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External Environment

History of

Bata Ltd. is a privately owned global shoe manufacturer and retailer headquartered in Ontario,
Canada. The company is led by a third generation of the Bata family. With operations in 68
countries, Bata is organized into four business units. Bata Canada, based in Toronto, serves the
Canadian market with 250 stores. Based in Paris, Bata Europe serves the European market with
500 stores. With supervision located in Singapore, Bata International boasts 3,000 stores to serve
markets in Africa, the Pacific, and Asia, Finally, Bata Latin America, operating out of Mexico
City, sells footwear throughout Latin America. All told, Bata owns more than 4,700 retail stores
and 46 production facilities. Total employment for the company exceeds 50,000.

The Bata family's ties to shoemaking span more than two dozen generations and purportedly date
as far back as 1580 to the small Czech village of Zlin. However, it was not until 1894 that the
family began to make the transition from cobblers to industrialists. In that year, Tomas G. Bata,
Sr., along with his brother Antonin and sister Anna, took 800 florins, some $350, inherited from
their mother and launched a shoemaking business. They rented a pair of rooms, acquired two
sewing machines on an installment plan, and paid for their leather and other materials with
promissory notes. They produced stitched, coarse-woolen footwear. Within a year, the business
was successful enough to enable the Batas to employ ten people in their factory, such as it was,
as well as another forty who worked out of their own homes. In the same year, 1895, Antonin
was drafted into the military and Anna quit the business to get married, forcing Tomas to assume
complete control of the venture. He was just 19 years old.

In 1900, Bata moved the operation to a new building located close to Zlin's railway station and
took the first major step in industrialization, installing steam-driven machines. The company
enjoyed success producing light, linen footwear that appealed to a large portion of the
population, who could not afford better-made leather shoes. Nevertheless, Bata came close to
bankruptcy on more than one occasion and concluded that in order for his business to survive he
needed to find more efficient ways to manufacture and distribute shoes. In 1904, he and three
employees took a trip to the United States to learn firsthand the ways of mass production. Bata
spent six months working as a laborer on a shoe assembly line in New England. On his way back
to Zlin, he also took time to visit English and German factories. Upon his return home, Bata
began to transform the family shoe business, not only by applying the latest production
techniques--which would one day earned him the moniker, "the Henry Ford of the shoe
industry"--but also by finding a way to preserve the role of workers, which all too often changed
dramatically during the transition from an artisan to an industrial approach to commerce.

The Bata shoe business began to experience steady growth, so that by 1912 it was employing
600 full-time workers plus another few hundred who worked out of their homes in neighboring
villages. Tomas Bata now began to exhibit another side to his personality, the social idealist.
Because there was a shortage of housing in Zlin for his new workers, he constructed new homes,
which he rented at cost. He also offered inexpensive meals in factory cafeterias and free medical
care. He even built a new hospital to care for his workers. However, as soon as they began to
earn higher incomes, area merchants raised prices. In answer, Tomas Bata opened his own less-
expensive company stores to ensure that his employees were able to enjoy the fruits of their

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success. He also took steps to identify management talent among the ranks of his workers and
instituted a training program that was ahead of its time.

Bata received a major boost in 1914, following the outbreak of World War I, when the company
received a contract to produce boots for the Austro-Hungarian army. From the waste of these
items, the company produced the uppers to a wooden shoe that it sold to the lower classes.
Tomas Bata then invested the profits in new machinery, as well as in the opening of new retail
shops, so that the business was well positioned to take advantage of the economic boom of the
1920s. Before the company could enjoy this strong period of growth, however, Tomas Bata and
his employees were forced to take a major gamble together. In the years immediately following
the end of World War I in 1918, an economic slump prevailed across the globe, leading to
significant unemployment. Czechoslovakia, formed as part of the peace settlement of World War
I, attempted to fight inflation, which had already devastated Germany, by adopting tight
monetary controls. As a result, the country's currency lost three-quarters of its value, which in
turn led to a drop in demand for products, a cutback in production, more unemployment, and
even less consumer demand--developments that together threatened national economic
devastation. In August 1922, a group of industrialists met to discuss their plight. Unlike the
others, Tomas Bata did not simply throw up his hands and blame the government. Instead, he
called on the industrialists to take decisive steps to stimulate market demand, and he shocked
everyone by announcing that he was going to cut the price of Bata shoes in half. Once the
surprise of the moment wore off, Bata's audience simply laughed at him.

Bata was able, however, to convince his workers that he had a plan, albeit a radical one, that
would work. He believed that the company had to cut costs to the bone and work at peak
efficiency in order to halve the price of Bata shoes. Workers, ignoring their union leadership,
accepted a 40 percent reduction in wages across the board. Tomas Bata, in turn, provided food,
clothing, and other necessities at half-price to mitigate the loss of wages. In addition, he
introduced measures that were pioneering, including the creation of individual profit centers and
incentive payments to both management and workers to spur productivity. With his operations
lean and efficient, he then launched a national advertising campaign. The response from
consumers was swift and dramatic, as Bata stores, which had been virtually empty for months,
were now swamped with customers looking for inexpensive shoes. Bata was forced to increase
production, and not only did the company maintain full employment, it began to hire. The
decision to cut prices proved to be a turning point in the history of the company, which now
grew at a tremendous pace.

Tomas Bata continued to innovate, improving on productivity primarily through the introduction
of an assembly line approach. After five years, productivity improved 15-fold; after ten, the retail
price of Bata shoes dropped by 82 percent. The employees' faith in Tomas Bata was also
rewarded. After accepting a severe wage cut in 1922, by 1932 they had seen their salaries
doubled. They were now working for the largest shoemaker in the world. According to company
lore, in fact, in some developing countries "bata" gained currency where there was no word for
"shoe." Moreover, Bata became involved in a variety of other industries, including socks,
leatherwork, chemicals used in leather making, shoemaking machinery, wooden packing crates,
tires and other rubber goods. The company launched its own film studio to produced advertising
materials, and it soon evolved into a full-fledged enterprise that produced some of the earliest

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animated films. Because of the company's involvement in transportation, as Bata became the
world's largest exporter of shoes, Tomas Bata even became involved in the manufacture of
airplanes through the Zlin Air Company, which produced both sporting and business planes. He
also became famous for housing his headquarters in the tallest reinforced concrete office
building in Europe, which featured an elevator that housed his "floating office." With a push of a
button, Bata was able to confer, and keep an eye on, his employees on every floor without
leaving his desk.

Bata established operations in new markets, such as Singapore in 1930. The company, which in
1931 adopted a joint stock company form of organization, also established subsidiaries and shoe
factories in a number of European countries as a way to circumvent tariffs that had been imposed
in response to a worldwide economic depression. In mid-1932, Tomas Bata called together his
team of executives and announced that in order for the company to weather increasingly difficult
economic conditions and drive further growth, they would have to look to more distant markets,
in particular North America. Just two days later, however, Tomas Bata was killed when an
airplane he was in took off in a thick fog and crashed into a chimney of one of his buildings. He
was 56 years old.

Bata left a 22-year-old son, Thomas J. Bata, whom he had groomed since childhood to one day
head the business, but in the meantime Bata's half-brother Jan took over and continued the
mentoring process. It was Thomas Bata who was to be dispatched to North America, to which
the company was already exporting shoes, to establish a manufacturing operation. While most
executives in the organization lobbied for the United States as the location for a plant, the young
Bata was fixated on locating the business in Canada, a place he had romanticized since childhood
after reading the works of Jack London. With the rise of Nazi Germany in the 1930s, the
importance of organizing a North American operation took on increasing importance, as the
company now made plans to relocate its headquarters to the West. In March 1939, with Germany
on the verge of invading his country, Thomas Bata fled to Canada along with 180
Czechoslovakians. After being granted permission from the Canadian government, he started up
operations in Frankford, Ontario, taking over a former Canadian Paper Company mill while a
new factory was built. To aid in the Allied war effort, the company focused its personnel and
equipment on the production of anti-aircraft equipment and machines used to inspect
ammunition. For his part, Jan Bata moved his headquarters to the United States, but when
blacklisted by the Allies he was forced to relocate to Brazil. The Bata Shoe Organization, as it
was called, was now split between uncle and nephew, resulting in an eventual contest for
management control and ownership. Thomas Bata essentially prevailed in 1949, but the contest
continued to be played out in the courts of numerous countries until the end of 1966.

The return of Bata operations lost to the Nazis was short lived after World War II. In 1945, the
communist government installed in Czechoslovakia by the Soviet Union had nationalized the
country's industry, usurping the original Bata shoe factory in Zlin and the company's far-flung
network of shops. (Even Zlin's name was changed, becoming known as Gottwaldov, a tribute to
the country's first communist president.) Bata was further stripped of assets as other countries,
including East Germany, Poland, and Yugoslavia, also nationalized their shoe industries. Now
based in the West, Bata and its many Czechoslovakian expatriates began to rebuild the business,
taking on an almost missionary zeal in the process. Rather than organizing in a centralized

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manner, the company established a structure based on autonomous operations, primarily in the
new markets of developing countries. Also following the war, Thomas Bata married an aspiring
architect named Sonja, a woman who would play an influential role in the success of the
company, supplementing her husband's manufacturing and sales expertise with a sense of design
and style. By the mid-1950s, Bata was operating 56 factories in 46 countries. Thirty years later,
Bata was in 115 countries, selling close to $2 billion worth of footwear each year through 6,000
company-owned stores and 120,000 independent retailers.

In the 1970s and 1980s, the manufacture of shoes began to shift increasingly to Pacific Rim
countries, where lower labor costs provided a competitive edge that proved devastating to shoe
companies around the world. With its widely cast operations and well-established distribution
network, Bata was better able to compete, but it too suffered from a softening in its business.

With the fall of communism in the late 1980s, Bata was able to return to the country where the
family business was founded. The company was not able to resume ownership of its prior assets,
which has been combined with other Czech shoe operations, nor did Bata wish to be encumbered
with facilities that the communists had neglected for more than 40 years. Nevertheless, Thomas
Bata was committed to establishing a business in his native country. After some study, the
management team elected to focus on a retail distribution business and a modest manufacturing
facility, one that was not part of the old Bata operation. A small factory established by the
communist regime was found acceptable, and the company then selected a number of retail
locations, which would total a 20 percent market share, and presented the government with a
joint venture proposal that was accepted in late 1991.

Thomas Bata, at the age of 80, elected to retire in 1994. His son, Thomas Bata, Jr., had been
serving as president since 1985. According to The Globe and Mail, Thomas, Jr. "took over at a
time when the international shoe maker was experiencing heightened competition from strong
global marketers. The movement toward free trade challenged its network of quasi-autonomous
national companies. Mr. Bata tried to make changes, but insiders says he lost the support of key
members of the board." He was widely expected to succeed his father, but to the surprise of
many, Stanley Heath, a Canadian with considerable executive experience with RJR Nabisco,
took over as president and CEO to assume the day-to-day running of the business, while the
younger Bata assumed the chairmanship, ostensibly charged with focusing on the "big picture."
He soon left the family business and moved to Switzerland. His father, with a reputation as an
autocrat, was slated to become honorary chairman, but the post proved to be far from ceremonial,
as he continued to be involved in the company's operations on a day-to-day basis and was not
reticent about letting management know his opinions. Little more than a year after coming to
Bata, Heath resigned for "personal and family reasons." Taking over for Heath was a loyal
company man, Rino Rizzo, who had been with the Bata organization since 1969. In 1999, Bata
brought in Jim Pantelidis, an executive who had no experience in the shoe industry, to assume
the CEO position. Pantelidis's background was in retail gasoline sales, and during his career he
had worked for one of Canada's largest chains, Petro-Canada Corporation. Pantelidis instituted a
plan to develop regional shoe lines, as opposed to lines created for individual countries. In
addition, he wanted to create economies of scale by building regional infrastructures. The goal
was to use the regional infrastructures to position the Bata brand on a global basis.

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The tenure of Pantelidis lasted just two years. In late 2001, Thomas Bata, Jr. returned, gained
control of the business, and was named chairman and CEO, while Pantelidis left to "pursue other
challenges." Bata began to reorganize the company, essentially running the business out of
Switzerland. It remained to be seen if he would be able to succeed where outsiders had failed in
the effort to transform Bata from a federation of stand-alone local subsidiaries into a truly
international company.

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Introduction of Bata Pakistan

Bata Pakistan limited is one of the 65 companies working all over the world as shoe
manufacturer. It started its operation at Batapur in 1942. It becomes listed company in 1979.
Bata Pakistan limited Heaving 60:40% foreign and local shareholdings respectively.

Bata equips with sophisticated technological and business skills, provides direct employment to
about 2,792 people, indirectly support “ABU`s” small manufactures and traders through local
purchase.

Bata Pakistan is producing more then 14.0 million pairs of Rubber& Canvas, Leather and Plastic
footwear annually in two production units at Batapur and Maraka.

Bata is selling more then 17.0 million pairs of Rubber, Leather and plastic footwear annually.
For this purpose company have the following selling channels all over the country.

1. Retail stores
Own stores 245
Agencies 83
K. type (Associates) 26
Bubble gummers 12

2. Wholesale Depots 11
3. Distributors / Mini Distributors 14

The company export volume is around 170 to 190 million annually (1.3 million pairs) in all
categories being supplied to various European countries, Middle East and Far East countries.

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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.

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

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Board of Directors

Mr. Jorge Carbajal Chairman

Mr. A. Carnecky Managing Director

Mr. M. G. Middleton Director

Mr. Muhammad Ali Malik Director

Mr. Salahuddin Niazi Director

Mr. Fakir Syed Ajazuddin Director

Mr. Ijaz Ahmad Chaudry Director

Mr. Shahid Anwar (Nominee of NIT) Director

Mr. Shamshad Ahmad (Nominee of NIT) Director

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Bata Product Line

Basically Bata is Shoe Manufacturer Company. But it deals with different variety of products,
For Kids, ladies and gents.

• Men Dress Shoes

• Men Comfit
• Ladies summer
• Marie Claire

• Bubble gummer
• Children summer

• School Boys
• School Girls

• Men’s Athletic
• Ladies Athletic
• Children Athlete

• Thongs
• Micro Lon
• Hawaianas
• Canvas

• Footwear

• Hosiery/ Socks
• Hand Bags

• Clothing Athlete
• Sacs

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External environment

Major forces outside the organization, with potential, to influence significantly a product or
service. External environment basically consist of two broad categories.
Which are.
1. Mega environment
2. Task environment

Mega environment

The broad conditions and trends in a society in which an organization operates. Mega
environment is further classified into five major elements. We will discuss all the
elements one by one.

1 Technological elements
The elements which reflect current knowledge about production of products and services
are called technological elements.

Bata Industries has set a new standard in the Safety & Health concept. To remain at this
high level of technological development Bata has a close co-operation with key
customers, universities, accredited test institutes, suppliers and large corporations in the
field of material research. In this fashion Bata continuously works on new product lines
as well as on improvements on specific aspects of their current collection.

Research focuses on many terrains, like:

• Perfect lasts
• Climate management
• Weight reduction
• Slip resistancy
• Mondopoint length and width system
• Special fibres in applications

Shoe of the Future

One of Bata’s latest development is the innovative concept for safety shoes. With this
new concept, Bata Industries is responding to the growing demand for safety shoes
adapted to specific work conditions. At present, the concept is being further developed
and tested.
Safety shoes are worn every day and every workplace has its own unique features.
Employees in the logistics industry who walk a great deal for their jobs have wearing-
comfort needs which are different from factory workers with a static workplace whose
jobs do not require a great deal of movement. However, temperature, humidity and the
surface also play a role. A safety shoe must therefore satisfy varying requirements. Bata
Industries analyses these conditions and, on the basis of the results, is developing the
modular Shoe of the Future.

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Countless possibilities
The new concept consists of six modules: sock, inlay sole, insulation/comfort layer
(Isotech), reinforced layer (Bio plate), mid-sole and outsole. A variety of materials are
available for each module. Thanks to this combination of options, it is possible to make
the ultimate shoe suitable for every specific type of workplace. With a single module, it is
easy to replace the materials to produce a different shoe with other qualities. The proper
climate control in the shoe starts with the choice of the right sock. For this reason, the
socks are also an integral part of the new concept.

2 Economic elements
These elements include the system of producing , distributing and consuming wealth .e.g.
volatility of global capital market, growth of service sector, and potential sluggishness of
economy etc.

Economic element of any country effect the business in that area. As far as Bata is
concern, it’s also effect by the economical elements. Doing business in Pakistan they
have to watch the economic condition of Pakistan. Purchasing power of people is very
important. But during the last 2 years and so inflation rate have increased at rapid pace
during this year inflation have been increased by 10%. Purchasing power of people have
been decreased so its effect the business of Bata in Pakistan. Another factor is that, in
making of leather, petrol is used and prices of petrol in Pakistan is increasing day by day
so it increase the cost of production of Bata company.

Bata Pakistan Ltd. reported earnings results for the full year of 2007. For the year, the
company's profit after tax has increased to PKR 358.637 million as compared to PKR
109.621 million earned in the corresponding period in 2006. The company's earning per
share surged to PKR 47.44 in the period under review against PKR 14.50 in the same
period a year back. The company's net sales increased to PKR 3,964.187 million as
compared to PKR 2,989.474 million in 2006. The board of directors of the company
recommended a final cash dividend for the year 2007 at PKR 2 per share, (20%).

3 Legal and political elements

Elements refers to the legal and governmental system within which an organization
functions like, patent laws, trade restraints, and deregulation of financial services
industry.

Like other organizations “BATA” also has to obey the laws, rules and regulations existing
within the country. In Pakistan we have a very friendly business environment, the
regulations and rules are very easy to apply and follow. For example for Bata industries
there are no restraints and no limitations to stop the expansion of their business. They
have no reason to slow down their production or distribution nor their publicity or
marketing.

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4 Socio cultural elements

It involves attributes, values, norms, beliefs, behaviors and associated demographic
trends characteristic of a given geographic area.
For example. Shift of employee involvement culture, globalization of managers etc.

Bata is producing its products in more then sixty countries world wide. Every country has
different culture ,norms and values so that Bata have to vary its strategies according to
the geographic area Bata advertise its products according to the cultural aspects, it means
Pakistani ad are different from Canada. E.g. In Pakistani Bata ads, they always show the
family concept to promote their product.

5 International elements
International element of the mega environment includes changes in countries outside an
organizations home country with potential to influence the organization. E.g.
international competition, Xerox-Canada etc.

1. Ever since the import and distribution of Chinese products namely shoes, has
increased in Pakistan, the sales of Bata have dropped considerably. Thus the business
of Bata industries has been effected by an international element in the form of low
labor, and manufacturing costs of Chinese products. In the process of countering this
situation, Bata industries contracted with Chinese manufacturers for low costing and
cheap products. So that they can have a leveled competition in the local and
international market.

2. We can also see that Bata industries being a Canadian company is effected by
Pakistani laws and competition in the form of other local companies such as Stylo,
Delhousy, Milli shoes and many others, as it has a whole limb in Pakistan in the form
of manufacturing units and dealerships.

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Task environment

Like mega environment, task environment also includes different aspects which are as
follows.

1 customer and clients

Customer and clients are the individuals and organizations purchasing an organization
products and services.

Bata Collections target a wide range of customers and offer an excellent price-quality
ratio. Bata’s exclusive models along with national and international brands are carefully
selected and updated in response to market demand.

1. The Army in World War II was supplied with shoes of Bata industries under contract.
2. Many schools have contracts with Bata industries for uniform shoes supplies.
3. Bata designs and manufactures products for all kinds of consumers such as athletes,
business men, school going children, working and business class women, home usage
and many others.

2 Competitors
Competitors are other organizations with a high potential, offering rival products or
services. e.g. service shoes, stylo, delhousy, English and many other high standard
industries, which compete with great strength and tact.
In early days of Bata in Pakistan, They have no such competitors. During the last decade
lot of shoe making companies have been arrived so Bata have to face the competition.
Because local competitors prices are relatively low as compared to Bata.

3 Suppliers
Organizations and individuals supplying resources to another organization or
manufacturer to conduct its operations with fluency are called suppliers. Like.
For example, Bata’s suppliers are Chinese raw material holders, manufactured supplies
from local cottage industry etc.

4 Labor suppliers
Those individuals or organizations that organize and refer potentially employable people
to an organization are called labor suppliers.
For example, Naukri.com, Bata’s own H-R Dpt.
Presently Bata’s employments have been stopped, as downsizing is under consideration.

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5 Government agencies

Various agencies providing services and monitoring compliance with laws and
regulations at local, state or regional and national level.
E.g.Excise and Taxation department, securities and exchange commission and
environmental protection agencies etc.

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Conclusion

It is concluded that Bata is going very well in Pakistan. They change their strategies according to
the situations. After all this competition, government laws and policies, economic factor etc Bata
is still the leading shoe making company in Pakistan and World wide.

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References

Muhammad Attique (IT Manager)

Sohail Aslam (Accounts Manager)

Muhammad Yaqoob.

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