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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 to survive in the market. The MD of Bata was considering the efforts necessary to
realign Bata Pakistans manufacturing, outsourcing, distribution and brand strategy in the
light of increased local competition and Chinese imports.

Company History
The Bata shoe organization was originally established by Thomas Bata in 1894 in
Czechoslovakia. It came to Pakistan in 1942 and was initially to produce leather boots for the
army. It established its first plant in Batapur and in later years Bata expanded and established
another factory known as Makara Branch in Multan in 1984 when the leather industry was on a
boom and was second in exports after textile. The Makara Factory was more capital intensive
and had incorporated direct equipment injection which allowed Bata to produce on a large scale
with the help of 350 employees. Following years were even more flourishing for Bata as it had
acquired a fully subsidiary known as International Tannery and Industries (ITI) which allowed
Bata to produce 700000 square feet of finished leather per month.
In 2002 Bata had Bata had two plants, 3322 employees and sales turnover of $ 2.3 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 quit the tire business. Bata used three distribution channels;
retail, wholesale and government and export.

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 advertisements
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

Dissatisfied customers
The company lacked the ability to innovate and bring new styles and
trends to the market unlike its competitors who thought on different
frontiers. Therefore this caused much dissatisfaction from its customers
because they did not get the product variety that they were after.

High attrition rate


BATA faced a high attrition rate. Employees lacked motivation and training
and therefore quickly left the company. Their salaries were also low and

therefore they left the company in search of higher pays.


Unions
The unions played a big role in the industry and had a strong foothold.

This was an even bigger problem the company faced.


Political instability
The change in government posed a lot of political instability for BATA. The
advent of a new government every time meant changing taxes and tariffs
that the company had to comply with every time.

SWOT Analysis
Strengths

Weaknesses

Largest

and

Tannery operation ( subsidiary)-Divestiture (loss-

marketing organization in world


Revolutionizing the production processes

Mens & Childrens shoes contributes to

104 Millon)
Gross Profit has decreased as compared to increase

48.9% of total sales


Brand Image
Reasonable quality products at reasonable

Price

Diversity of product line

Nationwide retail network (Align production

footwear

manufacturing

in cost of sales and with stagnant domestic sales


5 product lines (includes: Canvas, women shoes,
joggers,

slippers/

Hawai,

PVC/slippers)

collectively contributes only 51% of total sales


Lack of leadership
No innovative designs in products (no product

variety)
& distribution) & accessible
150 million demand and produce only 14 million
Footwear for Entire Family
shoes annually
Financially strong

Decline in exports
Among small manufacturer, Bata has 11/20%
Discontinued its tires & tubes business
Market share
Produce less or same product to reduce variation in
Catering all segments with multiple brands
product design
o Marie Claire (Upper class)
Labor intensive production
In-house production involves longer lead times
Opportunities
Threats
Mass Customization
Informal sector comprise 80% of Market share
Population growth 2% reached to 200 M.
Retail chains capturing small manufacturer

(38% Urban population, 68% others)


Demand of 150 million shoes per year
Develop new products to capture new

which wants to remain under central board of

markets
Capture market share from competitors
Sell online-(Digital Marketing-Online

and taxes- Higher profit Margins


Import of inexpensive Chinese products
Under
invoiced-Corruption-higher
profit

Retail store)
Partnership with Small Players
New medium of advertisements
Value chain
Growing leather industry

margins
Increased competition from China, Taiwan,

Vietnam
Customer Dissatisfaction
Price wars with competitors
Political Instability
Economic Threat
Changing in consumer preferences

revenue (CBR) screen to save number of duties

TOWS MATRIX
Strengths

Largest footwear
manufacturing and
marketing organization in
world
Revolutionizing the
production processes
Mens & Childrens
shoes contributes to
48.9% of total sales
Brand Image
Reasonable quality
products at reasonable
Price
Diversity of product line
Nationwide retail
network (Align
production &
distribution) & accessible
Footwear for Entire
Family
Financially strong
Among small
manufacturer, Bata has
11/20% Market share

Weaknesses

Opportunities
Demand of 150 million shoes per
year
Develop new products to capture
new markets
Capture market share from
competitors
Sell online-(Digital MarketingOnline Retail store)
Partnership with Small Players
Threats

Customer Dissatisfaction

SO Strategies
Acquisition & Join
Venture (S1,S2, S5,O6)
Product Development
(S1,S2, S5,O3)

ST Strategies
Increase Customization(S2,

5 product lines
(includes: Canvas,
women shoes, joggers,
slippers/ Hawai,
PVC/slippers)
collectively contributes
only 51% of total sales
Lack of leadership
No innovative designs
in products (no product
variety)
No proper planning in
advertisement
150 million demand
and produce only 14
million shoes annually
Decline in exports
Discontinued its tires
& tubes business
Produce less or same
product to reduce
variation in product
design
Labor intensive
production
In-house production
involves longer lead
times
WO Strategies
Introduce new
segments(W3,O3)
Market
Penetration(W3, W4,
O5)

WT Strategies

Related

Import of inexpensive
Chinese products
Changing in
consumer preferences
Under invoicedCorruption-higher profit
margins
Increased competition
from China, Taiwan,
Vietnam
Price wars with
competitors
Political Instability
Economic Threat

S8, T1)
Customers can be satisfied
with Batas quality and
reasonable prices.(S2, T1)

Diversification(W4,
T1)
Innovative
Products(W3, T3)