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Global Operations of Bata Shoe and Nike

 Read the company profiles of Bata and Nike. In questions 1-8 that follow, circle
 the appropriate response in the scale below each statement. Then write a brief
 response to question 9.

Bata Shoe Organization'
     . he Bata Shoe Organization (BSO) runs the global operations of Bata Ltd. Based in
       Lausanne, Switzerland, it is credited with being the world's largest manufacturer and
T      retailer of footwear, selling about 140 million pairs a year. BSO has a reputation for
manufacturing sturdy yet stylish mass-merchandized shoes-both formal and casual-for
men, women, and children. (Being privately owned, financial performance figures are not
released, but 2007 sales revenues are estimated at $3 billion.) It retails in 50 countries,
employing about 40,000 people. It owns 5,000 stores, apart from distributing through
several thousand franchisees worldwide. Its 40 operating units in 26 countries include shoe
manufacturing, mold making, quality control laboratories, hosiery units, and tanneries.
The operating companies are grouped into four regional business units that, according
to BSO, are based on similarities in markets and business issues. Each unit benefits from
synergies in product development, sourcing, and market appeal. The four business units
include Bata Asia Pacific-Africa, based in Singapore; Bata Europe, based in Lausanne;
 Bata Latin America, based in Mexico City; and Bata North America, based in Toronto.
        The Batas, a family of shoemakers, began operations in 1894 in Czechoslovakia, and
 had built a shoe network in 28 countries by the 1930s. Tom Bata Sr., the tenth generation,
 migrated to Canada at the time of the Nazi invasion of the country. In recent times, he,
 along with his son Thomas J. Bata, was largely responsible for building the company
 to its present status. In 2001, his grandson, Thomas G. Bata, was appointed chairman.
 Eighty-five percent of BSO's subsidiaries are wholly owned; although in some countries,
 due to local regulations, Bata Ltd. has only a minority ownership. Where it has no equity,
 it provides licensing, consulting, and technical assistance. BSO keeps a watchful eye over
 its autonomous subsidiaries. For instance, Bata India, the largest subsidiary in the Asia
 group, is 51 % owned by Bata Ltd. and had a record loss of $9.8 million in 1995. BSO
 intervened by sending expatriate managers with turnaround experience and providing
  fresh investments and an interest-free loan of $10 million. The new managing director,
  Stephen Davies, moved from Bangladesh with a charge to focus on marketing. Similarly,
  problems in Uganda led to closing operations there with the market to be served from its
  production center in neighboring Kenya.
         Factories and stores are built to standard specifications around the world. Bata
  focuses on low-cost manufacturing and builds a local network of retailers and suppliers

     For more information about Bata, visit its corporate Web site at
around it. It takes advantage of local materials in the countries where its plants are
It prefers to produce in a given market nearly everything it sells there.
       The company operates in several developing countries and is conscious of its role as a
provider of jobs in the economy. While top management may be composed of expatriates,
local personnel are inducted, trained, and given increasing responsibilities. Regular training
 programs are conducted at headquarters for senior worldwide employees. Country-based
 training programs work toward solutions to local problems that are culturally sensitive
 to their area.
       BSO deals with a variety of political environments and has units in democratic and
 totalitarian regimes. In some countries, its operations have been nationalized and then
  denationalized. It sponsors local sporting events and engages with the local communities,
  such as supporting Junior Achievement (an organization that promotes entrepreneurship)
  and AIDS education. Many of the company's factories are located away from urban
  centers. In some countries, Bata provides housing, schools, and other amenities for its
  workers. Tariff protection and other government incentives have helped protect its market
  in some places.
        The arrival of manufacturers such as Nike and Adidas, however, into the industry on
   a global scale caused consumer preferences to change dramatically. Innovation and brand
   image in the footwear industry in the early 1990s forced the industry to be more market
   driven rather than manufacturing driven. From 1995 to 1996, Bata closed about 20% of
   its outlets-as many of them had begun to lose money-and           the company restructured
   its operations in Europe. Bata's strategy is to provide footWear at affordable prices to
   the largest possible segment of the population, but in some African markets it has faced
   competition from Chinese imports and second~hand goods. It has also opened its own
    procurement center in China. More recently, in various markets around the world, it has
    begun to renovate its stores and revitalize its image from traditional and conservative to
    modern and up market and work toward a globally,integrated marketing.

  Nike Inc.2
  Nike Inc., based in Beaverton, Oregon (U.S.), manufactures a wide variety of high-quality
  athletic footwear and other accessories. The company was founded in 1964 by Phil
  Knight, a long distance runner, who remains chairman, and his coach, Bill Bowerman.
  Their goal was to design lightweight running shoes. The company catalog lists over 800
  models for use in about 25 different sports and leisure activities. The company has six
  divisions along categories of sports, with each division combining shoes and apparel:
  running, soccer, basketball, men's training, women's fitness, .and sports culture (products
  for casual wear). In 2007, Nike posted revenues of $16.3 billion. It plans to reach global
  sales of $23 billion by 2011 by focusing on fast growing regions such as China, India,
   Russia, and Brazil.
        The focus of the company is sports and fitness and it creates and markets its shoes,
   accessories, and related products to males and females between 18 and 34 years. Its
   success began with manufacturing running shoes for jogging, a popular activity in the
   United States. As it expanded, it successfully faced the challenge of bringing into its
   product line shoes popular in other regions, such as European-style soccer shoes, cricket
   shoes, and shoes for skateboarding. In each sports line, it targets its premium sports
   footwear at the high performance athlete while other models are designed and priced for
   the general consumer.
         Nike's strategy is built around individual sports and star players. The company has
    used famous sports personalities such as Michael Jordan (basketball), Roger Federer
    (tennis), and Tiger Woods (golf) as celebrity spokespersons and "signs" them to lucrative
    endorsement contracts with the belief that consumers will purchase Nike shoes and
    remain loyal to a brand name that is so closely identified with successful athletes. It

    2 For more information   about   Nike, visit its corporate   Web site at
    Part II Designing Strategy

    views Adidas as its global rival. Advertising, although centrally developed, is adapted to
    local cultures.
          Nike sells its products from its online store, and also through its own stores, footwear
    chain stores (such as Foot Locker), department stores, and franchises in 200 countries. It
    very closely monitors its international     marketing and consolidated distribution operations
    in 24 centers across the world for better control over marketing. The company's R&D
    centers in the U.S., Taiwan, and South Korea work on new technologies and advanced
    materials with which to update shoe models at least every six months.
           The company has contracted with over 700 manufacturers             in 52 mostly low-wage
    countries including China, Thailand, Vietnam, Indonesia, and the Philippines to produce
     its products.     Company     technicians  work closely with these contract        factories. The
     company's      production    system is closely tied to its order-booking     program,     in which
     retailers order up to six months in advance of delivery and receive discount rates. Quick
     delivery is also ensured, where necessary, through bypassing its distribution         centers, and
     moving directly to retail.
           In the early 90s Nike faced unwanted          publicity about sweatshop       conditions    in
     some of its contract factories, and has since worked to resolve the issues through better
      supervision and setting a code of conduct. Nike's growth has also come from acquisitions
      of companies such as Converse (sports footwear), Umbro (soccer shoes and apparel), and
      Cole Haan (casual luxury footwear).

      1. Each company perceives its target consumers as having similar needs across the globe.
                                                                                                                  To a greater extent
         Bata:                        To a lesser extent                 1     2        3      4     5
                                                                                                                  To a greater extent
         Nike:                        To a lesser extent                 1     2        3      4     5
      2. The Chinese factory's union has raised a dispute about poor working conditions. This matter is to be reported
         to the headquarters.
                                  To a lesser extent             1    2     3    4      5         To a greater extent
                                  To a lesser extent             ~ 2        3    4      5         To a greater extent
       3. The marketing manager wishes to launch a new promotional                 campaign.   This is a matter   to be discussed   and
          approved at a senior level in the headquarters.
                                                                         1      2       3      4      5                   More likely
          Bata:                                Less likely
                                                                         1      2       3      4      5                    More likely
          Nike:                                Less likely
       4. The plant manager wishes to hire more workers to meet production needs. She would need to obtain prior
          approval from the headquarters.
                                                             1     2      3   4     5                More likely
          Bata:                           Less likely
                                                             1     2      3   4     5                More likely
          Nike:                           Less likely
       5. In this company, the production schedule for each plant would need to be closely coordinated with the sales
          plan on a global basis.
                                   To a lesser extent           1    2     3     4     5          To a greater extent
                                   To a lesser extent           1     2    3     4     5           To a greater extent
       6. This company sees a need for better coordination among its offices for operational efficiencies. What would
          be the appropriate basis on which to undertake the restructuring?
          Bata:        Geographic / By product lines
          Nike:        Geographic / By product lines
        7. A manager on a field visit has identified a new line of footwear for use in schools in their physical education
           classes. Would prior permission be needed from headquarters in order to proceed?
           Bata:       Prior permission needed / Not needed
           Nike:       Prior permission needed / Not needed


8. In light of the responses to the above, what strategy would you say the company is following globally?
   Bata:             Global strategy                      1     2     3     4      5         Multidomestic strategy
   Nike:             Global strategy                      1     2     3     4      5         Multidomestic strategy
 9. Speculate on trends in the industry over the next 10 years with respect to (a) consumer preferences for footwear,
    (b) national investment policies, and (c) any other. What changes would you recommend the company initiate
    in its strategy/operations to best face these trends, and why?



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