Bata Shoes Ltd Case study Essay

how has Bata acted with foreign semi policy-making ashess interrogation 1Following the First world War the Austro-Hungarian conglom durationte was fragmented into Austria, Czechoslovakianoslovakia, Hungary, Romania and Yugoslavia. During this stopover the Czechoslovakian utter was conceived as a parliamentary democracy, with the constitution of 1920 giving the central formation a high head of control e trulywhere local organization. Czechoslovakia, in particular, saw rapid frugalal growth during the 1920 brought about by foreign investment and advances in manufacturing technology. The uncouth proved particularly tempting for foreign investors much(prenominal) as the British, French, Belgian and Dutch due to low labour costs and readily easy natural resources.Only in the shoe industry the foreign corking played no important role. Thanks to a monopoly position of Bata plant life Czechoslovakia held the set-back place among the worlds leading shoe exporters in 1930s after over victorious Great Britain and the USA. In 1938 interference by Hitler resulted in the old Slovak and Ruthenian demands for autonomy finally been granted. Czechoslovakia was deprived of one tierce of its territory containing some of its most important industrial centres and most potent furthestm-land, leaving the commonwealth stintingally crippled.Following this Bata realised his business did non excite good future prospects if it were to re important in Czechoslovakia. He seek to continue consummations and preserve the business by moving to Canada as the country was candidateed as a safer in public presentation(p) environment, both economicalally and governmentally.Bata incline to Canada, along with one hundred of his staff and families, would see the fraternity and its achievementers having to align to operations in a assorted policy-making outline to Czechoslovakia, the first of numerous adaptations they would go to make as the company expanded cro ssways the globe.The relocation in Canada was a big change for Bata, as the government in that respect gives significant policy-making power to the provinces which each have their featuretrade barriers. This is a big contrast to Czechoslovakia, where the central government has wide power over the provinces. except, Canada was seen as very policy-makingly and economically unchanging in comparison to Czechoslovakia despite the semipolitical differences mentioned supra.With operations in over 60 countries across the world, Bata Limited runs as a de concentrate operation in order to allow its managers to adjust operating procedures to local environments. However tight control of Batas core philosophies and strategies argon in place, sluice though these whitethorn be different from that of the country the operation is in and the managers and workers employed there. This could potential differencely cause problems if pursued too rigorously. However, the text states that Bata d oes interact with foreign political systems with Thomas G.Bata travelling extensively to check on quality control and to ensure good relations with the governments of the countries in which Bata operates. This interaction is particularly important as I feel Bata widens a mo of key receiptss to many of the countries it chooses to invest in much(prenominal)(prenominal) as increase economic stability due to their labour intensive operations and constitution of purchasing materials locally.The countries Bata operates in vary in the amount of political and economic exemption they offer to their citizens and companies operating there. The parapraxis states that Bata does non won carbon per centum of the factories it has in some countries. It appears that Bata prefer to own 100 percent of their factories, only if argon bequeathing to compromise if the political bit requires. This includes taking minority self-possession, or in some cases providing licensing, consulting and te chnical assistance where it does not have an equity interest in a country. Bata seem to work this policy well as they have the flexibility to cope with these different operating environments. I believe this is a sensible policy as it allows Bata intrusion into food markets that may become sinlessr and more prosperous in the future.Bata serves its markets by producing in each market all it impart sell there. It give buy raw materials locally and achieves economies of scale due to its processes being very labour intensive. One may suggest that the lack ofexports would make Bata a less attractive prospect for the host countries as little extraneous money is feeding into the parsimony. However, since operations ar labour intensive there will be a great take in from the job opportunities created. The main issue that causes problems to arise in some countries is if raw materials be import into the countries in question rather than being brought locally. In such cases the case st ates that Bata must adjust to local laws and requirements for operation. However, by normally purchasing raw materials within the countries Bata operates in it appears to work well with the governments concerned.The main unprompted force foot Bata choosing not to export goods is the security that operating domestically brings, such as the avoidance of problems associated with exporting like if an importing country were to restrict trade. Bata obviously feels that stability is of key importance to its strategy, particularly in many of the less economically genuine areas in which it operates. In these countries there are not the laws to protect workers rights and safeguard income in times of unemployment, so if a factory were to close the effect would be very tricky hitting to the workers and would potentially ruin Batas political relations permanently.Bata operates in countries with varying degrees of freedom. tomcat Bata Snr. prefers to operate in elective countries as these offer the chance to discuss issues, whereas totalitarian regimes do not. However, Bata have still operated chthonic some Totalitarian regimes such as South Africa, Chile and Uganda.In Uganda Bata has had its operations nationalised and de-nationalised twice maculation operating down the stairs a lurid and repressive regime that saw the expulsion of many skilled foreigners. Bata took the sight that people would still need jobs and shoes whatever political system they were living under, a similar view that has been expressed recently by many people talking about Iraq. Therefore operations would continue. Bata bene convulsioned as the way it operated fitted in with the Ugandan governments policy of becoming more self-importance sufficient, rather than relying on imports. This is because Bata obtained its raw materials from with the country and offered the stability of sellingin their space market. Bata as well as helped the government with a second policy that aimed to operate up links amid agriculture and industry, with the raw materials coming from rural areas. The continue presence of Bata in Uganda, despite the expulsion of many foreign workers, reinforces its conviction in local workforce, which in turn helped build trust.By designation in with these policies Bata was able to operate in Uganda while many new(prenominal) companies were forced to leave, and benefit from a 98% share of the shoe market. Bata followed a similar model in Chile where Pinochet come upd the country for a period of time while the company operated there. Again Bata saw no need to leave to country as it viewed its investment there to be long term, in which time various political systems would come and go, but people would always need jobs and shoes. Many of the benefits offered by Bata to Uganda were also of benefit to the Chilean government and people.The regimes in both Uganda and Penochet Chile both suffered from forgetful human rights records. Bata was therefore put u nder some pressure to pass from these countries by various parties including governments and international organisations. However, Bata was always able to argue that it had been in the countries far longer than the regimes in place and had seen many come and go. Its sincere reason for being there was the fact that people needed shoes, and it was in a good position of providing this basic need.South Africa caused far great problems for Bata. here(predicate) the same type of extreme regime was seen as in countries such Uganda and Chile. The difference for Bata was that South Africa attracted far more national anxiety across the globe. The Canadian government took a very negative view of Canadian countries having interests in South Africa. Maybe more importantly public opinion and knowledge about the regime in South Africa were to have a big effect on the company. Bata possibly realised that if it proceed to operate in South Africa it would risk alienating itself from its consum ers in countries such as Canada and the US and set itself up for ridicule by the large-mouthed number of international organisations opposed to apartheid.In this situation it was important for Bata to interact with the various political systems involved to withdraw operations from South Africa while causing minimum disruption. It sold its take prisonering in South Africa in 1986. It did not identify the buyer or the sales price, and it denied that apartheid was the reason for its pulling out, citing that all factors had been taken into account with respect to its investment. Bata ensured that the Bata name and trademark could not be used by the buyer and that the jobs of the workers in its plants would be preserved. wherefore they now operate in Czech Rep, but not Slovakia.Question 2Czechoslovakia has being subject to turbulent time in the period following World War II. With the advent of communistic rule countries were very much formed from different ethnic groups held togethe r by totalitarian rule, as was the case here. The break-up of the communist bloc in 1989 resulted in the disintegration of countries such as Czechoslovakia, that would be divorce into two independent nations The Czech majority rule and Slovakia.The fact that both of these countries are now free from communist rule does not necessarily mean that they are free. emancipation House is an organisation that monitors the political rights and well-behaved liberties of countries around the world and invest them to the degree that freedom exists. Below is a summary of the assessment they give to the Czech nation and Slovakia.Since 1972, Freedom House has published an annual assessment of state state of freedom by assigning each country and territory the placement of Free, Partly Free, or Not Free by averaging their political rights and elegant liberties ratings. Countries whose combined averages for political rights and for urbane liberties fall between 1.0 and 2.5 are designated free between 3.0 and 5.5. artly free? and between 5.5 and 7.0 ot free.?As we can see from the chart above, both countries are now considered politically free. However, economically Slovakia still lags behind the Czech country. It has being politically free for less time and lacks concurrence in the freedom scores it achieves, suggesting that the political system may be subject to some instability. Bata express concern relating to Slovakia not being economically free in the case. As The Czech commonwealth is clearly move on along in its progress to economic freedom than is Slovakia, Bata is likely to count considerably less government intervention in its business. Private spot ownership and protection, property rights, and economic competition are likely to be more common in the Czech Republic making the operating environment more stable.In Slovakia, Bata is likely to face greater political risks. There is likely to be more political instability in Slovakia, usually an indicator t hat there is also a lack of economic freedom. It also appears from the case that Slovakia may not have a very positive attitude toward foreign investment, despite Bata roots in the region.Bata would benefit from investment in both the Czech republic and Slovakia. From a nostalgic point of view, Bata will be able to return to the home country. Bata will also gain access to large facilities and a huge market in Eastern Europe and the former Soviet Union.The Czech Republic and Slovakia would also benefit from Batas investment themselves. They would gain access to Bata international design, production, and marketing expertise. They will be able to design better, more fashionable, and more reasonably priced shoes. The Czech Republic and Slovakia might be able to get Bata to invest significant capital into the plant to get it up to frontmost standards. Bata will create new jobs for Czech and Slovakian workers, especially as the processes are quite labour intensive. Bata also has a polic y of purchase raw materials locally, benefiting the host countries economic system as a whole.There are some disadvantages of investment for both parties too. Bata may be forced to ease up compensation for its own plants if the company chooses to invest in Slovakia. There is also a slightly higher risk of political instability and economic restrictions in the country. There are also disadvantages for the countries involved. Bata may actually have better production processes than are currently employed in the Czech Republic and Slovakia. Therefore they may actually require less workers than are currently employed in the factories so workers would be made unemployed. Bata do not export goods so do not bring as much foreign capital into the country as maybe would be expected by a company of their size.Bata reentered the Czech Republic and not Slovakia because the two countries have very different economic environments. The Czech Republic is moving more quickly than Slovakia toward a free market system. Slovakia are also in dispute with Bata regarding the ownership of the companies former factories in the country. The Slovak government appear disinterested in helping to solve the problem by implementing new laws to make it very difficult for companies in the same situation as Bata to regain their former property without either reaching agreement with the new owners or by taking expensivelegal action. When sounding at this evidence it looks advantageous for Bata not to seek to reinvest in Slovakia at present.Explain the current situation and relate to probable causes mentioned aboveThe political environment can have a dramatic impact on the operations of a firm. For example managers in most western European countries may be accustomed to a stable political system and a relatively homogenous population. This is often not true in other countries. A political system integrates the parts of a alliance into a viable, functioning unit. Sometimes that is a very diffi cult task. A country political system influences how business is conducted domestically and internationally.The basic political ideologies of a country are the body of ideas, theories and aims that constitute a socio-political program. The last test of any political system in its ability to hold a society together despite pressures from different ideologies tending to split it apart. History, culture, language, religion, geography and political ideologies help define national borders.Forms of government revolve from Democracy to Totalitarianism. Democracies usually have economic freedom and laws that safeguard idiosyncratic and corporate rights and are often preferred by investors. The more developed democracies tend to have the following characteristics.Freedom in the areas of political rights and civil liberties are particularly important in democracies. These are measured by the organisation Freedom House using a number of indicating factors, and the results compiled to rank c ountries according to their degree of freedom. In 1998, 88 of the worlds countries were free and 50 were not free. Free countries are high in both political rights and civil liberties, whereas those countries who deny their citizens basic political rights and civil liberties are not free. In addition 53 countries were partly free, with limited political rights and civil liberties, often in the context of corruption, weak rule of law, ethnic strife or civil war.Despite the large proportion of countries claiming to operate democratic governments, many new democracies around the world are not tho stable with few political parties and corruption threatening the systems survival. Examples include Indonesia and some countries from the former Soviet union. Businesses should be cautious when smell to invest in these areas.In contrast to democracies, totalitarian regimes offer far less political and economic freedom. Forms of totalitarianism include fascism (Mussolini Italy), authoritaria nism (Chile under Pinochet), and communism. Communists believe in the equal distribution of wealth, which entails total government ownership and control of resources.political systems have a great impact on management decisions. This includes political risk and government intervention in the economy.Political risk occurs when there is a possibility that the political climate in a foreign country will change in such a way that the operations ofinternational companies in that country will deteriorate. Types of political risk include government takeovers of property, operating restrictions, and agitation that misemploy the company performance. Such problems can be caused by changing opinions of political leadership, civil disorder, and changes in external relations (such as animosity between the home and host country governments.We can see many examples of the above in the Bata case. The companies operations were taken over in Czechoslovakia with the advent of communist rule. They are subject to operating restrictions in several countries where they are not allowed to have 100 percent ownership of their plants. Animosity between the home Canadian government and the South African host government during the Apartheid era was a contributing factor that lead to Batas eventual pulling out from South Africa. Civil disorder and strike action has affected the companies operations in several countries over the years.Government intervention in the economy occurs because some governments adopt an ndividualistic paradigm?and keep intervention in the economy at a minimum. Others adopt a ommunitarian paradigm?wherein the government plays a larger role in the economy. They thrive on a respected, centralised bureaucracy with a stable political party or compact in power.If a U.S. firm moves from the United States (individualistic) to Germany, Japan, or South Korea (communitarian), it may have to develop new strategies for its relationships with government, suppliers, customers , and competitors. Bata show evidence of adapting to different environments as the case states that the company is run as a decentralised operation in which its managers are free to adjust operating procedures to local environments. This highlights how the company acknowledge the need to be flexible in order to fit in under varying restrictions depending where in the world they are.Stable democracies are usually seen as the safest operating environment for businesses. In the Bata case Tom Bata Snr states that he prefers a democratic system a democracy offers the potential to discuss and change proceedings, whereas under totalitarianism it is sometimes wisest to remain unsounded. However, one must remember that not all democracies operate in the same way. For example the degree to which citizens are involved in thepolitical process and the degree of centralised control.In the case Bata relocate from Czechoslovakia to Canada. Here the provinces have significant political power at exp ense of the federal official government. Many provinces have their own trade barriers. Companies often have impediment determining how to operate in decentralised democratic systems because they face many different laws and regulations. For example different tax laws. For this reason one assumes that Bata guardedly chose exactly which state it would relocate to when it moved to Canada.Bibliography?Kurian, George Thomas 1992. Encyclopedia of the trinity World, fourth edition, volume III, Facts on File New York, N.Y., pp. 2009-2011.?Source Byrnes, Rita M. (ed.) 1992. Uganda A Country Study, Library of Congress Washington D.C. p. 123?The history of Slovakia (1929 1938) From Wall lane Crash to Munich http//www.adc.sk/english/slovakia/index.htm?Skilling H. G. ed. Czechoslovakia 1918-88. MacMillan Academic and Professional LTD., 1991.?J.D. Daniels and L.H. Radebaugh, International Business, Environment and Operations, 9th pas seul 2001, learner Hall. Ch 3?D. Holt and K. Wiggington , International Business, Second Edition ?2002, Harcourt College Publishers, Ch 3?Freedom House, http//www.freedomhouse.org/?R. Griffin and M. Pustay, International Business, A managerial perspective, Third Edition ?2002, Prentice Hall