Introduction

This case hi ghlights the challenges faced by the Bata Management in the wake of
changing markettrends in the form of increased competition from the local players as well as the
constantly increasingthreat of Chinese imports. Bata had traditionally targeted the lower middle and
middle class segmentsof the society and was now contemplating changes in its strategy to be able to
survive in the market.
Analysis of Batas Current Market Position
With the evolving market and changing market dynamics Bata was being given a tough
time by itsl ocal competitors and other footwear being imported from China. Bata
management feared that theywould not be able to survive because they could not compete with
the low cost Chinese products, hencethey embarked on a plan to enter the premium
segment of the market to be able to survi ve, becausethey 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 realizi ng
the fact that their image would be hurt and coul d get diluted because they were moving
into a domain for which their activities were not aligned. Other thanthe activiti es too we have to
consi der 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, i n fact Bata was just meeting the
basic functi onal needs of its middle cl ass customers. Therefore their strategy does not
seem to be at all well cut out, as frommos t of t hei r ac t i v i t i es i t appear s t hat
onc e t hey wer e c hal l enged t hey r es or t ed t o a f i r e f i ght i ng approach and tried
their hand at almost all possible arrangements, without gauging the fi t of theactivities
to their strategy. It may be concl uded that Batas management made the fatal error of
just enjoying their successes whilst the market was not mature, but when the competitors kicked in
and themarket approached maturity, they were left in the lurch because of not having made clear
trade offs int er ms of i mage, ac t i v i t i es & i nt er nal c oor di nat i on and t hen had t o
pay t he pr i c e. Thei r c ur r ent 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
theywere focused more on the lower middle and middle classes. Due to the changing market
dynamics thecompetition had started undercutti ng their prices and Bata was thinking of
shifti ng its focus towardsthe higher premium end of the market as well. This basically resulted in
it pursuing practices, throughwhich it could not focus its efforts.
Identity
Middle Cl ass famil ies 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 thecustomers that these would be spending roughly around Rs. 300 to Rs. 1500 for
a normal purchase.
Behaviors
I n t er ms of t he behav i or al as pec t s Bat a s t ar get c us t omer s c oul d
be qui t e pr i c esensitive, demanding value for money, looking for utilitari an needs to
be met, and not excessivelyc ons c i ous about t he s hoe l as t i ng f or ages and
bei ng v er y s t ur dy , y et at t he s ame t i me demandi ng a d e q u a t e q u a l i t y
f o o t we a r wh i c h t h e y c a n t r u s t t o l a s t f o r a s e a s o n o r t wo . B a t a
ma y a l s o b e categorized as a store where usually entire families visit together because of the
various offerings thatBata has to offer to them.


Value Proposition for the Customers
If analyzed for the val ue that Bata was providi ng to its customers their value
proposition may becategorized 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 traditi onally had product lines catering to the middl e class segment of
thesociety, 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 i n positioning itself as a brand
havingstores with products to meet the needs of almost all members of the family, since it had
product rangesfor children, men, women etc.
Access
Bata had positioned i tself by employing vari ous distri bution channels (retail as well
aswholesale) to enhance its access for the customers. Their nationwi de 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
entirefamily members and for the people belonging to the middle class. But when its management
decided toalso tap the premium segment of the market, their decision may be
categorized as one whi ch cast doubts about the sustainability of Batas desired position in the
market.
Image
In my opinion Batas image would be diluted as a result of it pursuing various segments andtrying
to cater to their needs. Its traditional positioning woul d also be impacted and there
would bechances of Bata not being able to provide an experience fit to its customers as per their
expectations.
Activities
The s or t of ac t i v i t i es whi c h t hey empl oy ed e. g. manuf ac t ur i ng i n - hous e
as wel l as outsourcing, having four categories of outlets (A,B,C,D) catering to various
segments of the societyfrom upper to the lower ones, selling through retail as well as the
wholesale channel, would not help inany way at conveying a consistent image t o its
customers. Hence it can be stated that they failed tomake any particular trade offs as far as
the key activities were concerned.
Internal Coordination
With Bata engagi ng a wide array of activities and practices it woul d 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 onoperational excellence as well as dwelling the fact that
they would be having product leadership to anextent too, since the premium product seekers look
for this as well. Once it would be difficult for themto 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
beout of question.
Proposed Future Strategy
I would recommend that Bata shoul d exit from the lower end segment and focus more
on the middleand upper middle cl ass 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 onewhich is becoming mature and people are quite
quality conscious now. Bata in order to deal with thethreat of the Chinese imports would have
a
strategy focusing primarily on customer intimacy
as i t would be aiming to enhance its brand equity and provide a complete experience for families
who cometo shop there. Another positive for Bata will be that the customers, who are more aware
now, usuallydo 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 hi gh quality and premium
products under its Batabrand because of the fact that Batas image has been created over its
existence of around 40 odd yearsand trying to j ust move out of its current segment of the
middle and upper mi ddl e 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 thesethree 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 i mporting its best practi ces from abroad to be able to
handle the manufacturi ngrequirements 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 andeconomies of scale to be able to meet the needs of the product
lines for which they had some sort of acost disadvantage and those which are targeting the middle
and upper middle class consumers.
Distribution
In terms of distri bution Bata shoul d 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 rai sing their stakes and maybe institutionalizing practices such as having
the inventory owned by the franchisees, tomake them push the sales of their products whilst making
sure that staff present at the franchises is alsotrained. This will enable Bata to provide a consistent
experience to its target customers at all the outletsand enable it to leverage its brand equity. With
regards to the wholesale channel, they can convenientlymove out of that and stop having their
footwear at the independent shops, because having that can denttheir 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,
itwould be appropriate for Bata to use its Bata brand name only with its traditional product
offerings. Itwould 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 l ike Bata known for itsfunctional footwear offering utility and reliability etc. So
even if they do bring out a fashion brand Batawould not be i n 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 ri ghts and also focus on their succes sful brands like
Bubblegummers. With brands like Slazenger and Hush Puppies which have their own stores in the
market aswell, 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 itoperates especially in the face that the firm provides to its customers and realign its
internal processesto 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
classsegment through its Bata brand, to enable to it to be a major force and have
higher profits throughenhanced market share. Also the fact that the renewed brand image will
enable Bata to earn premium atthe 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 offeringvalue 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 standardswould be strictly monitored and hence an experience fit will be
provided to the customers and thesecustomers for this will be will ing to pay a bit of
premium because of Batas brand and hence thecompetition 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 wi ll need torevamp its
operations management processes, customer management processes, innovation processesand
regulatory and social processes. Changes in the
Operations management processes
will allowBata to have l ow cost to an extent, through economies of scale a ttained
through specialist regionsworldwide supplying the products, as import duties would no longer
be a barrier, and other stable highvolume 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 todevelop 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 insuch products. Thi s
would be a competitive edge for Bata only, si nce Batas competitors would
nothav e t hi s edge whi c h Bat a enj oy s bec aus e of i t s
i nt er nat i onal pr es enc e. I n t er ms 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 especiallyfor 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 andeven
help its franchises by providing them wit h some of the employees Bata plans to lay
off, andthereby hel ping the franchises to resol ve their attrition rel ated problems, and
also enabl ing itself tomaintain 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 quitea lot of effort into
traini ng its human resource, especially those at the outlets to provide
consistentquality 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 rai sing the requisite
humancapital
which would be able to better handle the dynamically changing environment and thrive
throughincreased coordination.
Information capital
would need to be devel oped to allow better forecastingand t r end anal y s i s et c . f or
t he Bat a management and al s o t o meet t he gr owi ng needs of
i nt er nal coordination. This emphasis on developing information capital will be a key feature
allowing Bata toget closer to its customers as part of its revamped strategy with more
focus on customer inti macy. A
culture
of empowerment would need to be fostered and younger energetic management would need to be
given the responsibiliti es so that they may fill in any leadership void, if created.
However overall longer
leadership
s t i nt s f or t op ex ec ut i v es e. g. CEOs woul d be needed t o al l ow t hem t o t ake
t hecompany towards its goals by implementing the strategy. With these changes in place, Bata
would bein a better position to cope with the various challenges posed to it, by its immediate
environment.
Long-TermShareholder ValueExpand RevenueOpportunities withmore focus on thetarget segmentEnhance
Customer Value due toImproved Experienceat OutletsImproved cost structurewith ABUs andInternational
specializedregions as suppliers
Financial PerspectiveCustomer Perspective
Customer ValuePropositionQuality, Reasonable Price, Reliable product, Improved availability with access,Product range
selection, functional products, brand image, catering to the needs of the whole family
Internal PerspectiveOperationsManagement
Supply, Productionand Distributionsetup revamped
Customer Management
Building the brand, toacquire, retain and finallygrow through morecustomers
Innovation Processes
Relying on its internationalresearch centers to come upwith better tailored productsfor its target segment
Regulatory & Social Processes
Providing opportunities for employees and franchises to havebetter operations e.g. by adjustingemployees there
or having more K-scheme stores
Learning & GrowthPerspectiveHuman Capital
More Training,Empowerment to havebetter employees atoutletsMaking it a better experience for the family
Information Capital
Enhanced use of ITto have more dataon customers to getto know them better and meet their needs
Culture
Emphasisonprovidingthe same experience atall outlets to customersand having a culture of improved service
Leadership
Empowerment would helpnurture better leaders whowould be able to continuouslyserve Bata and implement
thestrategy
STRATEGY MAPPING




Questions
1.
Evaluate the different ways in which Bata has interacted with foreign political systems in its
investments and operations abroad.
2.
Do you think Bata made the correct decision to pull out of South Africa? How do you think
the political events in South Africa in the past few years might change Bata's strategy for
South Africa? How should Bata formulate a strategy for determining whether or not to re-
enter South Africa?
3.
What are the advantages and disadvantages to both Bata and the Republic of Slovakia of
having Bata take over his former operations? Why do you think the Czech Republic allowed
Bata to re-enter the market, but Slovakia had not as of the end of 1995? Why do you think
Bata is appealing for a political solution to his problems rather than go through the courts
to get back his property? What type of political system do the Czech Republic and Slovakia
have? How might that help explain Bata's problems?
4.
Check the Web for country pages, the CIA Factbook, or other sources of information on
South Africa, the Czech Republic, or Slovakia that will help you understand more about the
changing political and economic climates in those countries.
5.
Why do you think Tom Bata, Sr., has joined the list of entrepreneurs who cannot bear to
loosen their grip on businesses they started? What is the risk to Bata, Ltd. if Tom Bata, Sr.,
cannot find away to retire?