8.1.2 The example of Bata Ltd
Bata Ltd began in Czechoslovakia before World War II. In 1939, Bata took 100 Czech families and migrated to Canada , the current head office of this MNE. Here are some statistics relating to Bata Ltd:
- International sales - $US 3 billion
- in 115 countries
- Independent retailers - 125
- Factories in 90 countries
- Operations in some form in over 100 countries
- Total staff - 85,000
Where possible, Bata owns 100% of the operation. In some countries, this level of ownership is not possible: for example, in India it is 60% and in Japan 10%. In some cases, Bata provides licensing, consulting, and technical assistance to companies in which it has no equity.
Multi-domestic : |
This strategy is one which pursues local responsiveness and this, in structural terms, is decentralised with its overseas subsidiaries being functionally self-contained. Bata Ltd is run by Tom Bata (son of the founder) as a decentralised operation that is free to adjust to the local environment. As well, the company tries to service each local market solely through shoes it produces in that market. |
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To the extent that Bata is successful in doing that, and if we ignore those cases where Bata has incomplete control, we can say that Bata matches its multi-domestic strategy with a decentralised structure. |
International : |
Under this strategy a firm recognises the value in transferring its core competencies from head office operations to its overseas subsidiaries (it is implicit in multi-domestic strategy that overseas subsidiaries are left to develop these core competencies for themselves). Thus, the structural match for this type of strategy is to centralise core competencies and decentralise functional areas. Those decentralised functional areas are largely self-contained so, structurally, an international strategy requires more centralisation than a multi-domestic strategy, but it is not as strongly centralised as, say, global strategy (see below). |
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Core competencies are most frequently found in R&D and marketing (for example, Coca-Cola's centralised control over its key recipe ingredients and its worldwide marketing themes). In the case of Bata Ltd, Tom Bata travels extensively to check on quality control and, as noted above, Bata provides licensing, consulting and technical assistance in locations where it has no equity. This can be interpreted as centralisation of key competencies so, by this criterion, Bata could be represented as using an international strategy. |
Global: |
Where a global strategy is used, major decision making is centralised and so are core competencies. Ultimate control over operations is vested with head office but, generally speaking, functional control is decentralised. On the evidence available, Bata does not retain ultimate control over decision making so we must infer that Bata does not employ a global strategy. |
Transnational: |
Companies employing a transnational strategy are trying to optimise a combination of scale economies and local responsiveness. This creates competing requirements for centralisation vis-à-vis decentralisation. The need to transfer core competencies, particularly production and R&D, calls for centralisation of operating decisions. The need to be locally responsive calls for decentralisation of operating divisions, particularly in marketing. The end result is a mixture of centralisation and decentralisation. On the criteria discussed above, it is clear that Bata Ltd is not pursuing a transnational strategy. |
This discussion has strategy (Chapter 7) related to the issue of centralisation/decentralisation which Hill (2005) associates with vertical differentiation. In the next section we look at structural design and horizontal differentiation which leads to the formation of divisions, departments, sections and other forms of subdivision. However, you should keep in mind that structure evolves from the synthesis of both vertical and horizontal differentiation.
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