Page 91 - DMGT545_INTERNATIONAL_BUSINESS

International Business

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Case Study Bata ltd.
n 1996, Bata Ltd. was struggling to determine its future, both in defining its long-term
strategy and in finding a top management team who would move the company into the
I21 century. In doing so, it was deeply affected by the dramatic political changes taking
st
place in Eastern Europe, South Africa and elsewhere.
As war swept across Europe in 1939, Tom Bata, Sr., was faced with a difficult situation.
His father, the ninth generation of a family of Czechoslovakian shoemakers, had built a
worldwide shoe network in 28 countries, using machinery and mass production technology
of the 1920s.
On his father’s death, Tom Bata, Sr., was left with the responsibility of expanding that empire
during a period of great political uncertainty, worldwide. Because of the Nazi invasion of
Czechoslovakia and the uncertain future endangered by the resulting occupation, Tom
Bata, Sr., sought to preserve his father’s business by abandoning his Czechoslovakian
operations and immigrating to Canada with a hundred of his managers and their
families. His Czech operations were subsequently taken over by the communists after
World War II.
Since that time, Bata’s decision has been ratified through strong growth, worldwide.
The company is a family-owned business that is the world’s largest manufacturer and
retailer of footwear. Activities are carried out in over 60 countries, employing more
than 67,000 people worldwide. Bata operates 6,300 company-owned stores worldwide
and has over 100,000 independent retailers and franchisees over 70 manufacturing units
worldwide, including shoe manufacturing plants, engineering plants producing moulds,
quality control laboratories, hosiery factories and tanneries. Bata produces about 170
million pairs of shoes annually and sells about 270 million pairs worldwide (see Bata’s
website for current information).
It might appear that Bata is a multi-domestic company where local managers are free to
adjust operating procedures to local environments, within certain parameters. However,
Bata’s core philosophies and strategies are tightly controlled by Bata himself, who was 82
in 1996. In 1994, Bata hired the company’s first non-family chief executive in an attempt to
reinvigorate the paternalistic company, but disagreements over the future of the company
forced the resignation of the CEO and two of the top members of his management team in
October 1995.
The problem is that the shoe business is changing and Bata is being affected like any
other company. The key to Bata’s success has traditionally been a low-cost manufacturing
base, tied to an extensive distribution network. But Nike and Reebok turned the footwear
industry into one that was market-driven, not manufacturing-driven. Several of Bata’s
retail outlets began losing money and Bata was forced to close down 20 percent of its retail
outlets in 1995 and 1996.
Although Bata has factories and operations of various forms in many countries, it does not
own all of those facilities. Where possible, it owns 100 percent of them. The governments
of some countries, however, require less-than-majority ownership. In some cases, Bata
provides licensing, consulting and technical assistance to companies in which it has no
equity interest.
The company’s strategy for serving world markets is instructive. Some MNEs try to lower
costs by achieving economies of scale in production, which means they produce as much as
possible in the most optimally-sized factory and then serve markets worldwide from that
Contd...

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