Bata Company Analysis

Introduction / Back Ground

Bata India is the leading and largest manufacturers of footwear in India, which is a part of Bata Shoe Organisation (BSO). Initially footwear was produced in handicrafts and small segments before the entry of Bata in Indian market. Bata Shoe Company Private Limited was incorporated as a small operation unit in 1931 in Konnagar, India. It built its first manufacturing unit in the start of 1934. The company expanded in the years followed in its size and the township was known as Batanagar. It was the first company to receive ISO: 9001 certification for its manufacturing unit in the Indian shoe industry. The company went public in 1973 and changed its name to Bata India Limited. It has its manufacturing units and tannery in five specialised location across the country. The company has more than 1200 stores in its retail network in the metros, mini-metros and towns. The retail concept includes four types of stores across the country. They are City store, Large store format, Family store and Factory store. These four types were introduced by company in-order to reach all segments of customers from Tier1 to Tier3 locations. It also operates in non retail distribution with 12 depots across the country, which sells its products through more than 160 distributors and 20,000 independent shoe dealers. The company collaborates with corporate customers to design various shoe lines under both international and national brands such as Hush Puppies, Marie Claire, Mocassino, Ambassador, Comfit, School, Quovadis, North Star, Scholl’s, Weinbrenner, Bubble Gummers, Baby Bubble, Power and Sparx. The collaboration is done in order stay in-line with latest technology and industry specification to meet the customer requirements. It also focuses on army, police forces and mining industries with canvas shoes, hunter shoes and miner’s shoes. It currently employs more than 6800 people. The company sells more than 45 million pairs of shoes every year and also serves 120,000 customers every day.

Macro Analysis

It is very important for an organisation to consider its environment before initiating a marketing process. This must be a continuous process and should help in the positioning the organisation in the market. The factors that are considered are Political, Economical, Social and Technology.

POLITICAL FACTORS

• Rules and regulations for tannery wastes.
• Government stability.
• Fewer sports events apart from cricket to attract the customers.
• Merging of Adidas and Reebok
• Market pressure on sales.

ECONOMICAL FACTORS

• Seasonal Issues: Sports is more encouraged in summer.
• Increasing buyer power makes the customers to look at branded shoes.
• Lack in targeting the women and kid segments.
• Huge consumer market.

SOCIAL FACTORS

• Change in the lifestyle of the people (buyer).
• Increasing fashion trends.
• Advertising, publicity and media.
• Change in buyer behavior.

TECHNOLOGICAL FACTOR

• Increase in competing technology development.
• Up-ward shift in innovation and manufacturing maturity.

Micro Analysis

Customers – The products of Bata targets a wide range of customers which also includes Army, Police Force and Mining industries in all locations. This is mainly due to the wide range of products made available in market by the company. The company has two types of customers they are the final users and the It offers good quality products with best price in market, which means that the price-quality ratio is excellent for the Bata products.

Competitors – The competitors for Bata India in the market are Puma, Nike, Reebok, Adidas, Woodlands, Liberty and Action. The arrival of local and international brands in the Indian market has created a highly competitive environment in the footwear industry market. The products from the competitors serve as substitutes to the customers.

Suppliers – The raw materials for the company is PVC soles and the animal skin, the people or organization which supplies these raw material are known as the suppliers. Bata’s suppliers are Chinese raw material holders and the local cottage industries that supplies raw materials to the company.

SWOT ANALYSIS

Strength

• Availability of raw materials and other inputs for the company’s operations.
• Manufacturing units in various places helps in distribution.
• Subsidiaries and Tax incentives on machineries.
• Established links with buyers from Europe and US.
• Friendly government policies for export.
• The brand name is immediately identified with footwear by the consumers.

Weakness

• Facing challenges to move to new production technology, because of its existence for more than seven decades.
• High labour costs, as the company has large number of employees.

Opportunities

• There is a good scope for diversification into other products like leather wallets, seat covers and other types of leather garments.
• Growing National and International market.
• Developing fashion consciousness globally.
• Being in a large developing market which offers a demand for footwear, the company finds its potential in leveraging the Bata brand for marketing other merchandise consumer products.

Threats

• Changing fashion trends is hard to adopt for the Indian Leather Industries.
• Entry of global competitors into National market brings heavy competition in the market.

Financial & Marketing Aims and Objectives

Bata India has around 13.7 percent of the market share and the company has decided to increase its market share by introducing a new product under the brand Power in the market. Power brand is exclusively meant for sports wear. The company expects to have an increase of 3.25 percent in its market share by introducing this product. The product to be launched is named as Power – Lite. It sells around 45 million pairs every year and has decided to increase its sales by introducing Power- Lite. The decision to introduce a new product was made in-order to compete with the global brands like Nike, Adidas, Reebok, Puma etc in the Indian market. These global brands were the suppliers of specialised sports shoes and thus Bata is trying to capture its position in the market for the specialised sports shoes. The company identified some issues and customer needs with respect to their product. Their product was lagging behind in latest design (style) and the customer’s comfort when wearing the shoe. The company has invested in huge amount in changing its store appearance and has also taken steps to incorporate the new technology involved in manufacturing specialised shoes. The company forecasted the sales of specialised sports shoes for the up coming years and will have an increase by 14 percent in its revenue, after the launch of the new product. The new specialised sports shoes targets the people involved in sports and all segments of customers from children to adults. Thus the marketing, financial aims and objectives are discussed.

Market Segmentation & Target Segment/s

The process of grouping the market is known as Segmentation. The market segmentation is done based on the demographic and psychographic factors for Bata. The demographic factors are age, sex and occupation. Personal Activities like hobby, social events (marathon), sports, shopping and Personal interests like fashion, styles were considered in psychographic factors and buyer behaviour which includes the changing trend in buying pattern for the segmentation of market [ref-module book]. The foot wear industry market falls under the ideal type market, as it covers all segments of customers. The customers share their needs in this market. The target segments are classified into three categories namely Display Buyers, Knowledge Buyers and Fashion/Stylish Buyers. The customers who come under these buyer categories are children, students, adults, elderly people and sports people. 

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Positioning

Positioning is done in-order to locate the brand in the minds of the customers, which in-turn increases the benefits of the company. Positioning results in customer-focused value proposition. The positioning is done with respect to the brand and product portfolio. Positioning strategy is done by identifying the possible competitive advantages through which a company can attain sustainable position in the market. Bata always aims to be sustainable in the market and it has proved it over years. The company has taken various steps to increase its market share, some of them are renovating its already existing stores, opening new stores in sub-urban places and the main strategy which is followed by the company is high quality and low price. This has made the company sustainable for more than seven decades in India. The company will follow the same strategy for the new product Power-Lite. On the other hand when looking into the market for the products from Nike, Puma, Adidas and Reebok, they charge a huge amount for their sports products. The cost of shoes from Bata is relatively low, when compared to others.

There are few local manufacturers who produce the replica of the branded products with low quality and low costs. This makes the customers feel unsatisfied. Bata is already filling the positional gap in the market following low price and high quality strategy. This new product also comes under the same category, which adds value to the impression given to the customers in relation with the competing product. The low price and high quality strategy works well in the Indian market as it is a developing market.

Product

A product/service is anything that a firm or an individual sells, which satisfies the customer needs. The new product will replace an existing product named Life-Line under the same brand Power. The core, formal and augmented products are explained below using Figure 3.

The core product is the Power Lite, the formal products are its comfort, style, brand name and features. The augmented product is something which is offered after sales, in this case free repairing service is offered by the company for about 6 months from the time of sale. The product should have the following features wearing comfort, styling and latest design to compete with the competitor’s product.

Developing a new product involves the following processes.

Innovation of new ideas: A research done by the company among its employees, customers, competitors and other sources using feedback, surveys and other questionnaire in-order to generate a new idea.

Screening the ideas: In this stage all the feasible idea are selected from the bunch of idea that is generated with the help of the footwear industry checklist.

Testing the concept: The new product is tested conceptually with the help of selected customers (eg – athletes) for any changes or improvements, before it reaches the market.

Planning a strategy: Marketing and Financial objectives for the new product is set, which helps the company to face the success and further development or failure of the product.

Market Test: The new product is made available in the selected places and tested with selected customers and their feedback is got on the product.

Life Cycle of the Product

The product life cycle of a shoe is short, when compared to many other products. The shoe seemed to have a short introduction period, a little bigger growth period where it reaches its maturity stage. It stays in the maturity stage for longer time and then decline stage starts when a new product or a replacing product is launched in the market.

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Pricing

The price for a particular product is determined through break even analysis and the pricing model as given in Figure 5 and 6. The company operates with low price market penetration strategy. The main advantages of this strategy is increased sales growth, builds strong market position and high product awareness in the market. The price of the Power-Lite is determined to be Rs 2799 (Indian Rupee – INR) considering variable, fixed costs and the market floor, ceiling price. The company gets its contribution (profit) after selling 20,000 units of Power-Lite.

The pricing level of Nike, Adidas, Puma and Reebok are higher than Bata, they must follow this during the launch of the product in-order to sell their product initially. The break even analysis determines the point at which the contribution is made with respect to he number of products sold.

Place

The company will launch its new product in all the Tier 1 and Tier 2 locations of the market. This is done because of the demographic factors, psychographic factors and the target segments (wide range of customers). These are the changes that the company must do instead of launching the product in all the locations of the market. The firm a good distribution channel, they sell their products directly through their factory retail stores, franchise merchants, wholesalers, distributors, independent dealers and also in online. Hence they cover all the locations of the market in different ways.

Promotion

As this is a new product the company must advertise in media such as newspaper, TV, Banners and internet. They should follow the push and pull promotions in the initial stage which can be later changed to pull promotions, if the product is success in the market. The push and pull promotions include discounts to the wholesalers, staff incentives, advertising, display at point of sale. This should be done in consideration with the estimated budget for promotion purpose.

Physical Evidence

The company has taken steps to change the buying experience of the customers by renovating and expanding its stores in all the location, initially in Tier 1 location and it has started slowly to continue in Tier 2 location which makes the customers to have good shopping experience. 

The company has four types of stores that opened in recent years, they are City store, Large store format, Family store and Factory store. They must also expand and renovate stores in tier 3 locations of the market.

Marketing Strategy Communication

The main objective of the strategy communication is to create the awareness and interest in customers of the new product, which in-turn benefits the organisation to capture the market share and increase its contribution (profit). This is done by the AIDA model, where attention, interest, desire and necessary action is done for the demand in the market.

Awareness of the new product: Generating awareness is done through advertising in media like TV, newspaper, magazines, banners and internet. When this is done, the customers will be aware of the new product in the market.

Creating Interest: Done through advertising by emphasizing the formal products such as brand name, features, comfort and latest design. Thus creating an interest in the customer’s mind for the new product.

Arousing Desire: This can be done through sales promotions, word of mouth from the customers, who have already used the product.

Actions: When all the above strategic plans are done, the product must be made available in the market. If in case the product is not available, the customer gets disappointed and they find a substitute for their needs, which decrease the reputation of the brand and the company’s profit.

Sales Strategy

This explains how the new product (Power-Lite) is sold in the market. The plan involves two types of promotions Push and Pull. During the introduction stage the product can be pushed into the market by promotional offers such as discounts to the wholesalers, distributors when ordered in bulk numbers. Another type of pushing is done by giving incentives to the employees who the sell the new product in more numbers when compared to other employees. Pulling promotion influences the customers to buy it. The wholesalers, distributors and customers can be pulled by giving credit when ordered in bulk, displaying at the point of sale (stores), and complements when purchased the Power-Lite.

Profit and Loss Forecast

The below given is the profit and loss account of Bata India, this an assumption made by the author considering that the product is success in the market. The P&L forecast very clearly shows that the company will have profit (contribution) from the Power-Lite product which is launched.

Timing

The product will be launched during the Indian Premier League, this is done because of the because of the influence of cricket among the people. The product’s result will be known in six weeks of time from the date of launch.

Contingency

Few sports shoes of Bata are already available in the market, however most of the customers were unsatisfied with the medium quality and comfortless products. Hence Bata has decided to launch the Power-Lite, with low price and good quality feature which is well suited for the developing Indian market. This would replace many global brand’s product with its high quality, new style, comforts, latest design and technology used in the sole of the shoe. The product Power-Lite would be big success, if no competitors are providing such a good quality product at low price.