BATA Pakistan Limited: History and Analysis

As ‘Leather tanning / manufacturing’ (from raw to finish level) is my family business and my father has been dealing in this business since last two decades, that’s why I’ve selected ‘BATA Pakistan’ for my report/assignment of strategic planning. We sell finished / tanned leather for shoe uppers to ‘BATA Pakistan Limited’ a leading footwear manufacturing & selling company in the country. I’ve been in contact with BATA Pakistan for four years as I worked with my father in my afore-mentioned family business and I feel interested in discussing the marketing strategy of BATA Pakistan Limited

In this report, I’ll focus on:

history/background of BATA Pakistan

information about the company’s main brands

an overview of the marketing strategy of BATA Pakistan

impact factors that impact the business

needs and expectations of the stakeholders

appropriate tools to analyze the effects the business

resources needed to implement the strategic plan

measures to evaluate the business strategy

general critique and an analysis of BATA Pakistan’s marketing

strategy from my point of view

some recommendations for the future

A brief History/Background

Bata Pakistan Limited is Pakistan-based company engaged in the manufacturing and sale of footwear. It is one of the oldest footwear companies of Pakistan. Specializing in leather shoes and accessories, the company has made its special association with high quality school shoes and can be safely declared as a market leader in this category. Bata boasts its presence with more than 373 retail stores and 12 wholesale depots depots in Pakistan. The company provides full assortment of shoes ranging from newborn to adults in all categories.

MAIN BRANDS

BATA Pakistan Limited manufactures and sells footwear for men, women and children. Its major brands include:

Category: Men

Brand name: Price range Designs

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Power Rs. 699 – Rs. 1699 08

Bata Comfirt Rs. 449 – Rs. 1199 10

Weinbrenner Rs. 499 – Rs. 899 03

Category: Ladies

Power Rs. 899 – Rs. 899 04

Bata Comfit Rs. 249 – Rs. 899 14

Marie Claire Rs. 899 – Rs. 1299 10

Category: Children

Bubblegummers Rs. 249 – Rs. 599 09

(www.bata.pk/catalogue)

FOCUS ON BRAND DEVELOPMENT

BATA has focused and capitalized on its brands. Brand development has played an important role in Bata’s success. To offer customers the best in terms of fashion, quality, comfort and price, BATA’s brands are reasonably worthy-mentioning. Amongst them;

‘Bubblegummers’ is children’s leading footwear that has developed

extensively in Pakistan. It carries a wide range of accessories

including school bags, casual bags, stationery and other items.

Comfort is an important feature in design and assembling of all the ‘Bata Comfit’ shoes. “Get comfortable Today” is a tagline commonly

associated with these shoes.

‘Marie Claire’ shoes are for women with an active lifestyle, who seek

contemporary modern designs. This brand is very successful in

Pakistan.

‘Power’ embodies diversity with ranges in running, basketball,

football and outdoor, that combines function with creativity.

‘The Weinbrenner’ line is made up of leather shoes and boots; low,

mid and high cut. Cuts or designs are dictated by fashion.

Focussing on its brand development has resulted Bata in the following success:

Key Stats & Ratios

(Jan-Jun 2010) (July-Dec2010)

Net Profit Margin 3.67% 4.66%

Operating Margin 6.45% 6.86%

Return on Average

Assets 7.89% 9.28%

Return on Average

Equity 16.66% 19.24%

Employees 2912

(Commercial Credit Report for BATA Pakistan, Ltd. 2010)

BATA Pakistan has categorized an aggressive advertisement to be its first priority. It has been prominent in rationally and scientifically promoting public awareness for the right selection and usage of good quality shoes that has helped modifying public thinking about shoes selection and usage, and also increasing sales for Bata. Following are a few of the scientific facts highlighted by BATA:

Unstrained Walking: You walk on average about 10,000 steps a day. So during your lifetime you will have most probably walked enough steps to have traveled around the planet more than 4 times. For such a long ride, your feet deserve a comfortable vessel.

Shock Absorption: With each step, all of your weight is absorbed by tissues throughout the feet. The heel in particular absorbs most of your body’s weight. Did you know that you carry about four to six times of your body weight across the ankle joint when climbing stairs due to the mechanics required to your body? That explains why a soft landing is precious for your feet.

Safe Ride for your Feet: Have you experienced riding motorbike in sandals? You probably felt the burnt from the exhaust heat, slipped from the brake pedal, and got scratches with the gear shaft. Those are many annoyances making your ride uncomfortable and potentially dangerous. Now you can let your feet breathe and be safe at the same time when you ride your bike with BATA shoes.

Fresh Feet: There are more sweat glands per inch in your feet than

any where else in your body, approximately 2,50,000. And they

secrete all the time, as much as 20 cl of moisture everyday and not just

in response to heat or exercise, so your feet do need to continue

breathing even while locked up in your shoes.

Snapshot of Bata Pakistan’s Marketing Strategy

Bata’s marketing strategy focuses on:

-analysing the different needs of different groups of customers

-making the most of the company’s strengths and match them to the needs of the target customers

-offering customers the best in footwear in terms of fashion, quality and price

-concentrating a market niche where BATA can be the best

-acknowledging the existing and potential customers, grouping and segmenting them characterized them by their needs and preferences in terms of shoes selection and usage

-put the marketing strategy into effect with a marketing plan that sets out actions, dates, costs, resources and effective selling programmes

-measuring the effectiveness of what is being done, be prepared to change things that aren’t working

-considering the mixture of controllable marketing variables that the company will use to pursue the sought level of sales in the target market

-implementing and controlling the marketing efforts by collecting feedback and getting back to planning

-using forms of advertising that work the best i.e. exhibitions, creating effective points of sales, public relations initiatives, newspapers and TV ads

-consolidate the existing branded business activities into a leading industrial and professional footwear company

-promoting awareness about the importance of right selection and usage of footwear from health-consciousness and scientific researches angles

-supporting education and encouraging entrepreneurship to fight poverty and exclusion via auto-subsistence with Bata’s values regarding communities involving:

a) Respecting the integrity of local culture

b) Considering communities as partners in progress and involving employees in a two-way communication with them

c) Allocating resources to enhance the well-being of the communities in which BATA operates

d) Collaborating with people in the communities who are dedicated to raising standards of education and economic well-being.

(www.bata.pk/marketing)

MARKETING RESEARCH SYSTEM

Bata’s marketing system runs in a systematic way. It adopts the marketing research system that is based on periodic research. BATA Pakistan Limited arranges for advertisement (pre and post), observation in store, mystery shopping, usage and attitude surveys, focus groups for its marketing research programme. Before launching a new product in the market, it is a part of Bata’s marketing strategy to conduct interviews with the targeted customers and ask them about their likes, dislikes and preferences about the Bata brands/ products. Bata conducts marketing research and relevant interviews, distributes discount vouchers and offers other attractive incentives to its expected customers for their active participation in Bata’s marketing research-oriented programmes. The main reason behind the success of Bata Pakistan Limited is direct research process and directly contacting the target customers. It appears mentionable that in regard with the marketing research for new brands, pre-launch marketing research has played a very helpful role for paving the way of Bata’s marketing strategy. Bata’s marketing research system keeps Bata in touch with the needs of Bata’s customers and assists Bata in making its marketing decision.

SEGMENTATION

Segmentation is splitting customers into different segments; similar groups of customers, within which customers with the similar characteristics have the similar needs. Market segmentation is important and useful as market is the set of all actual and potential buyers of a product and buyers are not homogeneous. Marketing segmentation is vital for well- understanding of the market and it plays a key role for a successful business as it helps you know the target market better than your competitors. Bata’s market segmentation is comprised of geographic, demographic, psychographic and behavioral features of its market segments having taken into consideration of the area (rural/urban/city/town/village), age, gender, social class, occupation, income, personality attributes and lifestyles). For example, from age point of view, Bata segments the age groups into children, young and old age people. From marketing point of view, all the three categories are rationally focused by Bata with the priority to provide the customers the best footwear, comparable both in quality and price, according to the needs of each segment. Bata has come out remarkably successful in children segment that has helped Bata make high sales proving the segment worthwhile.

TARGETING

Targeting is an important part of marketing strategy. The key

step in target marketing is ‘dividing a market into distinct and meaningful groups of customers’. (Kotler and Karen F.A Fox 1985). After segmentation it is time to target the main and important segmented groups. In Bata’s marketing strategy, target groups are children, ladies and adults of different age levels. For an adequate targeting, Bata has offered Bubblegummers along with a wide range of accessories including school and casual bags, stationery, etc for children that has proved a huge success, Marie Claire for ladies offering them a nice blend of active lifestyle and contemporary modern designs, ‘Power’ for young age and sport-spirit people, Weinbrenner for office and ceremonial use, and ‘Bata Comfit’ featuring comfort and modernly designs, suits kids and young to old age people segment for their free, leisure time shoes usage.

POSITIONING

Positioning is customers’ perception of a product in relation to alternatives on the market. For its being an important part of marketing strategy, positioning has been given due attention in Bata’s marketing strategy. Customers’ attitudes towards Bata’s shoe brands and accessories is regularly observed and measured. It helps Bata identify the scope for new brands and also reposition the current brands. An edge that Bata Pakistan has got on other footwear manufacturing and selling companies in the market is that Bata has a large number of retail outlets throughout the country; it is footwear giant in the country, so it has a much bigger space for impressive and appealing positioning. Supported with good customer service and direct customers contact, Bata has come out with successful positioning.

PRODUCT

Product is the ‘offer’ that is exchanged between the manufacturer/seller and the buyer and consists of goods (tangible) and services, ideas (intangible). In Bata Pakistan Ltd’s case, products (shoes and accessories) are tangible. At Bata, products are featured in accordance with the need/benefits of the customers and customer-satisfaction is given due priority. As product is the key/base thing to be offered to the customer against his/her money, so Bata shoes and accessories, both in terms of product-quality and comparable price in the competitive market, are considered vital for the success of the company. Bata’s brand and packaging are of good standard and two months’ period free of charge after sale service is also offered to the Bata customers. In order to satisfy the target market, Bata manages the existing and new product efforts in a systematic way. That’s why, Bata has earned trust of its customers.

PRICE

Price is the value a buyer exchanges for the benefits of a product or service. It is also one of the key factors in the marketing strategy as it works for the survival, profit, return on investment, market, share and status quo of the manufacturer / seller. Customers can judge the quality of the product from the price being charged that makes the pricing very important in the marketing strategy of a company. As paying high price, customers want the product quality to be good while against low price, they (customers) normally assume a product to be of low quality. Bata has tried to do its products’ pricing quite reasonably as Bata shoes and accessories are of good quality while their prices are highly comparable that gives Bata a competitive edge over its competitors. Value for money and competitiveness are basis of Bata’s pricing policy. Bata’s pricing strategy does not simply aim to match the competition, but it focuses on beating its competitors both in good quality and reasonable prices that keeps its position strengthened in the market.

PLACE

It is about how and where a manufacturer/seller sells its products and it can include using different distribution channels. It is very beneficial if a company’s business place is conveniently accessible for the customers and the distribution channel is also possible less costing. Bata Pakistan Limited holds more than 373 retail outlets and 12 wholesale depots throughout the country. To cater the middle upper income segment of the market, 13 city concept stores have been opened in 2006-07 in the major cities ; Karachi, Lahore, Peshawar, Rawalpindi, Mirpur, Gujranwala and Gujrat. Obviously, place counts much more importance for Bata with such a wide business network. Bata has a good channel structure and channel management giving it an easy, in-time and cost-effective access to the market. Bata has its own manufacturing units and wholesale depots at easily accessible locations from where it can make timely supplies to its retail outlets. With a good retailer image, Bata is in a position where it can make its position even stronger.

PROMOTION

Promotion concerns with how you reach your customers / potential customers. It is the communication of an organization’s marketing mix to the desired audience and works as a backbone of a company’s marketing strategy. Bata Pakistan’ marketing strategy gives a very considerable importance to the promotion. It applies all the important tools of promotion including advertising, sales management, sales promotion, promotional mix, direct marketing and public relations for expanding the company’s business. Though the fair-price selling is the base of Bata’s marketing strategy, yet different attractive promotions and promotional mixes are also offered to the customers. Accessories including socks, shoe laces, shoe polishes and school bags for the children are offered free with different brands of shoes as promotional mixes.

SWOT Analysis of Bata Pakistan Ltd.

Strengths: Bata has strengthened its business in 2007 on the base of improved marketing strategy that is a sign of success. The return on average assets and the return on average equity have improved gradually. Bata’s success in business and better financial position have resulted in improved health and safety, and several key performance improvements. Good brand name, low cost work force, high efficiency on standard products, best in children shoes, good logistics, good local labour pool, good manufacturing units, wide network of retail outlets are all strengths of Bata Pakistan.

Weaknesses: Poor inter-company relations and less attractive salaries and incentive bonuses for the employees have been a halt in the possibly faster progress of the company that results in poorly motivated staff as a weakness of the organization.

Opportunities: The industry is suffering from the problems of design innovation, less production and inward/domestic demand-orientation of the market. Bata, by adequately utilizing its resources of modernly equipped manufacturing units and capabilities of trained staff, can take enough advantage of this loop hole. Poor delivery performance in the sector, well-paid and motivated staff placement, improvement in inter company links and new buyers, are all good opportunities for Bata.

Threats: The risk of losing skilled staff to the competitors due to lack of attractive salaries and incentive bonuses as cost of living rising rapidly. While the competitors might prefer to hire skilled and well-trained staff of Bata at higher salary packages. Imports of cheap price shoes and accessories especially from Chine, skilled staff movement to the competitors, relatively shrinking sector for leather shoes, increasing cost of raw materials and unreliable alternative raw materials suppliers, are all threats for Bata.

Learning from the mistakes

Bata Pakistan has experienced few mentionable mistakes in its marketing strategy in the past. One of those was when BATA decided to embrace the high-end segments of the Pakistani shoe market as a part of its target market. It launched quite a few brands for this segment with higher price tags. The move landed BATA in trouble. This segment was not meant for BATA. In the first place, this segment was not sizable for a company like BATA. Second, the segment did not get with Bata’s distinctive competence. The segment constituted a mere 5 to 10 per cent of the footwear market in Pakistan. It could not provide the volumes that BATA was used to at the mass end and high volume was essential for BATA for having healthy bottom line. Worse still, the adoption of the segment misdirected Bata’s entire strategy. The top end of the market suddenly became the main focus of the company and it forgot its bread-and-butter shoes that had given the company its identity. And, small regional competitors started nibbling away at Bata’s mainstay. Actually, Bata was squeezed at both ends. At the lower ends, smaller competitors attached Bata’s mass range in schools shoes and chappals, which the company had practically vacated on its own by ignoring them completely. At the high end, niche competitors, who were better prepared, were challenging Bata. From the market share of around 15 per cent in the mid 1999s, Bata found its share slide down to 10 per cent of the footwear market in mid 2000s. The year 2001 saw the company running a loss of Rs. 42 million.

After learning the lesson the hard way, BATA did an about-turn from its adventure with high-end-segment and returned to the mass segment. The new strategy was to get back to the original customers at the low end and keep that part of the market as its core focus. The company, of course, did not totally give up the new segment it had got into in the early 1999s. Brands like Hush Puppies, for example, continued to be sold by Bata, but in a selective way and through select stores only. (Anil Chawla, June 2003, ‘Marketing Management’).

Having faced an adverse situation, BATA successfully reinvented itself as a renowned retailer offering customers the best in footwear in terms of fashion, quality and introduced the concept of flagship stores to provide a complete and unique shopping experience based on modern trends, relaxed ambience, great products and courteous staff at the new-look flagship stores which are all part of Bata’s new marketing strategy paving the way of success for BATA, and it is a prominently practical example of BATA’ marketing strategy of monitoring and evaluating the marketing strategy in practice and then taking essential steps and changes accordingly as measuring the effectiveness of what has been done, and be prepared to change things that aren’t working.

BATA has effectively worked on consolidating the existing branded business activities into a leading and professional company that has helped in significant reduction of the company’s trade-debt burden. The company is strictly controlling on credit and reducing the outstanding receivables and it is able to augment its financial position to a greater extent. BATA Pakistan has strengthened its position on the stock exchange as evident from increasing P/E ratio and market per share. Backed by increase in demand, EPS has shown an upward trend as well until recently when it declined owing to instability in the country, which depressed the turnout to the retail stores of the company. The net value of the company is not very high. The company proposed a higher dividend in Nov.2007 due to the better results. It raised the final dividends by 20% thus increasing the investors’ confidence.

(Business Leader, Pakistan, March 2008, “BATA Pakistan Ltd: Investors’ perspective and Future Outlook”).

Future Outlook

Increase in the cost of production primarily because of the hike in prices of raw materials, interest rates and transportation costs might pose a challenge to the company. The increased costs might depress sales for the company along with affecting the top-line and bottom-line. Furthermore, Bata Pakistan should increasingly divert its focus towards innovation, new designs and maintenance of its retail outlets in order to keep its customers base intact. The cut-throat competition from the imported cheap price shoes and many new and existing local outlets can significantly affect the company business. In order to maintain its success as a household name for the people of Pakistan, creativity and research for higher quality should lie at the core of Bata product development policy. Bata needs to consistently focus on the development of shoes with exclusive comfort, technology features and designs available to the people through a chain of modern large format and sport concept outlets bringing in new trends to suit the needs of both the traditional and the trendy. Feed back from customers and employees, goof salaries packages coupled with bonus packs for the employees, using customer data, in store speciality/assistance counters, gifts with purchase, incentives for the retailers, promotional items like t shirts with ‘BATA’ printed on them, sponsorship of sports especially cricket as it is the most popular game with the Pakistani people, issuance of loyalty cards and delivery services can be of great help for Bata, particularly in its marketing.