The Shoe King
“Do not pursue money. He who pursues money will never achieve it. Serve! If you serve as best as you can, you will not be able to escape money.”
- Tomáš Baťa
[This text was written in March 2023 for a ‘World of Entrepreneurs’ class, but I had to include it to honor my roots:)]
Introduction
When Tomáš Bata died in an airplane crash on 12 July 1932 in Otrokovice (Balaban et al., 2021), the national newspaper wrote, “He [Tomáš Bata] retired from his full-time job, with which he secured the lives of his co-workers' families, which was strengthened by his native region, and which he devotedly served his nation and all of humanity (“Československá republika,” 1932).” By the time Tomáš Bata died, his company called after him Bata - had 31, 000 employees, savings of CZK 152 000 000 (Approx. 7, 450 980 USD at the time), invented a new kind of shoes – the so-called Batovky, the assets of the company were CZK 920 million (Approx. 45 mil. USD) with 80% of these assets covered by equity, it was responsible for 81% of the Czechoslovakian footwear production, its factories were run in 11 countries throughout Eurasia and Bata’s sister companies operated on four continents in 24 countries (Velvet 2020). Nevertheless, not everything has always been easy for the business, and Bata’s company faced a lot of difficulties on the way toward this immense success. This essay is going to discuss how a member of a traditional Czechoslovakian shoemaker family built one of the biggest footwear companies in the world.
The Big Picture
Due to the limited word count of this essay, I can’t provide the reader with the big picture of the history of this 129-year-old company. I believe, however, that knowing at least a brief overview of the overall history of this company will help the reader understand the concepts covered in this essay in a broader context. Here I provide a list of some of the major events in the company's history to give the reader an idea of the scale of how successful this company is.
Three siblings established the Bata company in 1894 in an Austro-Hungarian – later Czechoslovakian – city called Zlín. After struggling in the first few years, the company eventually started to prosper in the early 19 hundreds. It was able to establish a strange trend of expanding during the years of crisis. During WWI, it expanded production due to the order military footwear ordered by the Austro-Hungarian government. During the economic crisis in central Europe in 1922, caused by the war, Tomáš Bata took protective measures such as lowering the price of his shoes by 50% and lowering the wages of his employees by 40 %. His company expands and destroys the local shoemakers (Bůžková 2003). Bata diversified his sources of revenue and started to build an entrepreneur’s empire consisting of film studios, newspapers, mining, and many other fields. He also built an airport and expanded to Europe and India. He died in a plane crash in 1932, and the new owner of the company is now Tomáš Jan Bata (further Jan to avoid confusion). Jan Bata continued in the footsteps of his father and further expands his empire (Velvet 2020). During WWII, he emigrates to Canada, and after the establishment of communism in eastern and part of central Europe, his factory in Czechoslovakia was nationalized, and he continued to lead his worldwide empire from Latin America after being deported from Canada for collaboration with the Nazis. He is especially successful in India mostly for its low prices for good quality footwear. After the fall of the iron curtain, Bata’s success story slowly loses its pace. It has difficulties keeping up with the trend of brands specializing in certain kinds of footwear, like Adidas and Nike. Even though it is not one of the top shoe sellers in the world anymore, this company still thrives these days, and that is especially for the hard work and genius ideas of Tomáš Bata that will be covered in this essay (Bůžková 2003).
Success
My four units of success are first, social and environmental responsibility; financial performance, customer satisfaction; and employee satisfaction. I believe that this business is unique mostly because of its high score on the social responsibility and employee satisfaction units. As the quote on the first page implies, Bata’s main focus was exactly these two aspects of business and revenues followed as an automatic consequence. Furthermore, it is difficult to define if a company that is over a hundred years old is successful because it depends on the time period one is looking at. I believe that overcoming all of the challenges of the 20th century and being still in business today is an accomplishment in itself. However, to focus on success in a specific timeframe, I will focus on the beginnings of the company till 1932. However because it is not possible to get much data about the company’s financial situation at that time due to its private ownership, I will talk more broadly about how this industrialized company took over the market and destroyed the small-scale local shoemakers. Then I will follow by establishing how the company is doing today in comparison to one of its competitors – Deichmann company. Nevertheless, the most important measure of success in this essay will be the impact of the company on the development of the region where it originated and the value it brought to the local people.
The Team - Skills and Attribute Leading to Success
In 1894 Antonín Bata got a trade certificate and founded the shoe business with his older sister Anna Bata and younger brother, Tomáš Bata. Together they put together the capital of 800 guldens (approx. 320 USD today)(Rath 2022). Right from the beginning, this enterprise wasn’t just a regular shoemaker business as was usual at that time. The Bata siblings were focusing on mass production, and with the use of their family money, they started with already ten employees. Soon this number grew to 50 (Velvet 2020). Even though all three siblings had the same amount of share in the enterprise, Antonín was the “main” owner since he was the oldest man in the company. This position gave him the privilege of managing the funds of the company and having the strongest voice in the company's future. From a modern perspective, we could consider him to be the financial director of the company (FCO). Tomáš Bata on the other hand, was responsible mainly for the smooth running of the company, innovation, and product supervision. Today we could call him the Chief Executive Officer (CEO). Nevertheless, it is very difficult to apply today’s business structure to a company in the late 18 hundreds, so this description is only oriental. The role of Anna Bata was especially interesting given the fact that she was a female entrepreneur at the end of the 19th century. It is important to note that Anna was playing the traditional role of a woman at that time – taking care of the two brothers. She was making sure that the FCO and CEO had somewhere to sleep and something to eat. However, simultaneously, she was a valuable cofounder of the company, and her role was much more important than the one of a housewife. Anna was very educated and intelligent, and more importantly, she was a good negotiator. Her negotiating skills were crucial for the company, especially in the early days when after a few years of operation, the company had an overall debt of 8000 guldens (approx. 3 200 USD today)(Shalini Rath, 2022). The three siblings didn’t run the company for long. Anna got married and had to move to Austria so in 1898 she was paid out her share. Not long after, in 1908, Antonin bata died of Tuberculosis, and Tomáš Bata remains the only owner of the company (Velvet, 2020).
Tomáš Bata is arguably the most significant persona having an impact on the company’s success. In 1905 Tomáš lived in the US and worked as a regular worker in the most developed companies in the world to apply their concepts in his own enterprise. In 1919 he worked in one of the biggest business success stories in the world – Ford. He wanted to revolutionize his business field, and in 1927, Bata was the first footwear company to use an assembly line in this field. It was his ability to analyze costs versus benefits and – more importantly – his willingness to take reasonable risks that makes him one of the most successful entrepreneurs of this time. One of these risks that paid off very well was for instance, his massive investment in marketing in 1927. At that time, Bata builds his own film studio to support his marketing strategies further (Cameron 2023). This strategy has proven to be successful, and in 1928, Bata accounts for 55% of Czechoslovak footwear exports and is the number one leather footwear exporter in the world.
The second attribute of Tomáš Bata that made him a successful entrepreneur was treating his employees as partners with the same goal as him instead of tools to reach his own goals. He was known for not being afraid to work physically as an ordinary worker. Even later on in his career, when everyone starting in his factory is starting with the lowest and most demanding jobs, he is captured with a shovel and pickaxe in the midst of his workers working side by side for a day or two (Bůžková 2003). Even though this may sound like a cheap piece of propaganda, Tomáš Bata was known for following his own rules. One of these rules was that an entrepreneur should think of his workers as co-workers and work harder than his workers. Keeping up with this standard, Bata was known for working 10 to 12 hours a day which was more than the standard day of Bata’s employees. As Jana Dundelová and Martina Urbanová quote Tomáš Bata himself, „The only possibility of mutual relationship between the employee and the employer within the company is only in perfect cooperation, carried out every day; that is the solution of the problem, how to use the modern production machines for the source of wealth (2013, p. 5)“ Even though most of his employees were not as educated and have never left Zlín, he would talk to them openly and honestly. In return he earned his employees loyalty and trust. For example, in the year of post-war crisis and with inflation of around 50% in 1922, Tomáš knew that the only way for his business to survive without firing employees was to push the prices of his product down, which could be done only by pushing the salaries of his workers down too. “Dear companions, the fact that you accepted my proposal of decreasing the salaries by 40% proves to me that you fully understand my speech about the situation in which our industry is right now (Bata, 1932).”Baťa goes on to explain to his workers what caused the situation in the country and his plan to overcome it. He tells them that everyone will have to humble themselves temporally but that it won’t be for a long time and that he won’t let anyone down. The trust of his employees allowed him to sell all his stocks of shoes at that time at 50% off and not only survive the crisis but also thrive in the upcoming decade. As a result of this prosperity, he later built, for example, accommodations, a cinema, a hospital, and a school for his workers and their descendants. It is important to note that at the beginning of the 20th century, this kind of communication with employees was not a common practice. Bata was one of the first who interacted with his workers as with partners, and it was one of the main reasons for his enormous success.
Bata’s Positive Impacts
The main measure of the success of the SBE is focused on how Tomáš and his company developed the Zlín region and improved the lives of its inhabitants. Many of these examples are mentioned throughout this work, but to demonstrate it further, I will include one easily measurable example based on hard data. Rob Cameron points out that in surveys from 1920s and 1930s, it was found that the “average weekly cost of living in Zlín was 161 crowns(inflation with the average of 4.6 between 2023 and 1930 one CZK (Czech crown) 1930 is approximately the equivalent of 34 CZK today – today the USD – CZK ratio is 21. 61(Převod 1930 CZK na USD, n.d.)). Elsewhere in Czechoslovakia, it was 257 crowns. The average weekly salary of a Baťa worker was 450 crowns (Cameron, 2023).” This demonstrates how economically developed the region was after a few decades of Bata establishing his company there. Moreover, in 1906 when Bata established his more democratic form of leadership in the enterprise. His employees started receiving wages via Baťa bank accounts, which gave them 10% interest annually. They also shared losses and profits in a so-called motivational scheme. “When an autonomous unit produced good-quality work, on time and on budget, employees were rewarded with bonuses. If the workmanship was shoddy or the designs out of fashion and unsellable, salaries were docked(Cameron, 2023).” This shows how unconventionally Tomáš Bata treated his employees. He was willing to take a risk by changing the wage system to make it fairer and to treat his workers more as a partner.
Competition
Local shoemakers
In business, the success of one company is usually associated with the failure of many other companies in the same field. This is also the case for Bata. Tomáš Bata came from a family with a long shoemaking family tradition. The last seven generations of Batas before him were shoemakers in Zlín (Velvet, 2020). Family-owned small business like the one Tomas ancestors owned was the norm in central Europe for many centuries. These businesses would usually produce around not more than 50 high-quality pairs a week (Pelzer 2019). Tomáš, however, decided to change this tradition by maximizing production and his understanding of the market and pricing.
The first main difference between Bata and the local shoemakers was the number of shoes Bata was able to make every day. From the start, he and his siblings bet on high-volume production and hired ten employees with very specific tasks to maximize production. In 1906 after visiting factories in the US, he builds a three-story red brick factory very specifically structured to maximize the efficiency of his workers. In 1919 he visits Henry Ford’s automobile company, and 8 years later in 1927 he creates his own assembly line and becomes the first footwear business to use an assembly line for making shoes. By 1930 the company produces 36,300,000 pairs of shoes annually and makes up 81% of the footwear production in Czechoslovakia. It is logical that traditional local shoemakers weren’t able to keep pace with this pace of production, and many of them ended up working in Bata’s company (Velvet 2020).
Secondly, an arguably more important reason why the local shoemakers are the losers in the story of Bata’s success is his brave pricing politics based on deep, detailed analysis. With the high production rate that allowed him to buy an extensive amount of material from the suppliers, Bata could afford the sell his shoes for significantly lower prices than local shoemakers. In addition, in 1987, he introduced his new design of shoes for the working class that was lightly weighted and, therefore, could be sold for even cheaper. This was a turning point in Bata’s history when the masses started buying his shoes as local shoemakers could feel the impact of his presence on the market. As mentioned above, his genius pricing strategy during the tough years after WWI put the last net in the coffin of the small-scale shoemaking tradition in Czechoslovakia, and Bata’s monopoly was unstoppable on the domestic market (Rath 2022). When looking at it through the lenses of my definition of success, I acknowledge that indirectly making all these small shoemakers in the region go bankrupt has some negative impacts on the region. Nevertheless, that is how capitalism works, and if these local shoemakers couldn’t compete with Baťa, they did get employed by him, and their expertise was still valuable to them. Moreover, bata has created significantly more job opportunities than he has destroyed by destroying the local competition. Even though it is very difficult and in a way – subjective to weigh the pros and cons of this phenomenon his business has helped the region immensely, and without being so successful and better than the competition, none of that would have happened.
Deichmann
To make another comparison, this time more based on numbers, I will compare the Bata Corporation to Deichmann. Deichmann is a footwear company established in 1913 in Essen, Germany. In my opinion, it is a suitable company for the comparison because Deichmann started roughly at the same time as Bata and in a similar geographic location, so it is “fair” to compare these two. Today Deichmann employs 41 000 people around the world, has 4000 shops in 27 countries and sells on average 150 million pairs of shoes every year, and has an annual revenue of 6.9 billion (Hinkel, 2023). In contrast, Bata today employs 32,000 people, has 5300 shops in more than 70 countries around the world, and also sells 150 million pairs of shoes each year. Unfortunately, Bata doesn’t publish its financial data, so the revenue remains unclear, but Bata India published last year that its revenue was 1.2 billion USD. From all these indicators, it is evident that these two companies are comparable. Bata is not the clear winner in the competition but nor is it a loser. Even after 129 years of its existence, it is competing with the biggest players in the market. Nevertheless, when looking at it from the point of view of my definition of success, Baťa’s contribution to the development of the Zlín region was enormous. When talking about Deichmann, even though they have some social corporate responsibility programs today, they did not contribute to the development of Essen as much as Bata contributed to the development of Zlín. For example, building facilities and providing education to its customers was purely Bata’s concept that was not present in Deichmann’s business model.
Challenges
As hinted previously, Tomáš Baťa was really good at making crisis work for his business. It seems almost magical how events that could have been the end of his company turned out to be a booster for its growth. In this section, I will talk about some challenges the company faced. I will divide them into internal – meaning challenges coming from inside of the company – and external – meaning challenges the company had to face from the outside.
Internal challenges
The first internal challenge Bata company had to face was the 8000 gulden debt right at the beginning of its existence. At the same time, Antonín had to enlist at that time, and Tomáš had to manage this internal crisis alone with Anna. Fortunately, thanks to his analytical abilities, he knew how to save money on production. At the same time, Anna – as mentioned earlier – was a very good negotiator, and she was able to extend the periods of time in which the money had to be paid back. In the meantime, Thomas was able to boost the business and get the company back on track (Velvet, 2020).
The next internal challenge of the company was a strike in 1906 that lasted from September to December. This is a very important issue regarding this essay. Workers were on strikes for higher wages and better working conditions(Balaban et al., 2022). However, Baťa in his memoir describes the situation very differently and writes, “ I wanted to establish the American norms in Zlín. I called the workers and explained to them my opinions. I told them that I had found a system in which they could make more money and where we will be equal. […] I believed that it will be beneficial in the sense that the worker won’t have a fear of his wage being decreased if he will strive for the increase of the production (Bata, 1932).” He established a new, more democratic system where every worker had a “share” in the company. In practice, this meant that every worker’s wage would be directly connected to the amount of revenue of the company. Nevertheless, according to Bata’s words, after this, the workers lost their discipline and started to drink while at work, which was made possible by this new democratic system. Bata wanted to fire two individuals that were drunk at work and didn’t work as they were supposed to. Their coworkers interceded on their behalf, and Bata eventually didn’t fire them. Nevertheless, when this happened for the third time, Bata didn’t listen to them, and that was the moment workers decided to go on strike(Baťa 1932). It is difficult to decide which story is more probable, but it shows the kind of “welfare propaganda” that Bata was spreading around his business. Even though there is much evidence of him caring for his workers, one must keep in mind that history is written by the winner, and in the case of the history of an enterprise, it is the entrepreneur who writes it.
External challenges
The first external challenge that the company had to face was two world wars. Not to repeat what was already mentioned, Tomáš Bata saw an opportunity in WWI and got governmental military order which helped him boost the company. However, it is important to note that he and, later on, even Jan Bata never felt responsible for the actions the government they are supporting is taking. Jan Bata was even deported from the US because of his ambiguous stand towards Nazi Germany (Bůžková, 2003).
Tomáš Baťa also had to face two economic crises. It was already explained how he was able to handle the economic crisis in 1922. From 1929 to 1932, when the Great Depression was beginning, Bata didn’t face many issues. This was mainly because of his past visions to diversify his business to film production, mining, and many others (Bůžková 2003).
Bata company in Zlín that this essay is focusing on was caused by the external challenge of the change of political regime in Czechoslovakia in 1948(Bůžková 2003). The company was renamed Svit, and all of Bata’s principles were proclaimed to be capitalistic nonsense and replaced by communist slogans. Many of Bata’s workers later mentioned that the work and life conditions after the communist took over the company were incomparably worse than when it was led by the Bata family. It is ironic that a company that could be taken as an example of social capitalism and prosperity (even though it wasn’t perfect) was, in the end, destroyed by a proletariat regime. Tomáš Bata made Zlín “The America of Czechoslovakia”. In 54 years, he made the region a place where people would go to get better housing, a better job, and a better salary. The communist party needed only 40 years to make Zlín a city with no opportunities or perspective of a good life, a city known only for its museum of Tomáš Bata (Libiger 2022).
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