This report discusses the detail of 1) Bata’s main line of business. 2) Its main competitors and their value chain comparison. 3) Strategy the company is following. 4) Current Costing System of the company. 5) Decision making on the basis of cost and information. 6) Decisions are being taken using management accounting information. To summarise the above points we know that Bata is the fastest growing footwear brand in the country with a presence across 400 cities.
The brand offers a wide range of comfortable, stylish and trendy footwear at affordable prices, ensuring there is something in the collection for everyone. The USP of the brand lies in the fact that they have successfully made fashion and durability so affordable and accessible to all. This explains why Bata India sells over 45 million pairs of footwear every year and serves over 120,000 customers every day. Today, Bata India is the largest retailer and leading manufacturer of footwear in India.
Bata’s main competitors are Mirza Intl, Liberty Shoes, Crew B. O. S; Bhartiya Inter. In this report we have compared the Value chains of Bata India Ltd and liberty Shoes Ltd which says that Bata has a competitive advantage over Liberty shoes. Bata follows backward integration and are not dependent on some third party for procurement of raw materials which makes it cost effective. Apart from this Bata has a huge competitive advantage over Liberty in the area of sales and distribution channel. Bata follows Cost leadership strategy.
The company enjoys the highest market share in India and this is evident from the fact that the total retail presence of the company currently is more than thrice that of its closest competitor (Liberty: 381 stores). Bata has over 15% market share in Organized Retail market and around 6. 5% share in unorganized retail. Bata is produces its own raw material to improve its profitability. Bata reduces its cost by demand based production, setting up manufacturing base in tax-free locations, using different mix for footwear production with cheaper raw material.
Also, they started cutting some cost through sales and distribution network, which is really huge distribution network. Bata earlier concentrated only on manufacturing footwear and selling them anyhow but in recent times it has changed its image of the production oriented company to affordable, market driven, fashion conscious, lifestyle brand and hence the decision to reposition. The Company has been focusing on consumers and market demand which will reduce inventories and improve sales-to-stock turnover. Bata has also adopted cost cutting strategies without any compromise on style, quality and design.
Management Accounting Project: Company selected – Bata India Ltd. a. What is the company’s main line of business and which sector? Bata India is the largest retailer and leading manufacturer of footwear in India and is a part of the Bata Shoe Organization. b. Who are the main competitors? Bata India’s main competitors are Mirza Intl, Liberty Shoes, Crew B. O. S; Bhartiya Inter. Bata has the highest market share compared to all its competitors. c. Try to compare and contrast the value chains of the two companies.
Value Chain Analysis describes the activities that take place in a business and relates them to an analysis of the competitive strength of the business. The activities of a business could be grouped under two headings: (1) Primary Activities – those that are directly concerned with creating and delivering a product (e. g. component assembly) (2) Support Activities – not directly involved in production, may increase effectiveness or efficiency. The following come under support activities: Procurement Technology Development Human Resource management Firm infrastructure
It is rare for a business to undertake all primary and support activities. BATA INDIA LTD. : Operations (Backward integration)- Company’s own tanneries located in Batanagar and Mokamehghat insures uninterrupted supply of raw material. Now they are not dependant on some third party for procurement of raw material. Sales and distribution- Bata operated through exclusive chain of executive own and franchise stores located in prime location country wide. Bata owns network of 300 exclusive wholesalers who serviced 30,000 retail outlets throughout country.
Overall it has over 1,600 showrooms, 27 wholesale depots and 8 distribution centers across the country. Technological resources- In 2004, Bata installed point of sale management information system (POS), for providing sales and inventory information across the company’s stores. This provides company to plan production and optimize inventory level. LIBERTY SHOES LTD. : Technology – It has introduced a new material called TPU (Thermo Plastic Urethane), for high quality footwear, into the country. This material has better properties than PVC or TPR (conventional materials used for footwear).
Liberty has also been instrumental in introducing EVA (Ethyl Vinyl Acetate), which is a direct injection moulding used for making sole for the first time in Asia. This technology uses very light material & the footwear is made with the direct injection system. Liberty also pioneered the PU (Poly Urethane) Technology in India for the footwear industry. Besides these Thermo Plastic Elastomer has been developed for the first time in India at Liberty. A CAD/CAM design centre is in place at Liberty. The Sympatex waterproof technology in footwear was pioneered by also Liberty.
Liberty is also the first company to market PPE products for safety purpose. Operations- Gharaunda is the first plant of its kind in this part of Asia that is equipped with Desma machines for PU Direct Injection Moulding. Using PUF technology and Computer Aided Systems this vertically integrated plant produces Industrial Safety Shoes that are made to European standards. Sympatex TEX booties as well as ordinary booties are also made here. Beside these Gharaunda has a design centre where an ambitious team of young designers working in tandem with experienced technologists. . Which strategy do the companies follow? – Cost Leadership, Differentiation or Focus? Bata India Ltd. follows Cost Leadership strategy. Cost optimization and margin improvement: The Company is focusing on margin improvement and cost effectiveness programs which have started yielding results. The Company has initiated strict control on costs in purchases and outsourcing and is looking at global sourcing for raw materials to improve the net realization. The Company has also been clearing old merchandize through discount sales, write offs, etc. hich will enable it to focus on improving sales. e. The reflections about the current costing systems of the company? Currently the company is mainly focusing mainly on cost reducing strategies which are as follows: 1. Cost optimization: Strict control on costs in purchases and outsourcing. It is producing its own raw materials to improve its profitability. 2. Demand based production: The Company is focusing on consumers and market demand which will reduce inventories and improve sales-to-stock turnover. 3.
Tax-free zone manufacturing base: After Himachal Pradesh and Uttaranchal the company is looking at and negotiating with the third party manufacturing facilities in two other tax-free states of Assam and Jammu and Kashmir. 4. Cost-cutting: Raw material used for used for 33% of total cost. Now Bata identified this problem and started using different mix for footwear production with cheaper raw material. Also, they started cutting some cost through sales and distribution network, which is really huge distribution network. f. How do the companies manage cost and use the information for decision making and control?
Cost management in BATA : 1. BATA tried to reduce the costs of raw material. For this it tries to use different mix for footwear production with cheaper raw material. 2. It also tried to reduce costs through sales and distribution network which is a very huge distribution network. So they continued to invest in expanding retail business. 3. They also tried to generate skilled manpower and cut costs through manpower reduction. 4. They reduced the inventory costs by clearing the existing merchandize by offering discounts. g. What decisions are being taken using management accounting information? 1. Decision to reposition:
Bata earlier concentrated only on manufacturing footwear and selling them anyhow but in recent times it has changed its image of the production oriented company to affordable, market driven, fashion conscious, lifestyle brand and hence the decision to reposition. 2. Decision to produce based on logistics and demand: To optimise the utilisation of production facilities the logistics team focuses on obtaining orders from the market for the best selling designs and sizes and ensures that all raw materials are available in the factories well in time so that the Company can produce and place in shops the products that consumers want.
Thus the Company has been focusing on consumers and market demand which will reduce inventories and improve sales-to-stock turnover. 3. Training and restructuring the frontline sales force: The Company has reorganized its front line sales force. It has undertaken an intensive training programme for its shop assistants and managers to ensure excellence in service to customers. It has also undertaken a rural marketing thrust wherein its reach is rapidly growing. It is recruiting managers with fresh ideas to inspire and empower the workforce with the requisite skills. . Bata uses technology like installation of point of sale management information system to keep an update about the inventory level, sale figure etc. 5. Bata also adopted the cost cutting strategy through use of different mix of raw materials for footwear production and also through sales and distribution but without any compromise on the style, quality and design of the product as it endeavours to break the myth of price factor by producing economy range of good quality and stylish products.
RECOMMENDATIONS: ) The main recommendation we can give Bata is to repositioning itself. In India we still believe that Bata is just a company which produces footwear for school goers, office goers and regular use footwear like slippers and snickers. Bata is still trying to change its image of production oriented company to affordable, market driven, fashion conscious, lifestyle brand. Today they have a huge shoe line with a huge range of new designs on offer. To name a few they are Marie Claire, Weinbrenner, North Star, Power, Hush Puppies, Dr.
Scholls, Ambassador, Bubblegummer etc but only a few segment of people know about this. So Bata must back their campaign through TVC’s, print media and word of mouth. 2) According to the survey conducted by Bata in African continent it was observed that people were not wearing shoes at all. This means that there is a high scope of marketing shoes in African continent as no one has shoes. References: www. bata. in www. wikinvest. com www. moneycontrol. com www. inrnews. com www. scribd. com