3.
0 Internal Analysis of Bata Shoe Company
3.1 Bata’s Strengths and Weaknesses
Strengths of Bata
Business Advantage
1. Worldwide Presence of Parent Company
Bata Bangladesh is affiliated to the Bata Shoe Organization, the world’s largest footwear
manufacturing and marketing organization. With operations spanning across five continents,
this global company manages a retail presence in over 50 countries and runs 40 production
facilities across 26 countries. In effect, Bata's strength lies in its worldwide presence. It is one
of the first local branded footwear manufacturers in Bangladesh which started operation in
1962. Having worldwide presence and being one of the first entrants has provided it with
valuable experience.
2. Market Leader
Continuous expansion of product lines and outlets has helped it to attain 25% of local market
share. Its traditional strength lies in the volume sales it enjoys as a result of its ability to
capture the mass market. Moreover, sales figures for Bata stood at Tk 650 crore in 2008. The
highest revenue earner for Bata is the Men’s Sandals range.
3. Impressive Product Portfolio
Bata has decades of experience in the local shoe market and have paid meticulous attention
to buyers’ choice and their affordability. Even though Bata entered the local market with
only synthetic products like thongs and sandals, it now boasts of a product range that is
unparalleled by any other local manufacturer. It has products for both gender segments and
children under its Fashion, Contemporary and Classical and neo-classical lines. Each of the
ladies’, children’s’ and men’s collections are further divided into Sports, Summer, Canvas,
Dress and Casual segments. With its prices ranging from as low as Tk 150 to Tk12, 000, Bata
has moved in to capture all income segments with its strong product portfolio of 12 diverse
brands. Its Bata, Hawaianas, Sandak and B First are targeted to middle and lower middle
income segments while its Bubblegummers, Dr. Scholls, Hush Puppies, Marie Claire, North
Star, Power, Weinbrenner are targeted towards the upper middle and high income groups. It
has also earned exclusive rights to sell Nike through which it targets the brand conscious
high income segment. In its endeavor to provide a diverse product range and family
experience, Bata now provides accessories like hand bags, belts, etc alongside shoes.
4. Strong B2B Network
Alongside its presence in the consumer market as the market leader, Bata has also extended
its reach to the Business to Business market. Bata Institutional Sales Division is an exclusive
division of Bata which caters to the requirements of corporate customers across the country.
The Institutional Sales Team customizes footwear solutions to meet the requirements of
various industries including hospitality, aviation, healthcare, educational and government
organizations. The Bata Institutional team collaborates with corporate customers to design
exclusive shoe lines under the various international and national brands - Hush Puppies,
Marie Claire, Comfit, Scholl, North Star, Power, which are in line with latest technology.
The industrial footwear range further strengthens its portfolio.
5. Backward Integration
The company has its own source of high quality leather from its modern tannery at Dhamrai,
which has the latest technological facilities to process 5 million square feet of leather yearly.
The company therefore acquires advantages from this backward integration. Bata has the
facility and technology to produce most of the brands locally. Apart from the international
brands like Scholl, Hush Puppies and Nike (which constitutes 5% of total product), all the
other brands are made locally at the 2 manufacturing plants at Tongi and Dhamrai and has a
capacity to produce around 110,000 pairs of shoes daily.
6. Non-retail Stores
A growing middle class has made Bata shift its focus from family stores to city stores to
display fashionable products. It has also introduced a new dimension in marketing of their
products through the launch of “Brand Corner” concept in well recognized business chains
like Nandan Mega Shop, Trust Family Needs, Mohammadia Sharee house, etc. This has
provided it with greater presence in the city, in addition to their own outlets which other
footwear manufacturers do not have. Bata also has a strong foothold in the suburban areas
through its non- retail stores. The stores are positioned in strategic locations after extensive
market research undertaken by a fully functional marketing department. This has further
strengthened Bata’s endeavor in building a strong distribution network spanning across
different channels.
7. Largest Retail Store
In sync with their ongoing aggressive expansion strategy, Bata has recently opened a mega
store comprising of its own brands as well as other licensed world famous brands and designs
under one roof. Spread over 11,000 square feet, it is the largest showroom for footwear in
Asia. Bata’s focus on expansion of its retail stores is evident as a major 35% of its total overall
spending is on new retail stores, market research and renovation.
8. Attention to Local Need
The management of Bata, which is headed by an international team, has been following a
systematic, focused and structured methodology of conducting business. Although it is a
Multinational Company, Bata gives attention to the different local needs such as fashion
trends, climate, seasonal trends, specific needs, usages and customs. This has enabled the
company to build a repertoire as a reliable name in the Bangladesh footwear market.
9. Healthy Financial Performance
Bata, which is listed as a public limited company, has been maintaining a steady growth in
revenue and profit for the last decade. The Compounded Annual Growth Rate of Revenue
from 2005 to 2008 amounted to 10 percent while the CAGR of Profit before tax for the same
period stood at 17 percent. The company is 83 percent equity financed the lower leverage
and high profitability making it a credit worthy borrower. Moreover, the company reserves
amounted to BDT 835 million at the end of 2008 and along with BDT 300 million in cash
holdings, it can be termed as a cash cow. This implies that Bata has the financial strength to
carry out more expensive business strategies in future.
Core Competency
Unparalleled Distribution Network
Bata’s core competency remains in its unparalleled distribution network of 244 retail outlets
as well a strong network of non retail dealer outlets including 481 DSP (Dealer Support
Program) stores and 349 RWD (Registered Wholesale Dealers) under 13 depots all across
Bangladesh. Based on the commercial area rating and competitor analysis, Bata decides on
the type of retail outlet for each location under its three types of retail concepts: City Stores,
Bata Bazaars and Family Stores. Of these outlets, 24 are City Stores, 65 are Bata Bazars and
Super Stores, 51 are Family stores and the rest are Non retail Dealer Outlets. Where retail
channel contributed around 59 percent of the company’s turnover, the Non-Retail Sales
Department also moved in to contribute 39 percent of the total company’s turnover in 2008.
Operational Strength
1. Application of MIS
Bata has internal software called BSO which helps to calculate and forecast inventory
requirements. It has almost completed installing the Point of Sale software in all its depots
and retail outlets. Currently being used in over 210 outlets, the POS technology has helped
to speed up inventory control and has led to a more efficient supply chain management.
When installed in all stores and integrated with the head office, this could assist even faster
decision making and inventory management.
2. Training and Development
The Company stresses on training and development of employees through hosting
International training programs on merchandizing as well as sales management. Staff
training “on the job” coupled with periodical training courses on product knowledge, retail
sale techniques, general store operation rules, etc lead to a more customer-centric sales force.
It provides employees with on-going training opportunities to build new skills and
collaboration with the parent company is also beneficial in this regard.
Weaknesses of Bata
Areas of Improvement
Poor Control over Non-retail Outlets
The massive expansion program and its widespread distribution network through more
emphasis on N.R.S.D channels come with its own side-effects. In this system, the wholesalers
buy merchandise to resell to dealers, i.e., multi-brand outlets, located in street markets of
major cities, towns and suburban areas. They keep inventory of Bata products for
replacement and sell on credit or cash basis. Their focus is on volume products like basic
closed shoes, sandals / chappals, school shoes, Canvas shoes, Hawai, Sandak and Batalite.
These shops also deal in regional brands and unbranded footwear from small manufacturers.
This implies that Bata has very little control over these customer touch points. Since
customer loyalty is an element of utmost bearing on Bata, any complacency on behalf of the
company could result in depletion of existing customer base. More careful attention needs to
be given in selecting these non-retail outlets along with periodical monitoring and support.
Areas Avoided
Bureaucratic Structure
The organization structure is predominantly bureaucratic in nature, with little power vested
in the hands of mid level management. The Bata Shoe Organization is broken down into four
regional Meaningful Business Units which are entrepreneurial in nature, and can adapt to
changes in the market place and seize potential growth opportunities. Each MBU provides
resources and support in key areas to the companies operating in similar markets such as
product development, sourcing or marketing support. Bata Bangladesh is controlled by Bata
Emerging Markets, Singapore. Strategies to suit local needs take longer to implement since
they need to be approved by the Bata Emerging Market first.
Areas Performing Poorly
Low Promotion Budget
Bata spends less than 5% of its total budget on promotion. Its marketing comprises mostly of
discounts and rewards to dealers. It mostly follows a push-through strategy of rapid retail
expansion with little above the line promotion. In a market that is growing at a rate of 20%
annually and more competitors like Apex and Pegasus expanding their portfolio, Bata may
need greater consumer promotion to maintain its market share. Currently, it is being
deprived of the greater sales that an active pull strategy could bring.
3.2 Value Chain Analysis: Bata
Activity Analysis
Even before the production process has begun or raw materials have been procured the
demand in is projected through the BSO software of both local and international supply
goods. The forecasted demand schedule is sent to the head office for approval by senior
officials. After the schedule has been approved it is simultaneously sent to the regional
business units and also to the tannery for raw material supply. Bata has its own tannery in
Dhamrai which produces high quality leather from cow and goat hides as per demand. Bata
also has four meaningful business units to which the approved demand schedules are sent.
These business units provide support and resources at various stages of the production
process and are kept informed of the amount of goods to be produced.
From the tannery raw materials are produced. The BSO software is again used in this step in
order to forecast how much stock is required to be kept in the inventory. By this method
Bata avoids situations in which there is either scarcity or excess of inventory left. The
forecasted inventory are sent to the warehouse and stored.
Bata has two manufacturing plants in Tongi and in Dhamrai. The plants have a production
capacity of 110,000 pairs of shoes on an average daily basis. Each of the products of Bata has a
different production line. The ingredients comprise of both local and exported ones. The
production of the sole and takes place in a molding machine and there are separate ones for
female, male and children shoes in accordance to size. After the sole is produced the design is
incorporated in the shoes. These designs are imported mainly from Europe. This part of the
production procedure is labor intensive and there are frequent quality checks in the entire
process. The management business units provides support in every step if the way.
Finished goods are quality checked once again before packaging. No defective products are to
leave factory premises as per Bata’s policy. Non defective finished goods are accumulated
and sent to regional depots. The regional depots are in charge of sorting out different
product lines and repacking and sending it off to various wholesale outlets and retail outlets.
Delivery of goods to retail outlets is done either directly from the regional depots or from the
wholesale depots as per the agreements with stores. Finished Bata products are displayed in
three types of retail outlets, BataBazar, City stores and Family stores. From these outlets the
finished footwear reaches to the end consumers.
Projection the head office Raw material
Forecast sent to
supply from
regional
tannery
business units
Figure 2: Value Chain:
Calculation of
Continuous inventory
Support requirements through
BSO
Bata
Production
process takes
Accumulation of place through Raw materials stored
finished goods various product in central warehouse
lines
Finished goods sent Regional depots sort Goods sent to
to regional depots out the product lines Wholesale outlets
Goods sent to retail
outlets
City Store
End Consumers
BataBazar
Family Store
Meaningful Business Units (MBUs)
Bata has four meaningful business units that provide supplementary support to the
production process of finished footwear.
1. MIS Department
Bata has a strong MIS department that is in charge of handling the inbuilt BSO software
which integrates the processes. The MIS department constantly monitors the software and
periodically updates the software. The department also keeps an updated database of the
number of wholesale and retail outlets and also the number and types of shoes delivered to
these outlets. Keeping tab of the number of defective goods produced in the factories is also
another function performed by the MIS department.
2. Human Resource
The Human Resource department handles personnel and employee related matters. The most
important function of this department is to provide periodic trainings to employees. As a
new batch of design comes in from Europe the workers are trained on how to incorporate
that specific design in shoes and also management training is provided to mid level managers.
Other functions such as performance appraisal and grievance handling and hiring new
employees are part of the human resource department’s work.
3. Marketing and Sales
Bata has two separate sales teams. One caters to the B2B clients and the other to wholesale
and retail outlets. The sales department is in charge of monitoring the number of sales that
takes place in each area and reporting to the MIS department that incorporated the
information received in their database. Bata also has an active marketing department which
is in charge of the promotional activities that Bata undertakes.
4. Quality Control
Quality Control is a procedure that is ensured throughout the entire process of footwear
manufacturing in Bata. There is a separate department that ensures that there is manual
check in every point. The quality control department is also in charge of reducing the rate of
defective footwear production in the factories.
1.3 Bay Footwear Limited
Bay Footwear Ltd. founded in 2001 initially concentrated its focus on producing vulcanized,
cemented, stitch-down, safety shoes and other construction footwear .The first production factory
was conveniently located near Dhaka in Konabari, Gazipur and the company only focused on the
local market and exported in a limited lot to Europe & East Asia. Later, Bay Footwear’s second
factory was set up in 2007, in Mouchak, Konabari nd the company ventured into the leather
footwear market. In 2008 the company brought stitch down technology from Europe and started
to produce special structured shoes. In order to manage the main materials, Bay Footwear
engaged in vertical integration and established the material in factories to coordinate the
demands of the production line expansion and to actively control production costs, reduce
material lead time and master the production cycles.
Currently Bay Footwear Ltd has a maximum capacity of producing 5,000 pairs per day.
Following along with the improved production quality, the production system regulation
conformity, as well as the research and development designed capacity enhancement. Bay
Footwear now works with European designers and develops fashion and comfort leather shoes
for both male and female and of all age brackets. Moreover, the company is also a major
participant in the Asia Pacific Leather Fair and also the Japan Trade Fair. In order to stabilize
product quality, enhance working efficiency and promote customer service, Bay Footwear uses
the advanced management system. Its main corporation and the factories to use as a quality
guaranty that Bay Footwear gives to its products. Bay Footwear seeks to implement growth
through integration of customer demands, strong supply linkage and perpetual innovation for
constant growth. Bay Footwear also emphasizes “Three Wins” concept in their management
process.
4.0 Internal Analysis of Bay Footwear
Strengths of Bay
Business Advantage
1. Strong Export based Market
Bay footwear is a major player in the export footwear market. It has a strong base in European
countries and supplies high quality, innovative designs on a regular basis. Even though
Bangladesh leather footwear exporting companies have low exposure in international
exhibitions, Bay footwear has been a regular participant in the Asia Pacific Leather Fair and also
the Japan Trade Fair, making the company’s presence felt and also representing Bangladesh in
the due process. Bay not only focuses on designer footwear but it also exports durable
construction wear shoes from processed leather. These shoes have captured huge market in the
labor intensive countries such as Malaysia and Thailand.
2. Capacity to expand
Bay footwear only exports around 5 to 7 product lines in categories that cater to male and
female. This is lesser in number in comparison to their other two major competitors Bata and
Apex Adelchi. Furthermore Bay Footwear has minimal local retail outlets and as per the officials
of Bay Footwear the company needs to expand and also has the resource both in terms of
monetary and personnel to go forward with the expansion which they plan to take on. Bay
footwear also faces increasing demand from foreign markets for export and the company also
plans to implement the expansion in terms of international demand.
Core Competency
Perpetual Value Innovation
As Bay’s major market is export based, most of the company’s competitors are international
suppliers. Bangladesh lacks in innovative shoe design and has to import the designs from abroad.
In order to keep pace with the constantly changing fashion scenario and also to export updated
designs to foreign clients, Bay takes on the concept of perpetual value innovation in there
processes. Regular purchase of new designs from Europe and periodic training of the workforce
are part of the value innovation process.
Operational Strengths
1. Constant Quality Check
The value chain of Bay footwear is overlooked by software that is inbuilt in the entire production
system. Though there is presence is mainly completed through manual assistance the software
plays an important part in coordinating the activities of different departments and also other
activities such as demand projection. Even though the process is partially automated there is
presence of quality check personnel in every step of the production procedure, ensuring defect
free final products. There is also a quality check at the very end of each production line and it is
made sure that no defective goods leave the factory premise.
2. Intensive workforce training
Bay employs over a thousand people for their export oriented business. Due to the constant
arrival of new designs from European countries it is essential to keep employees trained to be
able to replicate those specific designs and also with the high competition that the Bangladeshi
export footwear market faces from Chinese products this training is a mandatory. Bay footwear
provides periodic trainings in skill development, waste reduction and better management
techniques. The latter training is provided to the mid and upper level management only.
Weaknesses of Bay
Areas of Improvement
1. Delayed Deliveries
Bay faces serious problems due to the low level of modernization and the infrequent up
gradation of technology. Further, despite the training provided to workers there is low level of
labor productivity and lag time prevalent in the production process. All these reasons combined
have lead to delay of deliveries of orders sought by foreign buyers. Hence sometimes an entire
batch of goods is rejected leading to huge amount of expected revenue loss.
2. Lack of Coordination among employees in varying levels
There is severe gap existent amidst the various layers of company. The top level managers are
the major decision makers and there is a consistent status of bureaucracy in the company. Any
change implementation must be approved by the top management before it goes onto being part
of the process. Further even the mid level managers are not entitled to make minor decisions.
This process helps keep consistency and continued good quality footwear production but it also
suppresses creativity, decision making managerial thought processes which ultimately leads to
lack of coordination in the different managerial levels.
Areas Avoided
Indistinct Promotion
Bay footwear has very few promotional elements focused on compared to their other
competitors. The promotional attempts are very small in number and there is also lack of a
separate team overlooking this area. This is one of the major weaknesses that the company faces.
Areas Performing Poorly
Insufficient Retail Outlets
As mentioned previously Bay focuses more on the export market than on the local market.
Unlike Bay, Apex Adelchi and Bata both have a strong export based market as well as a good
locally established market with numerous retail outlets at convenient locations. Thus both the
companies have a pool of loyal local consumers as well as high brand awareness and brand
loyalty. Bay Footwear has very few local outlets and thus are losing on market share in the local
market to their competitors.
4.2 Value Chain Analysis: Bay Footwear
Activity Analysis
Bay Footwear conducts an initial market research on the existing and potential design pattern for
footwear which accumulated alongside with input from the R&D department leads to the product
development department. Further as Bay is an export oriented company purchase order from
foreign buyers provides estimate of how much production is to be taken into process. The
product development department sends the estimates of raw materials to the procurement and
planning department from where it is approved and raw materials are purchased from specified
tanneries that Bay Footwear has previous agreements with. The raw materials are sent for quality
check from where upon approval it is sent off to the factories for production purpose. The raw
materials are sent into different lines in the start of the production in accordance to the foreign
designs that are imported from abroad. The semi-finished foot wears are sent to the finished
goods department where they are finalized and gone through a final quality check. The finished
goods are sent to the final depot from where it is cross-checked with the foreign orders and sent
to the main shipper. The shipper delivers the goods to Chittagong Port from where it is shipped
off to overseas. The local stores of Bay Footwear receive the finished goods from the main
depot. But there is very insignificant number of local Bay outlets and majority of the revenue of
the company comes from foreign buyers.
R&D and Product Purchase
Design Development Order
Market
Research
Procurement and Raw Material Raw Material
Production Planning Procurement from Quality Check
Local Tanneries
Final Quality Coloring and Production Raw Material
Control Finishing according to Processing
specified order
Finished Finished Goods Shipper sends the order
Goods Transported to overseas through the
Shipper Chittagong Port
Figure3: Value Chain Analysis: Bay Footwear
Meaningful Business Units (MBUs)
Bata has four meaningful business units that provide supplementary support to the production
process of finished footwear.
1. MIS Department
Bata has a strong MIS department that is in charge of handling the inbuilt BSO software which
integrates the processes. The MIS department constantly monitors the software and periodically
updates the software. The department also keeps an updated database of the number of wholesale and
retail outlets and also the number and types of shoes delivered to these outlets. Keeping tab of the
number of defective goods produced in the factories is also another function performed by the MIS
department.
2. Human Resource
The Human Resource department handles personnel and employee related matters. The most
important function of this department is to provide periodic trainings to employees. As a new batch
of design comes in from Europe the workers are trained on how to incorporate that specific design in
shoes and also management training is provided to mid level managers. Other functions such as
performance appraisal and grievance handling and hiring new employees are part of the human
resource department’s work.
3. Marketing and Sales
Bata has two separate sales teams. One caters to the B2B clients and the other to wholesale and retail
outlets. The sales department is in charge of monitoring the number of sales that takes place in each
area and reporting to the MIS department that incorporated the information received in their
database. Bata also has an active marketing department which is in charge of the promotional
activities that Bata undertakes.
4. Quality Control
Quality Control is a procedure that is ensured throughout the entire process of footwear
manufacturing in Bata. There is a separate department that ensures that there is manual check in
every point. The quality control department is also in charge of reducing the rate of defective
footwear production in the factories.