Assignment 3 Strategic Management

Junaid Baig 10108135

Muhammad Shoaib
Asad Baig
1

Hanan 10108117

BATA: Strategic Choices

Q1) why did Bata develop as a vertically integrated producers?

Ans: Because they wanted to make strong brand image by providing
consistent shoe quality at affordable prices. They wanted to improve the
supply chain co-ordination. Through vertical integration they have more
opportunities to differentiate by means of increased control over inputs. They
wanted to capture upstream and downstream profit margins. They wanted to
minimize the risk factors about quality and increased the entry barriers to
the potential competitors.
Q2) what events triggered the emergence of specialized firms along
the value chain?
Ans: These are the events that triggered the emergence of specialized
Firms;
1.
2.
3.
4.

Consumer buying power increased in 1980s.

Trade barriers decreased in 2000s.
The development of leather export industry.
Remittance from migrant workers in the Middle East, together with the
Afghan war, resulted in 6 % annual gross national product growth and
increase consumer spending that resulted in threefold increase in shoe

retailers and footwear manufacturer.

5. The number of lather tanneries tripled during 1981-91 from 180 to 509,
making quality finished leather widely available to small footwear
manufacturer.
Q3) why did Bata enter and then later leave the tanning business?
Why did Bata outsource women`s fashion shoes and leather uppers,
but not canvas shoes, slippers and joggers?
Ans: They prefer to outsource complicated and trendy fashionable shoes
because of their small volume. Due to small volume company incurred a high

Assignment 3 Strategic Management

Junaid Baig 10108135
Muhammad Shoaib
Asad Baig

Hanan 10108117

cost as compared to other shoes like joggers, slippers and canvas shoes. The
2

sale of canvas shoes, slippers and joggers was very high as compared to
women`s fashion shoes thats why they prefer to outsource them rather than
to built in-house. Bata first entered and then leave the tanning business
because they want to make a strong brand image by providing consistent
shoe quality at affordable prices.
Q4) Evaluate recent changes in channel policies in the light of Bata
decision to focus on a few premium brands. Should Bata launch
specialized Marie Claire Concept Stores for women`s fashion stores?
Ans: Bata`s balance sheet showed a sharp increase in trade debt, which
consisted mainly of credit to distributors. Trade debt increases from Rs 114
million in 1998 to 330 million in 1999 and 674 million in 2001. Whole sale
volume was high but the margins were very low. Thats why company
changed its policy to get out of price sensitive wholesale market and
concentrate on market premium brands through company owned stores.
Company Categories its own stores as A, B, C, and D. Exhibit 1 Shows that
the highest sale occurred in Category A stores which constitutes only
premium brand as compared to the other Categories so company decision to
focus on some premium brands was right because of the market condition. 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.

Assignment 3 Strategic Management

Junaid Baig 10108135
Muhammad Shoaib
Asad Baig

Hanan 10108117

Q5) Over the years, Bata has gradually decreased the level of in3

house manufacturing while increasing its ownership and control

over distribution and marketing. Discuss.
Ans: In 1980s leather and footwear industry expanded and markets became
more efficient. Smaller manufacturers who do not had access to quality raw
materials, low cost capital, imported technology and distribution networks
gained access to that, and developed specialized expertise. Therefore Bata
and Servis faced who were facing competition from these smaller firms
as well as imported footwear started developing supply networks to remain
competitive. During 1981 to 1992 the no of tanneries tripled (from 180 to
509), making quality finished leather widely available to footwear
manufacturers. As a result of the changed economics of vertical integration
during the eighties, both Bata and Servis started a process of de-integration
in the late 1990s. Bata diversified out of leather tanning in 1996 and
embarked on a program to increase outsourcing to specialized vendors and
there labor force decreased by 20%. Bata increased their company owned
stores from 160 to 256 and decrease their agencies from 100 to 91 and kScheme stores from 60 to 25.
Q6) Discuss the impact of alliance with Shafi, Firaj, and Chinese
producers on Bata`s Core competencies and competitive advantage.
Is Bata inadvertently strengthening its own competition through
these alliances?
Ans: China is not being a threat for Bata because now a days peoples prefer
quality products and china only provide the low cost products not the quality
products so they did not think about alliance with Chinese producers. If Bata
will make an alliance with Chinese producers then their reputation of quality
products will suffer and it will decrease the company`s brand image. Shafi
Group produces only premium shoes which is against the target market of

Assignment 3 Strategic Management

Junaid Baig 10108135
Muhammad Shoaib
Asad Baig

Hanan 10108117

Bata. But by making alliance with Shafi Group they can increase their market
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share which is according to the CEO of SIL`` only those who have the large
market share and volumes will survive``. But according to my point of view
they can`t do any alliance with any one of the above because it can hurt
Bata`s Image in the eyes of their consumers.

Exhibit 1

Profile of a typical retail outlet by

category

Annual

A
16.2

B
6.7

C
2.5

D
2.1

Sales
Size in

2200

1450

800

700

square feet
No. of SKUs
No. of

1250
22

1040
41

960
277

635
32

Assignment 3 Strategic Management

Junaid Baig 10108135
Muhammad Shoaib
Asad Baig
outlets
5 coNo.
owned

22

37

Hanan 10108117

208

16