Performance Dynamics of Bata Shoe Bangladesh

1. Historical Background The business that became the Bata Shoe Organization was established on August 24, 1894 in Zlin, Czechoslovakia by Tomas Bata, and included his brother Antonin and sister Anna. Although this business was new, the Bata name had been part of a tradition of shoemaking for eight generations, spanning three hundred years. It was one of the first modern-day shoe ‘manufacturers', a team of stitchers and shoemakers creating footwear not just for the local town, but also for distant retail merchants.This departure from the centuries-old tradition of the one-man cobbler's workshop was a brand new concept, creating an entirely new industry. Tomas consistently maintained a human focus, creating opportunities for development and advancement, and added compensation for employees based on achievement. As the enterprise prospered, so did the communities where it operated. Bata companies later provided rail services, construction, insurance, publishing and a tannery in Z lin. The Bata System† devised by the Zlin team, and later applied in other Bata Shoe Organization companies, organized operations into autonomous workshops and departments (â€Å"profit centre†), allowing employees to contribute ideas and stimulate production, and contributed significant breakthroughs in footwear technology. By 1938 Bata Shoe Organization had established a unique and widespread presence, designing, producing and marketing footwear in more than 30 countries.The Bata Shoe Organization regarded itself as a ‘Multi-Domestic' rather than multinational enterprise, making it a priority to contribute to the economy in any new markets it entered. During the 50s, 60s and 70s the Organization redoubled its focus on retailing excellence, international footwear branding, advanced manufacturing techniques and extensive employee training, another Bata tradition that dated back to the Organization's earliest years. At present, Bata is one of the world’s wid est reaching companies, with operations in 68 different countries.They strive to listen to the customers in their local markets and clearly identify their footwear needs, and then to provide products that exceed their customers’ expectations in terms of quality, style and value. Bata operating companies are grouped into four business units based on similarities in markets and business issues. Each group benefits from synergies specific to their requirements, such as product development, sourcing and marketing support. 1. 1 Bata Today Bata is one of the world’s widest reaching companies, with operations in 68 different countries.Bata companies strive to listen to the customers in their local markets and clearly identify their footwear needs, and then to provide products that exceed their customers’ expectations in terms of quality, style and value. Bata operating companies are grouped into four business units based on similarities in markets and business issues. Each group benefits from synergies specific to their requirements, such as product development, sourcing and marketing support. Each business unit is entrepreneurial in nature, and can quickly adapt to changes in the marketplace and seize potential growth opportunities. Bata International serves customers in much of Asia, the Pacific and Africa through its 3,000 stores and many dealers. It is supervised from Singapore. Bata International operates shoe innovation centers in several countries as well as 30 factories to serve individual markets. * Bata Europe is based in Paris and operates 500 stores offering fashionable footwear. The world-class shoe innovation center just outside of Venice supplies many of the exclusive lines found in Bata stores throughout Europe. * Bata Latin America is based in Mexico City.Bata is the leading retailer of shoes in Latin America and the leading marketer of children's branded footwear. * Bata Canada is based in Toronto from where 250 stores serve the Canadian market. Its chain of Athletes World’s and Nike Shops is the leading fashion source in Canada for young urban customers. Bata Shoe organization (B. S. O. ) is the largest manufacturer and marketer of footwear in the world. Its global business comprises of shoe factories, tanneries, engineering plants, quality control laboratories, product development and research centers.Bata distributes its products through approximately 6,300 retail outlets, 10,000 franchises and thousands of wholesale depots and dealers. More than 50,000 people are employed in producing and selling over 300 million pairs of shoes each year, primarily for the domestic markets in which B. S. O companies operate. Approximately 400,000 additional people and their families are engaged in the support services required by B. S. O. operations. Bata International Centre is located in Toronto, Canada. Mr.Tomas Bata, the founder of Bata Shoe Organization, initiated this worldwide operation in Zlin, Czechoslo vakia, now known as the Czech Republic. The year 1994 marked the 100th founding anniversary of BATA. Over the years B. S. O. ’s operation expanded across the entire globe and established itself as the world’s largest organization in footwear manufacturing and marketing Today Bata operates in 68 countries. 1. 2 Bata Bangladesh At the Pakistan period Bata was first came to this country. After independence Bata continue their commitment to provide good quality shoes at an affordable price.Many of the elderly people still remember the â€Å"Naughty Boy† shoe of Bata that was known for its durability among the kids of that time. But since then Bata Bangladesh has changed a lot. Now they are not only providing durable shoes but have brought new designs too according to the taste of the people. Bata expands its operation all through the country. It has now huge number of stores, agencies, dealers and wholesalers around the country. And undoubtedly it has the biggest sh oe manufacturing and marketing organization here in Bangladesh.There are hardly any places in the country where one will not found Bata store, which signals its expansion, success and popularity here. Bata Bangladesh is a public limited company, which has 51- 49% share with the government of Bangladesh. Though it has established in Czechoslovakia but at present Bata is a Canadian company because of the migration and mergers of the family and now J. Bata who happens to be the grandson of founder G. Bata has his operation and headquarter in Canada and operates as a Canadian company. In Bangladesh it is operating as a Canada-Bangladesh company. . 3 Mission Introduction of a strong shoe line targeted to various market segments to maintain leadership through increased market share. 1. 4 Vision To provide good quality shoes at an affordable price. By keeping in mind the comfort that needs to be there and providing new designs with it. 1. 5 Objectives * Achievement of 100% estimated busine ss in each category * Maintain a shoe line with 700 lines of which 200, 300, 150 & 50 lines for Men, Women Children & Plastic respectively * Introduction of a shoe ine as per life style as well as fashion trend * Achieve an average 55% margin in each category * Innovate ideas or system for better management of merchandise distribution by maintaining 4 times stock turn. 2. Product Profile Bata shoe Bangladesh Ltd. has more than 900 lines of shoes in different categories. They distribute all of these lines of shoes in different parts of Bangladesh through wholesalers, dealers and through their own stores. In the following chart some of the shoes, its average price, size and other dominating features are mentioned.Best Price Range (TK)| BATA| Dominating Color| Men's| 995-1695| Black| Women's| 250-550| Black, Chocolate| School| 200-330| Black, White| Children| 130-195| Multicolor| Sport| 695-995| White, Gray| Non Shoes| 50-100| Black, Chocolate| 3. Competitive Status * Be obsessed with customer satisfaction * Build reputation for providing quality product * Be dedicated to continuous growth in the market * Widespread availability of Bata shoes in the market The prices of Bata shoes are very competitive and in many cases lower than its competitors * Very good distribution channel with dedicated employees all through Bangladesh and established because of Bata’s experience in the Bangladesh for very long * Taking opportunity of the lower buying power of the people of the country by providing good quality shoe at a competitive price * To ensure that the end users receive medicines those are safe, effective and quality consistent with leadership position in the health care industry throughout the country * It has more than 900 lines of shoes in different categories * To apply the rinciples of customer-focused quality, service and excellence to all processes and system, from product design, development through production, distribution and marketing * To maintain the standard of quality in order to protect the patients, prevent errors and optimize value provided to the consumer and company. * To comply with group product standards and regulatory requirements * The company has more than 1000 shoe designs and caters to all the segments.Over 60% of sales come from the men's range, while children's and women’s range account for about 20% each * BB operates through a chain of exclusive own and franchise stores. BB's stores are located in prime locations countrywide. 70% of Bata's sales are from its own retail outlets. Besides there is a network of about 500 exclusive wholesalers who service about 300 retail stores all over the country. Bata has showrooms, wholesale depots and distribution centers across the country. 4. Trends of performance Products tend to go through different stages, each stage being affected by different competitive conditions.These stages require different marketing strategies at different times if sales and profits ar e to be efficiently realized. The length of a product life cycle is in no way a fixed period of time. It can last from weeks to years, depending on the type of product. In case of shoe industry in Bangladesh it is presently going through the growth stages which are characterized by many new consumers entry in the market, by fall in price as experience and economies of scale have been attained, by developed distribution channel and by increasing intensity of competition.Bata Bangladesh is the largest player in the footwear industry with around 9-10% volume share and a 60% market-share in the organized segment. BB (Bata Bangladesh) has a market share of 70% in canvas shoes segment while it has a share of 60% in leather shoes. BB manufactures about 10% of the total Hawaii’s sold in the country. BB competes in manufacturing low priced Hawaii’s with the unorganized sector with its price ranging from Taka35-Taka110 with unorganized sector's pricing in the range of Taka25-Tak a50. 4. 1 Production Bata Bangladesh operates 2 manufacturing plants in Tongi and Dhamrai.The company 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. Bata Bangladesh concentrates mainly on the domestic market through a countywide distribution network comprising retail stores, Dealer Support Program (DSPs) and independent dealers. 4. 2 Sales Turnover 4. 3 Profit & Profitability The average gross profit margin for the last five years has been 37% while average operating margin has been 12%. Average net margin stands at 8%.In 2008, 2009 & 2010 Bata’s net Income was (MM BDT) 449, 459, 509; Gross Margin 34% 35% 35%; Operating Margin 14% ,12% ,12%; Net Margin 10%, 9%, 9% and Operating Cash (MM BDT) 428,873 472,320 511,799 587,130 643,166 713,937 781,319. Average return on equity for the last five years has been more than 40% while average return on assets has been around 14%. Bata is also among the largest dividend payers with an average dividend payout ratio of 80% for the last three years. Moreover, the company has large land holdings which have not been revalued in a long time.The company has zero leverage and huge stockpiles of cash which give them enough flexibility to expand and/or maintain a high payout ratio. 5. Growth Rate (Trend Analysis of Productivity) Consistent margin and growth Bata has been a consistent performer in recent years and this is reflected in their profit margins for the last five years. Bata also enjoyed consistent growth in sales and earnings. Sales growth has been averaging around 16% in the last four years while earnings growth has been averaging over 25% during that period. EBITDA growth has been around 20% on average.No credit sales policy helped accumulate large cash. Bata maintains a no credit sales policy. This has helped reduce cash cycle for the company. 6. SWOT Analysis * Strengths: * Image of the compan y * Quality Product * Differentiated line of products * Competitive Pricing * Strong distribution channel * Modern manufacturing facilities * Brand loyalty at mass level * Weaknesses * Insufficient promotional activities * Bata at present conducts all the store management activity manually. This results lots of lengthy paper works, errors & waste of time. Inability to catch the present trend in time * Less competitive price due to high cost structure. * VAT & tax barrier * Opportunities * Despite political turbulence a segment of our middle-class is coming up with reasonable buying power. Many of them are women who are decision maker so the city store concept of Bata can attract them as whole of the family footwear can be available there. * Consumer like differentiated products. They like to shop in a store where they serve the whole family. * More competition results in more campaign for products. * Business Expansion in Shoe care products Utilize outsourcing especially the synergy sources to achieve competitive pricing * Franchisee opportunity with global brands like Nike, Reebok, Hush Puppy * Market expansion opportunity in high fashion & value for money footwear market for all categories of shoes through Retail & WCSM channels * Threat * Political instability affects the supply of raw materials and distribution of finished products. * Uncontrolled counterfeit of Bata products * New companies like Apex, Homeland, Pagasus of Bangladesh and the foreign companies like Nike, Reebok, Addidas are already in the market with good quality product.Have to keep up with them respect of quality. * Smuggelling of shoes and many stores in the city like the one’s in elephant road are the major market leaders. As they don’t have to pay for large amount of money for establishment, production, quality and advertising so they can sell at a much lower price than established brands like Bata. * Rapid market expansion program by organized competitors like APEX. 7. P ossible Measure to Improve Performance To improve the sales and profits, BB is planning to increase penetration by setting up more retail outlets and taking space in shopping malls across the country.Existing retail stores would be upgraded even as wholesale depots would be set up in smaller towns and semi-urban areas. BB's main efforts will be to streamline the wholesale business. BB's thrust is on becoming marketing driven firm from a manufacturing oriented company. Steps are also being taken to reduce costs, improve distribution logistics and focus on launch of new products in order to improve the performance of the company. * Give sales discount and free samples to influence more sales in the growing shoe market. * Reduce the price level. More advertisements should be aired. * Should build awareness among the potential users of this type of footwear product. * Bring more design, color, and design combination to be competitive. * To merge with the local companies and to expand mo re segmentation. 8. Conclusion From the analysis of Bata Shoe Company Bangladesh Ltd and the shoe industry we have identified that the shoe industry is growing and identified their main weakness is insufficient lack of development with the rapid changing market needs, insufficient promotional activities, and downward trend of quality.On the other hand, distribution system and vertical integration are the strengths of Bata From strategic marketing viewpoint; we see that Bata is taking corrective steps in almost all the way. In very few sides Bata has lacking. Based upon these facts recommended strategies would assist in more growth of Bata shoe company Bangladesh Ltd. in among the upcoming fierce competition in the shoe industry.