Group Name: Leather & Shoes

Value Chain of Leather & Shoes Industry

In the leather and shoes industry, the value chain involves multiple stages, from raw material
sourcing to the final sale of finished products. Here's a breakdown of the primary and
support activities:

Primary Activities
1. Inbound Logistics

 Procurement of Raw Materials: Sourcing hides and skins from livestock, along with
other raw materials like chemicals for tanning.

 Storage and Handling: Efficiently storing raw materials, ensuring that leather and
other materials are kept in optimal conditions.

 Supplier Relationship Management: Maintaining strong relationships with suppliers

to ensure quality and timely delivery.

2. Operations

 Tanning: Processing raw hides into finished leather, involving various stages like
soaking, tanning, dyeing, and drying.

 Cutting and Stitching: Cutting leather into different shapes and sizes, then stitching
pieces together to form shoe uppers.

 Assembly: Combining leather uppers with soles and other parts to create complete
footwear.

 Quality Control: Testing and inspecting shoes to meet industry standards for
durability, fit, and appearance.

3. Outbound Logistics

 Warehousing Finished Goods: Storing finished products in distribution centers.

 Distribution Management: Coordinating the distribution of products to wholesalers,

retailers, and direct-to-consumer channels.

 Inventory Management: Tracking inventory levels to meet market demand without

overstocking.

4. Marketing and Sales

 Brand Development: Creating brand identity, positioning products, and highlighting

unique selling points (e.g., sustainability or craftsmanship).

 Sales Channels: Using various channels, such as online stores, physical retail stores,
and partnerships with other retailers.
  Promotion: Running marketing campaigns through advertising, social media, and
influencer partnerships to promote products.

5. Service

 Customer Support: Providing customer service, handling returns, exchanges, and

repairs if needed.

 Feedback Collection: Gathering customer feedback for continuous improvement.

 Warranty and Repair Services: Offering warranties and repair options for premium
products.

Support Activities
1. Firm Infrastructure

 Finance and Accounting: Managing budgets, cost control, and financial planning to
ensure profitability.

 Legal and Compliance: Ensuring regulatory compliance, especially with

environmental, labor, and safety regulations.

 Strategic Planning and Management: Overseeing corporate strategy, resource

allocation, and business development.

2. Human Resource Management

 Recruitment and Training: Hiring skilled labor and investing in training programs to
improve craftsmanship, productivity, and quality.

 Labor Relations: Ensuring fair labor practices and maintaining positive employee
relations.

 Health and Safety: Implementing health and safety protocols to protect workers,
especially in tanneries and manufacturing.

3. Technology Development

 Product and Process Innovation: Innovating new designs, materials, and techniques
to enhance product quality and reduce costs.

 Automation and Equipment: Adopting advanced machinery for cutting, stitching, and
finishing to improve efficiency.

 IT Systems and Software: Implementing ERP systems, inventory management, and

customer relationship management systems.

4. Procurement

 Supplier Management: Building strong relationships with suppliers for consistent

quality and timely deliveries.
  Quality Control of Inputs: Ensuring that raw materials and chemicals meet standards
to produce high-quality leather and footwear.

 Negotiation and Cost Control: Negotiating favorable terms with suppliers and
managing costs to maximize profitability.

The leather and footwear industry in Bangladesh, with strong government support, has the
potential to thrive further by focusing on sustainable practices and improving value-added
processes throughout this value chain. This will enhance Bangladesh's competitive
advantage in the global market.

Example of Bata Shoes value chain

The value chain analysis of Bata Shoes Bangladesh involves identifying the key activities
that help the company create value and achieve a competitive edge in the footwear industry.
Here's a breakdown using Porter's Value Chain framework:

Primary Activities
1. Inbound Logistics

 Raw Materials Sourcing: Bata sources high-quality raw materials, including leather,
rubber, and synthetic materials, from both local and international suppliers.
 Inventory Management: Implements efficient warehousing systems to store
materials until needed for production.

2. Operations

 Production Facilities: Bata operates local manufacturing units in Bangladesh,

ensuring cost efficiency and quick production cycles.
 Quality Control: Maintains strict quality checks to produce durable and comfortable
footwear, aligning with its brand reputation.

3. Outbound Logistics

 Distribution Network: Bata has a robust network of distribution centers that supply
products to retail stores and wholesale buyers.
 Retail Outlets: Operates a large number of company-owned retail outlets across the
country to ensure product availability.

4. Marketing & Sales

 Branding: Focuses on promoting Bata as a household name for affordable yet high-
quality footwear.
  Promotions and Campaigns: Uses a mix of traditional and digital marketing channels
to reach different customer segments.
 Customer Segmentation: Offers a wide range of products (casual, formal, sports) to
cater to various market segments.

5. Service

 After-Sales Support: Provides warranty and repair services for certain products.
 Customer Feedback: Collects and analyses customer feedback to improve products
and services.

Support Activities

1. Firm Infrastructure

 Strategic Management: Implements a centralized decision-making structure for

operations in Bangladesh.
 Financial Planning: Efficient cost management to maintain competitive pricing.

2. Human Resource Management

 Employee Training: Regular training programs for retail staff and factory workers to
ensure productivity and customer satisfaction.
 Retention Policies: Focuses on employee welfare to retain skilled labor and reduce
turnover.

3. Technology Development

 Product Innovation: Invests in research and development for new designs and
materials.
 Automation: Uses advanced machinery in manufacturing for higher efficiency.

4. Procurement

 Supplier Relationships: Maintains strong partnerships with local and international

suppliers to ensure timely delivery of materials.
 Cost Optimization: Negotiates favourable terms to keep procurement costs low.
How does Bata Shoes gain cost leadership competitive advantage in
the value chain?
Bata Shoes Bangladesh achieves cost leadership by optimizing each activity in its value
chain to minimize costs while maintaining quality and customer satisfaction. Here’s how it
operates cost-effectively across the entire value chain:

Primary Activities

1. Inbound Logistics

 Local Sourcing of Raw Materials: Bata sources raw materials like leather and rubber
locally whenever possible, reducing transportation and import duties.
 Supplier Relationships: Long-term contracts with suppliers ensure bulk discounts
and lower procurement costs.

2. Operations

 Economies of Scale: With high production volumes in its factories, Bata spreads
fixed costs over a large number of units, reducing the per-unit cost.
 Lean Manufacturing: Adopts lean manufacturing principles to eliminate waste,
streamline production processes, and optimize resource use.

3. Outbound Logistics

 Own Distribution Network: Operates its own fleet and distribution centres, cutting
down on third-party logistics expenses.

 Efficient Store Supply Chain: Uses a centralized system to optimize store

replenishment, reducing excess inventory and associated costs.

4. Marketing & Sales

 Focused Marketing: Targets specific demographics through cost-effective marketing

channels, such as social media, which have a high return on investment.
 Own Retail Stores: Bata’s strategy of owning its retail outlets helps avoid distributor
and retailer margins, keeping prices competitive.

5. Service

 In-House Repair Services: Provides after-sales support like repairs at minimal costs
by using in-house technicians rather than outsourcing.
 Customer Feedback Systems: Uses digital tools to gather feedback, reducing the
need for extensive market surveys.
Support Activities

1. Firm Infrastructure

 Centralized Management: By centralizing decision-making processes, Bata reduces

administrative overheads.
 Financial Efficiency: Streamlined budgeting and financial controls help in reducing
unnecessary expenditures.

2. Human Resource Management

 Local Workforce: Employs a large number of local workers, benefiting from lower
labour costs in Bangladesh.
 Training Programs: Focuses on skill development, which reduces errors and
increases productivity, lowering overall operational costs.

3. Technology Development

 Standardized Production Techniques: Invests in proven technologies that optimize

production without incurring excessive R&D costs.
 Use of IT Systems: Implements efficient enterprise resource planning (ERP) systems
for real-time monitoring and cost control.

4. Procurement

 Bulk Purchasing: Procures raw materials in bulk to leverage volume discounts.

 Global Supplier Network: Diversifies its supplier base to source competitively priced
materials globally, reducing dependency on any single market.

Bata’s Key Strategies for Cost Leadership

1. Vertical Integration: By owning both production and retail, Bata controls costs at
multiple stages of the value chain.
2. Economies of Scale: High-volume production and distribution help achieve cost
savings.
3. Continuous Improvement: Regular process reviews ensure cost efficiencies are
maximized across operations.
How does Bata Shoes gain differentiation competitive advantage in the
value chain?

Bata Shoes Bangladesh gains differentiation advantage by enhancing both primary and
secondary activities in its value chain. Each activity is optimized to offer superior quality,
customer satisfaction, and brand value. Here’s how Bata leverages these activities for
differentiation:

Primary Activities

1. Inbound Logistics

 Sourcing High-Quality Materials: Bata sources premium materials locally and

internationally, focusing on durability, comfort, and style. This ensures high product
quality right from the raw materials stage.
 Efficient Supplier Relationships: Strong relationships with suppliers allow Bata to
maintain a steady supply of high-quality materials and negotiate favorable terms,
ensuring consistency and cost-effectiveness.

2. Operations

 Local Manufacturing Facilities: Bata has manufacturing plants in Bangladesh, which

allow it to manage production quality closely and respond quickly to local demand.
 Quality Control Processes: Rigorous quality checks during production ensure that all
products meet Bata’s standards for durability and comfort, enhancing customer
satisfaction and brand trust.

3. Outbound Logistics

 Efficient Distribution Network: Bata’s established distribution system ensures that

products are quickly and efficiently delivered to retail locations across Bangladesh,
keeping inventory levels optimized.
 Strategic Inventory Management: By using real-time inventory tracking and demand
forecasting, Bata minimizes stockouts and excess stock, improving customer
satisfaction and reducing costs.

4. Marketing and Sales

 Strong Brand Image and Promotion: Bata’s marketing highlights its heritage, quality,
and modern designs, building a trusted brand image that appeals to a wide range of
Bangladeshi consumers.
 Targeted Advertising and Promotions: Bata uses targeted campaigns to reach
different market segments, from budget-friendly to premium, allowing it to serve
diverse customer needs.
5. Service

 Customer-Centric After-Sales Support: Bata provides robust after-sales support,

including easy returns, exchanges, and repairs, fostering customer loyalty.
 Personalized Customer Service in Stores: Bata trains store staff to offer
personalized recommendations and assistance, creating a positive in-store
experience that builds customer trust.

Support Activities

1. Procurement

 Strategic Supplier Relationships: Bata works closely with suppliers to secure high-
quality materials at competitive prices, which helps maintain its quality standards.
 Sustainable Sourcing Initiatives: Increasingly, Bata incorporates sustainable
materials and eco-friendly practices, attracting environmentally conscious customers.

2. Technology Development

 Product Innovation: Bata invests in product innovation, such as comfort-enhancing

technology, antimicrobial treatments, and advanced design techniques, to stay
competitive and meet changing consumer demands.
 Digital Solutions for Inventory and Customer Experience: Bata employs technology
to optimize inventory management and offer a smooth online shopping experience,
improving customer satisfaction.

3. Human Resource Management

 Staff Training and Development: Bata invests in training programs for retail and
manufacturing staff, ensuring high service standards in stores and consistent quality
in production.
 Employee Welfare Programs: Bata’s commitment to employee satisfaction improves
morale and productivity, leading to a motivated workforce that contributes to product
quality and service.

4. Firm Infrastructure

 Efficient Management and Logistics: Bata’s centralized management supports

efficient decision-making and coordination across the company, ensuring that
strategies for differentiation are consistently implemented.
 Sustainability Initiatives: Bata’s infrastructure includes a focus on sustainable
practices, aligning with the company’s goals of minimizing environmental impact,
which appeals to a growing base of eco-conscious customers.