Page 317 - DMGT408DMGT203_Marketing Management

Marketing Management/Essentials of Marketing

Notes viable alternative. The firm should have a strong competitive position in a target segment and
have competencies to hold sustainable competitive advantage to pre-empt competitors. It is
often a good strategy to avoid direct competition with larger businesses that pursue several
larger market segments.

Example: Apple is a niche marketer serving customers having specialised needs. TAG
Heuer watches serve the specialised needs of auto race enthusiasts. A niche marketer gains
limited sales volume and earns high margins per unit of sales, and a mass marketer gains high
sales volumes and lesser margins.

A niche share firm is a market leader in many ways. It is simply the share leader in a more
narrowly defined and potentially profitable sub-segment of a larger segment. Niche marketer
can adopt defensive strategies to protect its share position.

Caselet Bata: Has it Lost its Way?

nce upon a time, the name Bata was synonymous with footwear. The Calcutta-
based company was a popular family destination - the whole family would buy
Oonly Bata shoes. Then somewhere, somehow, Bata lost its way - and its sheen.
The slide started sometime before 1995, when Bata changed its positioning and decided to
disengage itself from the traditional stronghold in the middle and lower-income segment.
Wanting to woo the premium segment, Bata’s entire strategy underwent a change. It
backfired and the result: a huge loss of ` 42 crore in 1995. Then came the labour problems,
which continue to haunt the company. One of few really successful players in the organised
sector didn’t really know what hit it.
Production of rubber and canvas footwear, its mainstay, stagnated at a level between
18,000 and 19,000 till 1998. Production of leather footwear fell from 14.6 million pairs in
1997 to 11.8 million pairs in 1999. Its stock has been performing miserably in recent times.
From a high of ` 257 in 1998, it is hovering at levels of ` 65 - 70 now.
In 1997, Bata decided to pull up its socks. The main focus was on controlling expenditure. Led
by new boss W. K. Weston, cost cutting at various levels resulted in increase in profits. Better
financial management yielded the results. Three years later, the financial position stabilised
somewhat. Commercial paper worth ` 15 crore (from ` 25.5 crore in the previous year) and
a decline in cost of fund, interest charge during the year dipped to ` 6.8 crore.
To maintain its prominent position in the organised footwear market, the company
revamped its systems. In 1999, it incurred a capital expenditure of ` 21.8 crore to modernise
existing stores, opening new stores, and improving the work process.
If one looks at it from the profitability point of view, the return on equity in 1999 was 8.94
per cent. This is an improvement over the 7.44 per cent achieved in the previous year. At the
same time, earning per share (EPS) went up from ` 4.7 per share to ` 5.9 per share. Dividend
paid for financial year 1999 increased to ` 1.5 per cent per share, from ` 0.9 the year before.

During the past two years, Bata has launched shoes in the mid-price segment. But the
question is: will it be able to sustain increased profits over a long period? In the volume
game, it has not been able to introduce the designs that sell (for the upper segment).

Contd...

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