Bata Ltd - World War I Boot Contract a Turning Point
World War I Boot Contract a Turning Point
Bata received a major boost in 1914, following the outbreak of World War I, when the company received a contract to produce boots for the Austro-Hungarian army. From the waste of these items, the company produced the uppers to a wooden shoe that it sold to the lower classes. Tomas Bata then invested the profits in new machinery, as well as in the opening of new retail shops, so that the business was well positioned to take advantage of the economic boom of the 1920s. Before the company could enjoy this strong period of growth, however, Tomas Bata and his employees were forced to take a major gamble together. In the years immediately following the end of World War I in 1918, an economic slump prevailed across the globe, leading to significant unemployment. Czechoslovakia, formed as part of the peace settlement of World War I, attempted to fight inflation, which had already devastated Germany, by adopting tight monetary controls. As a result, the country's currency lost three-quarters of its value, which in turn led to a drop in demand for products, a cutback in production, more unemployment, and even less consumer demand—developments that together threatened national economic devastation. In August 1922, a group of industrialists met to discuss their plight. Unlike the others, Tomas Bata did not simply throw up his hands and blame the government. Instead, he called on the industrialists to take decisive steps to stimulate market demand, and he shocked everyone by announcing that he was going to cut the price of Bata shoes in half. Once the surprise of the moment wore off, Bata's audience simply laughed at him.
Bata was able, however, to convince his workers that he had a plan, albeit a radical one, that would work. He believed that the company had to cut costs to the bone and work at peak efficiency in order to halve the price of Bata shoes. Workers, ignoring their union leadership, accepted a 40 percent reduction in wages across the board. Tomas Bata, in turn, provided food, clothing, and other necessities at half-price to mitigate the loss of wages. In addition, he introduced measures that were pioneering, including the creation of individual profit centers and incentive payments to both management and workers to spur productivity. With his operations lean and efficient, he then launched a national advertising campaign. The response from consumers was swift and dramatic, as Bata stores, which had been virtually empty for months, were now swamped with customers looking for inexpensive shoes. Bata was forced to increase production, and not only did the company maintain full employment, it began to hire. The decision to cut prices proved to be a turning point in the history of the company, which now grew at a tremendous pace.
Tomas Bata continued to innovate, improving on productivity primarily through the introduction of an assembly line approach. After five years, productivity improved 15-fold; after ten, the retail price of Bata shoes dropped by 82 percent. The employees' faith in Tomas Bata was also rewarded. After accepting a severe wage cut in 1922, by 1932 they had seen their salaries doubled. They were now working for the largest shoemaker in the world. According to company lore, in fact, in some developing countries "bata" gained currency where there was no word for "shoe." Moreover, Bata became involved in a variety of other industries, including socks, leatherwork, chemicals used in leather making, shoemaking machinery, wooden packing crates, tires and other rubber goods. The company launched its own film studio to produced advertising materials, and it soon evolved into a full-fledged enterprise that produced some of the earliest animated films. Because of the company's involvement in transportation, as Bata became the world's largest exporter of shoes, Tomas Bata even became involved in the manufacture of airplanes through the Zlin Air Company, which produced both sporting and business planes. He also became famous for housing his headquarters in the tallest reinforced concrete office building in Europe, which featured an elevator that housed his "floating office." With a push of a button, Bata was able to confer, and keep an eye on, his employees on every floor without leaving his desk.
Bata established operations in new markets, such as Singapore in 1930. The company, which in 1931 adopted a joint stock company form of organization, also established subsidiaries and shoe factories in a number of European countries as a way to circumvent tariffs that had been imposed in response to a worldwide economic depression. In mid-1932, Tomas Bata called together his team of executives and announced that in order for the company to weather increasingly difficult economic conditions and drive further growth, they would have to look to more distant markets, in particular North America. Just two days later, however, Tomas Bata was killed when an airplane he was in took off in a thick fog and crashed into a chimney of one of his buildings. He was 56 years old.
Bata left a 22-year-old son, Thomas J. Bata, whom he had groomed since childhood to one day head the business, but in the meantime Bata's half-brother Jan took over and continued the mentoring process. It was Thomas Bata who was to be dispatched to North America, to which the company was already exporting shoes, to establish a manufacturing operation. While most executives in the organization lobbied for the United States as the location for a plant, the young Bata was fixated on locating the business in Canada, a place he had romanticized since childhood after reading the works of Jack London. With the rise of Nazi Germany in the 1930s, the importance of organizing a North American operation took on increasing importance, as the company now made plans to relocate its headquarters to the West. In March 1939, with Germany on the verge of invading his country, Thomas Bata fled to Canada along with 180 Czechoslovakians. After being granted permission from the Canadian government, he started up operations in Frankford, Ontario, taking over a former Canadian Paper Company mill while a new factory was built. To aid in the Allied war effort, the company focused its personnel and equipment on the production of anti-aircraft equipment and machines used to inspect ammunition. For his part, Jan Bata moved his headquarters to the United States, but when blacklisted by the Allies he was forced to relocate to Brazil. The Bata Shoe Organization, as it was called, was now split between uncle and nephew, resulting in an eventual contest for management control and ownership. Thomas Bata essentially prevailed in 1949, but the contest continued to be played out in the courts of numerous countries until the end of 1966.
The return of Bata operations lost to the Nazis was short lived after World War II. In 1945, the communist government installed in Czechoslovakia by the Soviet Union had nationalized the country's industry, usurping the original Bata shoe factory in Zlin and the company's far-flung network of shops. (Even Zlin's name was changed, becoming known as Gottwaldov, a tribute to the country's first communist president.) Bata was further stripped of assets as other countries, including East Germany, Poland, and Yugoslavia, also nationalized their shoe industries. Now based in the West, Bata and its many Czechoslovakian expatriates began to rebuild the business, taking on an almost missionary zeal in the process. Rather than organizing in a centralized manner, the company established a structure based on autonomous operations, primarily in the new markets of developing countries. Also following the war, Thomas Bata married an aspiring architect named Sonja, a woman who would play an influential role in the success of the company, supplementing her husband's manufacturing and sales expertise with a sense of design and style. By the mid-1950s, Bata was operating 56 factories in 46 countries. Thirty years later, Bata was in 115 countries, selling close to $2 billion worth of footwear each year through 6,000 company-owned stores and 120,000 independent retailers.
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