Bata Case Study Essay Example

Bata Case Study Essay Example Bata Case Study Essay Bata Case Study Essay The restructuring and re-engineering of the Company was largely possible due to the continuous and sustained efforts put in by Mr. Villagran. He glanced through the report he had presented to his team a year ago. â€Å"Operational Restructuring† was the title he had given it. Closing cash drain stores, renovating few existing ones and large scale expansion was suggested. Mr. Villagran could sense the changing market. He knew he had to do something to give a boost to this 80year old company. The outcome of this decision was its opening of 69 new stores and renovation of 40 of its existing ones. The company also closed 73 stores that were not performing well. Now the count was 1250 stores. In the quarter ended June 2010, the company’s net sales increased by 13. 4 per cent and net profit by 41. 1 per cent over the corresponding quarter of the previous year. The operating margins also improved to 13. 4 per cent from 11 per cent. The team was delighted with the results but Mr. Villagran just smiled. He knew it was just the beginning. There is a lot more to be done. The competition in the Indian market had grown exponentially. The Indian customer was getting very demanding in terms of style and availability. The customer had more options. He sipped his coffee as he contemplated on how this success could be sustained. Indian Footwear Retail Industry Footwear is a necessity to every person and at the same time is now a lifestyle as also a performance enhancement product; and is thus a segment with vast potential. The Indian footwear market is estimated to be worth Rs. 14,000 crores (approximately) and constitutes just about one percent of Indian retail. About 37. percent of retail footwear is in the organized segment, which qualifies it as the second most organized retail category in India, next only to Watches. Footwear is expected to comprise about 60% of the total leather exports by 2011 from over 38% in 2006-07. Presently, the Indian footwear market is dominated by Mens footwear market that accounts for nearly 58% of the total Indian footwear retail market. By products, the Indian footwear market is domi nated by casual footwear market that makes up for nearly two-third of the total footwear retail market. As footwear retailing in India remain focused on mens shoes, there exists a plethora of opportunities in the exclusive ladies and kids footwear segment with no organized retailing chain having a national presence in either of these categories. The Indian footwear market scores over other footwear markets as it gives benefits like low cost of production, abundant raw material, and has huge consumption market. The footwear component industry also has enormous opportunity for growth to cater to increasing production of footwear of various types, both for export and domestic market. BATA-GLOBAL Bata Ltd. is a privately owned global shoe manufacturer and retailer headquartered in Ontario, Canada. Bata is organized into four business units. Bata Canada, based in Toronto, serves the Canadian market with 250 stores. Based in Paris, Bata Europe serves the European market with 500 stores. With supervision located in Singapore, Bata International boasts 3,000 stores to serve markets in Africa, the Pacific, and Asia, Finally, Bata Latin America, operating out of Mexico City, sells footwear throughout Latin America. All told, Bata owns more than 4,700 retail stores and 46 production facilities. Total employment for the company exceeds 50,000. The Bata Shoe Organisation consists of 96 independently run companies in 90 countries throughout the world. BATA-INDIA Bata India Limited was incorporated at Calcutta in 1931. The Company manufactures and markets of all types of footwear, footwear components, leather and products allied to footwear trade. Bata was originally promoted as Bata Shoe Co Pvt Ltd. It became a public limited company in 1973 and the name was changed to Bata India Ltd. A retail network of over 1250 stores gives Bata a reach unmatched by any other company. The Bata Shoe Store is amongst the most recognizable and favoured landmark in any major market in India. Bata continues with its strategy of retail expansion, with 60 new Bata Shoe Stores opened every year, and existing stores being renovated during the year. The focus is on growing its Retail business continued with the opening of almost 2 new/renovated Bata Shoe Stores every week. All the new stores are in large format, with an average size of 3000 sq. feet and offer an unparalleled footwear shopping experience to the customer. An extensive retail network of owned and franchised stores enables the Company to reach out to consumers across the length and breadth of the country. Being a part of the Bata Shoe Organization gives the Company access to new designs, brands and production technologies. India is a very large market and offers good demand potential for footwear which is an item of mass consumption . A continuous focus on consistent quality and a constant endeavour to provide quality products at affordable prices is been one of the strength’s for the company. The Company has been in existence for more than seven decades and faces a challenge in switching to new production technologies. The Company faces competition from the unorganized market which is able to sell footwear at low cost due to lower overheads and manufacturing costs. Opening of the Indian market to imports has resulted in the Company facing competition from cheap imports. It is also a fact that the need for the product differentiation in the current market has become very important. There is an immense growth in the need of new fashioned footwear and the women are becoming more fashion oriented in India. So a need arises to satisfy them with a lower cost product with unique features. All the new stores are in large format, with an average size of 3000 sq. ft. and with a growing focus on training of store staff, the new Bata Shoe Store delivers the best footwear shopping experience to the customers. The layout of Bata stores is as per Bata international standards and is designed to offer the most effective display and provide the maximum convenience to the customers. Bata’s Wholesale Division It consists of 14 depots located across the country selling Bata products through 150 distributors and over 20,000 independent shoe dealers. The focus is on selling volume products catering to complete family needs. Bata Industrials is a specialized division of Bata India Limited catering to footwear needs of various industries. Whilst safety and durability are essential properties of these footwear, Bata also provides special features like impact resistance, heat resistance, oil resistance, lightweight etc. depending upon specific industry requirements like steel, oil gas, cement, automobile, heavy engineering etc. Bata Institutional Sales Division It focuses on direct sales to various institutions such as hospitality, airlines, retail, hospitals, etc. For corporate offices, it offers a selected range of regular wear occupational shoes for management level people working in an industry or construction environment. In addition, it provides excellent quality canvas shoes, hunter shoes, miners shoes etc. to meet specific requirements of army, police forces and mining industry. Branding Division is a new division and it consists of 15 distributors located in major metros selling footwear under Hush Puppies and Dr Scholls brands to departmental stores, footwear chains, specialty stores and high street dealers. Milestones (post 1985) In 1988 an agreement was arrived at with Adidas of West Germany for manufacture and marketing of sports and special application footwear, sports goods and sportswear in India and the products were launched in December, 1989 for sales through wholesalers and independent retailers. In 1990 a highly versatile sample 18-station bicolour injection moulding plant was installed in the Bangalore factory for production of `State-of-the-art injection moulded shoes with synthetic and textile uppers and specially developed PVC compounds as sole material. In 1992 the workers at Batanagar factory went on strike from 3rd January, to 23rd May, which resulted in a substantial loss of production during the initial 6 months of the year. The Company undertook to set up a green field export oriented unit at Hosur in Tamilnadu with the State-of-the-art technology. Over the years, the Company with the collaboration of Bata Development, Ltd. , London, U. K. , and its association with Bata Ltd. , Toronto, also built up its own well-equipped and up-to-date RD organisation. 1993 the Company undertook to expand and modernise its existing plants to optimize capacity and to become cost efficient on a global basis. Apart from this it also undertook expansion and up gradation of its retail stores. In 1995 they resolved their labour issues by signing The Long Term Agreement with the Bata Mazdoor Union representing employees of Batanagar and Calcutta Offices at bipartite level satisfactorily without any disruption of work. As a result of all these efforts, Indias largest shoe company Bata India (BIL) performed admirably to stage a remarkable turnaround for the year ended December 1996. The companys debt-equity ratio also improved dramatically to 0. 60:1 from 1. 90:1 in December 1996, and 2. 06:1 in December 1996. Bata also entered into a marketing tie-up with Nike wherein the latter’s products were offered from select Bata outlets. In 1998, every Bata outlet, 1,000 owned and over 600 joint ventures started selling Hush Puppies, Marie Claire and Adidas. In 1999 they decided to launch new products on a regular basis by expanding its womens range, and move into the premium segments it had vacated. Also, Batas Faridabad factory workers union finally reached an agreement with the company management, ending the nearly eight-month-old lock-out at the unit the same year. In 1999 Bata India aimed to achieve a 15 per cent growth in turnover and profits, to reach the target set out in the Vision 2001 plan drawn up by Compass, the international board of the Bata Shoe Organisation (BSO). By 2000, Bata India (Bata) emerged as the largest footwear manufacturer and produces a wide range of footwear such as canvas, rubber, leather, plastic and so on. In 2000, Bata India becomes India’s largest footwear manufacturer. In 2003, Bata repositions itself as a marketing firm. Bata faced some major issues. One, a major reason for the rise in costs and fall in sales is because of Batas recurring labour problems. Second, while Bata continued to be a dominant organised player in the domestic footwear market, it faces competition from the unorganised sector. This, to a large extent, was on accou nt of the fact that Batas target market is also catered to by the unorganised sector. This sector appeared more competitive as it had the benefit of being unorganised and, thus, does not have to pay tax. This threatened Batas margins. The industry, especially the lower middle-class target market, was highly price-sensitive. High margins were virtually impossible as rising costs exert pressure on them. Turnaround Story Things started looking up in 2005, when old loyalist Marcelo Villagran was made MD. New collections, a tiered store structure, specialised manufacturing bases and stores kept time with mall culture. They started focussing on concept-based designs, and paid attention to the smallest of things: keeping stores open till late and displaying all our shoes in pairs. New designers and changing collections also helped. No-frills school shoes gave way to chic high-heeled numbers and the customers returned. Bata planned to open 70 stores that year and was expecting a 10 per cent increase in sales. The Company initiated a retail restructuring program, which enabled the Company to keep the shops open for longer hours and seven days a week. With voluntary retirement schemes in place to reduce excess manpower, closing down of 70 unviable shops, lucrative incentives to staff and better stock management helped Bata to turnaround fast. By 2006, sales started picking up and so had the bottomline. It started generating enough cash from operations to plonk down small sums on fixed asset expansion. Sensibly enough, it had also quickly moved in to reduce it borrowings. To cope with the expansion in volumes, the companys distribution network and computerised distribution and inventory systems were revamped. Inventory build-up was a problem, and the periodic sales in select outlets were a strategy to clear slow-moving articles. STP Segmentation: Bata has segmented the market on the basis of segmentation variables like Demographic –They have segmented the market on the basis of Age, Sex, Income and Occupation by providing products catering to the needs of customers across this segment. Psychographic –Readiness stage: Life style, Personality, Benefits sought, User status, Usage rate, Loyalty status. With the changing customer mindset, Bata is trying to bring in newer designs for the new generation customers who are style conscious and consider footwear as a style statement. Earlier Bata was seen as a durable and value for money brand and had little to worry about the design and style. But now people seek style and functionality together. Target Customers Bata had traditionally been targeting the middle strata of the society in India. In precise terms they were focused more on the lower middle and middle classes. Due to the changing market dynamics the competition had started undercutting their prices and Bata was thinking of shifting its focus towards the higher premium end of the market as well. This basically resulted in it pursuing practices, through which it could not focus its efforts. As of now they have a variety of products wherein they have casual and formal shoes, slippers and sandals. This is available for kids, men and women. The price range is from Rs 130 to more than Rs 3500. Value Proposition for the Customers If analyzed for the value that Bata was providing to its customers their value proposition may be categorized as follows. ?Reasonable quality at low or reasonable price ?Footwear for the entire family ?Footwear catering to various functional needs e. g. sports, casual footwear, formal-semi formal ? Conveniently accessible outlets in various parts of the country ? Prior to entry of local players and the Chinese imports, some sort of social visibility could also be associated with Bata, as it was one of the two major brands in the country then. 4Ps Product: Bata footwear is trusted for quality. Product Variety, Quality, Features, Options, Style, Brand Name, Packaging, Sizes etc are things which are Bata known for. Bata is trying to concentrate on customer buying experience now. As a part of this initiative Bata has introduced the concept of flagship stores to provide complete and unique shopping experience at par with their stores abroad. Bata’s brand new collection of highly fashionable international range of ladies footwear under the Marie Claire brand will be one of the major attractions at this flagship store These retail stores will also showcase top-of-the-line brands including the latest international collection from Weinbrenner, Hush Puppies, Bubble Gummer, Dr Scholls and Bata Tech shoes. Brands like Nike, Reebok and Adidas will also be available. Place: International trends, relaxed ambience, great products, and courteous staff at the new-look Flagship store are all a part of Bata’s new marketing strategy. These stores will additionally offer trendy accessories like caps, T-shirts and other lifestyle products making it a complete one-stop shopping experience for its customers. Earlier Bata concentrated on mass marketing and its nation-wide distribution network is the one factor which contributed to its popularity and accessibility for its customers. Promotion: Bata has tried to promote the brand by stressing on comfort and toughness. Recently there have been efforts to position it as a youth brand by bringing in shoes for girls and advertisements depicting youngsters and fun. Bata has gift vouchers in convenient denominations, redeemable on all Bata products, acceptable over 800 stores all over India and with 6 months validity Price: The price range of Bata footwear products varies from Rs. 130 to Rs. 3500. The product caters to lower middle class, middle class and upper middle class segments. But the range of upper middle class customers of Bata are less as it does not attract the young affluent population. Porters Value Chain BATA Factories-a network of almost 40 shoe production facilities, tanneries and engineering workshops in 25 countries. Procurement- B. I. P. C (Bata International Procurement Centre) has been established to satisfy the procurement needs of individual companies for finished products and components. Through strict controls of the supply chain management process, B. I. P. C ensures exclusive products and shoe production line development with superior quality and comfort at very competitive prices. Operations and Reach – Opening of new stores and shutting down of unprofitable stores. Widest network with 1250 stores spread across the nation Marketing and Sales- All BATA showrooms had well trained employees in uniforms to assist sales. The sales process was made more professional to reach out the the expectations of the new customer. Services – Exclusive outlets with an avg, space of greater than 3000 square feet. Good ambience. Improved online presence and e-commerce. Porter’s five force COMPETITOR ANALYSIS ADIDAS: Adidas ltd is a German sports apparel manufacturer and part of the Adidas group, which consists of Reebok sportswear company, Taylor Made-Adidas golf company, and Rockport. Adidas is the largest sportswear manufacturer in Europe and the second largest sportswear manufacturer in the world. The elements of the strategy are to target the brand to urban youth with brand proposition from ‘competition to lifestyle’ using the authentic sports platform and build and reinforce credibility through relevant brand ambassadors and grassroots sports marketing programs. Further, it would target principal consumption centres, namely metros and build significant stand-alone exclusive store presence in significant locations. Liberty: Liberty shoes ltd. is a leading leather shoes brand and is engaged in the manufacturing, supplying and exporting of the footwear’s. It is the only Indian leather shoe brand that occupies fifth ranking among the top shoes manufacturing companies in the world. Liberty’s strategy over the years is to create multi-brands under one umbrella label, plug existing gaps in consumer demographic profiles, and broad base pricing to a large extent. Force 10, Libertys first sub-brand, was born in August 1990. While theres Force 10 for casual sports, theres Geo Sport in the performance shoe slot. Windsor and Fortune are mens formals, Senorita and Tiptop comprise the womens range, Footfun is for kids, and sandals and chappals fall under the Gliders and Coolers labels. Although the prices are mass-oriented, it has image of a fairly upmarket imagery. Relaxo: Relaxo entered into footwear industry in 1976. It started off with the manufacturing of Hawaii slippers and subsequently diversified into manufacturing casuals, joggers, school and leather shoes. Relaxo has the capacity to manufacture over 100 million pairs, per annum. It has the customer base of around 100 million Nike: Nike, Inc. is the biggest manufacturer worldwide of both athletic footwear and apparel in terms of sales. It specializes in the production and sale of athletic footwear, apparel and equipment. For the fiscal year 2009 it announces revenues of about $19. 2 billion. Net income in the third quarter of 2010 is almost double in the net income in the same period of the previous year bringing it up to $496 million. Nike’s strategy in this front is to develop a premium brand associated with high quality product that satisfies customer needs. Nike’s brand is associated with an aggressive attitude portrayed by, â€Å"you don’t win silver, you lose gold,† which clearly suggests that winning is vital. Nike built its brand around sports, attitude and lifestyle. COMPARISON OF COMPANIES: Average Growth Rate (2005- 08) Nike 10. 5% Adidas 22. 46% Bata 7. 8% Liberty 11. 16% MARKET SHARE OVER YEARS Ansoff Model Bata in India caters to a large segment of the population. Earlier, before the markets opened, it was seen as a good quality, value for money brand with shoes that catered to various segments. Earlier it focused on good quality leather chappals and sandals that the middle class Indian could wear, be it to work or at home. Over a period of time it has diversified into the sport shoes segment, colourful sandals for the youth and the high range formal leather shoes. Bata has used all the 4 ways possible in the Ansoff matrix to grow over a period of time. In the early 90’s it used the market penetration strategy where they offered high quality leather products at a cheap rate. Lately, it has opened various new outlets all over the country with a special focus on tier 2 and tier 3 cities. It has also brought in a wide variety of brands from slippers, sandals, sports shoes and formal shoes. They also sell shoes for school kids. They basically cater to all the different kinds of footwear that is available in the India market. SWOT Strength Worldwide presence Offers customer best value and great possible service Manages retail presence in 50 countries High demand in foreign market Weakness Losing competition because of the other big players like adidas, nike, woodland etc Not too much stylist so it is losing the attraction of the customer, specially in the youth segment They don’t have any powerful brand ambassador to promote their brand They haven’t promoted themselves thoroughly, invested very less in their add campaign Opportunity Bata India Limited has undertaken initiatives to improve the companys cost structure and margins. The company has initiated a financial restructuring exercise to down its interest cost Financial re-engineering: The Company has tightened controls on costs in all areas of and is looking at global sourcing for raw materials and other inputs Bata India is also exploring third-party manufacturing units in Assam and Jammu Kashmir as these enjoy tax holidays Bata Shoe Organization (BSO) has decided to give a breather to its 51 per cent subsidiary. Threat Introduction of new brands in the market. Lagging behind in terms of technological factors. Young generation is attracted to the other branded shoes like adidas, nike, woodland etc. Final inferences and recommendations BATA shifted its focus from lower middle class to upper middle class and premium though it is still catering to the lower segment. Its exclusive retail outlets are doing well in attracting the upper middle segment but it is not friendly and inviting to the lower segments. This segment still prefers the shop type format as against the mall. The main competition for BATA in catering to this segment is the unorganized sectors which are easier to walk in and are located in the prime local market area. However, BATA’s strength has been a strong lower segment and it enjoyed strong loyalty from this segment. This shift in focus might lead to a loosening the grip of BATA in this market. The new Indian consumer with growing economy has become more informed, style and quality conscious. He is willing to pay a higher premium for the latest internationally styled footwear. Urban women who believe in changing their footwear with the changing season demand variety in style at affordable rates. BATA can leverage on their good distribution in the country and collaborate with more international brands and sell them via exclusive outlets only in tier 2 and tier 3 cities. Their strategy of these collaborations with Hush Puppies and like is actually a good move and might help them grab the attention of urban style conscious customers. However, they should maintain their small entry level shops to cater to the lower middle class. Even for the lower segment it is facing stiff competition from unorganized players because of the variety they offer. To maintain their foot hold they should come up more varieties and change their basic style to suit the needs of the new customer. BATA in the minds of the customer is still affordable price, low variety brand with no frill stores catering more to school children and men. This image can be changed only by advertising more about its international brands and new footwear categories. The store ambience should also meet the expectations of customers walking in to buy these brands from a BATA outlet. It should focus on more customer friendly store services, better feedback mechanisms and trained and knowledgeable sales personnel to assist sales. References thehindubusinessline. com/iw/2009/04/19/stories/2009041950421100. htm moneycontrol. com/company-facts/bataindia/history/BI01 http://en. wikipedia. org/wiki/Bata_Shoes