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 HistoryThe 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 shareA 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 AnalysisStrengthsWeaknesses

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 Catering all segments with multiple brands Marie Claire (Upper class) Tannery operation ( subsidiary)-Divestiture (loss-104 Millon) Gross Profit has decreased as compared to increase 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) 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

OpportunitiesThreats

Mass Customization Population growth 2% reached to 200 M. (38% Urban population, 68% others) Demand of 150 million shoes per year Develop new products to capture new markets Capture market share from competitors Sell online-(Digital Marketing-Online Retail store) Partnership with Small Players New medium of advertisements Value chain Growing leather industry Informal sector comprise 80% of Market share Retail chains capturing small manufacturer which wants to remain under central board of revenue (CBR) screen to save number of duties and taxes- Higher profit Margins Import of inexpensive Chinese products Under invoiced-Corruption-higher profit margins Increased competition from China, Taiwan, Vietnam CustomerDissatisfaction Price wars with competitors PoliticalInstability Economic Threat Changing in consumerpreferences

TOWS MATRIX

StrengthsWeaknesses

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

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

Opportunities SO Strategies WO Strategies

Demand of 150 million shoes per year Develop new products to capture new markets Capture market share from competitors Sell online-(Digital Marketing-Online Retail store) Partnership with Small Players Acquisition & Join Venture (S1,S2, S5,O6) Product Development (S1,S2, S5,O3) Introduce new segments(W3,O3) Market Penetration(W3, W4, O5)

ThreatsST StrategiesWT Strategies

CustomerDissatisfaction Import of inexpensive Chinese products Changing in consumerpreferences Under invoiced-Corruption-higher profit margins Increased competition from China, Taiwan, Vietnam Price wars with competitors PoliticalInstability Economic ThreatIncrease Customization(S2, S8, T1)Customers can be satisfied with Batas quality and reasonable prices.(S2, T1) Related Diversification(W4, T1) Innovative Products(W3, T3)