CHAPTER ONE

GENERAL INTRODUCTION

1.0 Introduction
This chapter will give information and knowledge about the reasons of the study, the background
of the study, problem statement, research objectives and research questions. Further information
will also be available clarifying the definition of terms as they are used purposefully for the
organization in specific and the limitations of the study as well as the means used to carry out the
research, with the limitations in regard.

1.1 Background of the Study

Footwear Industry comprises of several players operating in different parts of the country. These
players include Karasons, Marelli and the major player, Bata Shoe Company with other players
like G and D, Superior who have since closed due to high costs of operation. The Industry has
gone through tough times as it was striving to operate within minimum costs in an Industry
which is now saturated by numerous Chinese markets and Flea markets who smuggle inferior
products which are sold at very low prices. Out of the many the survivors in this Industry are
Karasons, Marelli and Bata where on the extreme end as the majority of the players got sunk due
to failure to manage the high costs of operation. The major contributor to the escalating costs
were high labour, scarcity of raw material which pushed prices upwards, inefficient machinery
due to old machine usage

The footwear sector has long been appreciated as a contributor to the economy of Zimbabwe,
and since 2009, the sector has been contributing an average of 3 to 4% to GDP (Ncube, 2011).
Most of the companies in the leather sector experienced high operating costs and the history of
high operating costs in the sector is evidenced by dating back to 2006, (Zimtrade, 2011). The
sector used to be functional with more than 16 tanneries but eventually, by 2011, the number
declined to 8 and then the number further declined to only 6 in 2012 (Miller 2013).
Due to high operating costs it has seen 2.2 million pairs of footwear being produced while 4

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million pairs of mainly cheap synthetic shoes were imported, essentially making Zimbabwe net
importer of footwear (Zimtrade 2015). Leather merchants prefer to export the hides in the raw
form as they could no longer process the hides due to lack of machinery, (Ncube 2011). The
process of tanning raw hide into finished leather requires chemicals and also energy to tan the
leather.

Some local suppliers of raw materials to the Footwear industry especially fabric, dyes and
loomstate drill downsized their operations and this reduced the local supply of raw materials for
the clothing industry by an average of 30 percent (Zimtrade 2012) and this raised the costs of
materials in the industry. Companies like Scottco, Afrorun Spinners, King Fisher, Imponent
tanning, EFE and Kermico Holdings are examples of those companies that downsized as a result
of economic challenges that prevailed in the country. These local manufacturing companies
cannot therefore stop producing but rather import the required materials and thus posing a lot of
pressure on their cash budgets since a lot of cash is required to pay for the duty on raw materials
as well as carriage of these materials from different ports in the country to the manufacturing
points thereby raising manufacturing costs in the industry, causing them to impose on these costs
to the customer that is, the Footwear Industry.

The increased labour turnover from 2012 until today also forced most of the companies within
the industry to offer more than benefits and allowances as a way of reducing labour turnover.
This forced Human Resources managers to adjust and develop pay and benefit plans since
workers are motivated by financial gains among other factors (Armstrong 2004). This raised
labour costs in the Footwear industry and most of the companies are still incurring high labour
costs. The emergence of globalisation has also resulted in the change in fashion preferences and
most of the customers switched to foreign designs. As companies have changed their focus from
product oriented to demand oriented for customer loyalty and customer profitability (Wei Lun
Chang, 2011), this forced many organisations within the industry to employ strong marketing
strategies as way of persuading and retaining customers and this raised the marketing costs of the
companies within the industry.

Footwear manufacturing companies require a lot of power but the power supply in Zimbabwe

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was inconsistent and this forced many companies to use generators during power cut thereby
raising operating costs in form of fuel and down time. Also, some Footwear companies in the
industry particularly BATA and Superior were using equipment which was old and cost
ineffective and this raised total operating costs within the industry.

The table below highlights the actual costs of each the player in the Footwear Industry. Although
the companies did not record the loss position, these escalating costs eroded much of the
company’s profits of the year. The problem fuelled in 2012 when the budgeted costs were
exceeded again by the actual operating costs.

Table 1.1 Showing Actual costs for 2011 up to 2016

Expense Actual Actual Actual Actual Actual Actual
Category costs Costs Costs Costs Costs Costs
2011 (2012) (2013) (2014) (2015) (2016)
Marelli Shoe 300,000 390,000 530,000 720,000 850,000 910,000
Company
Bata Shoe 800,000 1,090,000 1,580,000 1,690,000 1,710,00 1,840,000
Company
Karasons 285,000. 325,000 440,000 640,000 750,000 840,000
Footwear
Total 1,385,000 1,805,000 2,550, 000 3,050,000 3,310.00 3,590,000
(Source; Company financial statements; 2011-2016)

Upon realising the high costs the Footwear Industry adopted a number of costs reduction
strategies which include Outsourcing, Employee layoffs, Strategic alliance strategy, internal cost
control and Equipment maintenance strategy. Cost reduction strategies are the efforts to line up
objectives and put together resources across company boundaries to bring better value (Fawcett
Magnan, 2002).

Strategic Alliance was one of the strategies used by shoe manufacturers. Martin and Stiefelmeyer
(2005) defines strategic alliance as a business setup where two or more firms with different
intent come together by identifying each other’s needs, a mutual controlling of decision making

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processes and a mutual sharing of business risks and benefits is therefore achieved. The concept
of strategic alliance was meant to bring coalition so that industries buy the raw materials as a
group and share the costs. This strategy was used by all the companies understudy inorder to
curb the challenge of raw material sourcing.

Layoff is defined by Redman (2001) as the termination of employment for an employee or

employees on temporary or permanent grounds and this is mainly due to lack of positions and in
the cases of slow-down. The major cause of layoff in the Industry was to minimise the
remuneration costs by concentrating on major roles. Lay off was opted mainly by Bata and
Karasons who laid off almost 60% of the factory employees (company statistics:2014)

Mwanaongoro and Imbambi (2014) noted that equipment maintenance programs in manufactur-
ing industry are regarded as factors that augment first costs which are brought about by energy
efficiency and quality of a product. Predictive maintenance strategy was the most carried in the
industry and it involved the monitoring of manufacturing machines, their status, failure trends
and focused on implementing corrective actions before failure occurs. Followed by preventive
maintenance which was mainly done Karasons and Marelli, this focused on managing the sched-
uled maintenance activities and performing interval machine service. The third was the proactive
maintenance where the footwear manufacturers got involved in selecting the original equipment
manufacturers and helped in the designation of better manufacturing processes. This was mainly
done by Bata Shoe company. The approach to machinery has significantly shifted from the old to
the new, this means that it used to be about preserving physical asset and now it is about preserv-
ing their functionality

Hasnah (2001) defines cost reduction as all measures instituted by organisations to reduce their
operating costs and increase their profits. The application of cost reduction strategies did not
yield results to the Industry as costs continued to soar to the extent of causing closure to the
majority of the players leaving only a small percentage supplying the country with genuine
leather products

Despite, having these cost reduction strategies in place, Footwear manufacturers still experience
high operating costs as depicted in table 1.1 above. It is therefore against this background that the

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researcher intended to assess the cost reduction strategies used by various Footwear
manufacturers and probably come up with better solutions.

1.3 Statement of the Problem

Footwear Sector like any other Industry experienced enormous cases of closure in most of its
Industry players including the likes of Superior footwear,G and D among others. As of late, this
Industry was affected by high costs of operation/production which hampered productivity and
efficiency. Total operating costs seriously escalated between the period 2011 and 2016 as shown
in table 1.1. These high operating costs were contributed by high labour, raw material costs and
dilapidated machinery, The Herald 2013. The sector used to be functional with more than 16
tanneries but eventually, by 2011, the number declined to 8 and then the number further declined
to only 6 in 2012 (Miller 2013). The sector reported cases of failure to meet customer demands
and the dissatisfaction of customers intimidated the sector, customers had to switch to other shoe
suppliers, (Chinese and flea markets) that were reliable and cheap. The sector therefore
introduced some cost reduction strategies as survival strategies for their sustainability ahead of
others which are grappling for life. The strategies implemented included Outsourcing, employee
layoffs, internal cost control and strategic alliances strategy. Despite the use of various cost
reduction the costs were seen escalating hence the researcher sought to assess the cost reduction
strategies that were used in the footwear manufacturing sector.

1.4 Research Objectives

 To assess the causes of closure by some companies in the Footwear sector.

 To assess the factors that influenced the choice of cost reduction strategies

 To determine challenges being faced in implementing cost reduction strategies.

 To establish the relevance of cost reduction strategies being currently used.

1.5 Research Objectives

 What are major the causes of company closure in the footwear sector?
 What are the factors that lead the Sector to choose cost reduction strategies which they
adopted?

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  What are the challenges the Footwear sector faced during the implementation of the cost
reduction strategies?

 How relevant is the implementation of cost reduction strategies to the sector?

1.6 Significance of the Study

1.6.1 To practice
The research might assist the management staff of the identified footwear manufactures to be
responsive and flexible in adopting the cost reduction strategies and practices in the industry. It
was also used in the organisation as a source of reference and guidance in improving
profitability. Not forgetting also that, the research will give a clear picture of whether the
customer requirements are being met through the provision of all the required footwear products,
it will inform the organization on whether the standards set of high quality footwear, reduced
manufacturing costs and reliability in shoe supply are being met, the gap revealed areas of lack
that needed serious attention.

1.6.2 Significance to literature.

The research might edify the existing intellectual material on the cost reduction strategies which
can be adopted to enhance profitability in the Footwear industry in Zimbabwe. The existing
literature was based on studies that were done in a different context.

1.7. Delimitations
The study covered the period from Jan 2012 to December 2016 and this is because this is the
period in which the Footwear Industry was experiencing high costs of operation. The research
took place at three companies that is Bata(in Gweru), Karasons (in Bulawayo) and Marelli (in
Harare) since these were the major players in these big three cities. Also, the researcher has got a
deep understanding of the activities and performance of this Footwear sector

1.8 Assumptions
 The respondents would answer truthfully.
 The sample was a representative of the population wished to make inferences
 Cost reduction strategies should have a positive impact on the operating costs.

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1.9 Limitations
 Senior or top management had a lot of work commitments which might not permit them
to attend interviews. However, the researcher would request for an appointment with the
management, she would be flexible to alter the meeting dates to match their time commit-
ments.

 Participants might not be willing to divulge accurate information on the effectiveness of

cost reduction on profitability because of confidentiality issues. To go round this issue,
the researcher would assure participants that information collected would be used for aca-
demic purposes only and will be treated with a high degree of confidentiality.

 Target population was different and the sample which was used could not be entirely a
proper representation. However, the researcher ensured that all respondents participated
inorder to properly generalize the findings.

1.11 Chapter Summary

The objective of the chapter was to give an overview of the research, thus, the objective of the
study, its significance to the organization, nation and the researcher and also a statement of the
problem. The chapter highlighted the major footwear problem which is high costs of operation
and the objective of the researcher was to find the major causes of closure of the majority of the
manufacturers in the footwear sector, aimed also at to assessing the factors which lead the sector
to adopt the chosen strategies and challenges associated. Finally the researcher analysed the
relevance of the cost reduction strategies which were used. The time frame for this research was
between 2012 and 2016 and the research was done in the major cities, Harare at Marelli
Footwear, Bulawayo at Karasons and Gweru at Bata Shoe Company. Despite efforts to use the
cost reduction strategies the Industry continued to suffer from escalating costs. Following, is the
Literature review, which highlights views of various researchers about cost reduction strategies,
giving a view of contradicting ideas from various authors.

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 CHAPTER TWO

LITERATURE REVIEW

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 CHAPTER 3
RESEARCH METHODOLOGY

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Table.3.1 Population (Bata, Marelli and Karasons)

Company Target Population

Senior Manage- Middle Manage- Supervisors

ment ment
BATA
15 50 20

Marelli
5 20 10
Karasons 5 10 10

TOTAL 25 80 40
Source: Survey Data, 2017.
The above table highlights the population of 25 senior management and 80 middle management
together with 40 supervisors. The researcher did not seek information from the general hand as
they do not have adequate knowledge on cost reduction strategies.

3.3.2 Sample Size

A sample of 80 respondents was drawn from a target population of 145. The researcher drew a
sample of 50 from Bata Shoe Company in Gweru, 20 from Marelli in Harare and 10 from
Karasons in Bulawayo. The researcher followed the Krejcie and Morgan (1970) model which
specifies that a sample size of respondents is representative of a target population. Interviews
were held with 8 senior management, 4 from Bata Shoe Company, 2 from Karasons Footwear
and also 2 from Marelli.

3.4 Sampling Techniques

3.4.1 Stratified random sampling technique

Creswell (2002) contributed that, stratified sampling is the division of the population into
subgroups called strata’s, whose members are more or less equal with regard to some
characteristics. It is from these strata’s where individuals are then randomly selected to make up
a sample of the entire population. The researcher used stratified random sampling which was
based on identifying homogeneous subgroup from the target population

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The researcher then made use of simple random sampling method on the homogeneous groups
created by the above stratified random sampling. This method was used when the researcher was
distributing the questionnaires where the respondents were given questionnaires at random.This
is for employees only not managers and the population is first divided by organisations then the
so called departments then from here the sample is randomly selected.

3.4.2 Judgmental Sampling technique

The researcher made use of judgmental sampling to select the managing director and
departmental managers of Bata, Marelli and Karasons. These managers were the key source of
information and were well positioned in this research to give valid information about cost
reduction strategies of the organization since they were at the fore-front of strategy
implementation, hence the reason for the use of judgmental sampling. Saunders (2009) explained
that, judgment based sampling is a non- probabilistic sampling technique in which the researcher
chooses the sample basing on own judgment about some suitable characteristics required of the
members on a specified study. The technique was implemented to enhance accuracy in the study,
for the research in question requires some judgment, thus, the managers chosen were well-
informed and educated about the cost reduction strategies implemented at their respective
companies.

3.5 Sources of Data

The research understudy used primary and secondary sources of data.

3.5.1 Primary sources

The researcher used primary sources to collect data. According to Hox and Boeije, (2005),
primary sources of data are those that give data from firsthand reports of an event, such as,
witnessing the events. In this study, the primary sources gave the researcher the chance to
witness a piece of history up close, thus, to see the results of manufacturing strategies at Bata,
Marelli and Karasons through interaction with the companies employees, this therefore, enabled
the researcher to make more accurate conclusions because of some supporting evidence.

The researcher was able to access accurate and reliable data directly from the premises of BATA
Shoe Company, also Marelli and Karasons. It also made the research less costly to carry, as the
researcher was employed in the Footwear sector. However, this method was time consuming; the

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researcher took most of the time structuring and sequencing questionnaires and interviews.

3.5.2 Secondary sources

Apart from the primary sources, the researcher also made use of secondary sources of data.
According to Hoxet al (2005), secondary sources of data are those that support or further the
meaning given in primary sources and they give a wide variety of text on a specific study which
surpasses that which was obtained in the primary data sources. Secondary sources included the
use of text books, past research work, internet articles like journals that were researched by some
other researchers or examiners. The researcher had free access to the library and internet and
made use of secondary sources cheaper and convenient. There was little time spent on
structuring the method of obtaining data since some of the data was readily available, although
some of the data obtained was outdated and less likely to match with the prevailing situation.

3.6. Research techniques

The various instruments that the researcher used to gather data on primary basis were
questionnaire’s and personal interviews. On secondary data, the researcher used the internal
records from the production and accounting departments, company reports and client surveys.

3.6.1. Questionnaires
Questionnaires were used to carry out the research and these were designed for the four different
groups of the sample size, which was the managing directors, the departmental managers,
supervisory members and general staff members. (Panneerselven 2005) views a questionnaire as
a data collection instrument, it is a systematically prepared form with a list of questions
deliberately designed to draw responses from the respondents or participants. The form contains
a series of well-structured questions which made the participants to provide information that was
relevant in the knowledge of the research problem understudy.

The researcher used structured questionnaires whereby a number of the questions were guided by
pre- designed answers, thus, where respondents were asked to provide a “yes” or “no” response.
The structured questionnaires used in the research study also consisted of the multi- choice
questions whereby selection of answers was given for the questions. The structured
questionnaires in the research were used so as to appropriately suit the requirements of the
research design adopted. The descriptive form of the research demands the use of structured

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questions so as to enhance the scope of descriptive research design.

In conjunction with structured questions, the questionnaires included unstructured parts in the
structured questions administered. This is termed as the unrestricted type of questionnaire where
the participants were allowed to give the response in their own words, Lowe et al (2000). Spaces
were provided on every question so as to allow the respondent to add own detail and
observations. Questionnaires were used by the researcher because they allowed the respondents
to air out their views without personal interface with the researcher. This promoted chances of
accuracy; Sounders (2009) added that, a questionnaire is likely to produce accurate data when
both structured and un-structured answers complement each other as per question.
The questionnaires were physically distributed to all the respondents in Gweru at Bata Shoe
Company, in Harare at Marelli Footwear and in Bulawayo at Karasons. The pick and drop
technique was used in administering the questionnaires, since the respondents were occupied
with their routine schedules and works. The respondents filled in the questionnaires at their free
time and they were collected at a later date.

3.7 Interviews
The researcher made use of both the structured and unstructured interviews. The researcher in a
structured interview used formal face to face interactions with each respondent, where the pre-
planned questions were generally presented to each and every interviewee. In the unstructured
interview there was less procedure; the researcher freely altered the sequence of the questions,
indulgent to the flow of the discussion. Interviews were used in the research to augment the
results from the questionnaires in a manner that face to face interaction with the respondents
could give added value through the identification of gestures and verbal and non- verbal
questions. This gave the chance for clarity in areas to enhance accuracy. These were more
preferable because of their cost saving nature. The researcher visited all the three companies,
Marelli Footwear in Harare, Karasons in Bulawayo and Bata Shoe company in Gweru.

3.8 Data Presentation

The researcher used mainly tables to present the research findings. Saunders (2009), in relation
to the study alluded that the tables are mostly used because of their applicability to comparative

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and classified data, their presentation is found not to be complicated and can be easily
interpreted. The use of graphs and pie charts by the researcher was to complement the tabular
presentations inorder to improve description of variables. The researcher mainly used tables to
present data as this made it more easily traceable and is not difficult to understand also. Moreso,
tables were also preferred because of their ability to put sense to quantitative data and the
relations amongst variables.

3.9 Ethical Issues

Inorder to carry out a pilot study, the researcher gave opportunity for testing, learning the ethical
issues in administering questionnaires from Bata Shoe Company, Marelli and Karasons. Ross
(2005) supported the view that, pre- testing of the questionnaires gives information on possible
ethical issues that could be overlooked. Rubin and Babbie (1993) define ethics as conforming to
the standards of conduct of a given profession or group. The researcher ensured that participants
were well informed with reference to the purpose of the research prior to taking part in the study
to circumvent deception and encroaching into people’s privacy. In the case study, the researcher
learnt to be open to the organization on all issues as far as the research was concerned. Data
gathered was guaranteed to remain private and confidential. Being aware of ethics and doing the
research properly and professionally assist people to collaborate and the quality of the data is
enhanced (Punch, 2004).

3.10 Chapter Summary

The chapter gave a detailed discussion of the research design, sampling techniques and data
collection methods which were used to carry out the research. Secondary data were gathered
using questionnaires and interviews. The next chapter will be looking at the analysis and
presentation of data in form of tables.

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 CHAPTER 4

DATA PRESENTATION, ANALYSIS AND DISCUSSION.

4.0 Introduction
The chapter looks at the questionnaire response rate and the presentation and analysis of the
results obtained thereof. The results from the research will enable a discussion basing on the
secondary data cited in the literature and the research objectives of the study.. Each objective
gives analysis from the questionnaires viewpoint and interviewees point of view as well. An
analysis and comparisons with findings that are documented in literature review will be
conducted so as to ascertain whether there is a variance between this research and other studies
conducted prior to this current one. For presentation and analysis tables were used and the
frequencies and percentages are shown for a clearer explanation.

4.1Response rate
Table 4.1. Questionnaire response rate
Company Questionnn Questionnaires Response
aires returned rate (%)
distributed
Bata 50 45 90%
Marelli 20 18 90%
Karasons 10 10 100%
TOTALS 80 73 93%
Source: Survey data, 2017.
The footwear Company managers, senior managers and supervisors were the targeted
population. A total of 80 questionnaires were distributed and 73 were returned giving an overall

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response rate of 93%. The highest response rate of 100% was obtained Karasons where Bata and
Marelli shared the same rate. According to Saunders et al, (2012) a response rate which is above
50% is good enough to generalize the conclusions of the study and in this study it is 93%, so
conclusions can be generalized. Interviews were also carried out and this involved only senior
management of all the three companies and the resulted obtained was 75%, where 6 out of the
targeted managed to be interviewed. The other 2 senior managers could not put up with the
interview time that was set.

4.2. Demographic data

Table 4.2.1 Department of respondents
Productio
Company n % Procurement % HR % Costing % Marketing %
BATA 5 11 10 22 5 11 13 29 12 27

Karasons 2 11 3 17 6 33 4 22 3 17
Marelli 2 20 2 20 2 20 2 20 2 20

TOTAL 9 20 15 33 13 29 19 42 17 38
Source: Survey data, 2017

Results shown on the table above indicates that the majority of respondents came from the
costing department with 19 respondents giving a 42 response rate. 17 middle managers from the
marketing department also responded to the questionnaires resulting in them taking the second
from the costing department. Procurement also constituted 33% of the population, followed by
Human resources with 29% and finally the least where only section supervisors were targeted.
The study managed to get relevant information from employees who have upper hand to cost
structures and cost reduction fundamentals which was Costing and Marketing and Procurement
departments.

Table 4.2.2 Period with the organization

1 to 3 10 years and
Company years % 4 to 9 years % above %

Senior management 1 33 9 90

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 Middle
management 3 6 22 43 18 35

Supervisors 10 50 6 30 4 20

TOTAL 14 19 28 38 31 42
Source: Survey data, 2017
The results from the above table show that most of the employees understudy had 14 employees
who had 1 to 3 years of experience and the rate was 19%. Those who fell under 4 to 9 years
were 28 where 22 employees were the middle management and only 6 were the factory
supervisors. The majority of the employees had more than 10 years within the organization, this
is seen by 9 senior management and 18 were the middle management and only 4 were the
supervisors. The employees with more than 10 years in the organization constituted 42% of the
total population. From the 6 interviews held, all the 6 interviewees had more than 10 years
experience in the same companies.

These above results could mean that, the employees at Bata, Marelli and Karasons do have
experience with their companies and are therefore well aware of the high operating costs faced
by the company. It is also evident that they are aware of the strategies implemented during 2011
to 2016 in an endeavor to reduce operating costs. Thomas and Feldman (2009) supported the
idea that, a worker with a longer experience in an organisation has vast skills on how to reduce
costs and has considerable knowledge of the industry he/she is in. It is relevant to note that,
Marelli and Karasons’ company managers had more than 10 years working in the company and
most of the senior managers had the highest duration of more than 10 years working as
employees in all the companies. This means that they had more years of experience in the
management positions and have better views about cost reduction strategies implemented. The
short tenure of 1 to 3 years of Bata’ company managers was as a result of the hyper- inflationary
period, therefore the Bata Family in Switzerland were appointing new company managers
frequently to bring about fresh manufacturing strategies to stir up the company. However, studies
carried by the UK Leather (2011) suggested that new management and its strategies are likely to
face resistance from the organisation; therefore, the new company managers at Bata could be
facing resistance in policy implementation from employees who already were used to the old
ways.

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4.3 Assessing the causes of closure by some companies in the Footwear sector.

4.3.1 Causes of company closure in the footwear sector.

The table 4.3 below articulates the reasons/causes why the companies in Zimbabwe are closing
operations.

Table 4.3.1 Causes of company closure

Causes of company Number of Respondents

closure respondents Percentage

Economic meltdown 34 20%

Low capacity utilisation 29 15%

High operating costs 77 41%

Government Policies 41 22%

Lack of worker expertise 17 9%

188 100%

From the table above, 34 respondents viewed economic meltdown as one of the major cause of
company closure showing a 20% rate, where 29 other employees saw low capacity as one of the
major cause of these closures and the majority of 77 employees viewed high operating costs as
the major cause with a 41% rate. Government policies and lack of worker expertise were viewed
by 41 and 17 employees respectively with 22% going to government policies and 9% to lack of
worker expertise.

From the interviews held, the interviewees confirmed that as much as the economy itself is no
longer industry friendly, the cost of operations or cost of production fuelled the closure of many
companies. Two interviewees from Karasons highlighted the issue of raw material unavailability
and high labour cost as has a major contributor to escalating costs of production.

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There is clear indication that most companies are closing operations due to high operating costs
and this is shown by 41% of the respondents who agreed upon that company closures were
mainly caused by high operating costs. According to the (Leather Institute report 2011), G& D
Shoes was under liquidation, whilst Footwear and Rubber is under judiciary management.
Karasons Shoes is still in operation but is now focusing more on the distribution of safety shoes
through a partnership with a South African manufacturer; Wet Blue Industries.
.
Table 4.3.2 Major contributors to high operating costs

Number of Respondents
Contributors of high costs respondents Percentage

Scarcity of resources 67 24%

Competition 19 7%

Power outages 45 16%

High labour cost 69 24%

Water shortage 12 4%

Inefficient machinery 71 25%

TOTAL 283 100%

Source:(Survey data:2017)
The above table portrays that 67 respondents viewed scarcity of resources as a major contributor
to the escalating production costs and this was rated at 24%, where competition was viewed by
only 7% of the respondents. Power outages and high labour cost was viewed by 16% and 24%
respondents respectively as the major contributor to the high costs. Only 4% of the respondents
viewed water shortage as the push factor and 25% viewed inefficient machinery as the major

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contributor.

From the interview’s desk, the major contributors were sighted to be raw material shortages, high
labour cost, inefficient machinery as the major ones, interviewees from Marelli highlighted that
is they had new machinery, cost of production could have been lesser because maintenance costs
are the major source of high production costs. From the interviews which were held from
management at Karasons, they citied that electric power cuts/ shortages was the major
contributor of high operating costs.

It can therefore be deduced that raw materials specifically the raw hides and canvas material
together with high cost of labour and inefficient machinery/equipment contributed to the rise in
the operational costs. In support of the findings highlighted above, Ncube (2011) affirmed that,
the bulk of the major raw material in the sector has been the foremost export from Zimbabwe,
thus, 70% of raw animal hides were exported to China, Italy, Singapore, France and other
countries and this meant the local producers were left with only 30% share. The major
competition faced by the sector, originated from the Chinese traders who were exporting cheap
footwear to Zimbabwe and it is by their low pricing that caused horrendous competition to the
Zimbabwean manufacturers since they were already incurring high manufacturing costs

The CZI (2012) publications reports on the manufacturing industry of Zimbabwe that, water and
electricity shortages were causing closure of many companies, production had seized in various
factories because of poor supply by national welfare.

4.4 Assessing the factors that lead to the choice of the strategies

4.4.1 Factors affecting the choice of the strategies

The table 4.4 below highlights the factors which lead to the choice of the cost reduction
strategies implemented by the companies understudy.
Table 4.4 Factors leading to choice of the strategies
Factors affecting the choices of the strategies Bata Karasons Marelli Percentages
Availability of financial resources 25 14 10 87%
Size of the organization 11 10 8 71%

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 Value engineering techniques 9 7 3 65%
Level of competition 12 12 12 81%
Production processes 9 11 13 65%
TOTAL 61 54 46 100%
(Source: Survey data 2017)
From the table 4.4 above, the companies looked at different factors inorder to choose or select
the strategies and 87% of the respondents looked at the available resources inorder to implement
the strategies, 71% of the respondents concurred that before the strategies were being
implemented, size of the organisation was taken into consideration. Level of competition is also
another factor which was considered before implementation of the strategies, where 81% of the
respondents presumed that level of competition was mulled over. Production process and value
engineering techniques were also considered as factors leading to the choice of the cost reduction
strategies; this was supported by 65% of the respondents who regarded them as factors leading to
the choice of the strategies.

From the interviews held it is noticeable that there were factors which the companies considered
before selecting the strategies, one of the respondent from Karasons indicated that availability of
financial resources and production processes were key factors which were taken into account,
and from Marelli the researcher got that financial resources, level of competition and value
engineering techniques were considered the most. Lastly, respondents from Bata highlighted all
the above factors as having been considered, although the most important ones were availability
of resources, level of competition, size of the organisation and production process.

From the findings, it is articulate that before the strategies were implemented there were factors
which the companies understudy considered, and each company selected the factors which were
suiting their situation. According to Shehlata (2010) he explains cost reduction as a theory that is
concerned with the setting of cost levels at minimum acceptable levels by looking at the ways of
improving standards that provides the benchmarks for cost control. He indicated that this can be
achieved by factors like value engineering techniques, method study, production processes, and
level of competition and size of the organisation which can determine the strategy to be
implemented.

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4.5 Establishing the relevance of cost reduction strategies being currently used.

4.5.1 Relevance of cost reduction strategies

The below table illustrates the responses given by the respondents on whether they were
implementing the strategies or not.

Table 4.5.1 Strategies adopted in the Footwear sector

# Cost reduction Bata Marelli Karasons Respondents
strategies Shoe Footwear Percentages
Company Company
1 Employee Layoff 45 16 9 97%
2 Labour 41 15 7 81%
Outsourcing
3 Equipment 40 17 6 98%
maintenance
4 Strategic alliances 39 18 4 86%
with raw hides
suppliers
5 Alternative use of 42 18 9 97%
power
Source: Survey data, 2017.
Results in table 4.5 above shows that all Footwear companies under study implemented all the
above 4 strategies, where 97% of the respondents consented that they were using the employee
layoff strategy, 81% of the respondents also concurred that they were using labour outsourcing to
trim down the cost of making a pair of shoe. Equipment maintenance together with strategic
alliance were selected to have been implemented by the organizations, this is shown by 97% and
86% of the population who concurred that the strategies were being employed. Lastly is the
alternative use of power, the respondents consented that the strategy was in place and this is
shown by 97% who agreed that it was in place.

From the interviews’ desk, 2 respondents from Bata concurred that all the strategies mentioned

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in the table were being implemented where only 1 respondent was not sure of whether the
strategic alliance was being implemented, from the interviews held with Karasons revealed that
only labour outsourcing was not being implemented due to the inadequacy of machinery to
supply to the sewers.

It can therefore be presumed that in order for the companies understudy to survive where other
companies were closing operations, they were implementing cost reduction strategies and
employee layoff, equipment maintenance and alternative use of power being mainly adopted.
Other European countries such as Denmark, Spain and Portugal also embraced alternative energy
therefore companies tend to be more mature in Europe (www.altenergystocks.com) accessed on
12/03/2017). Hussain T et al, (2012), cited another country, Pakistan which faced severe power
shortages from 2003 to 2008 had to make use of coal and generators as an alternative source of
power. According to the African Agribusiness leather value chain report (2011), the Tanzanian
leather industry had to set up contractual relationship through alliances where they had to focus
on purchase guarantees for animal skins.

Table 4.5.2 Relevance of each cost reduction strategies to operating costs

Strategy good moderate weak Ranking %

strategy

Labour outsourcing 60 33 17 Good 54%

Equipment maintenance 20 10 71 Weak 70%

Employee layoff 18 20 50 Weak 57%
Use of alternative power 19 29 35 Weak 42%
sources 22 44 21 Moderate 51%
Strategic alliance

Source: (Survey data, 2017)

Labour outsourcing was ranked as good by the almost half of the respondents, this is shown by
60 respondents which is 54% who rated it to be good, however equipment maintanence,
employee layoff and strategic alliances were viewed as weak, where 70% of the respondents
ranked equipment maintenance as weak, employee layoff was ranked by 57% who concurred

53
that the strategy was not of an advantage to the organization. The use of alternative power
sources was also seen by 42% of the respondents who were in accord that the strategy was not of
help in resuscitating the high operational costs, instead the costs of using generators were even
high due to high prices of fuel.
From the interviews held, the strategic alliances was relevant and helped in reducing high cost
where Bata and Marelli footwear had strategic alliances with CSC, Bulawayo and Harare
abattoirs for the supply of their raw hides but however this did not solve the shortages of raw
hide supplies as these Abattoirs were still preferring to sell to foreign markets in search of
foreign currency. Karasons failed to benefit from the strategic alliances due to the treachery they
were getting from the raw hides suppliers who were taking advantage of the alliance and supply
decayed hides. Instead of Karasons benefiting them instead suffered losses. The strategy proved
to be a success in most Footwear factories; this is evidenced also in Bata Kenya where the
strategy was implemented with the objective of maximizing capacity utilisation (Innu, 2010).

Tahboub’s, (2011) assessment on the machinery maintenance carried in leather industry of

Jordan, the companies that failed to maintain their machinery on a continuous basis, reported
high operating costs meaning the search for repairs took longer when especially it is always the
case that breakdowns just occur without notice.

4.6 Determination of the challenges faced by footwear in implementing the above strategies

4.6.1 Challenges faced by the footwear sector

Below is a table showing the challenges which each company was facing and percentage rate.
Table 4.6. Challenges faced
Capacity utilization Bata Marelli Karasons Percentages
strategies Shoe Footwear
Company Company
1 Cost of energy 9 20 17 78%
conservation
2 High cost of running 12 43 13 89%
the system and
repairs

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3 Standardisation 14 39 14 67%
challenges arising
from Labour
outsourcing
4 Economic factors 9 34 16 77%
5 Competition 11 29 10 54%
Source: Survey data, 2017.

Respondents were asked about the challenges they were facing during the implementation of the
cost reduction strategies and from the above table, 78% presumed that cost of energy was also on
a higher side affecting the use of alternative power sources as a strategy, the cost associated with
the use of alternative sources like generators became three times higher as compared to the
national supply and most of the firms that owned the generators incurred massive overhead costs.
89% of the respondents viewed running costs of systems as a challenge, and 67% saw the
challenge of standardisation as a drawback to the success of the labour sourcing strategy. Lastly,
competition and economic factors accrued 77% and 54% from the respondents who were
acknowledging that as macro economic factors were the challenges faced during implementation
of the strategies.

From the interviews held, one of the Bata employees highlighted a challenge that was emanating
from the high cost of running the system and repairs in equipment repairs where conventional
systems were even technologically inadequate to handle. A Marelli respondent pointed out that
too many outsourcing affects quality and also that service providers may under-quote on
purpose, just to get the business. Then, when they get further into the contract, they take
advantage and produce just to cover the numbers not necessarily to satisfy the end user. Marelli’s
senior manager highlighted that at one point they failed to do production for a month as they had
a huge bill of fuel which it had failed to settle.

From the findings, it can be deduced that there were numerous challenges which were being
faced by the organisations during the implementation of the cost reduction strategies, where most
of the respondents complained about cost of running the systems, cost of energy conversation

55
and macro economic factors were the most hindrance in the implementation of the strategies.

According to (www.shoes.com Accessed 09/03/2017) in African countries, most footwear

manufacturing industries suffer from economic constraints. They experience the frequently
inordinately high cost of capital or inflation rates. Amount of capital tied up in work in-progress
has amplified along with the necessity to maintain higher inventories of chemicals, apparatus
spares, etc. Because of setbacks with poor infrastructure in lots of developing countries, the
tanneries have always reserved elevated stocks of chemicals than their corresponding
organisations in developing countries, against the contingency of delays in delivery from ports

4.7 Summary
The chapter analysed the results that the researcher obtained from the respondents and analysed
the factors that affected operating costs in the Footwear sector. The researcher also went on to
determine the causes of company closure, which was mainly cited by 81% of the respondents as
the high costs of operation factors. The researcher also examined the factors which lead to the
choices of the strategies which were mainly the availability of resources, size of the organisation
and level of competition. Assessment of the relevance of cost reduction to the operating costs
was also made, where labour outsourcing and strategic alliance was ranked as good and thus
yielding positive results and finally the determination of challenges which were faced during the
implementation of the strategies was made where cost of energy, economic factors were viewed
as the major challenge. The next chapter gave conclusions, recommendations and suggesting
further research of the research.

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 CHAPTER 5

SUMMARY OF FINDINGS, CONCLUSIONS AND RECOMMENDATIONS

5.0 Introduction
The research looked into the cost reduction strategies implemented by the footwear
manufacturing industries during the period 2011 to 2016. The bulk of the industries in the
Footwear sector, operated in an adverse economy, and at some point in time, the companies
reduced their operations when manufacturing costs went high, thus, the companies were battling
to reduce the operating costs. Despite the adoption of cost reduction strategies by the companies,
the cost of production was increasing each day. There are a number of cost reduction strategies
which were implemented and amongst them was employee layoff, strategic alliances with raw
material suppliers, equipment maintenance and labour outsourcing.

5.1 Summary findings

Footwear Industry faced enormous closure due to failing to operate under high operating costs,
which was fuelled by raw material shortage, high labour costs and power supplies shortage. Due
to these hold backs and some of the competitors of the companies seized production. Therefore,
the objectives of this research were to find out whether the use of alternative power sources,
labour outsourcing, strategic alliances, and employee lay off, was useful in reducing the cost of
production for the period 2011 to 2016

5.1.1 Response Rate

There was a high response rate on the questionnaires which saw a response rate of 93 % and 75%
on the interviews, where out of the 8,only 6 were successfully interviewed.

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5.1.2. Assessment on the causes of closure by some companies in the Footwear sector.

5.1.2.1 Causes of closure by some companies in the footwear sector

The researcher managed to assess the causes of company closure which was high operating costs
which was fuelled by scarcity of resources, high labour costs, inefficient machinery, and power
shortages/hikes. There was a clear indication that most companies were closing operations due
to high operating costs and this is shown by 41% of the respondents who agreed upon that
company closures were mainly caused by high operating costs.

5.1.3 Factors that influenced the choice of cost reduction strategies

5.1.3.1 Factors influencing the choice of cost reduction strategies

From the findings, it is evidence that before the strategies were implemented there were factors
which the companies understudy considered and these were availability of resources, size of the
organization , production processes, where 87% of the respondents looked at the available re-
sources,71% of the respondents concurred size of the organisation was taken into consideration,
level of competition was considered by 81% of the respondents, production process and value
engineering techniques were supported by 65% of the respondents who regarded these as factors
leading to the choice of strategies.

5.2.4 Determination of challenges being faced in implementing cost reduction strategies.

5.2.4.1 Challenges faced by companies during implementation of the strategies

The study was able to identify numerous challenges being faced by the footwear manufacturing
companies during the implementation of the strategies. 78% of the respondents presumed that
cost of energy as one of the challenge, where 89% viewed running costs of systems and 67% saw
the challenge of standardisation as a drawback to the success of the labour sourcing strategy.
Lastly, competition and economic factors accrued 77% and 54% from the respondents who were
acknowledging that as macro economic factors were the challenges faced during implementation
of the strategies.

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5.2.5 Establishing the relevance of cost reduction strategies being currently used.

5.2.5.1 Relevance of cost reduction strategies

The researcher looked at each strategy to see how relevant/ important it was in reducing the cost
of operations. Labour outsourcing was ranked as good by the almost half of the respondents, this
is shown by 60 respondents which is 54% who rated it to be good, however equipment
maintenance, employee layoff and strategic alliances were viewed as weak, where 70% of the
respondents ranked equipment maintenance as weak, employee layoff was ranked by 57% who
concurred that the strategy was not of an advantage to the organization. The use of alternative
power sources was also seen by 42% of the respondents who were in accord that the strategy was
not of help in resuscitating the high operational costs, instead the costs of using generators were
even high due to high prices of fuel.

5.2 Conclusions

5.2.1 Causes of closure by some companies in the Footwear sector.

There was a clear indication that most companies were closing operations due to high operating
costs and this is shown by 41% of the respondents who agreed upon that company closures were
mainly caused by high operating costs.

5.2.2 Factors influencing the choice of cost reduction strategies

From the findings, it was concluded that before the strategies were implemented there are factors
which the companies understudy considered and these factors include availability of resources,
size of the organization and production process.

5.2.3 Challenges faced by the Footwear companies in an effort to curb high operating costs.
The researcher concluded that there were numerous challenges which were being faced by the
organisations during the implementation of the cost reduction strategies, and most of the re-
spondents complained about cost of running the systems, cost of energy conversation and macro
economic factors as hindrance in the implementation of the strategies

5.2.4 The relevance of cost reduction strategies being currently used.

The researcher concluded that as much as the strategies were being implemented, they did not
yield positive results as expected, only labour outsourcing and strategic alliance were rated to be
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helping in reducing the escalating costs of operation. The use of alternative power source and
employee layoff did not yield constructive results because use of other power sources like gener-
ators also implied use of fuel and the prices of the fuel was also high.

5.3. Recommendations of the Study.

5.3.1 Allocate financial resources for equipment maintenance

The weak or poor equipment maintenance procedures characterised by the Zimbabwean
footwear factories are indicated by Dandira et al (2012). Poor equipment maintenance practices
due to a reduced sum of allocation of funds often cause mislaid orders and unremitting
breakdowns and outlays. A research prepared by the Jordan industries exposed that, poor
equipment maintenance affects in interrupted efficiency, thus, it results to the same effects
experienced when there is insufficiency in power supply, production is troubled and all work in
progress products are thrown away as irrecoverable substance. The research further advised that
a company in the footwear manufacturing industry should put in place budgets for equipment
maintenance and should also practice hands-on, remedial and defensive maintenance measures.

5.3.2 Extensive use of installation of solar power systems in tanneries

As the diesel generators currently at use are resulting in double fuel costly in comparison to
national power supply. The existing national power generation capacity is MW1, 500 whereas
the industry is in demand of about MW2, 300 (CZI, 2012), therefore in the long term, for
efficiency sake, there are fresh technologies in solar energy that the organisations can invest in.
Most of the factories in China were installed with towering dense solar reflectors that generate a
sufficient amount of power to run for an extended period. It is one of the green power generating
mechanisms adopted in United States that today’s industry should invest in.

Cabeza et al, (2011) added, the Dhakha tanneries implemented energy saving system in the
tanneries, the solar system was installed in tanneries and offices, which is the economical energy
alternative source ever and resulted a significant reduction in costs in the form of stumpy energy
costs, continuous production runs and surplus capacity in energy use.

The sustainability in energy and business article, (2011) supports the exercise of solar energy
than diesel generators as an alternative power source, it further designated that, a Mexican

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leather producer Curtidos Toluca Company switched from the use of diesel generators to the use
of solar energy in its tanneries and offices, this saved the company from high fuel costs of
heating water on an everyday basis and managed to reduce operating costs by 40% in energy
requirements.

5.3.3 Use of the Material requirement system

Joe, (2000) points out that, the material requirement system is a management tool most vital in
every organisation to set out manufacturing procedures, arrangements, schedules and order
requirements. By maintaining a consistent interaction with the system, it can indicate areas that
need attention. Most of the Zimbabwean tanneries that use the system such as the Main
Protective clothing company, pointed out that, they are mobilising funds to purchase
technologically advanced machines to boost production efficiency, it came to this action after the
system revealed machine lead times are too much and could delay production to satisfy delivery
dates.
Moustakis, (2000) also added that, the MRP system demands skilled workforce to efficiently run
the components in relation to manufacturing needs. Today’s industry calls for educated staff.
Education and training results to innovation and productivity, workers who are thoroughly
trained for a specific job, help the organisation to realise the usefulness of the systems in place
better and come up with judgements on the relevance of systems.

5.3.4 Education and training

The Footwear sector should invest more in educating and training its stakeholders on the
importance of strategies to minimize operating costs for the overall performance of the
organisation. On the same note workers needed to continuously upgrade their skills so as to
remain in tandem with technology. In many developing countries, many companies have bowed
because of incompetent and ineffecient management (who have long service but with less
education), thus lack of skills on management. As indicated by the respondents, Bata and
Marelli’s staff members have considerably low educational qualifications and the company
should consider training and serious education of staff. For the successful implementation of the
MRP system, accountants and those in production and operations need serious training on how to
run the system. Also in general, if the organisation is ever going to implement the system.

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5.3.5 Protection from foreign competition
The Zimbabwean government should put in force measures that protect the local footwear
manufacturers from the flooding of cheap Chinese footwear. It is regarded as unwarranted or
unjust competition when foreign products are traded at prices below production costs. In other
countries, this is regarded as dumping. The government should defend local companies from
such unfair practices.
The European governments established a legislation that ban dumping or sale of foreign goods
that are priced below production costs of local producers. This measure maintained a secured
growth in capacity utilisation and this resulted to the growth of the Italian leather industry and
now it is one of the world’s biggest leather manufacturers.

5.4 Suggestions for further studies.

Although the findings, conclusions and recommendations of this research were of paramount
importance, the study carried on cost reduction strategies in the Footwear sector was by no
means exhaustive. In order to get a greater insight to this, a further study needed to be carried out
in other sectors like the mining and agricultural sectors and also to venture into other causes of
company closures.

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