Bata India's HR Problems

            

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Themes: HR Problems
Period : 1990-2001
Organization :Bata India Ltd.
Pub Date : 2001
Countries : India
Industry : Shoes and Apparel

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Case Code : HROB001
Case Length : 06 Pages
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Bata India's HR Problems

For right or wrong reasons, Bata India Limited (Bata) always made the headlines in the financial dailies and business magazines during the late 1990s. The company was headed by the 60 year old managing director William Keith Weston (Weston). He was popularly known as a "turnaround specialist" and had successfully turned around many sick companies within the Bata Shoe Organization (BSO) group.

By the end of financial year 1999, Bata managed to report rising profits for four consecutive years after incurring its first ever loss of Rs. 420 mn in 1995. However, by the third quarter ended September 30, 2000, Weston was a worried man. Bata was once again on the downward path. The company’s nine months net profits of Rs 105.5 mn in 2000 was substantially lower than the Rs. 209.8 mn recorded in 1999. Its staff costs of Rs. 1.29 bn (23% of net sales) was also higher as compared to Rs. 1.18 bn incurred in the previous year. In September 2000, Bata was heading towards a major labour dispute as Bata Mazdoor Union (BMU) had requested West Bengal government to intervene in what it considered to be a major downsizing exercise.

Bata- A Household Name

With net revenues of Rs. 7.26 bn and net profit of Rs. 300.46 mn for the financial year ending December 31, 1999, Bata was India's largest manufacturer and marketer of footwear products. As on February 08, 2001, the company had a market valuation of Rs. 3.69 bn. For years, Bata's reasonably priced, sturdy footwear had made it one of India's best known brands. Bata sold over 60 million pairs per annum in India and also exported its products in overseas markets including the US, the UK, Europe and Middle East countries. The company was an important operation for its Toronto, Canada based parent, the BSO group run by Thomas Bata, which owned 51% equity stake.

The company provided employment to over 15,000 people in its manufacturing and sales operations throughout India. Headquartered in Calcutta, the company manufactured over 33 million pairs per year in its five plants located in Batanagar (West Bengal), Faridabad (Haryana), Bangalore (Karnataka), Patna (Bihar) and Hosur (Tamil Nadu). The company had a distribution network of over 1,500 retail stores and 27 wholesale depots. It outsourced over 23 million pairs of footwear per year from various small-scale manufacturers.

Throughout its history, Bata was plagued by labor problems with frequent strikes and lockouts at its manufacturing facilities. The company incurred huge employee expenses (22% of net sales in 1999). Competitors like Liberty Shoes were far more cost-effective with salaries of its 5,000 strong workforce comprising just 5% of its turnover.

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