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Costing and Management Accounting Practices: Company: Bata India LTD
Costing and Management Accounting Practices: Company: Bata India LTD
Costing and Management Accounting Practices: Company: Bata India LTD
ACCOUNTING PRACTICES
COMPANY:
BATA INDIA Ltd.
EXECUTIVE SUMMARY
This report discusses the detail of
To summarise the above points we know that Bata is the fastest growing footwear brand in
the country with a presence across 400 cities. The brand offers a wide range of comfortable,
stylish and trendy footwear at affordable prices, ensuring there is something in the
collection for everyone. The USP of the brand lies in the fact that they have successfully
made fashion and durability so affordable and accessible to all. This explains why Bata India
sells over 45 million pairs of footwear every year and serves over 120,000 customers every
day. Today, Bata India is the largest retailer and leading manufacturer of footwear in India.
Bata’s main competitors are Mirza Intl, Liberty Shoes, Crew B.O.S; Bhartiya Inter. In this
report we have compared the Value chains of Bata India Ltd and liberty Shoes Ltd which
says that Bata has a competitive advantage over Liberty shoes. Bata follows backward
integration and are not dependent on some third party for procurement of raw materials
which makes it cost effective. Apart from this Bata has a huge competitive advantage over
Liberty in the area of sales and distribution channel.
Bata follows Cost leadership strategy. The company enjoys the highest market share in India
and this is evident from the fact that the total retail presence of the company currently is
more than thrice that of its closest competitor (Liberty: 381 stores). Bata has over 15%
market share in Organized Retail market and around 6.5% share in unorganized retail. Bata
is produces its own raw material to improve its profitability. Bata reduces its cost by
demand based production, setting up manufacturing base in tax-free locations, using
different mix for footwear production with cheaper raw material. Also, they started cutting
some cost through sales and distribution network, which is really huge distribution network.
Bata earlier concentrated only on manufacturing footwear and selling them anyhow but in
recent times it has changed its image of the production oriented company to affordable,
market driven, fashion conscious, lifestyle brand and hence the decision to reposition. The
Company has been focusing on consumers and market demand which will reduce
inventories and improve sales-to-stock turnover. Bata has also adopted cost cutting
strategies without any compromise on style, quality and design.
Management Accounting Project: Company selected – Bata India
Ltd.
a. What is the company’s main line of business and which sector?
Bata India is the largest retailer and leading manufacturer of footwear in India and is a part
of the Bata Shoe Organization.
Bata India’s main competitors are Mirza Intl, Liberty Shoes, Crew B.O.S; Bhartiya Inter.
Bata has the highest market share compared to all its competitors.
c. Try to compare and contrast the value chains of the two companies.
Value Chain Analysis describes the activities that take place in a business and relates them
to an analysis of the competitive strength of the business. The activities of a business could
be grouped under two headings:
(1) Primary Activities - those that are directly concerned with creating and delivering a
product (e.g. component assembly)
(2) Support Activities - not directly involved in production, may increase effectiveness or
efficiency. The following come under support activities:
Procurement
Technology Development
Human Resource management
Firm infrastructure
It is rare for a business to undertake all primary and support activities.
Technological resources-
In 2004, Bata installed point of sale management information system (POS), for providing
sales and inventory information across the company’s stores. This provides company to
plan production and optimize inventory level.
Liberty has also been instrumental in introducing EVA (Ethyl Vinyl Acetate), which is a
direct injection moulding used for making sole for the first time in Asia. This technology
uses very light material & the footwear is made with the direct injection system.
Liberty also pioneered the PU (Poly Urethane) Technology in India for the footwear
industry.
Besides these Thermo Plastic Elastomer has been developed for the first time in India at
Liberty. A CAD/CAM design centre is in place at Liberty. The Sympatex waterproof
technology in footwear was pioneered by also Liberty. Liberty is also the first company to
market PPE products for safety purpose.
Operations-
Gharaunda is the first plant of its kind in this part of Asia that is equipped with Desma
machines for PU Direct Injection Moulding. Using PUF technology and Computer Aided
Systems this vertically integrated plant produces Industrial Safety Shoes that are made to
European standards. Sympatex TEX booties as well as ordinary booties are also made here.
Beside these Gharaunda has a design centre where an ambitious team of young designers
working in tandem with experienced technologists.
Currently the company is mainly focusing mainly on cost reducing strategies which are as
follows:
2. Demand based production: The Company is focusing on consumers and market demand
which will reduce inventories and improve sales-to-stock turnover.
3. Tax-free zone manufacturing base: After Himachal Pradesh and Uttaranchal the
company is looking at and negotiating with the third party manufacturing facilities in two
other tax-free states of Assam and Jammu and Kashmir.
4. Cost-cutting: Raw material used for used for 33% of total cost. Now Bata identified this
problem and started using different mix for footwear production with cheaper raw
material. Also, they started cutting some cost through sales and distribution network,
which is really huge distribution network.
f. How do the companies manage cost and use the information for decision making and
control?
1. BATA tried to reduce the costs of raw material. For this it tries to use different mix for
footwear production with cheaper raw material.
2. It also tried to reduce costs through sales and distribution network which is a very huge
distribution network. So they continued to invest in expanding retail business.
3. They also tried to generate skilled manpower and cut costs through manpower
reduction.
4. They reduced the inventory costs by clearing the existing merchandize by offering
discounts.
1. Decision to reposition:
Bata earlier concentrated only on manufacturing footwear and selling them anyhow
but in recent times it has changed its image of the production oriented company to
affordable, market driven, fashion conscious, lifestyle brand and hence the decision
to reposition.
2. Decision to produce based on logistics and demand:
To optimise the utilisation of production facilities the logistics team focuses on
obtaining orders from the market for the best selling designs and sizes and ensures
that all raw materials are available in the factories well in time so that the Company
can produce and place in shops the products that consumers want. Thus the
Company has been focusing on consumers and market demand which will reduce
inventories and improve sales-to-stock turnover.
5. Bata also adopted the cost cutting strategy through use of different mix of raw
materials for footwear production and also through sales and distribution but
without any compromise on the style, quality and design of the product as it
endeavours to break the myth of price factor by producing economy range of good
quality and stylish products.
RECOMMENDATIONS:
1) The main recommendation we can give Bata is to repositioning itself. In India we
still believe that Bata is just a company which produces footwear for school
goers, office goers and regular use footwear like slippers and snickers. Bata is still
trying to change its image of production oriented company to affordable, market
driven, fashion conscious, lifestyle brand. Today they have a huge shoe line with
a huge range of new designs on offer. To name a few they are Marie Claire,
Weinbrenner, North Star, Power, Hush Puppies, Dr. Scholls, Ambassador,
Bubblegummer etc but only a few segment of people know about this. So Bata
must back their campaign through TVC’s, print media and word of mouth.
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