Bata india's industrial relation issue case study

labor law assignment on case study of Bata India's Industrial Relation

1. A Case study on

Bata India’s Industrial Relation
Issues




Submitted By-
Talvinder Kour

2. Introduction
The company was originally incorporated as Bata Shoe Company Limited on December 23
rd,
1931 with the purpose of marketing and manufacturing of footwear products and engaged in
footwear trade. Later the company changed its name to Bata Shoe Company Private Limited on
April 6, 1956 and further as Bata India Limited on April 23, 1973.
During the late 1990s, either for wrong or right reasons, Bata India Limited has always made
the headlines in the financial dailies and business magazines. Throughout its inception Bata has
shown growth in profits, with the only loss shown in 1995, but in 2000 Bata again began its
downward phase which was mainly due to labor problems. In 1996, company signed a long-
bipartite agreement for the first time in Bata’s 62 year old history. This was done without any
disruption of work. The company after making huge loss in 1995 wanted to save itself by
bringing W.K. Weston who was expert in turning around performance. Weston made major
changes by selling the Bata headquarters in Calcutta to cover losses. The commercial
department was also shifted to Bata Nagar despite resistance from traded unions.
The management also retrenched 250 managers as well as juniors and froze the recruitment
hiring through internal transfers. After incurring its first loss of Rs. 420 million in 1995, Bata
managed to report profits by the end of year 1999. By the end of September 2000, Bata was
once again on downward path. The net profit of Rs. 105.5 million in 2000 was substantially
lower than Rs. 209.8 million recorded in 1999. Its staff cost of Rs. 1.29 million (23% of net
sales) was also higher than compared to Rs. 1.18 million incurred in the previous year. There
was a major labor dispute arising as BMU (Bata Mazdoor Union) had requested West Bengal
government to intervene in it.

Background Note
Bata was the largest marketer and manufacturer of footwear products with net revenue of Rs.
7.27 billion and net profit of Rs, 304.6 million for the financial year ending December 1999 with
a market valuation of Rs. 3.7 billion. Bata sold 60 million pairs per annum in India and exported
in overseas market including the US, UK, and the Middle East countries. The company was an
important operation as it had 51% of equity stake. The company gave employment to 15000
people with headquarter in Calcutta and five plants located in Batanagar (West Bengal),
Faridabad (Haryana), Bangalore(Karnataka), Patna(Bihar) and Hosur(Tamil Nadu). The
company had 1500 retail stores and 27 wholesale depots. At the manufacturing level, Bata had
severe issue related to labour. Company incurred huge employee expenses (22% of net sales in
1999) which other competitors had an edge over it. They made several key changes in
operations and key departments. Robin Majumdar, president, co-ordination committee, Bata
Trade Union, criticized the move saying, “Profits may return, but honour in difficult to regain.”
The management team implemented a massive exercise in which 250 managers and their junior
was asked to quit. The management offered its staff sales growth performance.

Assault case
More than half of Bata production came from Batanagar factory in West Bengal, a state well
known for its militant trade unions who derived their strength from political parties. The
politicalized trade union proved to be the hardest part for the company. On July 21, 1998,
Weston was severely assaulted by four workers at the company factory in Batanagar while he

3. was in the business meet. This incident occurred after one of the member of BMU, Arup Dutta
went to meet Weston to discuss issue on suspended employees. Dutta reportedly got into verbal
duel and other members got violent and assaulted Weston. This was the second attack on
Weston after he took over, first was on chief welfare officer in 1996. Soon after the incident the
three member involved in the violence were dismissed and this invoked anger in labours, and
they went on for a strike for two days. The incident had opened a can of worms said the
company insiders. Three men who were charge-sheeted were member of 41 member
committees, having strong political connection with Marxists. Company insider said that the
recent violence was more of political issue than industrial issue. Seeing up the seriousness of the
issues, the state government tried to solve issue by setting a tripartite meeting among company
officials, labor directorate and the union representatives.

Industrial Relations
Strikes seemed to be a perennial problem in Bata. Failure to the negotiation with the union
about the wage agreement, on March 2000, a lockout was declared by Bata in Bangalore
followed by strike in employee union. Their thought was the closure on sales and production
would reduce the cost of maintaining the idle plant. In 2000, Bata lifted the lockout from the
factory in Bangalore. They demanded revocation of 20 suspended employees confirming
standing orders and settlement in force. The company’s production of Hawai chappal also came
down by 58% of weekly capacity at Batanagar unit. This resulted to lower income of workers
forcing the government to intervene in between.

Questions for discussion
1. What do you think are the pros and cons of outsourcing of Bata? In 2000, was the
intervention of government rightly justified by union?
2. What are the necessary measure that Bata could take to establish good industrial
relation?
3. BMU (Bata Mazdoor Union) played more destructive role than constructive. Comment


Additional Reading (References)
1. Down in the dumps, Business India, April 10, 1995.
2. Bose, Madhumita & Subramaniam, Ganga, Looking for the right fit, Business India,
September 23, 1996.
3. Bata lifts lock out at Peenya factory, www.indiainfoline.com, July 5, 2000.
4. Another labour problem in the offing at Bata, www.indiainfoline.com, September 23,
2000.