Assignment 3 Strategic Management Junaid Baig 10108135 Muhammad
Shoaib Hanan 10108117 Asad Baig
4Assignment 3 Strategic Management Junaid Baig 10108135 Muhammad
Shoaib Hanan 10108117 Asad Baig
BATA: Strategic ChoicesQ1) 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. Consumer
buying power increased in 1980s.2. Trade barriers decreased in
2000s.3. The development of leather export industry.4. 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 cost as
compared to other shoes like joggers, slippers and canvas shoes.
The 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.Q5) Over the years, Bata has gradually decreased the level
of in-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 aswell asimported
footwear started developingsupply 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
ofleather 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 k-Scheme 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 Bata. But by making alliance with Shafi Group they
can increase their market 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 categoryABCD
Annual Sales16.26.72.52.1
Size in square feet22001450800700
No. of SKUs12501040960635
No. of outlets224127732
No. co-owned223720816
