Business Strategy

BATA: STRATEGIC CHOICES

Case Analysis Assignment
Introduction
This case highlights 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 contemplating changes in its strategy to be able to survive in the market.

Analysis of Bata’s Current Market Position

With the evolving market and changing market dynamics Bata was being given a tough time by its
local competitors and other footwear being imported from China. Bata management feared that they
would not be able to survive because they could not compete with the low cost Chinese products, hence
they embarked on a plan to enter the premium segment of the market to be able to survive, because
they felt competition from Chinese products there would be much less.

However, in my opinion, their management in the year 2001, made a mistake by committing to go after
the premium segment as well, without realizing the fact that their image would be hurt and could get
diluted because they were moving into a domain for which their activities were not aligned. Other than
the activities too we have to consider the Brand image that Bata had developed over the past 40 odd
years of its existence in Pakistan, and this image was by no means that of a brand which could boast
about having premium footwear products, in fact Bata was just meeting the basic functional needs of
its middle class customers. Therefore their strategy does not seem to be at all well cut out, as from
most of their activities it appears that once they were challenged they resorted to a fire fighting
approach and tried their hand at almost all possible arrangements, without gauging the fit of the
activities to their strategy. It may be concluded that Bata’s management made the fatal error of just
enjoying their successes whilst the market was not mature, but when the competitors kicked in and the
market approached maturity, they were left in the lurch because of not having made clear trade offs in
terms of image, activities & internal coordination and then had to pay the price. Their current
predicament has been analyzed in detail using a strategy framework below.

Target Customers
Bata had traditionally been targeting the middle strata of the society in Pakistan. In precise terms they
were focused more on the lower middle and middle classes. Due to the changing market dynamics the
competition had started undercutting their prices and Bata was thinking of shifting its focus towards
the higher premium end of the market as well. This basically resulted in it pursuing practices, through
which it could not focus its efforts.

Identity – Middle Class families were being offered footwear by Bata as they had shoes ranges for
school going children, young men, and even some offerings for women. It can be inferred about the
customers that these would be spending roughly around Rs. 300 to Rs. 1500 for a normal purchase.

Behaviors – In terms of the behavioral aspects Bata’s target customers could be quite price
sensitive, demanding value for money, looking for utilitarian needs to be met, and not excessively
conscious about the shoe lasting for ages and being very sturdy, yet at the same time demanding
adequate quality footwear which they can trust to last for a season or two. Bata may also be
categorized as a store where usually entire families visit together because of the various offerings that
Bata has to offer to them.
Value Proposition for the Customers
If analyzed for the value that Bata was providing to its customers their value proposition may be
categorized as follows.
• Reasonable quality at low or reasonable price
• Footwear for the entire family
• Footwear catering to various functional needs e.g. sports, casual footwear, formal-semi formal
• Conveniently accessible outlets in various parts of the country
• Prior to entry of local players and the Chinese imports, some sort of social visibility could also
be associated with Bata, as it was one of the two major brands in the country then.

Position of the Firm

Variety – Bata although traditionally had product lines catering to the middle class segment of the
society, yet recently it had also targeted the higher income segment with certain products.

Needs – In terms of the needs, Bata was in a way successful in positioning itself as a brand having
stores with products to meet the needs of almost all members of the family, since it had product ranges
for children, men, women etc.

Access – Bata had positioned itself by employing various distribution channels (retail as well as
wholesale) to enhance its access for the customers. Their nationwide retail network was one of their
key strengths.

Sustainability of the Position

Initially Bata as has been elaborated was positioned as brand offering footwear products for the entire
family members and for the people belonging to the middle class. But when its management decided to
also tap the premium segment of the market, their decision may be categorized as one which cast
doubts about the sustainability of Bata’s desired position in the market.

Image – In my opinion Bata’s image would be diluted as a result of it pursuing various segments and
trying to cater to their needs. Its traditional positioning would also be impacted and there would be
chances of Bata not being able to provide an experience fit to its customers as per their expectations.

Activities – The sort of activities which they employed e.g. manufacturing in-house as well as
outsourcing, having four categories of outlets (A,B,C,D) catering to various segments of the society
from upper to the lower ones, selling through retail as well as the wholesale channel, would not help in
any way at conveying a consistent image to its customers. Hence it can be stated that they failed to
make any particular trade offs as far as the key activities were concerned.

Internal Coordination – With Bata engaging a wide array of activities and practices it would be
almost impossible to maintain internal coordination and hence achieve optimization.

Sustainability of Competitive Advantage

The competitive advantage for Bata based on what they are currently planning to do i.e. trying to offer
something for each and every segment would render them pretty uncompetitive. The various levels of
fits, that a firm should strive for, would not be easily achievable for Bata given their current moves.
The first requirement of having the activities consistent with their strategy would be tough to attain
since with the decision of going after the premium segment, they would be having strategies based on
operational excellence as well as dwelling the fact that they would be having product leadership to an
extent too, since the premium product seekers look for this as well. Once it would be difficult for them
to have the 1st level fit, at that point it would be just impossible to foster the 2nd or the 3rd levels of fit
as with conflicting strategies having the activities reinforcing each other and optimizing them would be
out of question.

Proposed Future Strategy

I would recommend that Bata should exit from the lower end segment and focus more on the middle
and upper middle class of the society, because of the growth in numbers of people belonging to these
segments and also because of the rising incomes of its target customers. The market overall is one
which is becoming mature and people are quite quality conscious now. Bata in order to deal with the
threat of the Chinese imports would have a strategy focusing primarily on customer intimacy as it
would be aiming to enhance its brand equity and provide a complete experience for families who come
to shop there. Another positive for Bata will be that the customers, who are more aware now, usually
do not associate quality and reliability with Chinese products, where as Bata can use its brand to fill
this void. Bata should not be pursuing the very high quality and premium products under its Bata
brand because of the fact that Bata’s image has been created over its existence of around 40 odd years
and trying to just move out of its current segment of the middle and upper middle class people and
trying to capture the higher end of the market overnight can be an uphill task for Bata to say the least.
In order for this strategy to be executed the following decisions would need to be implemented in these
three key areas.

Manufacturing
Bata can dwell on its international presence which is its competitive edge and develop a select band of
ABUs in Pakistan by importing its best practices from abroad to be able to handle the manufacturing
requirements for slightly trendier lines with lesser volumes. It can also utilize its regional expertise e.g.
in Malaysia for rubber based shoes and in China for artificial leather shoes and use their expertise and
economies of scale to be able to meet the needs of the product lines for which they had some sort of a
cost disadvantage and those which are targeting the middle and upper middle class consumers.

Distribution
In terms of distribution Bata should lay emphasis on the company owned stores and maybe the K-
scheme stores because these are the stores in the retail channel where they can have the most impact by
bringing up systems and providing training to the staff present at these stores. Since their access based
positioning is to their advantage they can also get maximum out of the franchises by raising their
stakes and maybe institutionalizing practices such as having the inventory owned by the franchisees, to
make them push the sales of their products whilst making sure that staff present at the franchises is also
trained. This will enable Bata to provide a consistent experience to its target customers at all the outlets
and enable it to leverage its brand equity. With regards to the wholesale channel, they can conveniently
move out of that and stop having their footwear at the independent shops, because having that can dent
their chances of maintaining a proper image for their brand.

Brands
Considering the fact that the Bata brand has traditionally been targeting the middle class customers, it
would be appropriate for Bata to use its Bata brand name only with its traditional product offerings. It
would be better advised to move out of the fashion footwear for women, as again prospective buyers in
this segment will not really be able to associate style or fashion with a brand like Bata known for its
functional footwear offering utility and reliability etc. So even if they do bring out a fashion brand Bata
would not be in a position to challenge the supremacy of local, more responsive and trendy stores
famous for women footwear. However they may continue to carry brands like Power, Weinbrenner for
which they have exclusive distribution rights and also focus on their successful brands like Bubble
gummers. With brands like Slazenger and Hush Puppies which have their own stores in the market as
well, Bata might not be able to leverage these brands for its success and may discontinue them.

Strategy Mapping Details

With the proposed strategy above Bata would need to make some prominent changes in the way it
operates especially in the face that the firm provides to its customers and realign its internal processes
to be better geared at achieving the goals laid down in the strategy.

Financial – In terms of financial aspects in order to have better returns ensured for the shareholders,
Bata as per the proposed strategy would be banking on its focus on the middle and upper middle class
segment through its Bata brand, to enable to it to be a major force and have higher profits through
enhanced market share. Also the fact that the renewed brand image will enable Bata to earn premium at
the upper middle end of the market will aid the achievement of the financial goals.

Customer – The customer value proposition will also be substantial as Bata would now be offering
value for money along with the trust which its customers would have because of the established Bata
brand. In terms of access, functionality and selection options it would again be fulfilling its promises of
being a family outlet where each member of the family can buy something. The service standards
would be strictly monitored and hence an experience fit will be provided to the customers and these
customers for this will be willing to pay a bit of premium because of Bata’s brand and hence the
competition undercutting Bata on price would no longer be that big a threat.

Internal Processes – As far as the internal aspects of the firm are concerned Bata will need to
revamp its operations management processes, customer management processes, innovation processes
and regulatory and social processes. Changes in the Operations management processes will allow
Bata to have low cost to an extent, through economies of scale attained through specialist regions
worldwide supplying the products, as import duties would no longer be a barrier, and other stable high
volume products being manufactured locally at the Bata plants. For the brand targeting the upper
middle end of the market, Bata will use the expertise of a few ABUs, whose capabilities it will need to
develop by importing best practices from its internationally operational units. Hence these ABUs
would be able to reduce costs too even for the slightly premium products and achieve specialization in
such products. This would be a competitive edge for Bata only, since Bata’s competitors would not
have this edge which Bata enjoys because of its international presence. In terms of customer
management processes it will need to focus on marketing itself as an outlet meeting all basic needs of
the families in its target market segment. For innovation and R&D Bata can rely on its international
research centers and with their aid bring newer designs and further enhance its brand image especially
for the trendy footwear targeting the upper middle segment. Bata, with regards to regulatory & social
processes, can also enhance its care for its employees by allowing more K-scheme stores to open and
even help its franchises by providing them with some of the employees Bata plans to lay off, and
thereby helping the franchises to resolve their attrition related problems, and also enabling itself to
maintain a proper culture even at the franchise stores through those trained employees.
Learning & Growth – In order to attain its goals as per the new strategy Bata will need to put quite
a lot of effort into training its human resource, especially those at the outlets to provide consistent
quality service to its customers so that customers can associate the same experience with whichever
outlet they visit of Bata. Investments would also need to be made in raising the requisite human
capital which would be able to better handle the dynamically changing environment and thrive through
increased coordination. Information capital would need to be developed to allow better forecasting
and trend analysis etc. for the Bata management and also to meet the growing needs of internal
coordination. This emphasis on developing information capital will be a key feature allowing Bata to
get closer to its customers as part of its revamped strategy with more focus on customer intimacy. A
culture of empowerment would need to be fostered and younger energetic management would need to
be given the responsibilities so that they may fill in any leadership void, if created. However overall
longer leadership stints for top executives e.g. CEOs would be needed to allow them to take the
company towards its goals by implementing the strategy. With these changes in place, Bata would be
in a better position to cope with the various challenges posed to it, by its immediate environment.

STRATEGY MAPPING

Improved cost structure Expand Revenue Enhance Customer

Long-Term
with ABUs and Opportunities with Value due to
Shareholder Value
International specialized more focus on the Improved Experience
Financial Perspective
regions as suppliers target segment at Outlets

Quality , Reasonable Price, Reliable product, Improved availability with access ,

Customer Value
Customer Perspective Product range selection, functional products, brand image, catering to the needs of
Proposition
the whole family

Regulatory & Social Processes

Operations Customer Management Innovation Processes
Providing opportunities for
Management Building the brand, to Relying on its international
employees and franchises to have
Supply, Production acquire, retain and finally research centers to come up
Internal Perspective better operations e.g. by adjusting
and Distribution grow through more with better tailored products
employees there or having more K-
setup revamped customers for its target segment
scheme stores

Human Capital Information Capital Culture Leadership

More Training,
Empowerment to have
Learning & Growth
better employees at
Perspective
outlets—Making it a better
experience for the family
Enhanced use of IT Emphasis on providing Empowerment would help
to have more data the same experience at nurture better leaders who
on customers to get all outlets to customers would be able to continuously
to know them better and having a culture of serve Bata and implement the
and meet their needs improved service strategy
Sustainability of the Proposed Strategy
Value Offered to Customers as per the Revamped Strategy
Target Customers
• Footwear for the entire family
Middle and Upper Middle • A consistent level of service and experience at all Bata outlets
Class Segment • Quality, robust and reliable footwear
Families • Certain medium-high quality international brands through licensing
• Conveniently accessible outlets all over the country

Position of Bata

• Variety – It can afford to have more SKUs because of its developed ABUs , licensed international brands,
regional specialized units worldwide . Moreover its variety will be limited to the functional footwear good for a
season or two and not include highly trendy/fashion lines as it was previously planning to pursue .

• Needs – It will be catering to the needs of the families that it plan to target in the middle and upper middle class
segments. Its offerings will cover majority of the footwear that a normal family looks to wear in their everyday
lives barring very special occasions .

• Access – In terms of access Bata will have an edge over all its competitors with sheer number of stores, and
when through training of employees a standardized experience will be provided to the customers, this access
will further strengthen Bata’s image.

Sustainability of Bata’s Position

Key Trade Offs

• Image – With the current strategy Bata will not be diluting its image by going for two opposite ends of the market
and will be focusing more on the middle and upper middle segment , which is closer to the segments that Bata is
known to have targeted traditionally. It will be able to build on its brand history of 40 years and have an image of
a store having reliable, functional, footwear for the entire family.

• Activities – Bata will have activities in which unlike the past it will be focusing on its target segment , e.g. the
discontinuation of A,B,C,D category stores and focus on only those which will target the upper middle and
middle class families . It will move out of the wholesale channel and build its retail operations to better cater to
the customer needs.

• Internal Coordination – With activities aimed at satisfying the needs of the target market Bata will have an
opportunity and the need of improved internal coordination. With trained and empowered manpower and
management and systems in place with enhanced use of IT, through enhanced coordination there would be
chances of optimization.

Sustainability of Competitive Advantage

Activities like more emphasis on training , empowerment of management, improved IT

infrastructure, developing ABUs, utilizing international research centers, developing the
retail channel----will all be consistent with the strategy focusing on customer intimacy and
will also be reinforcing each other (This would ensure at least 1st and 2nd order of fits with
chances of moving towards the 3rd order as well)

Strategy

Focusing on
Customer Intimacy