“future of bata shoe company (bangladesh) ltd in present competitive market”
DESCRIPTION
Performance analysis of bataTRANSCRIPT
CHAPTER-ONE
Introduction.
1.1. The proposed topic is “FUTURE OF BATA SHOE COMPANY (BANGLADESH) LTD IN
PRESENT COMPETITIVE MARKET”.
1.2. Bata Shoe Co. (BD) is a leading manufacturer of footwear in Bangladesh. It produces
daily around 1, 10,000 pairs of shoes of various description. It is one of the largest contributors
of Tk1667.87 million in 2011 in the form of corporate tax, VAT, custom duties and other taxes
to the country’s National Exchequer.
1.3. In the process of preparing this term paper on Bata Shoe Co. (BD) Ltd a thorough study
is done to acquire practical knowledge on present condition and performance evaluation of the
company. Throughout this report we have tried to present the condition and performance
report using Industry analysis, Ratio Analysis Questionnaires analysis and basing on those
analyses we have tried to find out the future of the company in Bangladesh.
1.4 Objectives of the Study.
Broad Objective:
1.4.1 The overall objective of the research is to evaluate Performance of Bata Shoe
Company over the last nine years (2003 - 2011) and to find out the company future in
Bangladesh in present competitive market.
1.4.2 Specific objectives:
The specific objectives of the study are as follows:
a. Carrying out industry and company analysis
b. Analyze the financial performance and customary performance (Questionnaires)analysis.
c. Find out the future of the company in Bangladesh in present competitive market.
1.5 METHODOLOGY
1.5.1 Research Design: We will use the “Descriptive Research” techniques for collecting
relevant data mainly from two sources:
1. Secondary data
2. Survey.
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1.5.2 Sources of data: The relevant data for the study will be collected from two sources.
1.5.3 Firstly, primary data will be collected from the user / customers. Data have been
presented in tabular form followed by statistical analysis and/or numerical interpretation.
1.5.4 The Secondary data is collected from annual report of Bata Bangladesh Ltd,
publications, journals and internet website. Financial conditions and their trend analysis have
been done in the financial analysis part. It has served the purpose of descriptive research as
well.
1.5.5 Sample Design:
1.5.5.1 Sample Size:
A simple random sample will show at 60% (p= 0.6, q=0.4) estimated proportion of success, we
selected to estimate with 95% confidence interval (ZC.1.= 1.96) that allowance for sampling
error not greater than 9.602 percent (E). Subtracting the values in the formula we got the
sample size :
n = (ZC.1)2pq/ E2
= (1.96)2(0.6) (0.4)/ (0.09602)2
= 100
1.5.5.2 Sample frame: Due to time and resource constrains, it is not possible for us to
select a larger sample to minimize the sampling error of our findings. However, maximum
efforts will be given in reducing non-sampling error. We targeted the Govt users, in stitches
and domestic customers for the collection of respondents and retailer.
1.5.5.3 Sample selection procedure : We will use cluster sampling method for
selecting the sample. We will select our sample from 05 (five) different locations
(residential areas of each of the group members) based on probability sampling which
will considered as Area Sampling. The target group will be comprised of both male and
female and the age limit would be 10 and above individuals who either user of Bata involved in
business of Bata.
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1.5.5.4 Sample distribution :
We will distribute our 100 sample based on two stage cluster sampling. We will distribute out
our sample into following categories of respondents:
1. The user of 10 to 20 Year = 30
2. The user of 21 to 30 Year = 30
3. The user of 31 to 40 Year = 20
4. The user of 41 to 50 Year = 10
5. The retail outlet business man = 10
1.5.6 Data collecting instruments: We will develop a short but thorough questionnaire
for the Bata users/customs for our survey. We will concentrate to make closed ended
questions for making it easy to answer for the respondents. We will prepare 20 questionnaires
for the users/customs and the questionnaires will be comprised of 05 questions. It will be a
composition of background study of the respondents and their feedback regarding the issue.
We will try to pretest the questionnaire using a group that not too divergent from the actual
respondents to testify the ambiguity, consistency and timing. We used Simple Attitude Scale
and 5 point Likert Scale for the answers based on opinion.
Moreover, we will also conduct some unstructured personal interview for collecting the data
from few experts.
1.5.7 Data Collection:
The research’s primary data will be collected through field survey on the above described
samples by 5 of our group members in the following ratio
1. The Student of school, colleges and university = nos. 10
2. The Defense personnel = nos. 05
3. The Civil Service personnel = nos. 02
4. The Business man = nos. 02
5. The Outlet retailer = nos. 01
Since the surveys will be conducted ourselves, there is no need to check quality control and
editing. In order to control the sampling control problem, we will select our group leader and he
or she will be responsible to cross check number of completed interviews each of us. In order
to minimize cheating, our team leader will ask the interviewers some tricky questions so that
cheating can be identified.
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1.5.8 Budget and Time Schedule : With your approval the following schedule has been
arranged for the research:
Research Proposal Development and approval by 2nd week of September
Questionnaire and development by 3rd week of September
Finalizing the sample design phase by 4th week of September
Data collection by 1st & 2nd week of October
Data Processing by 3rd & 4th week of October
Completion of final report 1st week of November
Budget:
Item Taka
Photocopy of the Questionnaire 500×1 500
Project printing cost 50×10 500
Laminating 50×1 50
Cover page Print 50×1 50
Spiral Binding 50×1 50
Transportation 20×400 8000
Total 9150
1.6 LIMITATIONS
Time constraints of the semester have given us less time than may be ideal for an
ethnographic study. Our sample size too limited to get the real outcome of our problem
statement. Moreover since we are using the general people as our survey sample, they might
be reluctant to answer properly. The limitations are as follows:
a. Lack of experience in analyzing data and financial performance.
b. Failed to spend sufficient time and many for preparation of the report.
c. The report is prepared based on study of secondary data: annual audit reports,
publication and Questionnaires analysis.
d. Could not follow the correct procedures.
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CHAPTER: TWO
AN OVERVIEW OF BATA
BATA SHOE ORGANIZATION (BSO).
2.1 The Bata Shoe Organization was founded in 1894 by Czech businessman Tomas Bata
in the city of Zlin, what was the - then Czechoslovakia. Coming from a family of shoemakers
with a long heritage of eight generations and over three hundred years, Tomas Bata
capitalized on knowledge, expertise and skills to propel his newly founded company forward.
The introduction of factory automation, long distance retailing and modernized shoe making
ensured the profitability of the company from the very beginning. It is now the world’s largest
manufacturer and marketer of footwear operating across the globe. Its global business
comprises of shoe factories, tanneries, product development and research centers. BSO is
headquartered in Toronto, Canada.
2.2 Today the Bata Shoe Organization is a sprawling geo-centric company encompassing
operations in more than 70 countries around the world and is managed by 4 regional
commercial business units (CBUs) across five continents. It serves 1 million customers per
day, employs more than 50,000 people, operates 5,000 retail outlets, manages a retail
presence in over 70 countries and runs 27 production facilities across 20 countries.
BATA BANGLADESH.
2.3 In Bangladesh, Bata started its operation in 1962. The company is one of the largest
tax–paying corporate bodies contributing Tk. 1361million (year 2010) which represents
approximately 70% of tax paid by the entire footwear sector of Bangladesh. Currently Bata
Shoe Company (Bangladesh) Limited operates two manufacturing facilities – one in Tongi and
the other in Dhamrai. With a production capacity of 110,000 pairs of shoes daily, the company
also has a modern tannery facility with an output of 5 million square feet of leather annually.
Annual shoe sales currently stands at slightly more than 30 million pairs with a turnover of Tk
5.66 billion for the year 2010 having a net profit of tk 543.97 million and provided 250%
divident to its shareholder.
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2.4 Bata is playing a pivotal role in developing the leather industry of the country. Bata has
a firm commitment to eco-friendly business and a state of the art Effluent Treatment Plant
(ETP) has been set up to provide a pollution free environment for both workers and the
locality.
2.5 Fashion would never be complete without a well designed pair of shoes. This marketing
insight has prompted Bata to introduce a number of designers’ collections for men, women
and children. Internationally renowned brands such as Bata Comfit, Marie Claire, Hush
Puppies, Scholl, Nike, Bubblegummers, Sandak, Weinbrenner and B’first are a few names
that testify to the momentous change towards branded shoe marketing in Bangladesh.
Specialized shoe categories such as athletic shoes have been targeted through development
of the Power brand. Uncompromising quality with striking designs have put Bata shoes in a
key position to appeal to different segments of consumers.
PRODUCT CATEGORY:
VISION, MISSION & STRATEGY.
2.6 COMPANY VISION. Maintain competitiveness and leadership in the shoe market
with their aesthetic functional standard and cost effectiveness with increased market
participation by ensuring regular return to BATA’s shareholders. Bata Bangladesh has already
developed its vision up to 2013 showing significant business growth as well as increased
market share. With the vision of building a worldwide family of satisfied customers and
dedicated workers the legacy of Tomas Bata continues strong and unabated to this day – the
tradition is safe. Since its inception, Bata Shoe Company (Bangladesh) Ltd. has strived
towards one goal – customer satisfaction.
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2.7 COMPANY MISSION. To strengthen leadership position in the footwear market
and to increase the market share from 22.05% in 2005 to 30% in 2012 through.
a. Introduction of innovative product
b. New technology in manufacturing
c. Expansion of retail Bazar/City concepts
d. Increase number of DSP/Wholesalers
2.8 CORPORATE STRATEGY.
a. Penetration to new & targeted market segments through introduction of SHOELINES as per life styles with supportive promotion activities
b. Defined number of lines, assortment & quantity for each store according to merchandise classification & store profile in order to increase efficiency in distribution.
c. Introduction Of “Commercial Fashion Ladies Footwear“ & related product.
d. Importing of value added fashion footwear from other countries for city and
selected up market stores to generate additional turnover.
e. Implement POS in 20 volume-selling stores for correct information and improved
replenishment of merchandise.
f. Introduce and promote range of Accessories & Apparels.
g. Aggressive focus on social and corporate activities to maintain BATA’s corporate
image.
2.9 MAJOR CUSTOMERS
Domestic:
1. Bangladesh Army
2. Bangladesh Navy
3. Bangladesh Air Force
4. Bangladesh Rifles
5. Bangladesh Ansar & VDP
6. Selected institutions and industries.
7. Other domestic customers.
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2.10 Export:
a. Shoes:
a. Messrs Rakhi Traders (Saudi Arabia)
b. Shoes Fiji Limited (Fiji Islands)
c. Balaka International (UAE)
b. Leather:
a. Cosmo Cross Co. Ltd. (Japan)
b. Lalmai Footwear Ltd. (Bangladesh)
c. Bangladesh Exports Ltd. (Bangladesh)
2.5.2 MAJOR COMPETITORS: 2.11 Major Competitors.
Competitor Category
Apex footwear Leather closed and Summer
Pegasus Sports
Mark Leather closed and Summer
Homeland Leather closed and Summer
Kasim Leather closed and Summer
Rider Sports
Epsi Leather closed and Summer
BFI Leather closed and Summer
Flash Leather closed and Summer
Deshco Leather closed and Summer
PRODUCT AT A GLANCE.
2.12 BATA has an integrated manufacturing and marketing system thus its main sources of
products are its own factories at Tongi and Dhamrai.
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a. Statement of Production.
production capacity:
(in 000’ pairs)
Actual production capacity:
(in 000’ pairs)
2010 2009 2010 2009
Tongi plant 25,241 23,896 23,712 22,471
Dhamrai
plant
6,496 6,171 6,242 6,133
31,737 30,067 29,954 28,604
Environmental Effect on Bata Activities.
2.13 Political Environment. Followings are the effect of political condition in Bangladesh:
a. Political instabilities.b. Political programme like hortal/stick hamper the production target and sized the
normal activities of the company.c. Hamper the distribution and supply system.
2.14 Economical Environment. Followings are the effect on company’s economical condition in Bangladesh:
a. Frequent devaluation of taka.b. High VAT and import duties.c. Selling of low price production from China.d. Shift of consumer preference due to high cost.e. Insufficient power supply effect the production capabilities
2.15 Legal Environment. Followings are the effect of legal condition in Bangladesh:
a. The company Law in Bangladesh is provided and governed by the Companies
Act 1994.
b. It provides all legal support to Bata like other companies.
c. There are less counterfeit protection in this field.
2.16 Cultural Environment. Followings are the effect of cultural condition in Bangladesh:
a. Bata is very popular to the people of Bangladesh.
b. Bata matches with our culture and tradition including our religious feelings.
c. There is no anti-cultural sentiment about the materials used, quality and
product of Bata in the country.
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CHAPTER: THREE
Industry AnalysisFootwear Industry in General.
3.1 In Bangladesh Footwear Industry has grown since the colonial era although its
modernization took place only in the late 1980s. Due to availability of raw materials and
requirement of minimum technical know how, a large number of small scale footwear
manufacturer were emerged. Bata Shoe Company established its manufacturing plant at
Tongi in 1962, it was the first manufacturing plant to produce shoes on a large scale in the
then East Pakistan.
3.2 The industry suffered a major setback during the War of Liberation but was rehabilitated
after independence. Many new footwear manufacturing units have been established recently.
Notable among them are Apex Footwear, Excelsior Shoes, and Paragon Leather and
Footwear Industries.
3.3 In Bangladesh, the footwear industry can be categorized under two head:
a. Small and medium scale footwear industry with minimum technical know how.
b. Large scale footwear industry with mechanized and semi-mechanized production
technology.
3.4 Currently there are 2000 small and medium and 23 large footwear manufacturing unit
operating in the industry. These units vary in product line, production capacity and exposure to
domestic and foreign markets. The relatively large ones manufacture multiple items such as
leather shoes, sports and trainer shoes, canvas and leather sandals, jute shoes, chap pals
(slippers) and shoe uppers. These units constitute the largest share of the export market.
The Industry of BATA.
3.5 The fist ever large scale manufacturing unit of footwear was established by Bata Shoe
Company in 1962 at Tongi. The production capacity of Bata is about 30,000,000 pairs yearly.
In the last year Bata focused on local production facilities. To improve and increase factory
products they have purchased many machineries for rubber, plastic and leather factories to
meet high demand.
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3.6 The company receives support and assistance from the Bata Shoe Organization (BSO)
which provides valuable technical advice and innovation in manufacturing, marketing, shop
designing, as well as other advisory services, which contribute to the company’s progress.
3.7 The Company has contributed Tk 1.2 billion to the country’s National Exchequer for the
year 2009 which is 24% more than previous year. Bata is the highest tax payer in leather and
footwear sector in the country.
3.8 During 2010, the increase in the retail channel business was 4.53% in sale pairs and
20% in turnover compared to 2009. The total company’s net sales in 2010 is 5633.856 million
with a net profit of 509.074 million which was 449.41 million in 2009. Growth rate is 13.28%.
Company provides a tax of Tk 1477.96 million, the cost of sales was 64%, gross profit 36%,
expense 23%, tax 3.5% and net profit was 9.5%.
3.9 During 2011, the increase in the retail channel business was 5.17% in sale pairs and
22.82% in turnover compared to 2010. The total company’s turnover in 2011 is 6331.603
million with a net profit of 574.488 million which was 509.074 million in 2010. Growth rate is
20.73%. Company provides a tax of Tk 1667.87 million, the cost of sales was 65.43%, gross
profit 34.57%, expense 22.65%, tax 3.5% and net profit was 9.0%.
Industry Analysis on the basis of Porter’s Five Forces.
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Threat of new competitorsentering the
industry
Bargaining power of the industry’s suppliers
Rivalry among current competitors in the industry
Bargaining power of the industry’s customers
Threat of substitutes produced by other industries
RIVALRY AMONG CURRENT COMPETITORS IN THE INDUSTRY
3.10 Competitive Rivalry refers to the competitive struggle between companies in the same
industry to gain market share from each other. The competitive struggle can be fought using
price product design, advertising and promotion spending, direct selling efforts, and after sale
service and supports. More intensify rivalry implies lower prices. Intensity of rivalry is a
function of:
3.11 Industry Competitive Structure.
a. Number and size distribution of companies
b. Consolidated versus fragmented industries
3.12 Bata falls in the category of the largest and fragmented industry. Being the largest
industry, it can minimize threat by price cut etc. Fragmented industry is characterized by low
entry barriers and commodity type products that are hard to differentiate. But most booms are
short lived. Bata is countering the threat by brand value, quality, striking design, product
diversification, low price etc.
3.13 Demand Conditions.
a. Growing demand – tends to moderate competition and reduce rivalry
b. Declining demand – encourages rivalry for market share and revenue
3.14 In Bangladesh, the demand of footwear is high. Here low price customers are
substantial in number. Bata eyes on both classic and low price customers requirements. Thus
threat is reduced.
3.15 Cost Conditions.
a. High fixed costs – profitability leveraged by sales volume
b. Slow demand and growth – can result in intense rivalry and lower profits
c. Bata reduces threat by producing excess volume and raising promotion
spending to drive sales volume, cutting prices etc.
3.16 Exit Barriers. It prevents companies from leaving industry. Common exit
barriers are investment in specific machine, high fixed cost of exit, emotional attachments to
an industry, economic dependence on industry; need to maintain an expensive collection of
assets at minimum level. If exit barriers are low, this reduces rivalry and makes the industry
attractive. In case of footwear industry exit barriers for large industry is high due to huge
capital investment but as there is scope of converting operations to other lather products it can
be said that exist barriers is moderate.
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3.17 Strategies for Deterring Entry of Rivals.
3.18 Bata is successfully doing the above. For example, product proliferation, where the
product spaces have been filled, it is difficult for a new company to gain a foothold in the
market and differentiate itself. From the above discussion we can say that, rivalry among the
existing firms of the industry is moderate.
THREAT OF NEW COMPETITORS ENTERING THE INDUSTRY
3.19 Potential Competitors are companies that are not currently competing in an industry but
have the capability to do so if they choose. Barriers to new entrants include:
a. Economies of Scale – as firms expand output unit costs fall via:
(1). Cost reductions – through mass production
(2). Discounts on bulk purchases – of raw material and standard parts
(3), Cost advantages – of spreading fixed and marketing costs over large
volume
3.20 In Shoe industry there are presences of all small, medium & large industries. In case of
the small and medium category, economies of scale is low as fixed cost involvement is low.
Economy of scale is high in the large category.
3.21 Brand Loyalty
a. Achieved by creating well-established customer preferences.
b. Difficult for new entrants to take market share from established brands.
c. Bata enjoys brand loyalty. The threat of new entry is not remarkable.
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3.22 Absolute Cost Advantages – relative to new entrants.
Bata has--
a. Accumulated experience – in production and key business processes
b. Control of particular inputs required for production
c. Lower financial risks – access to cheaper funds
3.23 Customer Switching Costs. Customer switching cost is low in a product of mass
consumption. Considering this factor Bata is now bringing low cost material from China to
reach low price customer.
3.24 Government Regulation. May be a barrier to both new and existing industries.
Though it is too easy to enter into the small and medium category but entry in the large
category of footwear industry is difficult.
THREAT OF SUBSTITUTES PRODUCED BY OTHER INDUSTRIES
3.25 Substitute Products are the products from different businesses or industries that can
satisfy similar customer needs. The existence of close substitutes is a strong competitive
threat. Substitutes limit the price that companies can charge for their product.
3.26 China is producing artificial leather which is a substitute of natural leather. The price of
artificial leather is cheap. But performance is not as that of leather. But it has already obtained
market niches due to low cost. Bata is assembling a substantial portion of footwear bringing
from China. Though footwear of artificial lather is cheaper than original lather’s but the buyers
are more interested for lather products.
Comments: From all the above we can say that threat of substitutes is low.
ANALYSIS ABOUT THE INDUSTRY’S SUPPLIERS
3.27 Suppliers are the organizations that provide inputs such as material and labor into the
industry. These suppliers are most powerful when:
a. The product supplied is vital to the industry and has few substitutes.
b. The industry is not an important customer to suppliers.
c. Switching costs for companies in the industry are significant.
d. Suppliers can threaten to enter their customers’ industry.
e. Companies in the industry cannot threaten to enter suppliers’ industry.14
3.28 Supplier’s Concentration. The main raw materials are leather, shoal, rubber, lining,
gum, plastic, etc. Though price has spiraled up in recent years, the raw materials are available
in the local and foreign market and suppliers are not concentrated. More so there is large
number of small and cottage industries working in this field and BATA has made long term
contact with some of them for supplying semi finished products.
3.29 Forward and Backward integration: No indication of vertical integration is found in
this sector. But there is indication of backward integration to capture margins, which gives
firms in the industry power over suppliers.
3.30 Access to Labor: Footwear industry is basically a labor-oriented industry, i.e. labor is
one of the main inputs of this industry. So availability of skilled labor is also important for the
industry. As BATA has excellent pay package for its employee, so it is expected that BATA will
not face any major problem to get additional labor if it goes for expansion.
Comments: From all the above we can say that bargaining power of the industry’s
suppliers is low.
ANALYSIS OF INDUSTRY’S CUSTOMERS
3.31 Industry Buyers may be the consumers or end-users who ultimately use the product or
intermediaries that distribute or retail the products. These buyers are most powerful when:
Buyers are dominant.
a. Buyer concentration: Generally mass people buy the footwear and they are
not concentrated. However, bulk purchase is made by some authorities like Department
of Defense in case of Bata.
b. Buyer switching cost: Buyers switching cost in case of footwear is not
significant. So it is a threat. People of Bangladesh are generally low price buyer. Bata,
taking this into consideration, is producing variety of products in which gen customers
can have access.
c. Product differentiation: Some differentiations are observed in respect of
Bata’s design, providing warranty, brand image etc.
d. Backward integration: Backward integration is the process of providing for
themselves the means to produce the input. This can occur to guarantee a dependable
source of the input or to capture the margins normally paid to the suppliers. In case of
footwear industry in Bangladesh backward integration is observed in case of large
industries. Bata produces tanned leather in Dhamrai factory for finished products
onward.
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e. Brand identity of buyers: Bata is integrating world class brand like ‘Nike,
Marie Claire, Hush Puppies, Scholl, Bubble gummers, Sandal, Weinbrenner, Island and
B’first ’. These would give the industry power over the buyer. For creation of brand
identity BATA has is sponsoring Handball Tournament and taken other activities like
provided school shoe to the Street Children etc.
Comments: From all the above we can say that bargaining power of the
industry’s customers is low.
PREDICTION OF POTENTIAL PROFITABILITY:
3.32 Porter’s five factors analysis about footwear industry in Bangladesh shows us that the
industry is currently profitable and there is hopeful for profit retention in the future. In summary
it can be concluded that there are still have some market opportunities for manufacturing units
with innovative idea & design, modern technology and willingness to serve the customers
better. Porter’s Five Forces model at a glance:
New Entry
Easy
SWOT ANALYSIS:
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Bargaining Power of Buyers
Low
Bargaining Power of Suppliers
Low
Threat of substitutes produced by other
industriesModerate
Rivalry among
existing firmsModerate
3.33 SWOT analysis means finding out the strength, weakness, opportunity and threat of an
organization. SWOT analyses help to identify strategies that align, fit or match a company’s
resources and capabilities to the demand of its environment in which it operates. Managers
compare and contrast the various alternative strategies against each other and identify set of
strategies that will create and sustain a competitive advantage.
3.34 Strategy Implementation. From the above SWOT analysis it can be concluded that,
BATA already have a large market share in the footwear industry of Bangladesh and they
have taken different strategies through which they will be able to sustain their market share.
The different strategies of the company are follows:
a. Introduce and Promote range of Accessories & Apparels.
b. New technology in manufacturing
c. Expansion of retail Bazar / City concepts
d. Increase number of Wholesalers (Bata is having 420 Registered Wholesale
Dealer)17
Strength: Expert Management Team National Distribution Network Synergies with sister BSO companies. Good labor relation Excellent Bata brand
image Good production facilities After sales service Maintenance of Quality. Technical know how. Manpower. Innovative design.
Weakness:
High cost of own production High import duties.
Product range should be more diversified.
Opportunities:
Major opportunities in ladies fashion footwear Growing market for upgraded men’s closed shoes Fast growth in Bata Bazar stores Development of branded shoes Increase of export business
Threat: Increased competition of low-cost
products. Political instability Insufficient power supply Counterfeit of Bata products Low price products of China. Frequent devaluation of Taka Shifts in consumer preference.
e. Recruit educated & efficient store manager to ensure improved service level.
f. Providing training to the personnel home and abroad
g. Proving special reward to the best employee.( Employee of the Year)
h. Aggressive focus on social and corporate activities to maintain their corporate
mage.
j. Bata Shoe (Bangladesh) have introduced their international brands like Nike,
Bubble gummers, Marie Claire, North Star, Power, SANDAK, Weinberger etc. which
attracts the customers of different segment.
k. They are taking different promotional activities, like sponsor of games,
participating in fairs, highlighting in store promotions in different major seasonal and
festival promotions through press and Medias.
l. Another major change in the Bata business policy is the segmentation of retail
outlets according to profiles of different market segments and the introduction of novel
concepts such as Bata City Stores. These selective outlets, in conjunction with other
types of outlets such as Bata Bazar and Bata Family Stores, are adding a new level of
consumer satisfaction. The City Stores incorporate spacious floor space allowing a
comfortable shopping experience, modern interior décor enriched with novel shelving
systems, fittings, fixtures and lighting that can be found in the large retail shops in the
Far East and Europe. Bata has a network of 242 retail outlets located strategically in
different parts of the country. These retail outlets are an integral part of our brand
marketing. This extensive retail network is supplemented by an equally extensive
network of depots and dealers. Bata has 13 Wholesale depots covering Bangladesh.
Under these depots 390 RWD (Registered Wholesale Dealers) and 553 DSP (Dealer
Support Program) stores are operating.
3.35 Comments: In our analysis we found that existing strategy will work for
retaining the existing market and gaining accessing new market. However, concentration on
cost leadership may enhance the profitability resulting more market access.
CHAPTER: FOUR
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PERFORMANCE ANALYSIS
Introduction:
4.1 The goal of financial analysis is to asses the performance of a firm in the context of its
stated goals and strategy. There are two principal tools of financial analysis, Ratio analysis
and Cash flow analysis. Ratio analysis involves how various line items in a firm’s financial
statement relate to one another. Cash flow analysis allows the analyst to examine the firm’s
liquidity and how the firm is managing its operating, investment and financing cash flows.
Ratio analysis of a company’s present and past performance provides the foundation for
making forecast of future performance. Financial forecast is useful in company valuation,
financial distress prediction etc, which is very important. Ratio analysis helps to measure
management performance in three areas.
a. Profitability
b. Efficiency
c. Risk
4.2 Ratios can be classified in five broad categories.
a. Liquidity Ratio.
b. Operating performance ratio.
c. Risk analysis.
d. Growth analysis.
e. External liquidity.
Table 4.1: Percentage distribution of Liquidity Ratio (BATA):
Year 2003 2004 2005 2006 2007 2008 2009 2010 2011
1. Current Ratio 1.49 1.42 1.54 1.54 1.42 1.45 1.47 1.45 1.45
2. Quick Ratio 0.72 0.44 0.62 0.62 0.40 0.54 0.64 .61 0.41
3. Cash Ratio 0.27 0.11 0.31 0.33 .23 0.34 0.39 0.35 0.27
4. Average
Collection Period
43.98 37.55 22.32 10.79 3.16 3.09 3.07 2.96 2.98
Source : Bata Annual Report (2003-2011) Analysis by EMBA student in 2012.
COMMENTS:
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4.3 The current & quick ratio measures short-term liquidity of the firms. From a firms point
of view healthy current ratio indicates liquidities, but it may also indicate an inefficient use of
cash & other short-term assets. In any other circumstances a firm should have a current ratio
of at least 1 (one). A current ratio less than 1 (one) would mean that net working capital is
negative i.e. the firm will not be able to pay the current liability from its current assets. From
2003 to 2004 the Current ratio of Bata Shoe Co (Bangladesh) Ltd. had gone down from 1.49
to 1.42 & had gone up in 2005 and 2006 and again down to 1.42 but still above 1, which
indicate that the firm's current asset covers the current liability. The ratio improved in 2005 and
remains same in 2006. From 2007 to 2011 it is consistence which is a very good sign for Bata.
4.4 The Current ratio, Quick ratio & Cash ratio has more or less improving trend and they
are fluctuating moderately. The Quick & Cash ratio after 2003 decreases and then again
increases after 2004. From the overall position it is observed that the company is able to utilize
the cash & other liquid current assets efficiently.
4.5 Average collection period is calculated as the inverse of receivables turnover times 360
days. Receivables turnover is calculated as sales divided by account receivables. This ratio
measures how many days it takes to collect a proceeds from a credit sales. Average collection
period of Bata shoe co (Bangladesh) Ltd is decreased from 43.98-days in 2003 to 2.98-days in
2011 which is a positive side of the company.
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Chart 4.1: Distribution of Liquidity Ratio of Bata.
OPERATING PERFORMANCE RATIO:
4.6 Ratios that measures how well management is operating a business. Operating
performance ratio is two types.
a. Operating efficiency ratios – Examine how the management uses its assets and
capital.
b. Operating profitability ratios – Analyze profits as a percentage of sales and as a
percentage of the assets and capital employed.
Table 4.2: Percentage distribution of Operating Efficiency:
Year 2003 2004 2005 2006 2007 2008 2009 2010 2011
1. Fixed Asset
Turnover
7.89 7.31 8.96 10.49 10.85 9.75 10.82 11.02 8.18
2. Total Asset
Turnover
1.56 1.33 1.64 1.89 2.02 2.4 2.03 2.54 1.26
3. Inventory
Turnover
2.15 1.40 2.11 2.34 2.03 2.08 2.96 2.45 2.19
Source : Bata Annual Report (2003-2011) Analysis by EMBA student in 2012.
4.7 COMMENTS: Fixed asset turnover means how much sales is generated for every
single taka of fixed asset. Total asset turnover means how much sales is generated for every
single taka of total asset. Asset turnover was falling down in 2004 due to lower growth in sales
but substantially improved in 2005 and onward. The Inventory Turnover ratio shows the sales
management efficiency of the company. The standard cycle is 4 times. The calculated value is
2 times at average. So the management efficiency is expectably good.
Chart 4.2: Distribution of Operating Efficiency :
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Table 4.3: Percentage distribution of Operating profitability :
Year 2003 2004 2005 2006 2007 2008 2009 2010 2011
1. Gross Profit Margin
42.68% 40.09% 37.29% 39.82% 41.49% 42.78% 40.67% 43.09% 35%
2. operating Profit Margin
16.11% 11.00% 11.19% 10.77% 10.80% 11.74% 10.56% 11.89% 12%
3. Net Profit Margin
10.79% 6.65% 6.95% 7.18% 6.90% 7.09% 6.87% 6.67% 9%
Source : Bata Annual Report (2003-2011) Analysis by EMBA student in 2012.
4.8 COMMENTS: Profitability ratios show that Gross Profit Margin, operating Profit Margin
and Net Profit Margin do not fluctuate much indicating an improved operating profitability.
Company earned 6% and above the net profit against net sales. The standard is 5% - 10%. So
it can be assumed that it performed well.
Chart 4.3: Distribution of Operating profitability :
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FINANCIAL RISK:
4.9 Risk analysis: Risk analysis examines the uncertainty of income flows for the total firms
and for the individual sources of capital.
Table 4.3: Percentage distribution of Financial Risk:
Year 2003 2004 2005 2006 2007 2008 2009 2010 2011
Debt Ratio 0.60 0.64 0.60 0.60 .63 0.62 0.67 0.63 0.61
Debt-to-Equity 0.16 0.19 0.19 0.18 .17 0.18 0.18 0.19 0.19
Interest Coverage Ratio
56.64 21.76 22.61 54.85 59.91 58.78 59.86 57.34 58.31
Source : Bata Annual Report (2003-2011) Analysis by EMBA student in 2012.
4.10 COMMENTS: The Company does not use debt from any financial organization. But a
substantial amount of current assets is financed from supplier’s credit. As the company does
not use debt from financial institution, the Interest Coverage Ratio of the company is very
good. Hence we can say that the company has low financial risk.
FINANCIAL GROWTH ANALYSIS.
4.11 Growth analysis: Ratios that indicates the growth potential of a firm. Value of a firm
depends on its future growth in earnings and dividends.
4.12 Earning per share: This calculation shows how much earned per share. It is calculated by dividing net profit by number of shares. That is:
Net profit after taxNumber of shares
Table 4.5: Percentage distribution of EPS-Bata :
2003 2004 2005 2006 2007 2008 2009 2010 2011
Tk.22.46 Tk.12.64 Tk.15.57 Tk.20.32 Tk.22.96 32.85 32.85 39.76 41.99
Source : Bata Annual Report (2003-2011) Analysis by EMBA student in 2012.
Remarks: The calculation shows that earning per share got reduced in 2004. But it is good in recent years
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4.13 DUPONT ANALYSIS:
ROE = Net Income / Share holders Equity, (ROE is affected by the following two
factors)
= ROA x Financial leverage (ROA can be decomposed as a product of two factors)
ROA = Net profit margin x Assets turnover, Therefore,
ROE = Net profit margin x Total assets turnover x Financial leverage.
4.14 ROE is a comprehensive indicator of a firms performance because it provides an
indication of how well managers are employing the company funds to generate return. A
company ROE is affected by two factors: ROA & Financial Leverage. ROA tells us how much
profits a company is able to generate for each dollar of assets invested. Financial leverage
indicates how many dollars of assets the firm is able to deploy for each dollar invested by its
shareholders.
4.15 ROA can be decomposed as a product of two factors: Net profit margin & Total assets
turnover. Net profit margin ratio indicates how much the company is able to keep as profits for
each dollar of sales it makes and Assets turnover ratio indicates how many sales dollars the
firm is able to generate for each dollar of its assets.
4.16 Dupont identity tells us that ROE is affected by three things:
a. Profit margin.
b. Total asset turnover.
c, Equity multiplier.
4.17 Higher rate of ROE does not always reflect the actual picture of profitability. When ROE
increases due to increase of profit margin or total asset turnover then it is good for the firm.
But when ROE increase due to increase of debt financing, then it is not good for the firm. On
the other hand, lower rate of ROE does not always reflect the actual picture of profitability.
When ROE decreases due to increase in debt financing & all other remain same, it is good for
the firm.
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Table 4.6: Percentage distribution of Ratios related with ROE :
Year 2004 2005 2006 2007 2008 2009 2010 2011
Net Profit AT/Sales
6.65% 6.95% 7.18% 6.90% 7.28% 6.98% 7.34% 9.07%
Sales/ Total Assets
133.19% 165.67% 189.19% 202.02% 198.78% 201.56% 203.44% 192.61%
ROA 8.86% 11.51% 13.59% 13.95% 13.66% 14.47% 13.89% 18%
Total Assets / SE 288.42% 257.08% 249.98% 273.81% 287.98% 286.43% 294.23% 254.60%
ROE 25.56% 29.59% 33.96% 38.18% 35.12% 36.09% 39.65% 48%
Source : Bata Annual Report (2003-2011) Analysis by EMBA student in 2012.
Chart 4.4: Distribution of Dupoint Analysis :
4.18 COMMENTS: From the above table we find that ROE had decreasing trend till 2004
and then in 2007 it increased gradually and significantly. This happened in 2004 due to
decrease in Sales as well as Net Profit margin. The same has been increased slightly after
that in 2005 & 2006 though the Total Assets to Stockholders’ Equity ratio decreases. This
happened due to increase in Sales as well as Net Profit margin but it improve in 2008 to 2011.
From all these it can be concluded that the company fall in problem in 2004 but the position is
improving now.
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CHAPTER:FIVE
Questionnaires Analysis5.1 We have taken sample size 100. And we have distributed this sample size among
different age group. Following is the distribution of age:
Age group No of People
10-20 30
21-30 30
31-40 20
41-50 10
Retail outlet Business 10
Total 100
5.2 Our sources are:
1. Student of College/University.
2. Defense person.
3. Civil Services.
4. Business Person
5. Outlet relationship officer.
Table :5.1 Distribution of Customer choice About Bata .
Reason for Liking Number Percentage
Comfortable 17 17%
Easy to wear 10 10%
Cheep 3 3%
Available 50 50%
Durable 20 20%
Total 100 100%
Average 20
Source : Survey in the field by EMBA student in November 2012.
Comment : For general customers/users and to attract more people Bata should
lower its price. Side by side Bata should increase its durability and comfort level by improving
it’s over all qualities.
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Table :5.2 Distribution of Customers/Users Attraction About Bata .
Reasons for Attraction Number Percentage
Batter quality. 35 35%
Competitive price (price cutting). 10 10%
More attractive Varity with improvisation (Product proliferation) .
15 15%
Targeting the middle income group. 30 30%
Developing better supply chain. 10 10%
Total 100 100%
Average 20
Source : Survey in the field by EMBA student in November 2012.
Comment :
Most of the customers/users like Bata for its quality and still it is able to attract middle income
group. Though it needs to produce more varieties by innovative improvisation for better future.
To be more competitive it needs to reduce its price to attract the potential customers.
Table : 5.3 Distribution of Customer Satisfaction level About Bata .
Degree of Satisfaction Level/ Dissatisfaction Level
Number Percentage
Highly Satisfied 2 2%
Satisfied 40 40%
Neutral 30 30%
Dissatisfied 20 20%
Highly dissatisfied 8 8%
Total 100 100%
Average 20
Source : Survey in the field by EMBA student in November 2012.
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Comment : Most of the customers/users are satisfied but a good number of
customers/users are in neutral level. Again 20% are dissatisfied and 8% are highly
dissatisfied. So Bata needs to improve in those field for better future.
Weighted Average Score :
Let us consider the weights are as follows :
a. Highly Satisfied = 5
b. Satisfied = 4
c. Neutral = 3
d. Dissatisfied = 2
e. Hishly dissatisfied = 1
Weighted Average = 5X2+ 4X40 + 3X30 + 2X20 + 1X8_
100
= 3.08
Score: Location of Satisfaction Level of Bata is in-between Satisfied and Neutral.
Table :5.4 Distribution of Customers/ Users Liking about Any Footwear .
Degree of Likings of various Footwear
Number Percentage
Bata 40 40%
Apex 24 24%
Janis 10 10%
Pegasus 16 16%
Epsi 4 4%
Rider 6 6%
Total 100 100%
Average 16.66
Source : Survey in the field by EMBA student in November 2012.
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Comment: Most of the customers/users like Bata and Apex is the nearest
competitor of Bata in future.
Table :5.5 Distribution of Competition level of Bata with Various Footwear Brand .
Competition Level of Bata With Other Brand of Footwear
Number Percentage
Apex 61 61%
Janis 10 10%
Pegasus 21 21%
Epsi 5 5%
Rader 3 3%
Kasim 0 0%
Total 100 100%
Average
Source : Survey in the field by EMBA student in November 2012.
Comment: Presently Apex is the most nearest competitor of Bata and Pegasus
may come up in future also. So we can compare by analysis the common zone of
financial characteristics like cost of sales, gross profit, expense, tax’s and profit of
Apex with Bata to find out their financial condition.
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5.3 COMMON-ZONE ANALYSIS
Table 5.1: Percentage distribution Analysis for Common-size Income Statement (BATA ) :
Events 2003 2004 2005 2006 2007 2008 2009 2010 2011
Sales 100% 100% 100% 100% 100% 100% 100% 100% 100%
Cost of Sales
57% 60% 63% 60% 58% 65.5% 63% 64% 65.43%
Gross Profit
43% 40% 37% 40% 41% 34.5% 37% 36% 34.57%
Expenses 26% 29% 27% 29% 31% 20.6% 24% 23% 22.64%
Taxes 5% 3.8% 3.7% 3.4% 3.7% 3.7% 3.6% 3.5% 2.92%
Profit 10.7% 6.8% 6.76% 7.17% 7% 9.7% 8.9% 9.6% 9.1%
Source : Financial Analysis of Bata by EMBA student in November 2012.
Table 5.2: Percentage distribution Analysis for Common-size Income Statement (APEX ) :
Events 2003 2004 2005 2006 2007 2008 2009 2010 2011
Sales 100% 100% 100% 100% 100% 100% 100% 100% 100%
Cost of Sales
86% 89% 90% 91% 88% 88% 85% 84% 91.66%
Gross Profit
14% 11% 10% 9% 11% 12% 15% 16% 8.34%
Expenses 12% 8% 7.3% 7% 7% 8% 10% 12% 3.73%
Taxes 2% .49% .39% .34% .73% .60 .62 .65 1.01%
Profit .31% 2.5% .21% 1.72% 3.8% 3.4% 3.6% 3.3% 3.6%
Source: Financial Analysis of Apex by EMBA student in November 2012.
Comments: From the above, it is seen that Bata’s profit is better than that of Apex.
5.4 Corporate Social Responsibilities.
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5.4.1. One of the critical areas associated with external shareholders and the
community at large is the Corporate Social Responsibility Program of the company. Followings
are their part of CSR of Bata:
a. Supporting nationwide sports sponsorships.
b. Helping disabled persons.
c. Addressing environmental concerns by establishing Effluent Treatment Plant
(ETP) to provide a pollution free environment for both workers and locality.
d. Scholarship programs,
e. Charity contributions – Bata has always supported individuals and communities
in need.
f. Partnerships with other voluntary and charitable organizations are another
prominent feature of Bata’s corporate social responsibility.
g. Bata, in partnership with CARE, extends assistance to over two thousand rural
women in order to become independent entrepreneurs in the Rajshahi, Comilla
and Chittagong division selling shoes from door to door under its Rural Sales
Programme.
h. Provides school shoe to the street children.
i. Selecting employee of the year for better participation.
5.5. Recommendations:
a. Cost of sales needs to be reduced by better management and marketing efficiency. It needs to develop better supply chain system to reach the customers/users door.
b. As closer competitors Apex, is imposing considerable threat which needs to be negotiated by better business strategy with more product proliferation and price cutting.
c. Number of Turnover for fixed asset, total asset and inventory needs to be increased more for better utilization of asset and sales management capacity.
d. Need to address the threat of substitutes product produced by other industries and cheep foreign product imported from neighboring countries.
e. Environmental effect of political, economic, legal and cultural for Bata needs to be considered with due importance.
f. More aggressive focus on corporate, social responsibility (CSR) activities of Bata to be maintained for Bata’s corporate image.
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g. Finally Bata should strive towards one goal, “customers Satisfaction with affordability”.
5.6. CONCLUSIONS.
5.6.1. The Bata Shoe Organization is the largest manufacturer of footwear in the world.
Its business comprises of shoe factories. Tanneries, engineering plants, quality control
laboratories and R&D centers. So far, we have highlighted about Bata Shoe Company
(Bangladesh) Ltd which is the leading company of the industry. We have prepared ratio
analysis of the firm to show its performance. This report shows a comprehensive review and
analysis on the current state Bata Shoe Company (Bangladesh) Ltd. For better assimilation,
we have compared it with Apex which is another competent footwear industry in Bangladesh.
A common size income statement we have seen that Bata’s profit is better than that of Apex.
10. While preparing this paper it has been found that Bata now -a -days assembles a
substantial portion of Chinese materials product but is labeled with brand “Bata”. Sometimes
the quality seemed to be deteriorated but price seemed to be high. This might have negative
impact on customers. Bata should take care to keep up its long earned image while
diversifying its product. Finally Bata should strive towards one goal, “customers Satisfaction
with affordability”.
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BIBLIOGRAPHY
BOOKS/ REFERENCES:
1. Krishna G.Palepu, Paul M. Healy and Victor L Bernard - Business analysis & Valuation,
2nd Edition.
2. Fredrick C. Scherr- Modern Working Capital Management.
3. Charles W. L. Hill,Gareth R. Jones - Strategic Management, Seventh Edition.
4. Annual Reports, Bata (2003-2004).
5. Annual Reports, Bata (2005-2006).
6. Annual Reports, Bata (2007-2008).
7. Annual Reports, Bata (2009).
8. Annual Reports, Bata (2010).
9. Annual Reports, Bata (2011).
10. Internet:
o Apex – annual report 2010 dt 17-04-11.
o http://www.batabd.com
o Bata [email protected]
o http://www.dsebd.org
o http://www.batabd.com/about-us.html
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