Bata Case Study

INTERNATIONAL BUSINESS CASE STUDY

Javed Kalangade (P1118)Ashish Khandare (P1124)

Amit Kumar (P1129)Raul Pinto (P1148)

Sonal Sherekar (P1155)

FLOW OFPRESENTAION

1. Bata Company OverviewHistory, Evolution and Positioning

2. Case Study OverviewBata’s Journey over the world

3. Foreign Political SystemsBata’s interaction with foreign systems

4. Road Ahead for BataInternational Challenges for Bata Ahead

BATA COMPANY OVERVIEW

Facts about Bata

• Founded by Tomas Bata in 1894, riverside town of Zlin , Czechoslovakia

• Trusted global company that offers fashionable and affordable footwear to every member of the family

• 5,000 international retail locations in over 70 countries

• Services over one million customers per day


Facts about Bata

• Core Principle

– To know its customers and to create the best possible products to meet their needs

• Mission

– Offering style, comfort and quality at the best price


Facts about Bata

• Innovators and Leaders

• International and Local

• Future of footwear

• “Our success is built on our legacy of values and belief”

- Thomas G. Bata


Policy at Bata

• Managed in a decentralized way, which means that the company is able to adapt to the local environment

• Bata has a performing business strategy based on economies of scale

• Trying of not exporting; the local production is basically dedicated to the internal market

FOREIGN POLITICAL SYSTEMS

• The company was founded in 1894 in Zlín (Czech Republic) by Tomas Bata

• A large order from the army, military shoes and rising demand for them, during World War I started rapid growth and small manufacture turned into modern industrial concern, one of the first mass producers of shoes

Czechoslovakia


1918 The Czechoslovak state was conceived as a parliamentary democracy

1939 The Company relocates to Canada after the movement of German military forces into Eastern Europe

1945Czechoslovakia business operations are nationalized by the new communist government following World War II

Czechoslovakia


Canada

• Anticipating the Second World War, Thomas J. Bata, the founder's son, together with over 100 families from Czechoslovakia, moved to Canada in 1939 to develop the Bata Shoe Company of Canada, including a shoe factory and engineering plant, centred in a town that still bears his name, Batawa, Ontario


Canada

Business in Canada• Canada defines Small Businesses as those with

fewer than 100 employees (in goods producing firms) and 50 employees (in service firms)


Canada

Canadian Provincial Taxes


• The local factories of Bata in Uganda had been – nationalized by Milton Obote,

– de-nationalized by Idi Amin,

– re-nationalized by Amin

– and finally de-nationalized also by Amin

• Meanwhile the company had worked as nothing had ever happened

Uganda


Uganda

1962 Uganda gained independence from UK

1966 Following a power struggle between the Obote-led government and King Muteesa, the UPC-dominated

Parliament changed the constitution and removed the ceremonial president and vice president

1971 After a military coup in 1971, Obote was deposed from power and the dictator Idi Amin seized control of the country

1979 Amin's reign was ended after the Uganda Tanzania War

1986 Museveni has been in power since 1986


Uganda

Economy of Uganda

• For decades, Uganda's economy suffered from devastating economic policies and instability, leaving Uganda as one of the world's poorest countries

• Uganda has substantial natural resources, including fertile soils, regular rainfall, and sizable mineral deposits of copper and cobalt

• The country has largely untapped reserves of both crude oil and natural gas

• Uganda is rated among countries perceived as very corrupt by Transparency International


• Bata had been also criticized for maintaining different types of relationships with totalitarian regimes, as the one of Chile

• The company presented in its own defence the argument that it had been activating in Chile more than 40 years, meanwhile many political regimes had changed

Chile


Chile

Economy of Chile

• Chile is one of South America's most stable and prosperous nations

• During the early 1990s, Chile's reputation as a role model for economic reform was strengthened when the democratic government of Patricio Aylwin, who took over from the military in 1990, deepened the economic reform initiated by the military government

• The 1973–90 military government sold many state-owned companies, and the three democratic governments since 1990 have continued privatization, though at a slower pace


Types of Governments

Under Capitalism, the government has the role of easing the class struggle in favor of Capital

Under Socialism, the government has the role of favoring the needs of society

Under Communism, production is managed by communities of workers

Bata in South Africa

• The case of South Africa was a major challenge for Bata

• The GDP per capita in this country is the highest of all nations in the African continent

• The main attraction of the country is represented by the incredible high profit rate, mainly generated by low labour costs and rich deposits of mineral resources

• The relatively large South African market allows the companies to obtain economies of scale in production by using cheap labour force

• The general background deteriorated rapidly at the beginning of 1980s

• For decades, South Africa had an apartheid regime that led to political, social and economic segregations between black and white people

• The black Nationalists were fighting for the right to vote of each and every citizen, but the white Government was refusing them

• The African National Congress, led by Nelson Mandela, was fighting against capitalism and was sustaining the idea of nationalizing the whole industry, no matter if the companies considered were national or owned by foreign entities


• The Canadian Government had imposed a very conservative legislation regarding the new investments in South Africa

• As a result, Bata decided to leave South Africa in 1986, but the company did not admit that the apartheid had represented the cause of its decision

• The selling conditions were clearly stipulating that the name of the company and the production brand would not be used anymore in South Africa and all the connections with Canada would be broken off

• The new buyer of the business operations and the production facilities had to keep the jobs of all workers, most of them black people




South African Economy• The economy of South Africa is the

largest in Africa

• About a quarter of the population is unemployed and about the same proportion lives on less than US $1.25 a day

• South Africa has a comparative advantage in the production of agriculture, mining and manufacturing products relating to these sectors

• The top income tax rate in South Africa is 40%, and the top corporate tax rate is 28%


Business in South Africa• South Africa suffers from relatively

heavy overall regulation burden compared to developed countries

• State ownership and interference impose high barriers to entry in many areas the top corporate tax rate is 28%






• Since South Africa has evolved into a more favourable investment destination, Bata should re-enter South Africa

• Bata should continue with it’s strategy of using local production to cater to domestic markets as


Bata’s re-entry in Czech &

Slovakia

Political scenario of the region

• After the collapse of Czechoslovakia, Czech Republic and Slovakia, both were considered free politically

• Czech Republic was considered mostly free economically

• Czech started to encourage privatization of companies

• But Slovakia encouraged nationalization of companies


Slovakia

Advantages for Bata for getting back operations in Republic of Slovakia

• Bata will be able to return to the home country

• Bata will gain access to large facilities and a huge market in Eastern Europe and the former Soviet Union

• Already an established company thereDisadvantages for Bata for getting back operations in Republic of Slovakia

• Bata will have to face the not so free economic policy of Slovakia as its not promoter of free trade

• Bata have to comply with the economic policies which are not desired by a company which has been operating freely around the globe


Slovakia

Advantages for Republic of Slovakia

• Bata chooses local resources for the production so the local resources of the Slovakia will be explored and utilized in the proper manner

• Bata gets its raw materials from diversified local suppliers, this will help create strong supply base in the host land and it increase the revenues of the raw material producers

Disadvantages for Republic of Slovakia and the reason for not allowing Bata to reenter

• The compensation which was promised has to be paid back to Bata

• It has to handover the management to Bata itself

• The relation with the Slovakian government will not be truly positive and the support from the government will be less to Bata causing mutual conflict


Slovakia

Why Czech Republic allowed Bata to re enter

• The Czech Republic will gain access to Bata’s global design, production, and marketing expertise

• The Czech Republic might be able to get Bata to invest significant capital into the plant to get it up to world-class standards

• Bata will create new jobs for Czech workers and the purchasing power of the Czech will increase

• The success in the host country comprises of the better knowledge of economic, political and cultural diversity knowledge

• Bata having operated in almost 60 countries knows and have dealt with diverse conditions worldwide so, they are in great shape to deal with things there


Slovakia

Political System in Czech Republic

• Parliamentary republic, democratic state

• Power is divided into legislative (Czech Parliament), executive (Czech Government and the President of the Republic) and judicial

• The President of the Republic and the Czech Government are representatives of executive power within the country


Slovakia

Political System in Slovakia

• The National Council of The Slovak Republic

Country’s sole constitutional and legislative body

• It has 150 members elected for 4 year terms in direct elections

• Courts and Judicial Power: Consists of general courts (district courts, regional courts and the supreme court) and military courts

• The Constitutional Court is an independent judicial body and is not part of general courts system

• Military courts handle disputes of military personnel

Bata’s Future

Why Tom Bata Sr. cant bear to lose grip on business he started

• He is the one who took his ancestral business to a global level

• He did a lot of hard work to keep the Bata philosophies alive and also ensured that it grew into a global empire

• His entrepreneurship method of keeping the company alive was a success in his time and perhaps he believes that the same tradition should be carried forward to the future

Bata’s Future

• Having grown a business, it is often hard to turn it over to others who may have different ideas about how the firm should be managed

• Bata is huge, having operations in about 60 countries. Different countries have different political and cultural environment. Having seen and managed all this so effectively and for so long, its difficult to trust someone else

Bata’s Future

What is the risk, if Bata Sr. cant find a way to retire

• Tom J. Bata led his firm through a period of great turbulence and growth but both the world and the company are now very different than they were in

• Doing business is changing rapidly and being dynamic to adapt to those changes is a necessity

• So Tom Bata should formulate a retirement plan in such a way that the new CEO or a successor will be able to continue his inheritance in a new way

Bata’s Future

What is the risk, if Bata Sr. cant find a way to retire

• The training under Tom J. Bata will prove more effective

• Hiring and training the best candidate after he is gone, will be the challenge for the management

• Hence, Bata should focus not only in its current strategies but also have a good succession strategy

Thank You