Bayfoot Ware Strategic Assignement

8/8/2019 Bayfoot Ware Strategic Assignement

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3.0 Internal Analysis of Bata Shoe Company

3.1 Batas Strengths and Weaknesses

Strengths of Bata

Business Advantage

1. Worldwide Presence of Parent Company

Bata Bangladesh is affiliated to the Bata Shoe Organization, the

worlds largest footwear manufacturing and marketing

organization. With operations spanning across five continents,

this global company manages a retail presence in over 50

countries and runs 40 production facilities across 26 countries.

In effect, Bata's strength lies in its worldwide presence. It is

one of the first local branded footwear manufacturers in

Bangladesh which started operation in 1962. Having worldwide

presence and being one of the first entrants has provided it with

valuable experience.

2. Market Leader

Continuous expansion of product lines and outlets has helped it

to attain 25% of local market share. Its traditional strength

lies in the volume sales it enjoys as a result of its ability to

capture the mass market. Moreover, sales figures for Bata stood

at Tk 650 crore in 2008. The highest revenue earner for Bata is

the Mens Sandals range.


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3. Impressive Product Portfolio

Bata has decades of experience in the local shoe market and have

paid meticulous attention to buyers choice and their

affordability. Even though Bata entered the local market with

only synthetic products like thongs and sandals, it now boasts of

a product range that is unparalleled by any other local

manufacturer. It has products for both gender segments and

children under its Fashion, Contemporary and Classical and neo-

classical lines. Each of the ladies, childrens and mens

collections are further divided into Sports, Summer, Canvas,

Dress and Casual segments. With its prices ranging from as low as

Tk 150 to Tk12, 000, Bata has moved in to capture all income

segments with its strong product portfolio of 12 diverse brands.

Its Bata, Hawaianas, Sandak and B First are targeted to middle

and lower middle income segments while its Bubblegummers, Dr.

Scholls, Hush Puppies, Marie Claire, North Star, Power,

Weinbrenner are targeted towards the upper middle and high income

groups. It has also earned exclusive rights to sell Nike through

which it targets the brand conscious high income segment. In its

endeavor to provide a diverse product range and family

experience, Bata now provides accessories like hand bags, belts,

etc alongside shoes.

4. Strong B2B Network

Alongside its presence in the consumer market as the market

leader, Bata has also extended its reach to the Business to

Business market. Bata Institutional Sales Division is an


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exclusive division of Bata which caters to the requirements of

corporate customers across the country. The Institutional Sales

Team customizes footwear solutions to meet the requirements of

various industries including hospitality, aviation, healthcare,

educational and government organizations. The Bata Institutional

team collaborates with corporate customers to design exclusive

shoe lines under the various international and national brands -

Hush Puppies, Marie Claire, Comfit, Scholl, North Star, Power,

which are in line with latest technology. The industrial footwear

range further strengthens its portfolio.

5. Backward Integration

The company has its own source of high quality leather from its

modern tannery at Dhamrai, which has the latest technological

facilities to process 5 million square feet of leather yearly.

The company therefore acquires advantages from this backward

integration. Bata has the facility and technology to produce

most of the brands locally. Apart from the international brands

like Scholl, Hush Puppies and Nike (which constitutes 5% of total

product), all the other brands are made locally at the 2

manufacturing plants at Tongi and Dhamrai and has a capacity to

produce around 110,000 pairs of shoes daily.

6. Non-retail Stores


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A growing middle class has made Bata shift its focus from family

stores to city stores to display fashionable products. It has

also introduced a new dimension in marketing of their products

through the launch of Brand Corner concept in well recognized

business chains like Nandan Mega Shop, Trust Family Needs,

Mohammadia Sharee house, etc. This has provided it with greater

presence in the city, in addition to their own outlets which

other footwear manufacturers do not have. Bata also has a strong

foothold in the suburban areas through its non- retail stores.

The stores are positioned in strategic locations after extensive

market research undertaken by a fully functional marketing

department. This has further strengthened Batas endeavor in

building a strong distribution network spanning across different

channels.

7. Largest Retail Store

In sync with their ongoing aggressive expansion strategy, Bata

has recently opened a mega store comprising of its own brands as

well as other licensed world famous brands and designs under one

roof. Spread over 11,000 square feet, it is the largest showroom

for footwear in Asia. Batas focus on expansion of its retail

stores is evident as a major 35% of its total overall spending is

on new retail stores, market research and renovation.

8. Attention to Local Need

The management of Bata, which is headed by an international team,

has been following a systematic, focused and structured

methodology of conducting business. Although it is a


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Multinational Company, Bata gives attention to the different

local needs such as fashion trends, climate, seasonal trends,

specific needs, usages and customs. This has enabled the company

to build a repertoire as a reliable name in the Bangladesh

footwear market.

9. Healthy Financial Performance

Bata, which is listed as a public limited company, has been

maintaining a steady growth in revenue and profit for the last

decade. The Compounded Annual Growth Rate of Revenue from 2005 to

2008 amounted to 10 percent while the CAGR of Profit before tax

for the same period stood at 17 percent. The company is 83

percent equity financed the lower leverage and high profitability

making it a credit worthy borrower. Moreover, the company

reserves amounted to BDT 835 million at the end of 2008 and along

with BDT 300 million in cash holdings, it can be termed as a cash

cow. This implies that Bata has the financial strength to carry

out more expensive business strategies in future.

Core Competency

Unparalleled Distribution Network

Batas core competency remains in its unparalleled distribution

network of 244 retail outlets as well a strong network of non

retail dealer outlets including 481 DSP (Dealer Support Program)

stores and 349 RWD (Registered Wholesale Dealers) under 13 depots

all across Bangladesh. Based on the commercial area rating and

competitor analysis, Bata decides on the type of retail outlet


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for each location under its three types of retail concepts: City

Stores, Bata Bazaars and Family Stores. Of these outlets, 24 are

City Stores, 65 are Bata Bazars and Super Stores, 51 are Family

stores and the rest are Non retail Dealer Outlets. Where retail

channel contributed around 59 percent of the companys turnover,

the Non-Retail Sales Department also moved in to contribute 39

percent of the total companys turnover in 2008.

Operational Strength

1. Application of MIS

Bata has internal software called BSO which helps to calculate

and forecast inventory requirements. It has almost completed

installing the Point of Sale software in all its depots and

retail outlets. Currently being used in over 210 outlets, the POS

technology has helped to speed up inventory control and has led

to a more efficient supply chain management. When installed in

all stores and integrated with the head office, this could assist

even faster decision making and inventory management.

2. Training and Development

The Company stresses on training and development of employees

through hosting International training programs on merchandizing

as well as sales management. Staff training on the job coupled

with periodical training courses on product knowledge, retail

sale techniques, general store operation rules, etc lead to a

more customer-centric sales force. It provides employees with on-

going training opportunities to build new skills and


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collaboration with the parent company is also beneficial in this

regard.

Weaknesses of Bata

Areas of Improvement

Poor Control over Non-retail Outlets

The massive expansion program and its widespread distribution

network through more emphasis on N.R.S.D channels come with its

own side-effects. In this system, the wholesalers buy merchandise

to resell to dealers, i.e., multi-brand outlets, located in

street markets of major cities, towns and suburban areas. They

keep inventory of Bata products for replacement and sell on

credit or cash basis. Their focus is on volume products like

basic closed shoes, sandals / chappals, school shoes, Canvas

shoes, Hawai, Sandak and Batalite. These shops also deal in

regional brands and unbranded footwear from small manufacturers.

This implies that Bata has very little control over these

customer touch points. Since customer loyalty is an element of

utmost bearing on Bata, any complacency on behalf of the company

could result in depletion of existing customer base. More careful

attention needs to be given in selecting these non-retail outlets

along with periodical monitoring and support.

Areas Avoided

Bureaucratic Structure


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The organization structure is predominantly bureaucratic in

nature, with little power vested in the hands of mid level

management. The Bata Shoe Organization is broken down into four

regional Meaningful Business Units which are entrepreneurial in

nature, and can adapt to changes in the market place and seize

potential growth opportunities. Each MBU provides resources and

support in key areas to the companies operating in similar

markets such as product development, sourcing or marketing

support. Bata Bangladesh is controlled by Bata Emerging Markets,

Singapore. Strategies to suit local needs take longer to

implement since they need to be approved by the Bata Emerging

Market first.

Areas Performing Poorly

Low Promotion Budget

Bata spends less than 5% of its total budget on promotion. Its

marketing comprises mostly of discounts and rewards to dealers.

It mostly follows a push-through strategy of rapid retail

expansion with little above the line promotion. In a market that

is growing at a rate of 20% annually and more competitors like

Apex and Pegasus expanding their portfolio, Bata may need greater

consumer promotion to maintain its market share. Currently, it is

being deprived of the greater sales that an active pull strategy

could bring.


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3.2 Value Chain Analysis: Bata

Activity Analysis

Even before the production process has begun or raw materials

have been procured the demand in is projected through the BSO

software of both local and international supply goods. The

forecasted demand schedule is sent to the head office for

approval by senior officials. After the schedule has been

approved it is simultaneously sent to the regional business units

and also to the tannery for raw material supply. Bata has its own

tannery in Dhamrai which produces high quality leather from cow

and goat hides as per demand. Bata also has four meaningful

business units to which the approved demand schedules are sent.

These business units provide support and resources at various

stages of the production process and are kept informed of the

amount of goods to be produced.

From the tannery raw materials are produced. The BSO software is

again used in this step in order to forecast how much stock is

required to be kept in the inventory. By this method Bata avoids

situations in which there is either scarcity or excess of

inventory left. The forecasted inventory are sent to the

warehouse and stored.

Bata has two manufacturing plants in Tongi and in Dhamrai. The

plants have a production capacity of 110,000 pairs of shoes on an

average daily basis. Each of the products of Bata has a different

production line. The ingredients comprise of both local and


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exported ones. The production of the sole and takes place in a

molding machine and there are separate ones for female, male and

children shoes in accordance to size. After the sole is produced

the design is incorporated in the shoes. These designs are

imported mainly from Europe. This part of the production

procedure is labor intensive and there are frequent quality

checks in the entire process. The management business units

provides support in every step if the way.

Finished goods are quality checked once again before packaging.

No defective products are to leave factory premises as per Batas

policy. Non defective finished goods are accumulated and sent to

regional depots. The regional depots are in charge of sorting

out different product lines and repacking and sending it off to

various wholesale outlets and retail outlets. Delivery of goods

to retail outlets is done either directly from the regional

depots or from the wholesale depots as per the agreements with

stores. Finished Bata products are displayed in three types of

retail outlets, BataBazar, City stores and Family stores. From

these outlets the finished footwear reaches to the end consumers.


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Raw material

supply from

tannery

Accumulation of

finished goods

Production

process takes

place through

various product

lines

Regional depots sort

out the product lines

Goods sent to

Wholesale outlets

Calculation of

inventory

requirements through

BSO

Finished goods sent

to regional depots

Goods sent to retail

outlets

Demand

Projection Forecast sent toregional

business units

Approval from

the head office

Raw materials stored

in central warehouse

Continuous

Support

City Store


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Meaningful Business Units (MBUs)

Bata has four meaningful business units that provide

supplementary support to the production process of finished

footwear.

1. MIS Department

Bata has a strong MIS department that is in charge of handling

the inbuilt BSO software which integrates the processes. The MIS

department constantly monitors the software and periodically

updates the software. The department also keeps an updated

database of the number of wholesale and retail outlets and also

the number and types of shoes delivered to these outlets. Keeping

tab of the number of defective goods produced in the factories is

also another function performed by the MIS department.

Figure 2: Value Chain:

Bata


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2. Human Resource

The Human Resource department handles personnel and employee

related matters. The most important function of this department

is to provide periodic trainings to employees. As a new batch of

design comes in from Europe the workers are trained on how to

incorporate that specific design in shoes and also management

training is provided to mid level managers. Other functions such

as performance appraisal and grievance handling and hiring new

employees are part of the human resource departments work.

3. Marketing and Sales

Bata has two separate sales teams. One caters to the B2B clients

and the other to wholesale and retail outlets. The sales

department is in charge of monitoring the number of sales that

takes place in each area and reporting to the MIS department that

incorporated the information received in their database. Bata

also has an active marketing department which is in charge of the

promotional activities that Bata undertakes.

4. Quality Control


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Quality Control is a procedure that is ensured throughout the

entire process of footwear manufacturing in Bata. There is a

separate department that ensures that there is manual check in

every point. The quality control department is also in charge of

reducing the rate of defective footwear production in thefactories.

1.3 Bay Footwear LimitedBay Footwear Ltd. founded in 2001 initially concentrated its focus on producing vulcanized,

cemented, stitch-down, safety shoes and other construction footwear .The first production factory

was conveniently located near Dhaka in Konabari, Gazipur and the company only focused on the

local market and exported in a limited lot to Europe & East Asia. Later, Bay Footwears second

factory was set up in 2007, in Mouchak, Konabari nd the company ventured into the leather

footwear market. In 2008 the company brought stitch down technology from Europe and started

to produce special structured shoes. In order to manage the main materials, Bay Footwear

engaged in vertical integration and established the material in factories to coordinate the

demands of the production line expansion and to actively control production costs, reduce

material lead time and master the production cycles.

Currently Bay Footwear Ltd has a maximum capacity of producing 5,000 pairs per day.

Following along with the improved production quality, the production system regulation

conformity, as well as the research and development designed capacity enhancement. Bay

Footwear now works with European designers and develops fashion and comfort leather shoes

for both male and female and of all age brackets. Moreover, the company is also a major

participant in the Asia Pacific Leather Fair and also the Japan Trade Fair. In order to stabilize

product quality, enhance working efficiency and promote customer service, Bay Footwear uses

the advanced management system. Its main corporation and the factories to use as a quality

guaranty that Bay Footwear gives to its products. Bay Footwear seeks to implement growth

through integration of customer demands, strong supply linkage and perpetual innovation for

constant growth. Bay Footwear also emphasizes Three Wins concept in their management

process.


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4.0 Internal Analysis of Bay Footwear

Strengths of Bay

Business Advantage

1. Strong Export based Market

Bay footwear is a major player in the export footwear market. It has a strong base in European

countries and supplies high quality, innovative designs on a regular basis. Even though

Bangladesh leather footwear exporting companies have low exposure in international

exhibitions, Bay footwear has been a regular participant in the Asia Pacific Leather Fair and also

the Japan Trade Fair, making the companys presence felt and also representing Bangladesh in

the due process. Bay not only focuses on designer footwear but it also exports durable

construction wear shoes from processed leather. These shoes have captured huge market in the

labor intensive countries such as Malaysia and Thailand.

2. Capacity to expand

Bay footwear only exports around 5 to 7 product lines in categories that cater to male and

female. This is lesser in number in comparison to their other two major competitors Bata andApex Adelchi. Furthermore Bay Footwear has minimal local retail outlets and as per the officials

of Bay Footwear the company needs to expand and also has the resource both in terms of

monetary and personnel to go forward with the expansion which they plan to take on. Bay

footwear also faces increasing demand from foreign markets for export and the company also

plans to implement the expansion in terms of international demand.

Core Competency

Perpetual Value Innovation

As Bays major market is export based, most of the companys competitors are international

suppliers. Bangladesh lacks in innovative shoe design and has to import the designs from abroad.

In order to keep pace with the constantly changing fashion scenario and also to export updated


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designs to foreign clients, Bay takes on the concept of perpetual value innovation in there

processes. Regular purchase of new designs from Europe and periodic training of the workforce

are part of the value innovation process.

Operational Strengths

1. Constant Quality Check

The value chain of Bay footwear is overlooked by software that is inbuilt in the entire production

system. Though there is presence is mainly completed through manual assistance the software

plays an important part in coordinating the activities of different departments and also other

activities such as demand projection. Even though the process is partially automated there is

presence of quality check personnel in every step of the production procedure, ensuring defectfree final products. There is also a quality check at the very end of each production line and it is

made sure that no defective goods leave the factory premise.

2. Intensive workforce training

Bay employs over a thousand people for their export oriented business. Due to the constant

arrival of new designs from European countries it is essential to keep employees trained to be

able to replicate those specific designs and also with the high competition that the Bangladeshi

export footwear market faces from Chinese products this training is a mandatory. Bay footwear

provides periodic trainings in skill development, waste reduction and better management

techniques. The latter training is provided to the mid and upper level management only.

Weaknesses of Bay

Areas of Improvement

1. Delayed Deliveries


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Bay faces serious problems due to the low level of modernization and the infrequent up

gradation of technology. Further, despite the training provided to workers there is low level of

labor productivity and lag time prevalent in the production process. All these reasons combined

have lead to delay of deliveries of orders sought by foreign buyers. Hence sometimes an entire

batch of goods is rejected leading to huge amount of expected revenue loss.

2. Lack of Coordination among employees in varying levels

There is severe gap existent amidst the various layers of company. The top level managers are

the major decision makers and there is a consistent status of bureaucracy in the company. Any

change implementation must be approved by the top management before it goes onto being part

of the process. Further even the mid level managers are not entitled to make minor decisions.

This process helps keep consistency and continued good quality footwear production but it also

suppresses creativity, decision making managerial thought processes which ultimately leads to

lack of coordination in the different managerial levels.

Areas Avoided

IndistinctPromotion

Bay footwear has very few promotional elements focused on compared to their othercompetitors. The promotional attempts are very small in number and there is also lack of a

separate team overlooking this area. This is one of the major weaknesses that the company faces.

Areas Performing Poorly

Insufficient Retail Outlets

As mentioned previously Bay focuses more on the export market than on the local market.

Unlike Bay, Apex Adelchi and Bata both have a strong export based market as well as a good

locally established market with numerous retail outlets at convenient locations. Thus both the


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companies have a pool of loyal local consumers as well as high brand awareness and brand

loyalty. Bay Footwear has very few local outlets and thus are losing on market share in the local

market to their competitors.

4.2 Value Chain Analysis: Bay Footwear

Activity Analysis

Bay Footwear conducts an initial market research on the existing and potential design pattern for

footwear which accumulated alongside with input from the R&D department leads to the productdevelopment department. Further as Bay is an export oriented company purchase order from

foreign buyers provides estimate of how much production is to be taken into process. The

product development department sends the estimates of raw materials to the procurement and

planning department from where it is approved and raw materials are purchased from specified

tanneries that Bay Footwear has previous agreements with. The raw materials are sent for quality

check from where upon approval it is sent off to the factories for production purpose. The raw

materials are sent into different lines in the start of the production in accordance to the foreign

designs that are imported from abroad. The semi-finished foot wears are sent to the finished

goods department where they are finalized and gone through a final quality check. The finished

goods are sent to the final depot from where it is cross-checked with the foreign orders and sent

to the main shipper. The shipper delivers the goods to Chittagong Port from where it is shipped

off to overseas. The local stores of Bay Footwear receive the finished goods from the main

depot. But there is very insignificant number of local Bay outlets and majority of the revenue of

the company comes from foreign buyers.


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Figure3: Value Chain Analysis: Bay Footwear

Meaningful Business Units (MBUs)

Raw Material

Procurement from

Local Tanneries

Final Quality

Control

Raw Material

Quality Check

Coloring and

Finishing

Finished Goods

Transported to

Shipper

Finished

Goods

Raw Material

Processing

Shipper sends the order

overseas through the

Chittagong Port

R&D and

Design

Product

Development

Market

Research

Purchase

Order

Production

according to

specified order

Procurement and

Production Planning


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Bata has four meaningful business units that provide supplementary support to the production

process of finished footwear.

1. MIS Department

Bata has a strong MIS department that is in charge of handling the inbuilt BSO software which

integrates the processes. The MIS department constantly monitors the software and periodically

updates the software. The department also keeps an updated database of the number of wholesale and

retail outlets and also the number and types of shoes delivered to these outlets. Keeping tab of the

number of defective goods produced in the factories is also another function performed by the MIS

department.

2. Human Resource

The Human Resource department handles personnel and employee related matters. The most

important function of this department is to provide periodic trainings to employees. As a new batch

of design comes in from Europe the workers are trained on how to incorporate that specific design in

shoes and also management training is provided to mid level managers. Other functions such as

performance appraisal and grievance handling and hiring new employees are part of the human

resource departments work.

3. Marketing and Sales

Bata has two separate sales teams. One caters to the B2B clients and the other to wholesale and retail

outlets. The sales department is in charge of monitoring the number of sales that takes place in each

area and reporting to the MIS department that incorporated the information received in their

database. Bata also has an active marketing department which is in charge of the promotional

activities that Bata undertakes.

4. Quality Control

Quality Control is a procedure that is ensured throughout the entire process of footwear

manufacturing in Bata. There is a separate department that ensures that there is manual check in

every point. The quality control department is also in charge of reducing the rate of defective

footwear production in the factories.


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Bayfoot Ware Strategic Assignement

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