FOOTWEAR INDUSTRY

PESTEL ANALYSIS OF
FOOTWEAR INDUSTRY
Political Relatives Weight (B) Score (C) Weighted Opportunity Threats
factors important B=A/144 (1-10) score (D) (E) (F)
rating (A) (B*C) Largest (D) Largest
(1-10) (A-C)

1.Political 6 0.04 6 0.24 0

unrest
2.Poor 5 0.03 6 0.15 -1
environmental
laws and rules
3. Tax and
tariff policy 7 0.05 5 0.35 2 T3
4. Level of
corruption 7 0.05 4 0.35 3 T1
Economic Relatives Weight (B) Score (C) Weighted Opportunity Threats
factors important B=A/144 (1-10) score (D) (E) (F)
rating (A) (B*C) Largest (D) Largest
(1-10) (A-C)
1.Strong brand 9 0.06 8 0.54 1 1
equity
2.Poor 7 0.05 5 0.35 2 T4
infrastructure
2.Unavilability 5 0.03 4 0.15 1
& high cost of
power supply
3.Unemployme 6 0.04 6 0.24 0
nt rate
4. Lower rate of 3 0.02 4 0.06 -1
inflation
Social Relatives Weight (B) Score (C) Weighted Opportunity Threats
factors important B=A/144 (1-10) score (D) (E) (F)
rating (A) (B*C) Largest (D) Largest
(1-10) (A-C)
1.Large 8 0.06 7 0.48 3 1
Population
2.Change in 9 0.06 8 0.54 2 1
buying patterns
3. consumer
attitude and 4 0.03 4 0.12 0
opinions
changing towards
branded shows 5 0.03 4 0.15 1
4. Lifestyle trend-
upward shift
Technological Relatives Weight (B) Score (C) Weighted Opportunit Threats
factors important B=A/144 (1-10) score (D) y (F)
rating (A) (B*C) (E) Largest
(1-10) Largest (D) (A-C)
1.Increase in 4 0.03 5 0.12 -1
the use of
commerce
conducted
electronically
4
2.New 8 0.06 7 0.48 1
technology
emerging
5
3.Innovation 7 0.05 7 0.35 0
potential
4.Competing 5 0.03 4 0.15 1
technological
development
Legal Relatives Weight Score (C) Weighted Opportunity Threats
factors important (B) (1-10) score (D) (E) (F)
rating (A) B=A/144 (B*C) Largest (D) Largest
(1-10) (A-C)

1.Tax policy 5 0.03 6 0.15 -1

2.Compliance 5 0.03 4 0.15 1
issue
3.Safety 7 0.05 5 0.35 2 T2
Regulation
4. Level of 6 0.04 5 0.24 1
corruption
Environmen Relatives Weight Score (C) Weighted Opportunit Threats
tal important (B) (1-10) score (D) y (F)
factors rating (A) B=A/144 (B*C) (E) Largest
(1-10) Largest (A-C)
(D)
1.Environme 7 0.05 5 0.35 2 T5
ntal
regulation &
protection
2.Climate 6 0.04 5 0.24 1
change
affects on
operations
3.Recylcing 3 0.02 4 0.24 -1
 VALUE CHAIN ANALYSIS OF FOOTWEAR
INDUSTRY

Primary Activities: Supporting Activities:

•Inbound Logistic •Firm Infrastructure

•Operations •Human Resource Management
•Outbound Logistic •Procurement
•Marketing And Sales •Technology
•Services
PRIMARY ACTIVITIES OF FOOTWEAR INDUSTRY :
Inbound logistics
Various raw materials, such as skin, jute, leather, rubber, plastics, synthetics, and PVC
soles among others are used for manufacturing footwear products. The footwear
manufacturing companies including BATA, APEX, LOTTO etc procure all these
materials from different vendors to manufacture different footwear.
Operation
Every types of rubber, leather and related products are been manufactured in the
factory. These factories are controlled by the director of production. They are
responsible for directing, coordinating and controlling the overall production activities
means from the purchasing raw materials to transferring those into complete shoes
Outbound logistics
The finished products send to the factory. After receiving the finished products then
the packaging has been done according to the requirement of different stores,
Agencies, dealers and wholesalers the goods has been transferred directly to the
distributors.

Marketing & Sales

Footwear industry also invests heavily in marketing and uses sportspeople like
football celebrity for the marketing and promotion of its products and brand. Its
video marketing strategy is especially appreciated.
The main sales channels are: physical and online channel.

Services
Footwear industry repair, exchange or refund any products if defects found through
their company. They also exchange or refund on unworn merchandise if one changes
one’s
mind. Proof of purchase is required for refunds. They provide warranty for every
category of shoes.
Supporting activities of footwear industry:
Technology:
Technology and product quality both are important components for footwear
industry. While focus is on the best quality, sustainability has also become an
important focus. It is using best in class technologies to reuse the waste generated
by different company and technologies that specially focus on creating material
that is both user friendly and sustainable.
Human Resources Development
Activities of human resources department are to ensure the proper section of
personnel, help the employees to grow and develop themselves, maintenance of
personnel records and maintain cordial and peaceful labor management
relationship to ensure discipline among the employees.
Procurement:
In footwear industry, quality is a very important focus and therefore, there is an
entire procurement team dedicated to this task which analyzes and evaluates the
eligible suppliers. It keeps only the ones who can guarantee more than the
minimum quality requirements. Raw materials are procured from several
countries.
Firm infrastructure
Finance department try to allocate the fund in a proper way that minimizes its
cost and maximizes its profit but cost is not fact, quality is the most focusing
issue. Internal audit department is very much intellectual. Quality assurance and
R& D department employees’ creativity should be high.
 Vision and Mission of BATA
Vision
“To provide good quality shoes at an affordable price by
keeping in mind the comfort that needs to be there and
providing new designs with it.”
Mission
“Introduction of a strong shoe line targeted to various
market segments to maintain leadership through
increased market share.”
 Objectives of BATA
• To achieve of 100% estimated business in each
category
• To maintain a shoe line with 700 lines of which 200,
300, 150 & 50 lines for Men, Women Children & Plastic
respectively.
• To introduction of a shoe line as per life style as well as
fashion trend.
• To achieve an average 55% margin in each category
• To innovate ideas or system for better management of
merchandise distribution by maintaining 4 times stock
turn.
 Strategies of BATA
The company’s strategy that they encompasses:
• Penetration to new & targeted market segments through introduction of
shoe lines as per life styles with supportive promotion activities.
• Identification of loopholes in cost structure to increase production
efficiency
• Detail analysis of price points of entire shoe line in order to achieve
maximum margin
• Detail analysis of departmental work flow & bringing necessary changes
for efficiency and better coordination with other departments
• Defined number of lines, assortment & quantity for each store according
to merchandise classification & store profile in order to increase
efficiency in distribution.
• Maximum reach across the channels
• Ensure seamless shopping experience
• Build the right team and culture
 Policies of BATA
• Dividend Distribution Policy
• Policy for Determination of Materiality of an Event/Information
• Policy for Preservation of Documents & Archival Process
• Remuneration Policy
• Familiarization Program for Independent Directors 
• SEBI (Prohibition of Insider Trading) Regulations, 2015
– Code of Conduct of Fair Disclosure of UPSI
– Code of Conduct to regulate, monitor and report Insider Trading     
• Corporate Social Responsibility (CSR) Policy 
• Related Party Transactions (RPT) Policy 
• Code of Conduct for Directors, Senior Management Personnel and
Functional Heads 
• Whistle Blower Policy
• Prevention of Sexual Harassment Policy
 Current positions:
Bata Bd. – Basic Facts:
Year of Establishment as Branch Office :1962
Year of Incorporation as Full Fledged Company : 1972
Total Manpower :4300
Number of Broad Categories Of Shoes :4
Total Number Of Categories Of Shoes :40
Bata‘s Annual Sale Pairs (2009) :35 M Pairs
Bata‘s Annual Turnover in 2009 :70m Us $
Average Retail Price :4 Us $
 No. Of Brand :20
 CURRENT HIGHLIGHTS:

Period
Sep 30, 2018 Jun 30, 2018 Mar 31, 2018 Dec 31, 2017
Ending:

Total Revenue 2008.46 3123.32 2022.24 2086.15

Gross Profit 927.47 1423.98 849.83 1058.62

Operating
285.93 703.57 252.6 490.79
Income

Net Income 206.4 459.12 175.97 370.08

Balanced scorecard for
BATA
 LEARNING AND GROWTH
Objectives Measures Targets Strategic
Initiatives
Competencies Training and 65% of Specialized
development employees trainings
Employee Employee Limit turnover to High rewards for
retention turnover rate 2% best performers
Employee Employee 35% High reward for
satisfaction productivity improvement best performance
Philanthropy Increased CSR 2% budget Initiate
interventions allocation campaigns for re-
imaging
corporate
citizenship
Team building # of integrated All employees to Cross
engagements be part of teams departmental
teams
 CUSTOMERS

Objectives Measures Targets Strategic

Initiatives
Efficient delivery Improved 98% on time Reward for
time logistics and meeting
management support delivery/cycle
time
Customer loyalty Survey/feedback 70% customer Customer service
at the time of retention and product
sales warrantees
Customer growth Market share 25% growth in Dealers to be
market share given attractive
margins for
exceeding
periodic targets
 INTERNAL PROCESSSES
Objectives Measures Targets Strategic Initiatives

Product innovations Quality/performance Improved designs Research and

ratings and survey and endurance development budget
capability to be increased by
25% involving
customers input in
innovation
Improved supply Delivered cost of raw 15% cost reduction Improves stock and
chain management material distribution through supply chain spare management
cost efficiency and supplier
collaborations

Quality of dealers Ratings of dealers Evaluate strategic Setup new

hubs and core dealership and
markets showrooms

Improved accounting IFRS/GAAT 100% conformity Qualified and ethical

practices standards professionals to be
hired
 FINANCIAL
Objectives Measures Targets Strategic
Initiatives
RAVENUE SALES GROWTH 10% increase in
MAXIMIZATION by market each product line
penetration
COST Reduced raw Unit cost reduction
MINIMIZATION material and
process costs
RETURN ON Ratio 5% up
CAPITAL
EMPLOYED
RETURN ON Ratio 5% up
ASSETS
“RIGHT SIZING ” Less labor intensive 15% labor cost cut
work environment
IMPROVED Increase in market 5% EPS
SHAREHOLDER value of shares and 10% DPS
EQUITY increased dividend
 Resource Based View of

The Resource-based View (RBV) of the

BATA
Firm is an approach to business
strategic management that emerged in
1980s and 1990s.

The approach is based on the concept

that firms consist of various types of
tangible and intangible resources –
assets, processes, skills,information,
knowledge, etc. When these resources
are combined, they create ‘Business
Capabilities’ (viewed as a special type of
resource), some of which, either
individually, or in combination, create a
set of “Core Competencies”, that provide
a sustainable competitive advantage to
the firm.
 Tangible Assets

A tangible asset is an asset that

has a physical form. Tangible
assets include both fixed assets,
such as machinery, buildings
and land, and current assets,
such as inventory.

Tangible assets of Bata:

★Factory

★Machinery

★ Show-rooms etc.
 Intangible Aasets
An intangible asset is an asset that is not physical in nature. Goodwill, brand
recognition and intellectual property, such as patents, trademarks and
copyrights, are all intangible assets.

Intangible assets of Bata:

★ Brand image

★ Technical know how

★ Software etc.
 Heterogeneous Assets

For a firm to attain competitive advantage,it must posses some

heterogeneous assets. These assets needs to be unique and as a result in
will not be imitated by competitor. Bata has some heterogeneous assets like:
♦Brand Image
♦ Experienced workers,employees and management.
 Immovable Assets
The RBV theory says that to have competitive advantage, assets of a
firm needs to be immoveable(at least in short term), otherwise there will
be no competitive advantage. The immovable assets of Bata are :

♣ Brand Image

♣ Production Facilities

♣ Knowledge & skill of employees

♣ Softwares & Production process

 VRIO Framework of Bata

The VRIO Analysis was developed by Jay B. Barney as a way of

evaluating the resources of an organization (company’s micro-
environment) which are as follows:
 Financial resources

 Human resources

 Material resources

 Non-material resources (information, knowledge)

Assets Valuable Rare Inimitable Organised

Fixed Yes No No Yes

Assets or
Tangible
Assets
Brand Yes Yes Yes Yes
Image

Software Yes No Yes Yes

Skilled Yes Yes Yes Yes

Workforce
The frame work shows that, among all the assets of Bata, Brand
Image and Skilled Workers give Bata Competitive Advantage
over the rivals. Their other resources like Software gives
Temporary Competitive Advantage and their Tangible Assets
give them Competitive Parity.
 Strategic posture of Apex Footwear Ltd.
Current Position:
Journey of Apex Footwear Limited started more than two
decades ago, from the inspiration of leather business &
later curving it’s way into shoemaking. As one of the
largest shoemaker in the subcontinent, the company
holds 15% share of leather footwear export in
Bangladesh from $1.1 billion leather export. AFL was
able to generate 13% revenue growth in exports in 2017-
18. It also continues it’s growth in registering 12%
domestic market growth in 2017-18. Shoemaking being a
highly labor intensive job, their company is home
to 13000 workers mostly women to make stylish leather
shoes. 
Vision statement:
‘Honest Growth’

Review of vision statement:

Vision statement of ‘Apex Footwear Ltd.’ is short
and vague. It does not convey the purpose of the
firm. Also, it does not include what type of business
it is doing. It also should mention what it want to
achieve in the future.
Mission statement:
Mission statement of ‘Apex Footwear Ltd.’ are;
To ensure sustainable growth
To be a vendor of choice for our customers
To create value for our shareholders
To be proactively compliant with Global best practices & standards
To be a responsible corporate citizen

Review of mission statement:

The statement covers only four of nine components. It covers (1)
Technology, (2) Survival, growth and profitability, (3) Philosophy & (4)
Public Image. It failed to cover Customer, Products and services, Markets,
Distinctive competence and employees. Its of only 34 words. It does not
answer all important question of what their business is. No objectives and
formulating strategies are given. Reasons for their doing their business
should have been mentioned in the mission statement. Though it includes
its venture in mission statement but it did not mention how it aspires to
distinguish it’s operation from all other firms in the industry.
 Objectives
• Invest more in training and Human Resources development
• Strengthen production team
• Improve margin recovery
• Reduce cost and process loss
• Boost productivity
• Strengthen Quality management team and system
• Become more customer centric
• Continue the move towards higher design content and sustainability
• Improve capacity utilization
• Improve supply chain management to reduce inventory levels at all
stage
The objectives of AFL is relevant and Specific
×
timely and considering firm’s current Measurable ×
position, these objectives are also
achievable. Achievable 

But some are not Specific or Relevant 

Measurable as there is no qualitative
target. Timed 
 Strategies of AFL
Corporate level strategy:
A continuous involvement of all company resources towards quality
insurance. Strengthening it’s business and supply chain through out
the country.
Also establish a standard for their brand using state of the art
equipment and design.
Business level strategy:
Continuous integration with different parties to develop supply chain.

Continuous monitoring of business processes that influence customer

satisfaction in order to identify room for improvement.
Functional level strategy:
Maintaining functional activities for the integrated management of
the processes that affect the quality of the product / service.
 Internal Environment Analysis
Physical Resources Financial Technological
Resources Resources
Resource Based View (Tangible Resource)
• Property, plant • Cash & Cash • MIS control
and equipment Equivalents system
• Vehicles • Short term • ERP System
• Office equipment Borrowing
• Computers and Capacity
printers • Inventories
• Furniture and • Account
fittings receivable
• Plant and • Advance, deposit
Machinery and prepayment
 Human Resources: Reputation:

Resource•• Brand
• Employees (13000)
• Effective Work Team
Based name View
Award: WRAP Gold
(Intangible
• Highly qualified
Management
Resources)
certification
• ISO Certification
• Employee knowledge and 9001:2015
skills • Tannery unit achieved ISO
14001:2015 certification
• Achieved alliance standard
in workplace safety
• High Quality Products
 VRIO Framework of AFL
Resources Valuable Rare Inimitable Organized

R&D skills 

HRM 

Product Quality Mix  

CSR Image 

Propensity for Innovation  

Relations with supply chain  

Capital   
Competency

Machinery & Equipment    

Corporate leadership &    

Core

vision
Brand Image    
 Financial ratios analysis of AFL

Liquidity ratios 2017-2018 2016-2017

1. Current ratio 1.01 times 1.03 times
2. Quick ratio 0.32 times 0.33 times

The current ratio is 1.01 in 2017-2018 and 1.03 in 2016-2017

where standard is 2:1. So their liquidity status is not satisfactory.

The Quick ratio is also not satisfactory for AFL.

0.32 in 2017-2018 and 0.33 in 2016-2017 where standard is 1:
1. That’s indicate that their asset liability is not good.

 
 Activity ratios 2017-2018 2016-2017

Receivable turnover 7.15 times 8.20 times

Inventory turnover 2.4 times 3.89 times

Receivable turnover rate 8.20 times in 2016; decreased

in 2017 to 7.15 times. It means this decreasing trend indicate that
condition of the firm is not good.

Inventory turnover ratio is good in 2016 but in 2017 it

decreased to 2.4 times. This decreasing trend is not satisfactory for
the company.
Market value ratio 2017-2018 2016-2017

Price Earning Ratio 31.27 times 47.73times

Receivable turnover rate 8.20 times in 2016; decreased

in 2017 to 7.15 times. It means this decreasing trend indicate that
condition of the firm is not good.
 Profitability Ratio 2017-2018 2016-2017

Gross Profit Margin 20.89% 19.93 %

Receivable turnover rate 8.20 times in 2016; decreased

in 2017 to 7.15 times. It means this decreasing trend indicate that
condition of the firm is not good.
Solvency Ratio 2017-2018 2016-2017

Interest coverage ratio 1.40 times 1.39 times

Receivable turnover rate 8.20 times in 2016; decreased

in 2017 to 7.15 times. It means this decreasing trend indicate that
condition of the firm is not good.
 Internal Environment Analysis (Strengths and Weaknesses)
Factors Relative Weight Score Weighted Strengths Weaknesses
importance (B)B= A/52 (C) score (D) (E) (F)
rating (A) (1–10) (B × C) largest (D) largest
(1–10) (A–C)

International 8 0.15 8 1.20 Strength(3 0

supply chain
)
Supplementary raw
material
6 0.11 7 0.77 -1

R&D 9 0.17 7 1.19 Strength(3 2

)
Continuous
improvement
5 0.12 6 0.72 -1

Product diversity 8 0.15 9 1.35 -1

Brand Image 9 0.17 7 1.19 Strength(1 2

)
Customer Loyalty 7 0.13 6 0.78 Strength 1
 External Environment Analysis (Opportunities and Threats)

Factors Relative Weight Score Weighted Strengths Weaknesses

importance (B)B= A/45 (C) score (D) (E) (F) largest
rating (A) (1–10) (B × C) largest (D) (A–C)
(1–10)

International 8 0.18 7 1.26 Opportunity 1

Market
   

Supplementary 0.18 1.44

8 8 Opportunity 0
raw material  
 

Market Share 0.16 1.12

7 7 Opportunity 0
   

Trade war 0.07 0.49

3 7 Threat -4
   

Competition 0.13 0..91

6 7 Threat -1
   

Port facilities 0.13 0.6

6 5 Opportunity 1
 

Domestic 0.16 0.86

7 6 Threat -1
Business  
environment