootwear for :ntire &amily &inancially strong 9mong small manufacturer/ Bata has 11;$+6
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Tannery operation , subsidiary-=7ivestiture ,loss=
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1+! Millon>ross #rofit has decreased as compared to increase
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in cost of sales and with stagnant domestic sales * product lines ,includes? Canvas/ women shoes/ (oggers/
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@awai/
#AC;slippers-
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collectively contributes only *16 of total sales 2ack of leadership o innovative designs in products ,no product
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variety1*+ million demand and produce only 1! million
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Market share Catering all segments with multiple brands o Marie Claire ,
slippers;
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shoes annually 7ecline in e%ports 7iscontinued its tires 5 tubes business #roduce less or same product to reduce variation in
product design 2abor intensive production "n=house production involves longer lead times pportunities Threats Mass Customization "nformal sector comprise 8+6 of Market share #opulation growth $6 reached to $++ M. 3etail chains capturing small manufacturer • •
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rowing leather industry
which wants to remain under central board of revenue ,CB3- screen to save number of duties
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and ta%es= @igher profit Margins "mport of ine%pensive Chinese products
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margins "ncreased competition from China/ Taiwan/
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Aietnam Customer 7issatisfaction #rice wars with competitors #olitical "nstability :conomic Threat Changing in consumer preferences
'O&S M('RI) Strengths •
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2argest footwear manufacturing and marketing organization in world 3evolutionizing the production processes Men4s 5 Children4s shoes contributes to !8.6 of total sales Brand "mage 3easonable 'uality products at reasonable #rice 7iversity of product line ationwide retail network ,9lign production 5 distribution- 5 accessible &ootwear for :ntire &amily &inancially strong 9mong small manufacturer/ Bata has 11;$+6 Market share
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pportunities •
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7emand of 1*+ million shoes per year 7evelop new products to capture new markets Capture market share from competitors ell online=,7igital Marketing= Dnline 3etail store#artnership with mall #layers Threats •
Customer 7issatisfaction
S Strategies •
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9c'uisition 5 Eoin Aenture ,1/$/ */D#roduct 7evelopment
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,1/$/ */D)-
ST Strategies "ncrease Customization,$/
* product lines ,includes? Canvas/ women shoes/ (oggers/ slippers; @awai/ #AC;slipperscollectively contributes only *16 of total sales 2ack of leadership o innovative designs in products ,no product variety o proper planning in advertisement 1*+ million demand and produce only 1! million shoes annually 7ecline in e%ports 7iscontinued its tires 5 tubes business #roduce less or same product to reduce variation in product design 2abor intensive production "n=house production involves longer lead times W Strategies "ntroduce new segments,F)/D)Market #enetration,F)/ F!/ D*-
WT Strategies •
3elated
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"mport of ine%pensive Chinese products Changing in consumer preferences
8/ T1Customers can be satisfied with Bata4s 'uality and reasonable prices.,$/ T1-
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7iversification,F!/ T1"nnovative #roducts,F)/ T)-
