Assignment on BATA INDIA LIMITED

Course: Strategic Management Course Instructor: Prof. Pradeep Mishra

Group Members: Anadi Shankar (10201005) Chandan Kumar (10201013) Rohit Srivastava (10201043) Shaivya Sachan (10201046)

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Case Summary:
Bata India Limited was Indias largest manufacturer and marketer of footwear products. The company was incorporated by Tomas Bata as Bata shoe company Ltd on Dec 23, 1931 at Kolkata, West Bengal. It sold over 60 million pairs every year throughout year and exports in markets of countries such as USA, UK, Europe, Middle East and Far East. As footwear industry is labor intensive and concentrated in small and cottage industry area. Availability of human resource is one of important strength of Bata India limited. They emphasized on training and updating skills of its employees. Training is imparted both at classroom and shop floor. The company had 8 trade unions and biggest and oldest plant at Batanagar witnessed industrial unrest in 1992 when there was a strike from January 3 to May 25, 2002. Strike was resolved through tripartite settlement for a term of 3 year. During the year 2002-04, company entered into agreement with its eight trade unions wherein the dearness allowance was capped. Employees were categorized in descending hierarchy- Director, senior manager (senior vice president, vice president, general manager), middle manager, junior manager, selling manager, shop manager, shop employees. Marketing department was divided into four zones. Senior general manager was responsible for each zone, supported by business development manager and several district level managers. Hence BIL has good trained manpower who work at low daily wage, BIL provide all facility to improve their performance, still company is facing problem of lockout, go slow and strike in retail, production unit. There is something which has not been addressed till now or it can be communication gap between top level and worker. Bata has created unique image in consumer mind as footwear producer. Consumer easily connects Bata as Shoe Company. It has positioned itself as, one Bata, one world. BIL has most modern leather shoe factory, at HOSUR geared to make international footwear for export. Six manufacturing locations enable company to schedule production to meet demand for a large number and varied categories of footwear. In 2004, Bata installed point of sale management information system (POS), for providing sales and inventory information across the companys stores. This provides company to plan production and optimize inventory level. Companys own tanneries located in Batanagar and
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Mokamehghat

insures uninterrupted supply of raw material. Now they are not dependant on

some third party for procurement of raw material. Bata operated through exclusive chain of executive own and franchise stores located in prime location countrywide. Bata owns network of 300 exclusive wholesalers who serviced 30,000 retail outlets throughout country. Overall it has over 1,600 showrooms, 27 wholesale depots and 8 distribution centers across the country. Company had a financial collaboration with Bata BV, Holland for all types of footwear and footwear component. Companys focus is on key areas of product, process, material development, footwear moulds, and tannery technology with emphasis on pollution free environment. Research resulted in breakthrough product like comfort, wind and flexible technologies. Indian market is highly fragmented between rural and urban market. Rural market was large at approximately 70% of the total market but was dominated by multiple medium size regional players and serviced through traditional independent dealers. Thats the reason BIL competes with unorganized market by selling hawai footwear (market share 10% of total market share) ranging from Rs.35-110. Industry is governed by central by Central Excise and Custom, Factory act and Labor Law and Environmental control acts. Council for leather export, Central leather research institute and Footwear design and development institute were promoting industry for special purpose. Political unrest, cross border unrest, terrorism in and out of India has direct or indirect impact on industry. When quantitative restriction was lifted from import then industry slowed down from 20 % (in 90s) to 8-10 %( in 2004). Increase in excise duty led to increase in cost of footwear (1993-94, excise exemption was withdrawn from shoe costing below Rs. 200 and hence price went up by 20% and this led to drop in profit from 20 crore to 95 lakhs within a year). Tax holidays for

period of 10 years on full excise duty and income tax and a subsidy on sales tax, land/building and plant/machinery was given by state government of Himachal Pradesh, Uttaranchal, Jammu & Kashmir and Assam to promote manufacturing.

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Industry Analysis
The leather industry has occupied a prominent position in the Indian market because of its potential in terms of employment, growth, market share. It occupies the second position after China. Analysis of industry on the basis of following factors: Threat of new entrants: There are many barriers to entry preventing new entrants from capturing significant market share. Large footwear producer enjoy economy of scale that create cost advantage over any new rival. BIL differentiated its product from rivals product like Comfort (using dynamic spring pad that acted as cushion on the feet for womens footwear), Wind (in build air technology that allowed feet to breath fresh air) etc. Switching cost is very low for footwear industry because shoes are relatively inexpensive personal goods that are frequently replaced. Access to distribution channel is barrier to entry because it is really difficult for a startup firm to get shelf space at major shoe retailer. But existing firm may use their existing connections to easily access shoe distribution channel. Bargaining power of buyers Bata was largest player in industry with 9-10%volume share and 60% market share in organized segment. It had a market share of 70% in canvas shoe segment and 60% in leather shoe segment. Their dominant market share give them power over buyer. Bata is a big buyer of raw material who buys significant part of suppliers revenue. This in a way provides good bargaining power over suppliers. As a part of its strategic decision Bata set up a rubber/canvas factory in Faridabad, Haryana in 1951. So it can threaten its supplier to integrate backward.

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Bargaining power of suppliers Shoes are made of leather, rubber, nylon etc. These materials could be classified as commodities, where the manufacturing process ads the value because of this reason supplier have limited bargaining power over buyers. Threat of substitute product Consumer switched from one product to another if alternatives are available in same quality and performance range and have competing price or lesser price.BIL produces 10% of total hawai ranged from Rs. 35-110 while competing local brands were selling at Rs. 25-50.Again when global trade open then market flooded with many international brands having variety and competing price. Rivalry among existing firms Mostly numbers of competitors are stable, especially because of high entry barriers. This adds to the rivalry among existing firm. Manufacturers watch each other carefully and make appropriate countermove to match the competitors move. Leading competitor of BIL are Lakhani shoes, liberty shoes, action shoes, woodland, paragon and Relaxo in organized segment.

Organisational competence:
1) The organization is competent enough in promoting its brand i.e. Bata has its brand value. It is clear from the evident by holding 60% market share in organized market and 60% market share in leather shoes. 2) Bata had its own tannery, this shows they dont have to depend on third party and as stated in case Bata manufacture according to its own process and ensure uninterrupted supply of raw material. 3) Bata has middle and lower class customers. It manufactures approx.10% of hawai sold in India and compete with unorganized sector because of its price range.

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Stakeholder analysis: S.NO

1) 2) 3)

STAKEHOLDER
LABOR UNION EMPLOYEES PROMOTER ORGANISATION

POWER
HIGH LOW HIGH

INTEREST
HIGH HIGH HIGH

4) 5)

TOP MANAGEMENT CUSTOMERS

HIGH LOW

HIGH LOW

This table shows different stakeholders as labor union, employees, promoters, board members and customers. In the case of Bata footwear the variable Power varies from high to low but the interest is high in respect of every stakeholder except customers. Labour union, Promoter organization and top management hold high power and simultaneously high interest too. To provide best of quality and price to customers, high margin and profit to promoters and investors, top management is also interested in building brand image of company apart from making profit, Labour union is highly interested in providing timely wages/incentives and job security for labors. Although, employees has low power and high interest but customers has low power and low interest because there is high interest drift due to influence of the competitive footwear market.

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Issues to be dealt with:

The major concerning issues which need to be dealt by BATA INDIA LTD. are as follows: 1) Batas trademarks were being copied by competitors selling footwear at low prices as compared to that of Bata. 2) The focus of Bata is on premium segment but it accounts hardly 20% of the total market. 3) The problem of labor unrest causing disrupt in production and increasing cost. 4) BATA INDIA LTD. heavily depends upon its promoter company for its decisions and technology. 5) Bata has strong image of footwear of low and cheap range among customers which urgently required for the organization to break the dilemma and promote itself in other accessories and premium priced product. 6) Sales and distribution cost is very high as they run the outlets with their own staffed employees accounting to 4400 in number. 7) There is lower capacity utilization in terms of all types of footwear (rubber, canvas, and leather) and finished leather from hides in comparison to licensed capacity utilization. Stated below are the issues at the regional level observed at the city of Bhubaneswar during primary data collection: 1) The exclusive showroom of Bata does not function properly: a) Footwear is not demand driven, low and out of market stock of leather shoes for which the Bata is known for. b) Manpower or sales force is not competent enough to sell product efficiently. The motivation factor seems to be low among employees.

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Strategies, directions and methods:

These are some of the strategic choices adopted by the BATA INDIA LTD. to build the brand to the next level: Generic strategy of BIL: Differentiation strategy: Demand based production: As per demand production line was shifted to make 90% of the shoes for medium and low priced segment. Reasonably priced super hit range of shoes was introduced. Focused differentiation: Branding and designing: It is trying to leverage the brands like hush puppies, bounce and design, comfort curve and body shoe etc .It has been continuously introducing designs for men, women and children. Corporate level strategy (BIL): Tax free zone for manufacturing: Outsourcing manufacturing from tax holiday states Himachal Pradesh and Uttaranchal and exploring possibility of third party manufacturing units in other tax free states such as Assam and Jammu and Kashmir. Technology: Installation of POS information system to update inventory level. Company also entered into technology collaborations with Adidas sports, Germany and Leader AG, Switzerland. Business level strategy (BIL): Cost cutting: Replacement of costly raw materials with cheaper substitutes, reduction in freight cost, waste reduction by stringent quality control. Focus shifted from increasing price to increasing volumes, leading to reduction in 33% of cost of raw material. Replaced nine cash drain stores with new large format stores and five deport were converted into C&F agents. Voluntary retirement scheme (VRS) for employees to cue the manpower related cost.

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Collection of outstanding dues: The Company focused on collecting old dues from wholesalers to reduce marginal cost. They adopted a dual policy, i.e. on one hand negotiated with wholesalers and offered discounts and at the same time filed legal cases against those who are not ready to pay. Cost optimization and margin Improvement: The Company initiated control on costs in purchase and outsourcing and want global sourcing for raw materials to improve net realization. Clearing write offs, discounts to improve sales. New logistics team: To ensure timely availability of raw material and obtaining specific orders from market for best selling designs and sizes. Training: Employees were sent to BSO international conference and trained in wholesale and retail operations, human resources and merchandising strategies. Collaboration: It entered into following arrangements with international shoe manufacturers such as Reebok, Adidas, M&B footwear Pvt. Ltd., Tej International Pvt. Ltd. and Sierra Industrial Enterprise Pvt. Ltd. for marketing their product through companys retail outlets. Methods: Strategic Alliance: Bata entered into two of the strategic alliances namely: i. Joint venture: It was done with Calcutta Metropolitan Group Ltd. to acquire land and property, construct houses and for infrastructure development. ii. Collaboration: Entered into collaboration for marketing the products of other companies in their retail outlets.

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Conclusion:
Over a period of time Bata is trying to reposition itself by entering into other accessories segment, manufacturing premium priced shoes, entering into joint venture and collaborations with many other big players in footwear segment. Further Bata has improved in terms of distribution network, skilled labor, lower input cost, improved infrastructure, technology advancement, resolved conflict with labor union. It continuously trying to increase its distribution network and revising cost by manpower reduction. Bata is no more considered as manufacturing company but now seen as fashion driving, market oriented manufacturer. At the same time campaigning is done through TVC, word of mouth and print media. Bata has been successful in changing its image and repositioning itself.

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