Strategic Analysis Of Case Study Bata:strategic Choices

Introduction This case describes 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 considering changes in its strategy to be able to survive in the market. The MD of Bata was considering the efforts necessary to realign Bata Pakistan’s manufacturing, outsourcing, distribution and brand strategy in the light of increased local competition and Chinese imports.

Strengths 1. Brand Image 2. Reasonable quality at low or reasonable price 3. Diversity with ranges in running, training, court, basketball, football and Outdoor 4. 5. 6. 7. 8. 9.

Footwear for the entire family Financialy Strong Conveniently accessible outlets in various parts of the country Targetting all income segments Provide training for managers and employees Nationwide retail network

Weaknesses 1. 2. 3. 4.

No continuity of leadership In 2001, 5% decrease in net saless No proper planning regarding Advertisement No variety in Fashionable shoes

Opportunities

1. 2. 3. 4. 5. 6.

E-Commerce Acquired, Partnership with small players Entring new segments of Markets Capturing Market where no other potential competitor exists Innovative Products New mediums for advertisements

Threats 1. 2. 3. 4. 5. 6.

Customer Dissatisfaction Price wars with competitors Competitors Political Instability Economic Threat Changing in consumer prefernces.

SWOT Matrix Strengths Weaknesses 1. Brand Image 1. No continuity of 2. Reasonable quality leadership at low or 2. In 2001, 5% decrease reasonable price in net saless 3. No proper planning 3. Diversity with regarding ranges in running, Advertisement training, court, 4. No variety in basketball, football Fashionable shoes and Outdoor 4. Footwear for the entire family 5. Financialy Strong 6. Conveniently accessible outlets in various parts of the country 7. Targetting all income segments 8. Provide training for managers and employees 9. Nationwide retail network Opportunities 1. E-Commerce 2. Acquired, Partnership with small players 3. Entring new segments of

SO Strategies Acquisition, Joint Venture (S2, S5, O5)

WO Strategies Introduce new segments (W4,O3)

Product Development (S2, S5, O5)

Market Penetration (W3, O6)

Markets 4. Capturing Market where no other potential competitor exists 5. Innovative Products 6. New mediums for advertisements Threats 1. Customer Dissatisfaction 2. Price wars with competitors 3. Competitors 4. Political Instability 5. Economic Threat 6. Changing in consumer preferences

E-Market Development (S1, S5, O1)

ST Strategies Increase Customization (S2, S8, T1)

WT Strategies Related Diversification (W4, T1)

Customers can be satisfied with Bata’s quality and reasonable prices. (S2, T1)

Innovative Products (W4, T6)

Evaluation of Three Strategic Options for Bata Manufacturing: Bata can use 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. Bata can also stay in its International markets that are benefitial to compete with potential competitors.

Distribution:

Bata should give more importance to Company-owned stores. In which it can control and managae its operations easily. It should arrange more training programmes for employees to have better quality according to consumer preferences. They can get profits from franshises but with assurance that employees working there are also trained otherwise it can hurt the image of Bata.

For wholesale channel, they should come out of that and stop having their footwear at the Wholesale shops, because having that can damage their chances of maintaining a proper image for their brand.

Brands:

Bata should target to middle and upper class, because lower class now prefer to purchase Chinese and local shoes. Bata should continue to grow in uuper middle class. Should provide better products in terms of quality as well as price. Bata should not focus on fashionable footwear because Bata is well known for its functional footwear for its reliability. It should focus on their successful brands like Bubble gummers.

Respond to competition from Chinese imported shoes and other local shoes seller According to my analysis Chinese imported shoes and other local shoes seller are not a major threat for Bata, because now a day’s people are more quality consious instead of price consious. They know very well about the quality of Bata as compare to these Chinese and local shoes.

Bata should build a strong relationship with its customers so that they come with their families for the best quality shoes. It would enhance its brand equity.

People still does not have an idea of quality difference of Chinese products as compare to Bata.They just prefer to buy because of low price, Bata should aware those people.

Competitive Profile Matrix

Bata Critical Success Factor Product Quality Outlets Market Share Price Financail Position Customer Loyality Global Expansion Advertisin g Total

Weight

Rating

Score

Rating

Score

Shafi Group Rating

0.10

3

0.3

3

0.3

3

0.3

0.10 0.05

4 3

0.4 0.15

3 2

0.3 0.1

2 2

0.2 0.1

0.10 0.15

4 3

0.4 0.45

3 3

0.3 0.45

2 2

0.2 0.3

0.10

3

0.3

3

0.3

2

0.2

0.20

3

0.6

2

0.4

1

0.2

0.20

2

0.4

2

0.4

1

0.2

1.00

Service

3

Grand Strategy Matrix Potential strategies are: ➢ ➢ ➢ ➢ ➢ ➢ ➢

Market Development Market Penetration Product Development Backward Integration Forward Integration Horizontal Integration Related Diversification

2.25

Score

1.7

Quantitative Strategic Planning Matrix

Key Factors

Opportunities 1. E-Commerce 2. Acquired, Partnership with small players 3. Entring new segments of Markets 4. Capturing Market where no other potential competitor exists 5. Innovative Products 6. New mediums for advertisements

Weight

Product AS

Development TAS

Market AS

Development TAS

Market AS

Penetration TAS

0.05 0.05

2 -

0.1 -

2 -

0.1 -

3 -

0.15 -

0.10

2

0.2

3

0.3

2

0.2

0.10

2

0.2

3

0.3

2

0.2

4

0.4

3

0.3

3

0.3

1

0.05

1

0.05

3

0.15

0.10 0.05

Threats 1. Customer Dissatisfaction 2. Price wars with competitors 3. Competitors 4. Political Instability 5. Economic Threat 6. Changing in consumer preferences

Strengths 1. Brand Image 2. Reasonable quality at low or reasonable price 3. Diversity with ranges in running, training, court, basketball, football and Outdoor 4. Footwear0.05for the entire 0.10 family 5. Financialy0.05 Strong 6. Conveniently accessible outlets in 0.05 various parts of the country 0.05 7. Targetting all income segments 0.10 8. Provide

0.05 0.10 0.10 0.05 0.05 0.3

3 3 3

0.15 0.3

0.9

2 3 2

0.1 0.3

0.6

3 3 2

0.15 0.3

0.6

0.10 0.10

3 3

0.3 0.3

3 3

0.3 0.3

3 3

0.3 0.3

0.10

3

0.3

2

0.2

2

0.2

-

-

-

-

-

-

4

0.4

4

0.4

4

0.4

2

0.1

3

0.15

1

0.5

-

-

-

-

-

-

-

-

-

-

-

-

1

0.10

3

0.3

2

0.2

training for managers and employees 9. Nationwide retail network Weaknesses 1. No continuity of 0.05 leadership 2. In 2001, 5% decrease in net 0.15 saless 3. No proper planning regarding Advertisement 0.05 4. No variety in Fashionable shoes

-

-

-

-

-

-

3

0.45

3

0.45

4

0.6

1

0.05

1

0.05

4

0.2

4

0.2

2

0.1

3

0.15

0.05

Total

1.00

4.5

4.3

According to QSPM Company should more focus on Market Penetration Strategy

Financial Analysis

4.9

Current ratio = Current assets/Curretn Liabilities 2001 = 1.17:1 2000 = 1.15:1 1999 = 1.23:1 Debt to equity Ratio = Total debts/Shareholder Equity

2001 = 3.09:1 2000 = 3.44:1 1999 = 3.60:1 That means company is mostly relying on external resources, and the ratios of last three years are continuously decreasing. Inventory Turnover = Cost of goods sold/Average Inventory 2001 = 3.52 Times 2000 = 3.31 Times This ratio is increasing it means management is improving its strategies about the inventory and stock Gross Profit Margin = Gross profit/Sales 2001 = 33% 2000 = 29.6% 1999 = 28.9%

Recommendations ➢ Company should focus on Product Development, Market Development and Market penetration Strategies

➢ 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. ➢ 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. ➢ Footwear industry is highly fashionable industry; hence Bata must improve the efficiency of product development in order to bring new design and style. ➢ The service standards should 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. ➢ It will need to focus on marketing itself as an outlet meeting all basic needs of the families in its target market segment ➢ Should provide consistent quality service to its customers so that customers can associate the same experience with whichever outlet they visit of Bata. ➢ Bata debt to equity ratio is 3.51, which means almost 75% are debts. Management should reduce its debts to reduce the financial charges. ➢ Reduce Selling and Administration expenses to get more Net income. ➢ Internet is a broad medium so they should also improve e-business.