The Bata Shoe Organization

Case Synopsis The Bata Shoe Organization, headquarter in Toronto, Canada, is the worlds largest footwear manufacturer and retailer. It has built a worldwide shoe network in 28 countries, using machinery and mass production technology. Batas activities are carried out in 60 countries on virtually every continent. Bata is originally a Czechoslovakian company but after war swept across Europe in 1939, it shifted its headquarter to Canada. Currently, Bata executes all of its strategies through its headquarter. The companys basic strategy is to provide footwear at affordable prices to the largest segment of the population. But the success story is not same in all countries. Bata was successful in Czech Republic but it was not able to sell one pair of shoes in Slovakia. Case Analysis During the World War II, the political risks forced Bata to move its operations from Europe to Canada. The Czech operations were subsequently taken over by the communists after World War II. When Bata started its operations in former Czechoslovakia had problems dealing with the newly formed governments. Bata actually tried to recover lost investments in the Czech Republic and Slovakia but it faced economic and political problems. In the Czech Republic, Bata might be able to get more economic freedom. In this country, the government has likely set its economic policies to be more liberalized. Bata might be able to operate independently and get a percentage of its previous assets back and gradually get back everything due to the low government intervention and economic freedom which is exercised here. This will encourage and enable Bata to begin its operations quickly and capture its once lost market. In an economically free country, there would be no constraints on the flow of investment capital. Individuals and firms would be allowed to move their resources. Trade freedom is another attraction of the economically free government. Bata could easily export its shoes to other parts where the risk is low. Since Bata avoids excessive reliance on exports due to the risks of restricted trade. In the politically free environment like Czech Republic the restricted trade can be overcome and take the advantage from exports. On the other hand, in Slovakia, Bata might face a lot of government intervention in its operations. It might not be able to operate freely and easily in this nation let alone getting back its assets from the government. There might be a lot of political risks which the company must bear. In addition to this, Bata must probably go through different legal procedures which will take a long time for it to establish itself in the country and start operations smoothly like in the Czech Republic. Innovations will be hard to be seen in Slovakia because companies will be state owned and thus individuals will be less inclined to find better ways to satisfy consumers needs.

After the collapse of Czechoslovakia, Czech Republic and Slovakia, both were considered free politically, but Czech Republic was considered mostly free economically. Czech started to encourage privatization of companies but Slovakia encouraged nationalization of companies. Talking more about Slovakia, Bata will get a lot of advantages as well as some disadvantages when it will enter the Republic of Slovakia. Some of the advantages for Bata are as follows: Advantages to Bata y y Bata will be able to return to the home country. Bata will gain access to large facilities and a huge market in Eastern Europe and the former Soviet Union.

On the other hand there are some disadvantages and risks for Bata. Bata will have to face the not so free economic policy of Slovakia. It will have amended its rules and regulations as Slovakia is not promoters of free trade. Bata have to comply with the economic policies which are not desired by a company which has been operating freely around the globe. Bata will not able to enjoy much profit as it has to undergo certain legal issues as well and the rules are not flexible as in other countries around the globe. Bata in Slovakia is nationalized and it is under the government of Slovakia so it may face some management problems as well. Similarly, the country Slovakia will get a lot of benefits, if it accepts Batas operation in the country. The advantages are as follows: Advantages to Slovakia y Bata chooses local resources for the production so the local resources of tihe Slovakia will be explored and utilized in the proper manner. The ultimate benefit goes to Slovakia. y Bata gets its raw materials from diversified local suppliers, this will help create strong supply base in the host land and it increase the revenues of the raw material producers. y Since Bata is a multinational country so the technology transfer and management know how is obvious to be transferred to Slovakia. y The operations of the multinational company in the Slovakia will attract other foreign investments in the similar kind of industry. This will enhance the economy of Slovakia itself. But to attain some advantages from the Bata Slovakia may have to lose something. The compensation which was promised has to be paid back to Bata and it have to handover the management to Bata itself. The major disadvantages are discussed below: Disadvantages to Slovakia y Bata have to cope itself to the command and totalitarian control of Slovakia if it were to establish its operations in the country.

y y

If Bata were to operate in Slovakia, it may have to operate as a public company rathethan the private. Slovakian has to amend some of its law and rules regarding the trade. The relation with the Slovakian government will not be truly positive and the support from the government will be less to Bata.

But Czech Republic was clever enough and it allowed Bata to reenter the market easily. It did not take Bata long to operate in Czech Republic. Bata reentered the Czech Republic and not Slovakia because the two countries have very different economic environments. The Czech Republic is moving more quickly than Slovakia toward a free market system. The Czech Republic may have allowed Bata to reenter the market because of the following reason:

The Czech Republic will gain access to Batas global design, production, and marketing expertise. They will be able to design better, more fashionable and more reasonably priced shoes. The Czech Republic might be able to get Bata to invest significant capital into the plant to get it up to world-class standards. Bata will create new jobs for Czech workers and the purchasing power of the Czech will increase.

Bata has been operating in about 60 countries and the economical and political structures of these countries may vary from each other considerably. The operations span the globe with over 62 manufacturing units and it has over 100,000 independent retailers and franchisees. Multinational companies have to understand political and cultural environment of the host countries. The success in the host country comprises of the better knowledge of economic, political and cultural diversity knowledge. Batas presence in dozens of countries complicates its political strategy. By and large Batas operations are independent units established in each country where the firm does business. As such, Bata is able to decentralize control of its political strategy giving subsidiaries significant autonomy in managing relations with their respective government. Since important issues will vary from country to country, Bata must allow subsidiaries to identify the appropriate issues themselves while formulating strategies. The strategies that are formulated to deal with those issues are likely to be subsidiary specific as well. The same strategy may not work all over the globe so the political strategies have to be formulated in the clever way to match the political environment. If the country is politically sound at that country further investment can be made but if the country is not politically sound the home countries have to wait till the situation is sound. In other to avoid the political risk Tom Bata seems to be clever enough by not relying excessively on exports. The reason behind is to avoid risk as well as it may lose market opportunity and market share. So the main challenge that Tom Bata has to face is to keep the

core values, philosophies and strategies intact while formulating effective political strategy for the company. The final issue in the case is the issue about Tom J. Bata Sr. He is the one who took his ancestral business to a global level. He was faced with the responsibility of expanding his fathers empire during a political turmoil around the world. He did a lot of hard work to keep the Bata philosophies alive and also ensured that it grew into a global empire. His entrepreneurship method of keeping the company alive was a success in his time and perhaps he believes that the same tradition should be carried forward to the future. So Tom J. Bata Sr. has joined the list of entrepreneurs who cannot bear to loosen their grip on businesses they started. Having grown a business, it is often hard to turn it over to others who may have different ideas about how the firm should be managed. However, a mature, established business requires a different set of leadership and administrative skills than are needed by a young, growing firm. Tom J. Bata led his firm through a period of great turbulence and growthbut both the world and the company are now very different than they were in. The method of doing business is changing rapidly and being dynamic to adapt to those changes is a necessity. The manager now needs to be very competitive and make strategies according to the situations. So Tom Bata should formulate a retirement plan in such a way that the new CEO or a successor will be able to continue his inheritance in a new way. So in case of Bata, the current chief officer must find a way to retire. If he fails to bring in a good succession plan, his retirement will prove to turn down the companys performance which is a big risk to the shoe organization. The biggest danger facing Bata Shoes is the lack of a clear succession plan for the time when Tom J. Bata either retires or dies. He needs to be laying the framework to provide as smooth a transition to another chief executive as possible. If a successor were being groomed the timing of Tom J. Batas departure would not be as important, since there would already be someone in place making increasingly important decisions and ready to step in effectively when the time came. The training under Tom J. Bata will prove more effective and hiring the best candidate will be the challenge for the management. Hence, Bata should focus not only in its current strategies but also have a good succession strategy.