CASE 1
In 1996, 1996, Bata Bata Ltd, was struggli struggling ng to determi determine ne its future, future, both both in definin defining g its long-term long-term strategy and in finding a top management team who would move the company into the twenty-first century. And in doing so, it was being deeply effected by the dramatic political changes taking place in Eastern Europe. South Africa, and elsewhere.
As war swept across across Europe Europe in 1939, 1939, Tom Bata Sr. was faced with a difficult difficult situation. situation. His father, the ninth generation of a family of Czechoslovakian shoemakers, had built a worldwide shoe network network in twentytwenty-eigh eightt countri countries, es, using using machine machinery ry and the mass-pr mass-produ oductio ction n techno technolog logy y of the 1920s. On his father's death, Tom Bata Sr, was left with the responsibility of expanding that empire duri during ng a peri period od of grea greatt poli politic tical al unce uncert rtai aint nty y worl worldw dwid ide. e. Beca Becaus use e of the the Nazi Nazi inva invasi sion on of Czecho Czechoslov slovakia akia and the uncerta uncertain in future future engend engendere ered d by the resulti resulting ng occup occupatio ation, n, Tom Bata Bata Sr., Sr., sought to preserve his father's business by abandoning his Czechoslovakian operations and emigrating to Canada with a hundred of his managers and their families. His Czech operations were subsequently taken taken over by the communists after World War II. I I.
Since that time, Bata's decision been ratified through strong growth worldwide. The company is a fami familyly-ow owne ned d busi busines ness s that that is the the worl world d s larg larges estt manu manufa factu cturer rer and and retail retailer er of foo footwea twear. r. Activities Activities are carried out in over 60 countries countries on virtually every continen continent, t, employi employing ng more more than than 67,000 people worldwide. worldwide.
Bata operates operates 6,300 company-owned company-owned stores stores worldwide worldwide,, and has over over
100,000 100,000 independ independent ent retailers retailers and franch franchisees isees.. Bata Bata owns owns over 70 manufactu manufacturing ring units worldwide, worldwide, including shoe manufacturing plants, engineering plants producing molds, quality control laboratories, hosiery hosiery factories, factories, and tanneries. tanneries. Bata produces produces about 170 million million pairs pairs of shoes annually and sells about about 270 million pairs worldwide (see Bata's Web page for current information).
It might appear that Bata is a multidomestic company where local managers are free to adjust operatin operating g procedure procedures s to local local environm environments, ents, within within certain certain paramet parameters. ers. As one outside outsiderr noted, noted, "wherever "wherever you had a strong strong Czech, you had a strong company. Where you had a lousy Czech, Czech, you had a lousy company." 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. In announcing his resignation, the CEO stated that he had tried to balance the strong values of the company company with the need for change. change. But he appeared to have overestimated overestimated his ability to operate
independently of the family shareholders. As one executive stated, "Tom Bata is a charismatic personality who exerts an awful lot of personal authority."
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 dose 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 single production facility. Bata serves its different national markets by producing in a given market nearly everything it sells in that market. It does this in part because substantial sales volume in the countries in which it produces enable it to achieve economies of scale very quickly. It may seem difficult to believe that Bata can always achieve economies of scale, especially since the company has production facilities in some small African nations. However, Bata's management believes that the company can achieve scale economies very easily because its shoe production is a labor-intensive operation. It also tries to buy all its raw materials locally, although this is not always possible, especially in some poorer countries.
Bata also prefers not to export production; when possible, it chooses local production to serve the local market rather than imports! However, sometimes Bata becomes entangled with local governments when it imports some raw materials but does not export. In such cases, it must adjust to local laws and requirements for operation.
Bata avoids excessive reliance on exports partly to reduce its risks. For example, if an importing country were to restrict trade, Bata could possibly lose market opportunity and market share. In addition, Tom Bata Sr., noted the benefit to a developing country of not exposing itself to possible protectionism:
We know very well what kind of a social shock it is when a plant closes in Canada. Yet in Canada we have unemployment insurance and all kinds of welfare operations, and there are many alternative jobs that people can usually go to. In most of the developing countries, on the other hand, it's a question of life and death for these people. They have uprooted themselves from an agricultural society. They've come to a town to work in an industry. They've brought their relatives with them because working in industry, their earnings are so much higher. Thus a large group of their relatives have become dependent on them and have changed their lifestyle and standard of living. For these people it is a terrible thing to lose a job. And so we are very sensitive to that particular problem.
Bata operates in many different types of economies. It has extensive operations in both industrial democratic countries and developing countries. However, it was soundly criticized for operating in South Africa and thus tacitly supporting the white minority political regime. It also has been censured for operating in totalitarian regimes, such as that in Chile. In the latter case, Tom Bata, Sr., countered by pointing out that the company had been operating in Chile for over forty years, during which time various political regimes were in power.
Although Bata's local operations have not been nationalized often, the company has had j some fascinating experiences with such actions. For example, in Uganda, Bata's local operations were nationalized by Milton Obote, denationalized by Idi Amin, renationalized by Amin, and finally denationalized by Amin. During that time, the factory continued to operate as if nothing had happened. As Tom Bata, Sr., explained, "Shoes had to be bought and wages paid. Life went on. In most cases, the governments concluded it really wasn't in their interest to run businesses, so they canceled the nationalization arrangements."
Despite Bata's ability to operate in any type of political environment, Tom Bata, Sr., prefers a democratic system. He feels that both democratic and totalitarian regimes are bureaucratic, but a democracy offers the potential to discuss and change procedures, whereas under totalitarianism it sometimes is wisest to remain silent.
Bata has a multifaceted impact on a country. Its product is a necessity, not a luxury. The company's basic strategy is to provide footwear at affordable prices for the largest possible segment of the population. The production of shoes is labor-intensive, so jobs are created, which increases consumers' purchasing power. Although top management may come from outside the country, local management is trained to assume responsibility -quickly as possible. Because the company tries to get most of its raw
materials locally, sources of supplies usually are developed. Further, it likes to diversify its purchases, so i usually uses more than one supplier for a given product, which leads to competition and efficiencies.
South Africa presented unique challenges for Bata management. The size of the country's population is just under that of Nigeria, Egypt, or Ethiopia. Thus South Africa had long been considered a good place in which to invest because of its large market size. Further, South Africa's per capita GNP was the largest in Africa. However, the country's main attraction was the incredibly high rate of return that companies could earn, which was largely the result of low labor costs and extensive mineral wealth. The large market allowed companies to achieve economies of scale in production while exploiting the low labor costs.
But the situation deteriorated rapidly in the early 1980s. A relatively stagnant economy, political strife resulting from apartheid, including the policy of not granting political freedom and civil liberties to blacks, prompted foreign companies and governments to pressure the government for political reforms. The Canadian attitude toward South Africa was very negative. Canada's government issued very conservative voluntary guidelines on new investments in South Africa. As a result, Bata sold its holdings in South Africa in 1986. It did not identify the buyer or the sales price, and it denied that apartheid was the reason for its pulling out. Company personnel stated, "It really was a business decision that took into account all of the factors with respect to investment in South Africa at the present time." Under the terms of the sale, the Bata company name and trademark could no longer be used in South Africa, and all ties with Canadian headquarters were broken. In addition, the new buyer apparently assured that the jobs of the workers, most of whom are black, would be preserved.
Bata also faced problems trying to get back into Slovakia. As noted earlier, the Bata operations started in the former Czechoslovakia, and as Eastern Europe opened up, Bata immediately tried to recover lost investments in the Czech Republic and Slovakia. The problem was that the Czech and Slovak governments wanted compensation for the factories, but Bata (known as Tomas Baoa in his homeland) felt the factories were still his. He eventually opened one factory in the Czech Republic and 48 retail outlets where the company sold 3 million pairs of shoes in the first year, capturing 11 percent of the Czech shoe market.
However, things were not so rosy in Slovakia. Baoa said that the problem is that "his company's former Slovak properties ended up in the hands of the Slovak government, which isn't interested in giving them up. Instead, he is expected to rebuild his Slovak business using his own resources." He says that he is still waiting for the government to keep the promise it made when his 45,000-employee factory in
Slovakia was nationalized. Compensation was promised by the communists but never paid. The official government position is that a new restitution law has been put into effect and that Bata has to raise his ownership claims with the new owner of the factory. If the two parties cannot agree to a joint solution to the problem, Bata is welcome to file a lawsuit against the new owner to be settled in Slovakian courts. Despite his success in the Czech Republic, Bata had not sold one pair of shoes in Slovakia by the beginning of 1999.
Bata Shoes (Czech: Baťa or Baťovy závody) is a large, family owned shoe company based in Bermuda but currently headquartered in Lausanne, Switzerland, operating 3 business units worldwide – Bata Metro Markets, Bata Emerging Markets and Bata Branded Business. It has a retail presence in over 50 countries and production facilities in 26 countries. In its history the company has sold more than 14 billion pairs of shoes.
Contents [hide] •
1 Foundation, Tomáš Baťa
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2 Jan Antonín Baťa
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2.1 Thirties and Forties
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2.2 Bata-villes
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2.3 During World War II
3 After the war o
3.1 Communist Czechoslovakia
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3.2 Canada - Thomas J. Bata
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3.3 Present
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3.4 Czechoslovakia after 1989
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4 In popular culture
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5 See also
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6 References
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7 External links
[edit] Foundation, Tomáš Baťa
The company was founded in 1894 [Zlín] (then Austro-Hungarian Empire, today the Czech Republic) by Tomáš Baťa (Czech pronunciation: [ˈtomaːʃ ˈbaca]), whose family had been cobblers for generations. A large order from the army, military shoes and rising demand for them, during World War I started rapid growth and small manufacture turned into modern industrial concern, one of the first mass producers of shoes. Tomáš Baťa was recognized for his social conscienceness, establishing housing, cinemas and advancement programmes for his employees. The phrase "work collectively, live individually" is one of his sayings. Baťa recognized the potential of large-scale production, and was often called the "Henry Ford of Eastern Europe". He saw technology as a means of progress, and wanted to make the shoes as cheaply as possible so that the greatest number of people could access them In 1932 Tomáš died in a plane crash at the Zlín airport (attempting to take-off under bad weather conditions) and his half-brother Jan Antonín Baťa became head of the company. At the time of Tomáš's death, the Baťa company employed 16,560 people, maintained 1,645 shops and 25 enterprises. Most of what Tomáš had built was centralized in Bohemia-Moravia (15,770 employees, 1,500 shops, 25 enterprises) and Slovakia (250 employees and 2 enterprises). The total international contribution to the Baťa organization at the time of Tomas's death consisted of 20 international enterprises, 132 shops, and 790 employees.
[edit] Jan Antonín Baťa Under Jan Antonín Baťa the company grew quickly and continued its expansion throughout Europe, North America, Asia, and North Africa. Zlín accommodated the largest part of the company, with manufacturing and headquarters. Apart from shoes, Baťa also diversified into other areas (tyres, toys, plastic fibres, etc.).
[edit] Thirties and Forties Jan Baťa expanded the Bohemian and Moravian part of the business, more than doubling its size to 38,000 employees, 2,200 shops, and 70 enterprises. In Slovakia, the business grew from 250 employees to 12,340 and 8 enterprises. In the face of a worldwide depression, Jan Baťa, following the plans laid down by Tomas Bata before his death, expanded the company more than six times its original size throughout Czechoslovakia and the world. From the time of his brother's death, in 1932, to 1942, he grew the Baťa organization to 105,770 employees. During the 1930s, imports from Czechoslovakia ultimately became too expensive, due to the economic crisis in Europe at the time. Jan Antonín also established subsidiaries in several foreign countries (for example in Brazil and Britain.
[edit] Bata-villes Company policy initiated under Tomas Bata was to set up villages around the factories for the workers and to supply schools and welfare.
These villages include Batadorp in the Netherlands, Baťovany (present-day Partizánske) and Svit in Slovakia, Baťov (nowadays Bahňák, part of Otrokovice) in the Czech Republic, Borovo-Bata (nowadays Borovo Naselje, part of Vukovar in Croatia then in Kingdom of Yugoslavia), Bataville in Lorraine, France, Batawa in Canada, East Tilbury[1] in Essex, England, Batapur in Pakistan and Batanagar and Bataganj in India. The company, which established itself in India in 1931, started manufacturing shoes in Batanagar in 1936. In 1922, the first Bata shop abroad opened in the Netherlands; in 1933, construction began on the Bata shoe factory in Best, in the Dutch province of Brabant, at the intersection of the railway tracks leading to Eindhoven and the Wilhelmina Canal located nearby. There was an abundance of inexpensive and hardworking labourers in the Brabant countryside. The British "Bata-ville" in East Tilbury inspired the documentary Bata-ville: We Are Not Afraid of the Future.
[edit] During World War II After Germany occupied the rest of pre-war Czechoslovakia (15 March 1939) Jan Antonín Baťa, who left the country with his family after a brief time in jail after the Nazi occupation, tried to save as much as possible, submitting to the plans of Germany as well as supporting financially theCzechoslovak Government-in-Exile led by Edvard Beneš. Foreign factories were separated from mother company and ownership of plants in Czech lands was transferred to one member of the family. Jan Antonín Baťa stayed in the Americas from 1939–1940, but as America entered the war, he felt it would be safer for his co-workers and their families back in occupied Czechoslovakia if he left the United States. At the moment he left the protection of the United States, the British placed him on the "black list". It is believed that the communist influence on the Beneš' exile government was behind this. The official reason for this was Mr. Baťa's inability to pay a demand by the British government amounting to 250,000 pounds sterling (a huge sum of money at the time). The United Kingdom insisted on the huge bail because Mr. Baťa was the owner of the largest industrial concern in occupied Czechoslovakia, located in enemy territory and employing more than 40,000 Czechs and Slovaks.
[edit] After the war This article is written like a personal reflection or essay and may require cleanup. Please help improve it by rewriting it in an encyclopedic style. (May 2011)
[edit] Communist Czechoslovakia After the war, Jan Antonín Baťa attempted (unsuccessfully) to clear his good name against communist accusations against him, in spite of 64 trumped up charges, typical mock trials, and the inability of his attorneys to be allowed to offer a defence. Despite the organized effort against him, the jury of the time took the brave step of finding Jan innocent of all 64 charges. Communist Military Judge Sramek then invented two new charges against Jan Bat'a and found him guilty, thus expropriating his property in Czechoslovakia.
Two unsuccessful attempts were made by the family of Jan Baťa to clear him of the communist era charges. The first attempt was made during 1968. The second attempt was made via a lawsuit filed in Prague in 1993. Finally on the third attempt in 2007, Jan Bata was cleared of all charges made against him. In 1945, the Czech companies were nationalized under the Beneš decrees, part of a large scale nationalization programme in Czechoslovakia. After the communist party took overall power in 1948, it tried to suppress all memory of Tomáš and the Bata enterprise. Tomas Bata was portrayed as a ruthless capitalist, in pursuit of higher profit, yet Baťa employees were typically paid from 3-5 times the wages of their counterparts around the world (see Svatopluk Turek ). Furthermore, Bat'a employees were recipients of benefits such as life insurance, healthcare, long term care, and generous savings accounts for retirement. Bata even gifted employees' babies generous bank accounts. The company was renamed as Svit and the town of Zlín as Gottwaldov (after the leader of the communist party). The Svit factory concentrated on the domestic market. During the following decades, its ability to compete and its technological infrastructure declined due to under-investment, weak management and bad decisions.
[edit] Canada - Thomas J. Bata
Bata International Centre 1965-2004 Anticipating the Second World war , Thomas J. Bata, the founder's son, together with over 100 families from Czechoslovakia, moved to Canada in 1939 to develop the Bata Shoe Company of Canada, including a shoe factory and engineering plant, centred in a town that still bears his name, Batawa, Ontario. Thomas J. Bata successfully established and ran the new Canadian operations and, during the war years, he sought to maintain the necessary coordination with as many of the overseas Bata operations as was possible. During this period, the Canadian engineering plant manufactured strategic components for the Allies' war effort and Thomas J. Bata worked together with the Czechoslovak government-in-exile of President Beneš and with other democratic powers. The Second World war saw many Bata businesses in Europe and the Far East destroyed. After the Second World War, the core business enterprise in Czechoslovakia and other major enterprises in Central and Eastern Europe were nationalized by the Communist governments. Thomas devoted himself to the rebuilding and growth of the Bata Shoe Organization, together with his wife and partner, Sonja. He successfully spearheaded ethical and innovative expansion into new markets throughout Asia, the Middle East, Africa and Latin America. Under his leadership, the Bata Shoe Organization experienced unprecedented growth and became the world's largest manufacturer and marketer of footwear, selling over 300 million pairs of shoes each year and employing over 80,000 people. In 1964, the headquarters of the Bata Shoe Organization was moved to Toronto, Canada and in 1965 it moved into an ultra-modern building, the Bata International Centre. The Bata Shoes' former headquarters in North York
was designed in the 1960s by architect John Parkin. The building was later sold and was to be replaced by a cultural centre, museum, and park .[2] Other Bata family contributions to Canadian life include: Mrs. Sonja I. Bata founding the Bata Shoe Museum in Toronto in 1998, Mr. and Mrs. Bata being supporters of Trent University, where the Thomas J. Bata Library bears Bata's name,and supporters of York University in Toronto. After the Second World War, the Bata Shoe Organization was led by Thomas J. Bata (Tomáš Baťa Junior), son of Tomáš Baťa and the company grew significantly under Thomas J. Bata's driving leadership. In 2002, the headquarters was moved to Lausanne, Switzerland and the organization has been led byThomas G. Bata, grandson of Tomáš Baťa.
[edit] Present
Key: Red = Countries currently with Bata Shoe Stores After the global economic changes in 1990s, the company closed a number of its manufacturing factories in developed countries and has focussed its activities on expanding its retail business there. In developing countries it still has a large number of manufacturing units and still produces a significant number of shoes each year.:
Bata Store Wenceslas Square in Prague, the Czech republic - 2005 The company is currently headquartered in Lausanne, Switzerland, with 3 business units •
Bata Metro Markets, Lausanne
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Bata Emerging Markets, Singapore
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Bata Branded Business, Best, Netherlands
Current shoe brands are: •
Bata (Baťa in former Czechoslovakia)
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Bata Premium (handcrafted dress shoes)
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Bata Industrials (safety footwear)
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Bubblegummers (children)
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Power (athletic shoes )
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Marie Claire (women)
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Hush Puppies (Premium)
According to Bata, in 2007, the company served 1 million customers per day, employed over 40,000 people, operated 4,600 retail stores, managed a retail presence in over 50 countries and had 40 production facilities across 26 countries.
[edit] Czechoslovakia after 1989 After the "Velvet Revolution" in November 1989, Thomas J. Baťa arrived as soon as December 1989. He was warmly welcomed by the population. The Czechoslovak government offered him the opportunity to invest in the ailing Svit. Since companies "nationalised" before 1948 were not returned to their original owners, the state continued to own Svit and " privatized" it during voucher privatization in Czechoslovakia. Its inability to compete in the free market led to its decline and in 2000 Svit went bankrupt
