This study deals with suggesting two potential destinations for the company Bata where they should expand their operations. The Bata Company was started in the year 1990 and owned by 5 shareholders who had great passion for entrepreneurship (Bata.com 2017). The company deals with manufacturing of shoes, leather bags as well as belts. The company had opened many sales outlets in most part of the country. Bata Company purchases raw material that is mainly animal skins that turns into useful materials. The company shows interest in global presence where they will make their products available as well as get hold of customers both nationally and internationally (Bader, Gassmann and Ziegler 2014). The current segment had properly explained two potential destinations where Bata Company should start thinking of operating in the near future. The selected destinations are Japan and United States of America where the company does not have presence yet. Both the destinations are evaluated in areas such as cultural fit, market fit and strategic operations. There are vast difference present among Japanese culture and American culture. In order to plan for expansion in these countries, it is important to conduct market research so that proper information is gathered about the tastes, market trends, preferences and other vital attributes that will help the company for expansion purpose. After proper evaluating the factors, it is recommended that Bata Company should set up their expansion in United States of America and the country will give lot of opportunities and market presence (Xie and Li 2017).
Background of Bata
Bata is a private-owned company that operates in retail and manufacturing sector from the year 1894 (Bata.com 2017). Bata is one of the family-owned global footwear as well as fashion accessory manufacturer and retailer that are headquartered at Lausanne in Switzerland. The company is organized into three main business units. The company has retail presence of over 5200 retail stores in 70 countries.
Discussion of two Potential Destinations where Bata can operate
For this study, the potential destinations selected where Bata can go global are United States of America and Japan. These two countries are selected as potential destinations because Bata has not yet operated in these countries (Wheelen and Hunger 2017).
United States of America is one of the federal republics that are composed of 50 states, 5 major self-governing territories and different professions (Bader, Gassmann and Ziegler 2014). The Capital of United States of America is Washington and largest city in USA is New York City. The used currency at USA is United States Dollar and population 325365189 by 2017.
Japan is one of the sovereign island nations in East Asia. The population of 127 million at Japan makes it 11th largest populated country (Song 2014). The capital of Japan is Tokyo.
Justification for going global to these selected destinations and examining the cultural and market fit
Examining cultural fit in potential destinations
Culture can be termed as the collection of deeply ingrained values as well as beliefs that drive behavior of an individual. To explain in detail, cultural environment means culture as a shared beliefs as well as values of Group (Shaver 2013). There is difference present in cultural fit in the selected destinations and it is explained below with proper justification:
At United States of America, the cultural fit values are unique and interesting to know as it will help any company who desire to expand their business in these potential destinations (Samiee 2013). Bata as a company need to evaluate and understand how is the culture of American people or what are their preferences towards the products offered by Bata. To explain in detail, it is noted that Americans strongly believes in the concept of individualism. Americans consider themselves to be separate as individuals who feel that they have the control of their own lives rather than members of family, nation or religious group (Bader, Gassmann and Ziegler 2014). The next cultural values present in Americans are sense of equality. It was stated in American Declaration of Independence that all people are created equal and this belief had been present in them as their cultural values. They believe in equality and become uncomfortable with overt displays of respect like being bowed in front of anyone. The next cultural values present in Americans are informality. They always behave informally with other people while talking. Americans believes in frankness and openness at the time of dealing with other people. In short, Americans believes in directness where problem can be solved by telling the person directly rather than using any other method to solve it (Regnér and Zander 2014).
At Japan, their cultural fit is thoroughly rooted in all aspects of life and always impact family, work as well as social interactions. Japanese people are very helpful by nature. Family tie-ups are very strong in Japan where they live in joint families Some of the core values of Japan are thinking for others first, not giving up, respecting elders as well as working in a group (Peppard and Ward 2016).
Examining market fit in potential destinations
At United States of America, it is a fantastic market for expansion for company like Bata. US market has huge single market, open-minded buyers as well as access to fantastic tech talent from the greatest universities as well as Holy Grail of venture capital (Naidoo and Wu 2014). This study had been conducted to find out whether US market will be potential destinations for expansion of Bata as they want to go global and recognized all over the world. The advertising market of US is saturated. There is some of the modest priced advertising market hidden in USA but it very costly or expensive advertising market in and across the world. USA does not have more clever scientists or innovators as compared to rest of the world. They have better need for marketing activities. It is difficult for any company to enter into US market and start to attract local capital (Leonidou et al. 2015).
Recently in Japan, they are suffering from weak GDP rates. In order to recover from the sluggish domestic economy, most of the Japanese companies are engaging in evaluating the opportunities to overseas countries such as China with its geographic and cultural advantages (Bader, Gassmann and Ziegler 2014). The economy of Japan had expanded at faster pace for more than 2 years with domestic spending that accelerates rapidly. Japan is shrugging from past decades in terms of growth and attempts to counter with a massive money printing programs in order to stimulate bank lending, investment from companies as well as buying among computers at the same time. There are several factors that in actual had been the reason for most recent growth in GDP that rises from domestic activity where consumer spending accelerated significantly. Japanese customers can be very demanding and have frequent changes in their tastes and needs as compared to that of Americans (Ang, Benischke and Doh 2015). It is for this reason why companies based in USA redesign or redevelop products so that they can succeed or can offer it to Japanese customers. After looking at the size of market of Japan, it is necessary to engage in substantial investments and it give rise to inherent risks at the same time (Bader, Gassmann and Ziegler 2014). To that, Japan has many strong local companies. In Japan, the people mostly do not welcome new competitor but engages in developing strategies to compete with the new entrants. It is important for any company who wish to expand to be ready for competing and have thorough knowledge of market and strategy development (Laufs, Bembom and Schwens 2016).
Strategic capability, risk assessment and cost of Bata
The strategic capability and risk assessment of Bata is explained in this section that will help in understanding how far they are ready to go global with their existing strategies (Andreu, Claver and Quer 2017). There are various challenges faced by Bata because of fast-changing market trends in the form of increased competition from the local players as well as increased threat from Chinese imports. Traditionally, Bata had targeted lower middle class as well as middle class segments of the society but now they are planning to expand and change their strategies so that they are well-recognized in and across the world (Laufs and Schwens 2014).
Strong financial position
Recognized in most of the countries
Best quality at reasonable price (Ang, Benischke and Doh 2015)
Footwear for entire family
Targeting all income segments
Lacks proper planning of advertisement
No variety in fashionable shoes
No continuity of leadership (Bader, Gassmann and Ziegler 2014)
Entering new segments of markets
Capturing markets where no other potential competitor exists (Bader, Gassmann and Ziegler 2014)
Acquired and partnership with small players
New mediums for advertisements
Price war with competitors
Frequent change in consumer preferences (Ang, Benischke and Doh 2015)
Strategic options of Bata
There are primarily three strategic options of Bata that are explained as under:
- Manufacturing- One of the strategic options of Bata is manufacturing where the company uses regional expertise for meeting the needs of the product lines and they enjoys some sort of cost advantages. In addition, the company has the potential to deal in international markets that are beneficial to them in order to compete with the potential competitors (Huettinger 2016).
- Distribution- One of the strategic options of Bata is distribution where the company should give more value to their company-owned stores (Bader, Gassmann and Ziegler 2014). Giving important to company-owned stores will help the company to have control and manage the operations smoothly. The company should arrange more training sessions for the employees where proper explanation is given to the employees about the product quality that matches with frequent consumer preferences and market trends. The company even can enjoy profits from franchises but they should make sure that the employee working for that stores are well-trained and experienced; otherwise the company’s image will be hampered in negative form (Hollender, Zapkau and Schwens 2017).
- Brands- One of the strategic options of Bata Company is brand recognition. The company should target middle as well as upper class (Bader, Gassmann and Ziegler 2014). The reason to that is lower class start preferring to purchase Chinese and local shoes. To that, Bata should try to continue their business and target upper middle class and provide them with better quality products at reasonable prices. The company should follow their traditional image and not focus upon fashionable footwear as it will change the strategy to large extent. The company should continue following their older strategy as they are well-known for their functional footwear for its reliability (Hitt, Li and Xu 2016).
Environmental factors to enter potential destinations
In order to understand the external environment of Bata, the best tool used is PESTLE analysis as it clearly talks about several relevant factors such as Political, economical, social, technological factors (Bader, Gassmann and Ziegler 2014). These factors are mentioned below with proper justification:
- Political factors- It is difficult to expand in other countries due to strict rules and regulations that are present. There is government stability that acts as one of the political factors of Bata. Huge market pressure is there for the company as far as sales is concerned. To that, the company faces stiff competition from local and Chinese products that operates in footwear industry (Hitt 2016).
- Economical factors- Bata faces several economic factors that restrict further international expansion for the company. Most of the buyer looks for branded shoes. Bata fails to target the women and kids segments. Bata has huge consumer market to deal with (Hill, Jones and Schilling 2014).
- Social factors- Frequent changes in the lifestyle of consumer or buyers is one of the social factors that need proper attention by the company (Bader, Gassmann and Ziegler 2014). Trends in fashion are increasing each day but Bata believes in reliability and does not focus on offering fashionable shoes to the target customer. Their main focus is on reliability and durability of shoes. There is frequent change in buyer behavior that pretty much become difficult for company to understand at faster pace. Other social factor includes advertising, media as well as publicity (Hill and Jones 2013).
- Technological factors- There had been increase in technology recently that defines technological factors faced by Bata Company. In addition, upward shift in innovation as well as manufacturing maturity is other technological factors that need urgent attention by the company (Hennart and Slangen 2015).
The above are the external environment analysis that is faced by Bata. The next segment explains micro analysis so that there is clear understanding on the current position of Bata Company.
- Customers- Bata Company targets a wide range of customers that include police, army and other individuals from all locations. The company deals in wide range of products that are offered by them. The company believes in offering good quality products with best prices that means price-quality ratio is excellent as in case of Bata Products (Golbatenmofrad and Zhou 2017).
- Competitors- Bata Company faces stiff competition from other footwear brands such as Puma, Reebok, Adidas, Reebok and Woodlands (Bader, Gassmann and Ziegler 2014).
- Suppliers- Bata Company needs raw materials such as PVC soles and animal skin. The company gets supply from China and other local cottage industries that eventually supplies raw materials to the company (George and Iravo 2014).
Audit of Bata Company
The Internal Audit Department of Bata Company aims at providing assurance of adequate as well as effective process of internal control and functioning in an effective way so that the assets are safeguarded and there is proper recording of accounts (Frynas and Mellahi 2015). The auditing department makes sure that the accountings records are maintained and financial information are reliable without any misstated figures. The Audit Department confirms transparency in all the auditable entities. In case of pre-audit, it means carrying out all the operational checks. As far as post-audit is concerned, it means conducting internal control review as well as physical verification on different audit functions. To that investigation means conducting audit functions through review in any of the specific area of audit function by the concerned audit entity (Ethiraj, Gambardella and Helfat 2016).
Ethical conduct and corporate social responsibility at Bata Company
Bata Company is famous for their traditional and authentic products they offer and being the good corporate citizens as well as contributes to the well-being of the countries and communities as a whole (Ang, Benischke and Doh 2015). The company believes in contributing to the members of the community where they operate by providing employees with a safe as well as healthy work environment. To that, the company is committed that the operations are conducted ethically and in compliance with applicable laws and regulations. The company is concerned with the environmental safety related issues (De Villa, Rajwani and Lawton 2015).
Recommendation on selecting destinations that best fit for market entry for Bata
After analyzing all the important aspects in the study, it is now important to recommend one potential destination where Bata should expand their operations so that they get global recognition and generate more profits as well. Before suggesting a potential destination, it is important to find out why Bata not has any outlets in the United States of America. The reason to this question is Bata products is not that much good as compared to other shoemakers or competitors at the time when someone talks about shoes, sneakers or casual wear and footwear. Bata is famous in India and mainly segmented among the middle class people (Ang, Benischke and Doh 2015). The company produces decent shoes for kids at cheaper prices. Bata proves to be dominating brands in footwear in Asian countries. In that way, Asian countries are different from US market and that is the reason why Bata had not yet decided to expand the business in US.
It is recommended to Bata Company that they should expand their operations in United States of America and this will be one of the potential destinations markets that will help the company to gain more market share. Japan is also a potential destination for expansion purpose but comparing it with USA, Bata should start making strategies to expand in USA. In the previous assignment, it is suggested that Bata Company should select Export strategy as it will be easier way to venture into global market. In this way, the Company should start exporting their products to USA and start targeting their customers. Export strategy will be best among licensing, franchising and joint venturing. The reason for selecting Export strategy is that the strategy does not need several procedures to undertake (Ang, Benischke and Doh 2015).
Bata Company wants to expand their operations and ready to go global, then the potential destination selected for the company is United States of America. It is one of the toughest decisions to decide the potential destinations for further expansion by any company as it come along with risk, uncertainty and many more challenges that cannot be avoided or predicted during initial stages of operation (Brouthers 2013).
The main requirement for expanding any business is the product or brand (Brouthers 2013). Bata Company already has an existence in many countries. US market is extremely competitive than any of the other market. Barrier to entry in US market is difficult as there are already so many competitors present in the footwear industry. But, as Bata is a known brand, they can take the risk to enter the US market and try to go global. Before entering into US market, it is important for the company to have good traction in the country that they are planning to operate. Bata Company should make sure that their product has Unique Selling Proposition so that they can compete with the other global and local brands. To this, Bata has its Unique Selling Proposition as they believe in durability and longevity of the footwear that people are wearing. Therefore, strong references help in product legitimacy at the time of entering into foreign markets (United States of America) (Barney 2014).
As a whole, it is recommended to Bata Company to provide sales discounts and free samples to influence more sales in the destination that is selected for expansion purpose. In USA, the company should make strategies to lower their price level to attract more customers. The company needs to invest in advertising and promotional activities so that people based in USA are aware of the new market entrant. The company should build awareness among the potential users of the particular type of footwear product that is liked by the Americans. The company need to change their strategy of producing or manufacturing classic or reliable footwear, rather they should now bring more design, color and combination of both so that they can compete with other global and local brands of USA. The company can even merge with local brands to expand more segmentation. The company should work upon their weakness area and try to enhance their strengths so that they can very well manage to enter the new market of USA. To that, the area of weakness faced by Bata Company are insufficient lack of development because of rapid changing needs and preferences of consumers, lack in promotional activities as well as downward trend in quality. This weakness should be handled at top priority before thinking to expand in USA because the county is highly competitive and entering in this market need best products at prices that can be affordable by the Americans. The strengths of Bata Company are distribution system as well as vertical integration. To that, it is important that Bata Company should take corrective actions to minimize the risks as far as possible.
At the end of the study, it is concluded that Bata Company is a well-known footwear brand that has strong market presence and financial position. The company decides to go global and plans to evaluate between two potential destinations as to which country will best suit for their current product offerings. On analysis, it is found out that United States of America will be the best suited destinations where Bata Company can export their products and gain profits from the customers. Exporting is the best strategy to venture in the global market. It is a known concept that foreign investment proves to be the best approach that help countries, both host and source country. The company under study had been famous for decades and enjoys strong capital base as well as human capital. It is for this reason that the company feels that they can better perform in other countries as well. Expanding in global market will help the company to gain many customers that has varied tastes, preferences and provides an opportunity for the company to manufacture various styles of products in order to meet the needs and expectations of the customers
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