School of Business & Economics Logistics management in Supply Chains 4FE003

Bata Shoe Company

(Bangladesh) Ltd.

Scenario Work

Examinator: Helena Forslund

Authors: Mahmudul Islam 3/21/2011

Executive Summary
The objective of this paper is to create four different plausible scenarios for Bata Bangladesh Company, with which we worked: to give applied knowledge of transforming overall corporate strategies and by the use of scenario methodology selecting one most probable scenario and then recommend an action plan. Bata is a well-established company in Bangladesh footwear market with and their mission is to satisfy their customers desire to look good by providing commercial fashion footwear and accessories, at superior value and quality, in a unique retail format served by competence sales associates. This paper is further divided into a number of parts. The first part of paper includes company presentation, background, problem discussion, and purpose along with some limitations. Second part is about the theoretical background regarding strategic tools that have been selected for further analysis of the selected company among scenarios. With help of TAIDA approach, at first we gathered all strategic key drivers of the Bata Shoe Company. The strategic tools that are included in this paper are SWOT analysis and PESTEL Analysis. It also includes some theory regarding scenario planning like what is scenario planning actually and how scenario study is carried out. We select two factors, competiveness, and negative perception of consumers. Further, with the help of selected factors, we make four scenarios for Bata, named Train speed scenario, Buss speed scenario, cycling speed scenario and walking speed scenario. For the action plan, we select the walking speed scenario, which we think is the most critical one for Bata. At the end of the paper, we have made the conclusion of what we have done.

Table of Contents
1. Introduction ..................................................................................................................................... 6 1.1. 1.2. Background.............................................................................................................................. 6 Company presentation ............................................................................................................ 6 Bata today ....................................................................................................................... 6 Bata Bangladesh .............................................................................................................. 7 Products line of Bata ....................................................................................................... 8 Market share ................................................................................................................... 8 Sourcing policy of Bata .................................................................................................... 9 Brand image of Bata ...................................................................................................... 10

1.2.1. 1.2.2. 1.2.3. 1.2.4. 1.2.5. 1.2.6. 1.3. 1.4. 1.5. 2.

Problem discussion ................................................................................................................ 10 Purpose of the Study ............................................................................................................. 10 Limitation of the study .......................................................................................................... 10

Theoratical Framework ................................................................................................................. 10 2.1. 2.2. 2.3. SWOT Analysis ...................................................................................................................... 10 TAIDA Concept....................................................................................................................... 11 PESTEL analysis ...................................................................................................................... 13 Political factors .............................................................................................................. 13 Economical Factors ........................................................................................................ 13 Social/cultural factors.................................................................................................... 13 Technological factors..................................................................................................... 13 Ecological factors ........................................................................................................... 13 Legal factors................................................................................................................... 13

2.3.1. 2.3.2. 2.3.3. 2.3.4. 2.3.5. 2.3.6. 2.4. 3.

Scenario planning .................................................................................................................. 14

Scenario Analysis ........................................................................................................................... 15 3.1. Swot Analysis ......................................................................................................................... 15 Batas Strengths ............................................................................................................ 15 Batas Weakness ........................................................................................................... 16 Batas Opportunities ..................................................................................................... 16 Batas Threats ................................................................................................................ 16

3.1.1. 3.1.2. 3.1.3. 3.1.4. 3.2.

PESTEL analysis ...................................................................................................................... 18 Political analysis............................................................................................................. 18 Economical analysis ....................................................................................................... 19 Societal analysis ............................................................................................................. 19 3

3.2.1. 3.2.2. 3.2.3.

3.2.4. 3.2.5. 3.2.6. 3.2.7. 4.

Technological analysis ................................................................................................... 19 Ecological analysis ......................................................................................................... 19 Legal analysis ................................................................................................................. 20 Summary of PESTEL analysis ......................................................................................... 20

Drivers and scenario development ............................................................................................... 21 4.1. Batas main drivers ................................................................................................................ 21 Competitors low price product .................................................................................. 22 Dependency on suppliers .............................................................................................. 22 Buying power of consumers .......................................................................................... 23 Negative perception of consumers ............................................................................... 23 Longevity of products .................................................................................................... 23

4.1.1. 4.1.2. 4.1.3. 4.1.4. 4.1.5. 4.2.

Scenario development........................................................................................................... 23 Train speed scenario...................................................................................................... 24 Bus speed scenario ........................................................................................................ 25 Cycling speed scenario .................................................................................................. 25 Walking speed scenario ................................................................................................. 25

4.2.1. 4.2.2. 4.2.3. 4.2.4. 5.

One Scenario & Action plan........................................................................................................... 26 5.1. 5.2. Scenario selection.................................................................................................................. 26 Action plan............................................................................................................................. 27

6. 7.

Conclusion ..................................................................................................................................... 29 References ..................................................................................................................................... 30

Appendix................................................................................................................................................ 32 Appendix 1: Interviewing process ..................................................................................................... 32 Appendix 2: Questionnaire and with their answers .......................................................................... 32

Table of Figures
Figure 1: Market share covered by footwear industries (Own Illustration)............................................ 9 Figure 2: SWOT Analysis and Evaluating the Quality of a Firms Theory of how to compete successfully and Gain Competitive Advantage (Barney, 2002, p.20) .................................................... 11 Figure 3: TAIDA process (Lindgren and Bandhold, 2003) ..................................................................... 12 Figure 4: The outside-in perspective of scenario planning (Lindgren and Bandhold, 2003)................ 12 Figure 5: Merchandising and Marketing strategy of Bata (from Bata merchandizing manual) ........... 18 Figure 6: Illustrative factors that could affect Bata (Own Illustration) ................................................. 20 Figure 7: Spider Diagram Bata Shoe Company (Bangladeh) Ltd. Scenario Impact vs Uncertainty (Inspired by Wulf et al., 2010) ............................................................................................................... 21 Figure 8: Factors that affect Bata business, based on the two axis degree of uncertainty and level of impact .................................................................................................................................................... 22 Figure 9: Four scenarios for Bata Shoe Company (Bangladesh) Ltd................................................................... 24 Figure 10: Degree of threats of Bata ..................................................................................................... 27 Figure 11: Summary of action plan ...................................................................................................... 28

1. Introduction
In this chapter first presents a background of scenario planning and scenario work. After that company presentation of Bata Bangladesh comes. We have illustrated it briefly. The company presentation followed by the problem discussion of Bata and in purpose section, we find out why scenario planning needs to be conduct is followed by the limitations of the paper.

1.1. Background
In this uncertain world, nothing is stable. Everything is changing in this world and will change where Mother Nature has a great influence on changing. The future is uncertain and complex. For getting better idea about future Scenario learning is a good idea. A business environment change with the time passes on. This is happens because external factors outside the organizations is varies with the time. Every organization is heavily influenced by factors outside their own boundaries (Steil & Gibbons-Carr, 2005). Scenario is defined in the dictionaries, an outline of a natural or expected course of event . Porter (1985) says, An internally consistent view of what the future might turn out to be not a forecast, but one possible future outcome. It could be like the probabilities of future possible outcomes or events. In scenarios, there are factors or driver of changes. We can choose most important two factors then we can assign those two factors with four scenarios with level of impact and degree of uncertainty. Many organizations already have considerable experience using strategic management to identify, select, and execute choices for the business scope, competitive differentiation, and market place goals. As an important addition to the strategic management technology, scenario learning helps mangers explore the truth range of available choices involved in preparing for the future, test how well this choices would succeed in various possible futures, and prepare a rough timetable for the future events. (Fahey & Randall, 1998)

1.2. Company presentation

In 1884, the T. & A. Bata Shoe Company is registered in Zlin, Czechoslovakia by the siblings Tomas, Anna and Antonin Bata. Innovative from the beginning it departs from century old traditions of the one-man cobblers workshop. In 1885, Antonin leaves the Company to join the army, his sister Anna follows shortly after to get married. Tomas Bata takes over the company leadership alone. 1.2.1. Bata today Bata has worldwide reach, with operations across 5 continents managed by 4 regional meaningful business units (MBUs). Each unit benefits from synergies specific to their environment, such as

product development, sourcing or marketing support. Each MBU is entrepreneurial in nature, and can quickly adapt to changes in the market place and seize potential growth opportunities. Bata's strength lies in its worldwide presence. While local companies are self-governing, each one benefits from its link to the international organization for back-office systems, product innovations, and sourcing. Bata today Serves 1 million customers per day Employs more than 50,000 people Operates 5000 retail stores Manages a retail presence in over 70 countries Runs 27 production facilities across 20 countries Bata's 4 Business Units: Bata Europe, Switzerland Bata Asia Pacific-Africa, Singapore Bata Latin America, Mexico Bata North America, Canada

1.2.2. Bata Bangladesh Bata Bangladesh is affiliated with the Bata Shoe Organization. This is the worlds largest footwear manufacturing and marketing organization, started operation in Bangladesh in 1962, Incorporation in Bangladesh in 1972. Currently, Bata Bangladesh operates 2 manufacturing plant Tongi and Dhamrai, Bata Bangladesh is producing around 110,000 pairs of shoes daily. It has a modern tannery with the latest technological facilities to process 5 million square feet of leather yearly. The Tannery is equipped with a high-tech effluent treatment plant ensuring a pollution free environment for both workers and locality where we operate. Bata Bangladesh sells all kinds of footwear, which are classified in alignment with market sectors as follows: Domestic market. Under the trademarks of Bata, Power, Weinbrenner Bubblegummers, and Marie Claire, through a countywide distribution network comprising retail stores, DSPs and independent dealers. 7

Overseas market. Under the trademarks of its own brands to sister Companies in the Middle East. Mission. To satisfy our customers desire to look good by providing commercial fashion footwear and accessories, at superior value and quality, in a unique retail format served by competence sales associates. Objectives: Identifying the performance results the organization intends to achieve There are Marketing and Financial objectives: Marketing objectives range from a clear definition of the customer target group, market share goals, store concepts, products, and pricing. Financial objectives include achieving the desired gross profit and expenses levels in order to be profitable. Strategies: Specific course of actions describing precisely how to reach objectives Likewise, there are marketing and financial strategies: Marketing strategies focus on marketing variables that have a direct impact on the customers response to the organizations offer against the competitors offer. Key variables include products, price, customer service, visual merchandising and store atmosphere. Financial strategies indicate how the organization intends to monitor its financial variables to achieve its financial objectives such as turnover, expenses, assets, liabilities, and profits. 1.2.3. Products line of Bata Bata has three products line. These are:

1.2.4. Market share The company possesses the largest distribution network in the country controlling the largest market share in the footwear market. The retail footwear market size is approximately USD 214bn and estimated to be expanding at 20% per year, according to newspaper reports. Bata currently enjoys 8

around 30% of the market share with net revenue of USD 65.7bn.1 In Bangladesh, some renowned shoe manufacturer companies are offering same quality of products at a same price what Bata offers. These are Appex-adelchi, Bay Tanneries, Jennys, and other local manufacturers.

Market share covered by footwear companies

34% 33% Bata

Appex-adelchi
Bay Tanneries 13% 6.7% 13% Jenny's Other Manufacturers

Figure 1: Market share covered by footwear industries (Own Illustration)

As we see in the figure 6, comparing with Bata, Appex-adelchi is a booming power and Bay Tanneries in terms of price range and quality. More recently, the competition has intensified among the rivalries rebates, suitable financing, and longevity of products have helped to lure the customers. However, Bata is still in the suitable position of its market because of its demographic allocation of stores. Batas point of view is that not all shoe retailers are their direct competitors. They believe that direct competitors may be defined as those offering the same price/value product as they, regardless of store format, location and customer service. 1.2.5. Sourcing policy of Bata Bata does sourcing in three ways; from their own production two-production plant, supply from local producer, and import especially from China. In case of local producer, they buy final product from Small and Medium Enterprises (SMEs) with their required quality & condition. These SMEs has little or no market share. They can even manufacture only for Bata. Obviously, Bata wins over their supplier and no problem with Chinese supplier as want to supply as much as they can.

http://eplbangladesh.com/brokerage/research/1297916914BATASHOE%20-%20Oct%2029,%202009.pdf

1.2.6. Brand image of Bata Branding is a big factor; Coca-Cola, Kodak, and Nike are names that people around the world recognize and respect for consistency of product quality. Bata is like that kind of brand in including Bangladesh; holds 30 percent of Bangladeshi market share. People go to Bata with most of the time determining that they would buy. It is considered that 60% 80% of consumers purchase decisions are made at the store level. Bata sells products at fixed price. Bata also has a discount policy.

1.3. Problem discussion

Which future uncertainties can be found around Bata Bangladesh and how can the company adapt to the major ones?

1.4. Purpose of the Study

The purpose of this paper is to perform a scenario analysis to identify the market uncertainties and external and internal strategic factors, which might have an effect on future business position in the market Bata Bangladesh. Furthermore, to create actions plan to cope with these uncertainties. From the findings of this study, organizations in this sector will be able to find some effective guidelines in configuring their business in Bangladesh and looking at the economic and social factors.

1.5. Limitation of the study

The result and implications that are drawn from the study are subject to the limitations associated mainly with the small number of secondary sources due to time limitation. Considering the time and financial constraints, it was not possible to make a door-to-door survey. As a result, it has used the data from different secondary sources. However, the result would have been more valid, if the proper survey can be conducted, the findings of the research will be more reliable & representative.

2. Theoratical Framework
2.1. SWOT Analysis
SWOT analysis is the best-known strategic tool and it is used in 80 percent of organizations. It stands for Strengths, Weakness, Opportunities, and Threats (Webb, 2008, p.9). The theory is used to analyze how successful the firm and they evaluate the theories to gain competitive advantage relating to the four aspects (Barney, 2002, p.19). Under SWOT, the most important thing is to identify internal and external factors and to comprehend their implications (Webb, 2008, p.10). Strengths. A firms strengths are resources and capabilities that it possesses and that enable it to employ in activities which generate economic value and sometimes, competitive 10

advantage (Barney, 2002, p.19). For example, what is the organization good at, what advantages does the organization have and that it can exploit (Webb, 2008, p.10). Weakness. A firms resources and capabilities that make it difficult to either comprehend the economic value of its strengths or reduce the firms economic value (Barney, 2002, p.23). For example, what impedes the achievement of goals, what do your competitors do better than you or what areas does the organization need to develop (Webb, 2008, p.10)? Opportunities. These are chances for a firm to improve its competitive position and

performance (Barney, 2002, p.20). Threats. Threats are any individual, group, or organization outside a firm that seeks to reduce the level of that firms performance. The more successful a firm is, the greater the threats it faces (Barney, 2002, p.20). Organizational analyses Environmental analyses

Strengths

Opportunities

Weakness

Threats

Strategic choices
Figure 2: SWOT Analysis and Evaluating the Quality of a Firms Theory of how to compete successfully and Gain Competitive Advantage (Barney, 2002, p.20)

2.2. TAIDA Concept

TAIDA is a scenario-planning framework developed in more than fifteen years ago by Lindgren and

Bandhold and it has been used in more than hundreds of scenario planning projects (Lindgren and Bandhold, 2003, p.47). TAIDA stands for: Tracking. The main purpose of this step is to trace and describe changes in the surrounding world that may have an impact on the focal firm. Analyzing. When tracking is done, next step is to analyze changes and generate scenarios. Imaging. After gathering insights of probable futures, a image is created about what is desired: visions. 11

 Deciding. In this section, development areas and strategies are identified to meet threats and achieve visions and goals. Acting. It is all about taking action and following up. In this part, short-term goals are set up.

Figure 3: TAIDA process (Lindgren and Bandhold, 2003)

Driving forces that may have an impact on the organization Long-term developments in the business very largely depend on driving forces in the surrounding world. Therefore, the natural starting point for tracking is the surrounding world (Lindgren and Bandhold, 2003, p.56).

Figure 4: The outside-in perspective of scenario planning (Lindgren and Bandhold, 2003)

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2.3. PESTEL analysis

PESTEL analysis stands for Political, Economic, Social, Technological, Ecological, and Legal analysis and describes a framework of macro-environmental factors. It is Popular in the United Kingdom. It is used for strategic planning process. In this analysis, mainly two questions are asked like how this factor affects the company and the uncertainty behind those factors. 2.3.1. Political factors Governmental and political actions often have a direct effect on a company. It might have major events that affect the whole business community. For example, government itself, election results, white papers, competition commission, fiscal policies, UN sanctions (Webb, 2008, p.11). 2.3.2. Economical Factors It can range from local to international, from current to future. For example, global economy, emergence of developing countries as major forces of economic power, economic cycles, inflation, interest rate, exchange rates, EU expansion, unemployment, and oil prices (Webb, 2008, p.11). 2.3.3. Social/cultural factors It includes the cultural aspects and social factors affect the demand for a companys product. It includes demographic trends, work/life balance, job security, employability, income trends, education, fashions, mobility, living conditions, and poverty levels (Webb, 2008, p.11). 2.3.4. Technological factors Technology changes have direct impact on companies. Organizations, which have identified and capitalize on the key technological developments for their industries have a certain competitive advantage over other companies in the industry (Byars, 1984, pp. 58-59). It includes aspects such as IT spend, new communication channels, R&D spend, speed of technology transfer, social networking trends, technology innovations and rates of obsolescence, internet (Webb, 2008, p.11). 2.3.5. Ecological factors Factors include ecological and environmental aspects such as climate change, global warming, recycling, organic farming and food, green issues, carbon footprint, carbon trading, Kyoto Treaty about reducing emissions (Webb, 2008, p.11). Global awareness of the potential impacts of climate change is affecting how companies operate and the products they offer. 2.3.6. Legal factors Factors include consumer law, antitrust law, employment law, discrimination legislation, green laws, health and safety law, data protection, freedom of information, minimum wage, working hours directives (Webb, 2008, p.11). 13

2.4. Scenario planning

In Todays world, it has become very important for companies to plan and prepare for the uncertainties around them. As there are rapid day to day changing in the business environment, hence the strategic planning and scenario planning has become extremely important for manager. As Porter (2004), An internally consistent view of what the future might turn out to be not a forecast, but one possible future outcome, has defined scenario. A scenario refer to the future of the external environment; i.e. the environment within which an organisation operates. It is useful to assess what that future environment may look like, while developing strategic options, so that an appropriate plan may be produced. A single scenario about future is not appropriate, rather multiple scenarios presented as a set, are more appropriate for the uncertain future. (OBrien, 2004) Scenarios are the projections of a potential future. Scenarios need to be plausible, i.e. they should be based on a possible, credible, and relevant hypothesis. They are a combination of estimations of what might happen and assumptions about what could happen, but they are not accurate forecasts of what will happen in the future. Thus, projection should not be confused with predictions; a projection should be taken to mean as one view of the future, which is based upon specific information, and a set of logical assumptions. (Fahey et al., 1998) According to OBrien (2004), scenario development process consists of the following five steps: 1. Set the scene: Understanding the organization for which the scenario is being developed. Establish the scope of the scenario development, and looking at the current and the past issues in the organization. 2. Generate and select factors: Produce a list of factors that were considered to be out of control but important for the organization in the past. The factor might be political, economic, social, and technological. Moreover, choosing a qualitative or quantitative rang of value for the factors. 3. Choose themes and developed scenario details: in this stage, the number of scenario needed to be developed. Normally two to four scenarios are developed. Next participants are advised to develop their scenarios in an order, selecting factors and giving them the desire values. 4. Check the consistency of the scenarios: here the cross impact analysis is considered i.e. the positive and negative correlation between the factors is considered, also the strength of the relationship (strong, medium, and weak) between two factors is estimated. 5. Develop and test strategies: in this final stage of the process is to use the scenarios to develop a set of strategic options that would be the most powerful under each of the scenarios. 14

3. Scenario Analysis
As mentioned in the theoretical part the environmental analysis will be used to build-up relevant scenarios. In this section, SWOT-analysis and PESTEL analysis will be used for Bata (Bangladesh) to gain the required information. While SWOT-analysis focus more on the internal perspective or the company as starting point, PESTEL analysis shall mainly be used to determine factors and threats of the surroundings and characteristics of the industry and the company itself.

3.1. Swot Analysis

3.1.1. Batas Strengths Batas commitment is to continue customer service to this day, from the designers sketchbook through to the customers foot. Bata companies strive to supply the right products, at the right time, at the right price, and in a manner, that fulfills our service commitments to both retail and wholesale customers. Bata is an international team whose diversity of ideas and exchange of expertise creates an environment that stimulates people to think beyond their immediate national markets. It is Batas culture to provide equality of opportunity, to promote on merit and to provide employees with ongoing training opportunities to build new skills. Bata companies have a tradition of being good corporate citizens and seek to contribute to the well-being of the countries and communities where they operate. Bata strives to develop long-term partnership with its suppliers and business associates. Each Bata company around the world is committed to ensuring that operations are conducted ethically. Bata collects locally available international quality leather. Bata provide quality products using creative and innovative merchandising management styles. Thinking green It is Batas endeavor to preserve the environment. The Bata Environmental Mission Statement is to protect our people, customers, and communities and to protect our natural environment in order to help sustain human development. In the implementation of this mission, international guidelines have been developed in the areas of environment, health, and safety. The contribution to environmental conservation includes a role in prevention and education. Bata companies have long-standing relationships with groups that have helped several generations of young people become more aware of the need for protection of the natural environment.

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3.1.2. Batas Weakness Bata has some weakness. Its main weakness is it cannot fill all the market demand by their own production plant. Therefore, they have to switch to the local suppliers and have to import a large number to meet the customer demand. Bata is very dependent on its suppliers. For this, sometimes quality of the product degrades. It is a stable situation as long as you can keep a good quality. Nevertheless, if they lose quality and reputation, the advantage will turn into a threat. The size of the store is one of the major weaknesses. Maximum stores are small. Small stores faces problem because Bata has long product line and in a small place it is hard to present all the merchandise for visualization. In case of merchandising, Bata has too many price points and excessive markdowns in children category. 3.1.3. Batas Opportunities Bata has three types of product line, which are mens collection, ladies collection and childrens collection. In Bangladesh, the womens shoe market has not yet properly explored and has lack of variations. Bata has huge opportunity to invest this section and gain competitive advantage. Most of the people in Bangladesh live in joint family and Bata has developed a concept named Family store, where all the members of the family will find their desired shoe. It is an easy way to gain profit and get closer to the customer. Bata has a network of 242 retail outlets located strategically in different parts of the country. These retail outlets are an integral part their brand marketing. An equally extensive network of depots and dealers supplements this extensive retail network. Bata has 13 Wholesale depots covering Bangladesh. Under these depots 390 RWD (Registered Wholesale Dealers) and 553 DSP (Dealer Support Program) stores are operating. It shows that demographically Bata has greater coverage all over the country and it a great opportunity to get closer to the customers. Another opportunity lies in customer dealings. If salespersons are proper trained, then they can convert the visitors into buyers, which can make extra benefit. 3.1.4. Batas Threats Bata has three sourcing channels. These are; from own factory, from suppliers and by importing. When importing, countrys political climate or stability, which may threaten the promised delivery dates. Sometimes trade restrictions and possible quotas and duties affect the costing deliveries. There are various threats and costs to be considered such as labor, pricing, rates of exchange, letters of credit requirements and the impact on cash flow.

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For meeting customer demand, Bata is now importing huge amount of products and majority of these products are made by synthetic material instead of leather. However, in Bangladesh people know Bata because it produces high quality leather shoes that have longevity. However, the imported items are not leather-made and in terms of longevity, it is not good. This trend is damaging the brand image of Bata, which can hinder the growth of Bata.

Strengths
Marketing driven company Profit minded store managers Excellent sell-out rate in ladies and men categories Strong brand name Good after-sales service Quality product Integrated production chain from raw materials to tanneries and footwear available Geographic position for the future market Good potential of raw materials for maximum added value Low costs of production labor available Footwear industry got stimulus for the progress in finished leather production Good warehousing facility

Weakness

Small size stores Too many price points High prices as compared to competitors Excessive markdowns in children category Footwear accessories such as tapes, trims, buckles, linings are not available locally Backward linkage between leather products industry and tanneries is still not a prevailing culture Dependency on suppliers

Opportunities

Threats
Concepts positioning Aging portfolio Unfocused merchandise mix Leather footwear consumption is considerably replaced by casual footwear made of synthetic materials No organized industrial unit for sole production (Natural rubber based, TRP, NU or EVA) Political instability

Ladies Market Family Store concept Conversion rate Geographical coverage Gradual progress in the finishing process of leather

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Process from Objectives to Customer Satisfaction The following illustration with SWOT as its centerpiece, demonstrates the complete process from objectives to satisfy their customers. Several of these activities provide an opportunity to differentiate their stores and products from the competition. For example, product offer, branding, and packaging are only a few of the elements that can give us a competitive advantage in the market place. The buyer and merchandiser need to understand the 3 C s in this marketing plan as part of their total merchandise planning. Merchandising and Marketing plan of Bata Marketing Objectives Store Concept Store Profiles Product Profiles Budget Planning Collection Structure Branding Packaging Company Analysis Sourcing BSO/Others Shoe line Monitoring Customer Analysis Competition Analysis Target Customers Store Staff Advertising

Promotion Activities Customer Service Visual

Merchandising

Figure 5: Merchandising and Marketing strategy of Bata (from Bata merchandizing manual)

3.2. PESTEL analysis

In this paper, we use the PESTEL analysis for analyzing the external environment of the company. 3.2.1. Political analysis Bata has geopolitical stability in Bangladesh because it has started operation in Bangladesh in 1962 and over the years, it has become the market pioneer of footwear industry. However, if any changes happen, it could affect the company directly. One major factor affecting Bata regarding impose of extra TAX almost every year. It is directly affecting the price of products that is a big challenge for

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them. One factor that could have affects Bata severely, if the Government opens the market or liberalizes the market for outsider companies. 3.2.2. Economical analysis One factor that affects Bata is prices of raw materials. Every year the prices of raw materials are changing. For this, the price of finished goods has changed subsequently. However, the income level of people has not increased. Therefore, it may affect the selling quantity as well as company margin. In Bangladesh, recently a big fall happen in share market. It may affect the liquidity and the interest rate has increased which is directly affecting. Bata can capitalize targeting the growing middle class. Under this section, the demand is rising. Another factor is the competitors product price. They are offering almost same quality of product at a low price comparing to Bata. This could affect the buying intention of buyers. 3.2.3. Societal analysis In case of development of corporate business, Bata has great impact on sales and stability of the company. Increased negative attitudes towards products that seem to be less durable than previous which could have large effect on Bata business. This growing negative attitude is hindering the brand image of Bata. In case of acceptance of products among population, Bata has built a brand image and it has a huge networking and it has already accepted by mass people and I think in Bangladesh it is hard to find any man who havent wear a Bata product. Therefore, it has less impact on sales. 3.2.4. Technological analysis Two technological factors that may effect on Bata are improvements in longevity of products and improvements in style with leather. If the longevity of products is increased, then more customers will buy their product, they will come repeatedly, and it will increase the margin. In Bangladesh, one recent trend is people want styled shoes with leather. Bata has leather products. However, if they concentrate on more leather goods and style, it will increase the sale. Another factor that has less effect is regarding safety and less pollution. Because Bata has following all the safety rules and they are working on to make less pollution. 3.2.5. Ecological analysis Thinking green It is Batas endeavor to preserve the environment. In Batas Environmental Mission Statement, it is written that they will protect people, customers, and communities and will protect natural environment in order to help sustain human development. In the implementation of this mission, international guidelines have been developed in the areas of environment. The contribution to environmental conservation includes a role in prevention and education. Bata companies have long-standing relationships with groups that have helped several generations of young people 19

become more aware of the need for protection of the natural environment. Therefore, in ecological sector, Bata has strong position. 3.2.6. Legal analysis One factor health and safety has lees impact on Bata, because it is abiding by all the rules and regulations of health and safety. In case of application of the water treatment plant, Bata has already had it. One factor is that could have direct affected on Batas sales trend, which is changing operating time of retail stores. Previously, all Bata stores were opened at 8am and closed at 11pm or 12pm or more. Now, government has declared that all markets have to close within 8pm because lack of electricity. This is already affecting the margin. If Government will impose new rules, then it might have effect on Bata. 3.2.7. Summary of PESTEL analysis The identified factors that are identified illustrated bellow:

P L

olitical Factors
Geopolitical stability Burden of extra TAX Liberalized market?

conomical Factors
Increased price of raw materials Buying power of consumers Financial market crisis Competitors low price product

egal Factors
changing operating time of retail stores

Organization

ocial Factors
Negative perception of consumers in case of absence of durability

cological Factors

echnological Factors
Longevity of products Improvements in style with leather

Figure 6: Illustrative factors that could affect Bata (Own Illustration)

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4. Drivers and scenario development

Identifying all the drivers, they need to categorized based on two criterias, (1) Level of impact and (2) Degree of uncertainty (Van der Heijden et al., 2002, cited in Postma and Liebl, 2005 )By categorizing the factors by these criterias it is possible to identify the most critical factors that could affect the organization (Postma and Liebl, 2005).

4.1. Batas main drivers

For getting the information of impact and uncertainty, we asked them some questions under PESTEL analysis, which is shown in appendix 2 and asked them to make numbering from 1 (Low/weak) to 10 (high/strong). After getting the results, we posted all the factors in a 360: spider diagram. It shows us which one is critical factor, which one is important planning issue and which one needs to be monitor. It is a clear view for managers. From here, they can easily trace the drawbacks. This is shown in figure 7.

Figure 7: Spider Diagram Bata Shoe Company (Bangladesh) Ltd. Scenario Impact vs. Uncertainty (Inspired by Wulf et al., 2010)

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From the diagram and from the SWOT analysis we selected 14 drivers of changes and put them in an Impact/Predictability matrix according to their value. From the matrix, we selected two drivers that will generate most uncertainty and high impact. These two drivers will be used for scenario construction.

Degree of Uncertainty
Low
Competitors low price product Expansion of ladies shoe market

Medium
Changing operation time of retail stores

High Negative perception of

consumers in case of absence of durability Increased competiveness Burden of extra TAX Political instability Increased price of raw materials

High

Level of Impact

Dependency on suppliers

Financial market crisis Improvements in style with leather

Medium

Buying power of consumers

Rising demand in emerging markets due to the growing middle class

Longevity of products

Figure 8: Factors that affect Bata business, based on the two axis degree of uncertainty and level of impact

Low

4.1.1. Competitors low price product Batas standard product or quality product are high prices. There are competitors who are able to provide at lower prices. Competitors low price impact could be high as some of the competitors (Apex adelchi ,Bay tanneries ,Jennys) have similar quality or even better quality at lower than Batas price level. Nevertheless, the degree of uncertainty is low as Bata has the leading market share. 4.1.2. Dependency on suppliers Batas impact is medium here and the uncertainty of their dependency on the suppliers is low. Bata manage its sourcing in three ways; from their own two-production plant, supply from local producer, and import especially from China. They have product plant in two opposite side of Bangladeshi 22

capital of Dhaka; one in Aushulia, Gazipur and other is Dhamrai, Dhaka .In case of local producer, they buy final product from couples of Small and Medium Enterprises (SMEs) with their required quality & condition. These SMEs has little or no market share. 4.1.3. Buying power of consumers Bata sells their products at fixed price. Bangladeshis consumer is quite familiar with that. As in Bangladesh, middle class people are more, so the buying power of people is low, though they have spending habit. Because of Batas strategy and marketing policy consumer are enticed to cost more for Bata. Therefore, this factor needs to be monitor. 4.1.4. Negative perception of consumers If a product price is high but quality is low consumer will be dissatisfied. Indeed Bata is losing some of its product quality. If it continuously goes on their margin will definitely fall and about the consumers perception, it will be obviously negative at a high range after a certain time. The impact of this would be high for Bata. 4.1.5. Longevity of products This is similar like above. It has a great impact in the long run. Shoe product must need to be longlasting considering the weather and environmental condition of Bangladesh. This is one of the factors for buying decision of Bangladeshi consumer. If Bata fail to do so, they might lose customer in future. If people start believing Batas product were lack of long lasting its impact would be profound.

4.2. Scenario development

From the Impact/Predictability matrix, we developed our scenarios out of the drivers of Negative perception of consumers in case of absence of durability and competiveness among competitors as shown in figure 9. We have selected these factors because we consider that it has greater impact on the Bata Bangladesh. The four scenarios named according to the speed of different transportation system to reflect the conditions in different scenarios. The first scenario has been named the train speed scenario, which reflects the situation of the company economy at a certain time. The second scenario has been named the buss speed scenario. The third one has been named the cycling speed scenario and the fourth one has been named the walking speed scenario in terms of the speed of walk for a certain distance.

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Increased competitiveness

Low negative perception of consumers

Bus Speed Scenario

Walking Speed Scenario

High negative perception of consumers

Train Speed Scenario

Cycling Speed Scenario

Less competitiveness

Figure 9: Four scenarios for Bata Shoe Company (Bangladesh) Ltd.

4.2.1. Train speed scenario Train speed in terms of transportation system on land is the highest. We choose the name train speed scenario, because it shows the strongest position of the company in the market. This is the most favorable scenario for the company. In this scenario, we have shown Bata as leader in the market. The competitiveness in the market is low and the perception of the consumers is almost positive, which is a good sign for the expansion of business for Bata. Bata do not need to worry about it. They can expand business and increase market share because of low competition in the market. This scenario does not mean that there are no risks. As there is no competition and no negative attitude, so this sector, they have to cautious about their product quality and market availability. For market availability of product, they can improve its logistics working especially on transportation of products to shorten the lead-time and can develop the better product mix for better visualization in store.

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4.2.2. Bus speed scenario Bus speed in terms of transportation system on land is the second highest. The bus speed scenario represents the second scenario, which have more competitors in the market but still Bata is enjoying consumer loyalty, as there is low negative perception of customers towards Bata. In this situation, Bata has to focus on their current business capacities and they should strive to retain the current market share. The population birth rate in Bangladesh is around two percent so the market is expanding automatically. For the increased competition, Bata has to search new market for expansion. By this Bata will be benefited from a pull effect to meet new customers. For facing this new demand, they need to expand their production capability and have to develop their warehousing. In this scenario, Bata also have to focus on their product quality in case of longevity to minimize the negative perception of consumers. Here they have to make a strategy to gain more proportion of the new market by competing with the competitors and retaining the current market share. As Bata is the pioneer in current situation, so this scenario most probably represents the current position of Bata. 4.2.3. Cycling speed scenario Cycling speed comparing with train and bus is very low. The cycling speed scenario is that when there will be high negative perception of consumers towards the Bata products, which has started recently because of their decreasing quality for using bad quality and uncomfortable leather. The competition in the market is still less, which is favorable aspect of the selected scenario, but if negative perception rise for Bata then the current competitors like Apex adelchi, Bay tanneries and jennys can take the market share of Bata and they dont need to wait for the new rivals in the market. This is the scenario; Bata really has to pay for it. In such situation, they can cut their 30% of their budget on production activities because of less demand among consumers for bad perception and shift it towards some promotional activities. If Bata efficiently confirms their business plans and makes more promotional activities and humanitarian work to regain customer loyalty and increase their sales efforts, they can manage to grasp increased market share, with the existing product range, in such weak competition. 4.2.4. Walking speed scenario Walking speed in terms of going for a very long distance on land is the worst idea and un-even situation. Walking speed scenario is the most crucial one for the Bata, for which they have to prepare. Here they will have to face greater degree of competition and they are supposed to have 25

high negative perception in the marker for their products. This is the most unfavorable situation, which they can face in the future. Here Bata will focus on regaining the positive perception and making loyal customers while the same time they have to compete with wide range of competitors. From the study of economic theories, the wide range of competition does not exist in the market in long run, as many weak competitors have to give up for the strong one. Therefore, Bata need to focus mostly on making loyal customers and making positive perception towards Bata products. After having loyal costumers then they can compete with newly emerging competitors.

5. One Scenario & Action plan

In this chapter, we want to consider strategic aspects and action plan for one scenario. On the four scenarios, we have chosen one because focusing on one scenario will help to manages to make decisions and further steps.

5.1. Scenario selection

In the train speed scenario, it has less competitiveness and less negative perception of consumers. In current situation, Bata already has two or three competitors and therefore it is not possible for Bata to eliminate the entire competitor from market. Moreover, about the less negative perception, Bata can regain it by providing good quality. In the bus speed scenario, Bata is facing high degree of competition in the market but still Bata is enjoying consumer loyalty, as there is low negative perception of customers towards Bata. This situation is almost similar or less differs from current situation of Bata. Therefore, this scenario will not have a major affect on Bata business and it can assume that it will not change within the two or three years due to Batas big retail network or big market share. In the cycling speed scenario, Bata got high negative perception of consumers towards the Bata products and the competition in the market is still less, which is favorable aspect of the selected scenario. In this section, Bata still have competitor but only the problem is the negative perception. This scenario does not show the current position and about the future, it cannot be predictable. However, by analyzing the market share are footwear industry raise it can assume that the competitors will not give up. Therefore, it cannot be the future scenario. Finally, in the walking speed scenario, Bata has to face greater degree of competition and they are supposed to have high negative perception in the marker for their products. As discussed earlier that the two factors are increasing quite severely. This scenario has the highest impact on Bata and within three or four years, they can face this situation if they do not change their strategy. 26

After analyzing all the scenarios, we have selected Walking speed scenario because of its robustness of damage.

5.2. Action plan

In this section, an action plan will be presented for time frame of 3 years in order to help Bata to meet the walking speed scenario in a best way. It the walking speed scenario, the main factor is the high negative perception of consumers in case of Bata products. For eliminating this factor, Bata need to focus on their product quality in terms of durability that is the most desired criteria among rising middle class consumers. Another technological factor is that they need to capitalize on especially for leather goods and obviously with good style because the products need to be trendy. One weakness of Bata is that they have too many price points and high prices compared to competitors that are identified in SWOT analysis. For the price point, it is hard to eliminate because they have almost 2000 types of article or designed shoes. In case of product price, Bata should work on it because competitors are offering same kind of product at a comparatively less price. By this, they are losing customers and as a result margin. Therefore, they need to review the whole price system and need to compare the competitors price at a periodic system like quarterly. Another weakness identified in SWOT analysis is dependency on suppliers. As they are sourcing in three ways, they need to cut down the supplier power over industry and need to increase their production capacity. One factor is previously Bay Tanneries were supplying Bata. However, they are seems to be a competitor because of their quality and price. In figure 10, we can see how the degree of threat affecting Bata.

Substitut es 6 4 Rivalry 2 0

Degree Of threats
Degree Of threats

New Entrant

Supplier

Buyer

Figure 10: Degree of threats of Bata

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One of the strengths of Bata is their financial position. Due to this strength, the company has good conditions to implement and do this type of investment especially on production increase. For eliminating the higher negative perception, Bata have to do focused merchandise mix, which is a threat determined in SWOT analysis. They need to do more advertisement about green environment that will help them to regain the soft corner of consumers for Bata. One opportunities identified in SWOT analysis is the womens shoe market. They should capitalize on it and need to expand their market by offering trendy and middle priced range product to lure the rising middle class. They have favorable economic condition and there is stronger influence from competitors it cannot be rather bigger challenge for Bata. The only challenge will be the rising negative conception and competitors are capitalizing on it. Therefore, Bata can regain their market by doing all the actions what we have proposed and within three years, it is possible to become the market pioneer. Therefore, we believe the scenario would be more crucial. The management has to consider and plan accordingly for avoiding such uncertainties on their business activity. The summary of action plan is shown in figure 11.

Technological development in durability of product

Rising middle class consumers

Innovation of styled trendy products

Win over competitors

Opportunities to expand womens shoe market

Average product price

Better customer service

Figure 11: Summary of action plan

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6. Conclusion
Usually a winning product has multi dimensions so that it can serve customers from various spectrums. A product must have three levels of identities where the first level is the essence of a product how well it satisfies the customers needs, the second level is the physical product, and finally it should be a goods or a service. The third level is the products shell. It includes all the additional products and services offered with the product to exceed customer expectations (Viardot, 2004, p.155). When the customer satisfaction exceeds the expectation level then the customer becomes delighted and only then it is possible to retain that customer, otherwise there is a probability of switching (Ratan et al., 2007). Todays consumers are becoming more aware of product value, quality and fashion than ever before. It is essential that a buyer have the latest fashions, but equally important that the merchandise is of the best quality and value available. In this paper, with help of TAIDA approach, at first we gathered all strategic key drivers of the Bata Shoe Company using SWOT and PESTEL analysis. Among the drivers, we identified two key drivers, which are most critical, i.e. having greatest impact and high degree of uncertainties and we have built scenarios for a period of 3 years. With the help of selected factors, we make four scenarios for Bata, naming Train speed scenario, Buss speed scenario, and cycle speed scenario and walking speed scenario. For the action plan, we select the walking speed scenario, which we think is the most critical one for Bata. Looking at the geo political situation of Bangladesh, we think there would be new rivals in footwear industry and as the quality of Batas products are decreasing, which creates negative perceptions of consumers towards Batas products. Thus in the period of upcoming years Bata might have face the walking speed scenario. We suggest them to be prepared for the unfavorable business position like the walking speed scenario.

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7. References
Books Barney, J. (2002), Gaining and Sustaining Competitive Advantage, Prentice Hall, New Jersey. Boyd, H.W; Walker, O.C.; Mullis, J.; and Larrch, J.C. (2002), Marketing Management: a strategic decision-making approach, McGraw-Hill, New York. Byers, L. L., (1984), Strategic management: Planning and implementation, Harper and Row publishers, New York Fahey, L. and Randall, R.M. (1998), Learning for the future competitive foresight scenarios, John Wiley & Sons, inc., Canada Lindgren, M. and Bandhold, H. (2003), Scenario planning: The link between future and strategy, Palgrave Macmillan. Hampshire, Great Britain. Porter, M. E. (1985), Competitive advantage, Free Press, New York Porter, M.E. (2004), Competitive Strategy- Techniques and analyzing industries and competitors, Free Press, New York van der Heijden, K.; Bradfield, R.; Burt, G.; Cairns, G. and Wright, G. (2002), The Sixth Sense: Accelerating Organizational Learning with Scenarios, Wiley, Chichester. Viardot, E. (2004), Successful Marketing Strategy for High-Tech Firms, 3rd ed., Artech House, Boston. Webb, J., (2008), Strategic information management: A practitioners guide, Chandos publishing, Oxford. Articles OBrien, F.A. (2004), Scenario planning-lessons for practice from teaching and learning, European journal of operational research, V. 152, pp. 709-722. Porter, M.E. (1980), Industry structure and competitive strategy: keys to profitability, Financial analysis Journal, July-August, p.33. Postma, T. J. and Liebl, F. (2003), How to improve scenario analysis as a strategic management tool, Technological forecasting and social change, Vol.72, pp. 161-173. Ratan, S.R.A.; Alam, M.S. and Soheluzzaman, A.S.M. (2007), Innovation strategy: A realistic example in Bangladesh Mobile Telecommunication Service Marketing, The Cost and Management, Vol. 35, No. 1, pp. 49-58 Steil, G., Gibbons-Carr, M., (2005), Large group scenario planning: Scenario planning with the whole system in the room, The journal of applied behavioral science, Vol. 41, No., pp. 15- 29. Wulf, T.; Brands, C. and Meissner, P. (2010), A Scenario-based Approach to Strategic Planning, working paper 3, Leipzig Graduate School of Management, Center for Scenario Planning, Ronald Berger Research Unit, May 6th.

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WeB Ali, A.N.M. (2010), Corporate Strategy of Apex-Adelchi Footwear, available at: http://www.scribd.com/doc/44850685/Strategic-Marketing , (accessed 15th March 2011). http://eplbangladesh.com/brokerage/research/1297916914BATASHOE%20%20Oct%2029,%202009.pdf , (accessed 15th March 2011). http://www.thedailystar.net/story.php?nid=25713 (accessed 17th March, 2011) www.Bata.com (accessed 7th March, 2011) www.Batabd.con (accessed 7th March, 2011)

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Appendix
Appendix 1: Interviewing process
We called Bata Shoe Company (Bangladesh) and talked with Mohammad Julfekar Ali, Merchandiser officer. We asked him some specific questions that are in appendix 2 and for making conversation we used Skype. One of our group member named Mahmudul Islam, have worked in Bata Shoe Company (Bangladesh) Ltd. He also mentioned some internal and external factors that are affecting Bata. It helped our study to become more credible.

Appendix 2: Questionnaire and with their answers

What about Bata brand, only one or more? Under the trademarks of Bata, Power, Weinbrenner Bubblegummers, and Marie Claire What types of store they have? City store, Bazaar concept and family store and factory store How many types of product line you have? Bata has three types of product line, which are mens collection, womens collection and childrens collection. In Bangladesh, Bata feels the womens shoe market has not yet properly explored and has lack of variations. Bata want to use huge opportunity to invest this section and gain competitive advantage. How dose Bata sourcing its product? Bata has three sourcing channels. These are; from own factory which in Damrai, Dhaka & Tongi, Gazipur, from local suppliers and by importing. What is the market share of the company? It has 30% market share of footwear industry in Bangladesh Is the morale of the employees high? Yes, it stands at a high place. It is Bata culture to provide equality of opportunity, to promote on merit and to provide employees with on-going training opportunities to build new skills. Assignments in different operational areas or abroad are also a common factor within the Group to enable promising individuals to gather an unusually broad set of experiences. Is there any new market opportunity to expand? Yes, in womens shoe market a huge opportunity to expand. Who are your top competitors?

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Apex-adelchi is number one, then Bay tanneries, Jennys. We believe that not all shoe retailers are our direct competitors. Direct competitors may be defined as those offering the same price / value product as we, regardless of store format, location, and customer service. At last we adopted a questionnaire from Wulf et al., 2010 and asked them to rate them from 1 (low/weak) to 10(high/strong). The questionnaire is bellow:

Please rate the following factors from 1 (low/weak) to 10 (high/strong). Political factors
Political stability International liberalization of market Harmonization of all competitors (e.g. unity of all manufacturer companies) Governmental competition policy (e.g. subsidies, protectionist regulations) Impose of extra TAX Political support for expansion of the market

Impact
6 9 3.5 3 8 4

Uncertainty
10 4 2 7 10 2

Economical Factors
Global economic growth Shift of economic power towards Asia Prices of raw materials Capital market risks (e.g. exchange rates, interest rates, liquidity) Competitiveness among competitors Expansion of warehouse in different Locations Rising demand in emerging markets due to the growing middle class

Impact
9 6 9 6 8 3 5

Uncertainty
5 5.5 8.5 6.5 9 5 6

Societal Factors
Development of corporate business Acceptance of products among population Negative Perception of consumers Disposable income of population Service/comfort/price expectations of potential customers

Impact
7.5 3 10 5 6

Uncertainty
5 3 8 8 4

Technological Factors
Improvements in operational efficiency (e.g. safety, less pollution) Improvements in Longevity of products Improvements in style with leather

Impact
2 5 5

Uncertainty
3 8 4.5

Ecological Factors
Environmental consciousness of consumers Increasing amount of environmental regulations Legal Factors Applications of the water treatment plant Changes in collective bargaining law Changing operation time of retail stores

Impact
3 2 Impact 0 1 9

Uncertainty
1 4 Uncertainty 5 4 7

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