Strategic Management

Assignment # 2
Sec - A

Submitted To:

Prof. Amjad Hussain

Submitted By: Group Members

Muhammad Afzal Nasir Iqbal Sheikh Mustafa Abdul Qayum

L1F09MBAM2009 (Group Leader) L1S09MBAM0147 L1S10MBAM0116

Industry Company

: :

Foot Wear Industry Bata Shoes

Why we Selected Foot Wear Industry & Bata Shoes as Company?

Respected Sir, I (Muhammad Afzal) currently running my own Bata shoes Franchise located at Sadder Cantt for the last 10 years. My family background is of shoe business. Thats the reason I choose Footwear Industry & Bata as a company. After my B.COM, I properly do all my shop operations myself, means opening & closing the shop, marketing operations selling and buying etc After completing my MBA, I shall apply all my concepts that I have studied and my vision is to enhance my business throughout Lahore. Before MBA, I just simply running my shop, but now I should apply the strategies that relates to my mission & vision. The other reason to choose Bata Shoes Lahore Pakistan because they are using some techniques for finding opportunities and evaluation of new initiatives among their competitors. They are also using a technique for testing its concept before development and launch new product in the market. They are also using a technique for evaluate the organization capabilities before developing product.

As the assignment proceeds to a complete project, we shall discuss all that techniques/strategies which are used by Bata, discuss about the draw backs and give the recommendations on these techniques for improvement at the end.

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EXECUTIVE SUMMARY
Bata was originally established in Czechoslovakia by Thomas Bata in 1894. He was actually engaged in no formal shoe making business. He decided to visit Michigan for observing how Ford Motor Company was making auto mobiles in assembly line production. He observes and took that idea and started applying all those same lines for production of shoes on large scale. As he started doing so, a revolution came over there in shoe making industry. In 2002 Bata was the largest organization in world of footwear industry with 14 billion pair of shoes produced and sold. Company has 75 footwear factories and tanneries in 95 countries. In Pakistan, Bata had started its business in 1942 near Lahore. Bata Pakistan was established in 1942 when Pakistan came into being, it was ready to serve the nation. It was incorporated in Pakistan as Bata Shoe Company (Pakistan) Limited in 1951 and went public to become Bata Pakistan Limited in the year 1979. During the last year Bata produced over 17.2 million pairs and sold 16.9 out of them with the help of their large distribution network of 400 Retail Stores and Agencies, 13 Wholesale Depots, 23 Distributors and about 400 Registered Wholesale Dealers who are selling goods as independent retailers. In 2011 the company generated turnover of Rs.6.5, billon showed an increase of 26% against previous year.

BATA TODAY Serves 1 million customers per day Employs more than 40,000 people Operates 5000 retail stores Manages a retail presence in over 50 countries Runs 40 production facilities across 26 countries

BATAS BUSINESS UNITS Bata Europe, Lausanne Bata Asia Pacific-Africa, Singapore Bata Latin America, Mexico Bata North America, Toronto

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Batas Vision & Mission Statement Bata Vision

To grow as a dynamic, innovative and market driven domestic manufacturer and distributor, with footwear as our core business, while maintaining a commitment to the country, culture and environment in which we operate.

Bata Mission
To be successful as the most dynamic, flexible and market responsive organization, with footwear as its core business.

Analysis of Vision

I think the vision of Bata is long and include few things that must be included in Mission, so I Purposed a one line Clear Vision of Bata

Our Proposed Vision

To become the front ranking multiple shoes company in the world

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Analysis of Mission Statement

According to my analysis, Batas current mission statement is too short and missing major components. Mission Statement must include 9 components. So I proposed a mission statement for Bata. I have bold and underline the main components in my proposed mission statement.

Our Proposed Mission

To provide quality shoes at an affordable price to our valued customers and maintain our competitiveness and leadership in the shoe market with our aesthetic functional standard and cost effectiveness with increased market participation by ensuring regular return to our shareholders through increased market share keeping in line with the Nations interest

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Analysis of Mission Statement

Components of Mission Statement Customer Product or services

Addresses or Not Yes Yes

Technology

Yes

Concern for survival, growth, profitability

Yes

Philosophy

Yes

Self-Concept

Yes

Market

Yes

Concern for public image

Yes

Concern for employees

Yes

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STAGE 1 INPUT STAGE

External Factor Evaluation (EFE) Matrix IFE Matrix CPM Matrix

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External Factor Evaluation (EFE) Matrix

Key External Factors Opportunities

Increasing Trends Towards Fashion Shoes Sales of apparel & footwear on the Internet has been growing at a double digit pace Increasing Sports Events in Pakistan Increase in wedding seasons and festivals (average wedding season of 8 months now) Awareness of Quality among customers Increasing population by 10% Availability of Untapped market segment

Weighted Weight Rating Score

0.11 0.06 0.1 0.05 0.11 0.07 0.08 2 1 3 1 4 3 2 0.22 0.06 0.3 0.05 0.44 0.21 0.16 0 0.12 0.08 0.07 0.09 0.06 1 3 3 3 2 3 0.36 0.24 0.21 0.18 0.18 2.61

Threats
Stiff competition in the market from local and foreign brands Electricity Shortage Increase in unemployment has impacted the household income which may result in spending less on brand name Decrease in customers purchasing power ( Inflation) Political Instability

Total

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Analysis of OPPORTUNITIES

With the rapid growth of middle class in the state, the purchasing power of the average person has increased. The awareness for the quality footwear has created a rise in demand for quality footwear affordable prices.

The fashion conscious customers always look for new styles and designs in favor. The Pakistans footwear market is highly dynamic nature.

Increasing Trends towards Fashion Shoes Bata has an opportunity to move into the casual footwear and apparel business. This area is not totally new for Bata, but represents a very high fraction of their sales. Bata needs to be in tune and quickly test this market with desirable and well built products.

Increasing population by 10% Women represent a huge market. Stylo sells nearly 50% of it shoes to women after its great success with Fancy shoes. Bata should begun to take notice of the female market and started to market to it. We feel the female sector is strong opportunity in both fancy & athletics.

Sales of apparel & footwear on the Internet has been growing at a double digit pace, considerably faster than more traditional sales models such as retail stores
The Internet allows footwear companies to pursue a direct to consumer sales channel. Internet sales of apparel, accessories, and footwear could reach 18 percent of category sales by 2012 Companies that added a Web-based sales strategy are able to customize footwear and other merchandise directly to the customer's needs and taste, are enable to achieve considerably better pricing as well as "deepening" the emotional bond consumers have with the brand

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IFE MATRIX

STRENGTHS
1. Largest retailer network of 1300 outlets, 4000 franchises and another 10000 dealers. 2. Brand awareness was established in the early 30s. People associated Bata for quality and real value for money. 3. Brand loyalty: Bata has got its own brand of customers who swear by the name Bata from medium class to premium class. 4. Bata is restructuring the retail operation whereby it is closing loss making stores and is planning of opening new stores which are more viable. 5. Quality Product 6. Differentiated line of products 7. Competitive Low Pricing 8. Strong distribution channel 9. Modern manufacturing facilities

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WEAKNESSES
1. Lagging in innovation Bata has not been able to keep pace with the latest changes taking place in the footwear market. 2. Cost structure Cost structure is a big concern to Bata. Raw material cost has increased mainly due to increase in price of natural rubber by 44%. This is something that the industry players are not being able to control. However employee cost was as high as 26% of sales as compared to 10% for the industry. Bata has not been able to control this cost.

3. Competition With the entry of the big brands like NIKE, CHINA etc Bata found it very difficult to hold its market share. 4. Cash tied up in inventories Bata invested a lot of money in the inventories and fixed assets in the form of unused land extensive network of dealer showroom for which maintenance and up keeping is paid out which in return reduces profitability. 5. Low motivations among retailers outlets and sloppy showrooms. 6. Female market penetration is weak 7. Low aspiration value in high income group 8. Insufficient promotional activities 9. Bata at present conducts all the store management activity manually. This results lots of lengthy paper works, errors & waste of time. 10. Inability to catch the present trend in time 11. VAT & tax barrier

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Sr #

Key Internal Factors Strengths

Weight Rating

WScore

Largest retailer network of 1300 outlets, 4000 franchises and another 10000 dealers. Extensive Distribution with 241 retail stores (Forward integration) People associated Bata for quality and real value for money. (Shoe Quality) Brand loyalty Financial Strength Geographical coverage Variety of products Image of durable shoes Largest footwear group in Pakistan

0.09

0.36

0.11

0.44

3 4 5 6 7 8

0.09 0.11 0.09 0.07 0.09 0.08

4 4 4 3 4 4

0.36 0.44 0.36 0.21 0.36 0.32 0

Weaknesses
1 2 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 (old Fashion & Old Designs) Bata does not present itself as a brand of corporate and sports personalities. Supply chain and Inventory management issues 0.09 0.04 1 1

0 0.09 0.04

3 4 6

0.07 0.03 0.04

2 2 2

0.14 0.06 0.08 0

Total

3.26
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Bata Major/Close Competitors are

1. 2. 3. 4. 5.

Servis Local Brands International Brands Shafi Group ( Urban Sole) Chinese Shoe

Competitive Profile Matrix

Bata
Critical Success Factors
Advertising Shoe Quality Financial position Market Share Price Outlets Customer Loyalty R&D

Servis

Local

China

WWWWWeight Rating Score Rating Score Rating Score Rating Score

0.2 0.3 0.15 0.07 0.06 0.09 0.08 0.05 1 3 4 3 3 3 4 3 3 0.6 1.2 0.45 0.21 0.18 0.36 0.24 0.15 0 3.39 3 3 4 2 3 4 3 2 0.6 0.9 0.6 0.14 0.18 0.36 0.24 0.1 3.12 1 2 2 1 4 2 2 1 0.2 0.6 0.3 0.07 0.24 0.18 0.16 0.05 1.8 1 1 3 2 4 2 2 3 0.2 0.3 0.45 0.14 0.24 0.18 0.16 0.15 1.82

Total

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STAGE 2 MATCHING STAGE

SWOT/TOWS MATRIX SPACE MATRIX IE MATRIX BCG MATRIX GRAND STRATEGY MATRIX

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SPACE MATRIX

Financial Strength (FS) (+1 worst, +6 best) Return on Assets Leverage Net income 6 5 6

Environmental Stability (ES) (-6 worst, -1 best) Rate of inflation Technological changes Price elasticity of Demand Taxation Barriers -5 -3 -3

Income/Employee Inventory Turnover

4 4

-3 -2

FS Average

5.0

ES Average

-3.2

Competitive Advantage (CA) (-6 worst, -1 best) Market Share Product Quality Customer Loyalty Technical know-how -3 -2 -2 -2

Industry Strength (IS) (+1 worst, +6 best) Growth Potential Financial Stability 5 6

Ease of Entry into market 5 Resource Utilization Profit Potential 6 4

Control over Suppliers & Distributors -3

CA Average

-2.4

IS Average

5.2

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 Aggressive Strategy
As Bata falls in aggressive, But still we have to see at which angel it lies. If it lies in exactly 45 degree line, then all good strategies will follow. But Bata falls just below the 4f degree line, so we should select these strategies
Forward, Horizontal Integration Market Penetration, Market Development & Product Development Related Diversification

Note: Unrelated Diversification and Backward Integration should not be followed

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Market shares of the marie clarie and weinbrenner shows that these SBUs lies in stars , power and bubble gummers are in cash cows and sandak is in dog.

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