Adv Strat Man Exam Case PDF

Preview

Summary

Download Adv Strat Man Exam Case PDF

Description

2

LSG Sky Chefs Introduction Erdmann Rauer, CEO of LSG Lufthansa Service Holdings, pushed his finished cup of tea deeper into the table as he stared at the a picture in Times magazine of the Vaartkapoen sculpture by Tom Frantzen placed in Molenbeek, Brussels, in front of the building of the Communauté Française (the French Community of Belguim). The sculture depicts a Brussels policeman caught by his ankle by a "rogue of the canal" (dock worker) coming out of a sewer. Thinking about the agenda for today’s LSG Sky Chefs board meeting, Rauer muttered softly to himself “I hope our business in South Africa do not trip us up”.

Rauer is CEO of LSG since October 1, 2014. In this role, he is responsible for the LSG Group’s Strategy and Business Development, Marketing and Sales, Communications, Legal, Corporate Affairs and Compliance, as well as the Internal Audit. In January 2011, when he was appointed CSO (Chief Sales Officer) of LSG Holding, he assumed responsibility for LSG Sky Chefs’ worldwide Sales and Marketing, as well as the company’s Buy-on-Board and In-flight Retail activities. In his previous position as Corporate Senior Vice President Sales and Marketing, he concentrated on formulating company-wide and customer-specific sales and marketing strategies. Additionally, he established a new market and consumer research and innovation team. He joined LSG Sky Chefs in 2006 as Managing Director of its equipment and logistics subsidiary SPIRIANT (formerly LSG Sky Chefs Catering Logistics), where he initiated the globalization of the business by acquiring new international customers and expanding into Asia. He was also the key driver in the formation of SkylogistiX, a joint venture with Kuehne + Nagel (a leading logistics company). Prior to joining LSG Sky Chefs, Erdmann Rauer had gained extensive experience at GKN Walterscheid, the world’s technological leader in the field of driveline systems, where he held several senior management positions. His last position at GKN was Managing Director of the Service and Distribution Division, which is responsible for worldwide relationships with small OEM’s (Original Equipment Manufacturers) and aftermarket sales and distribution. Erdmann Rauer completed his studies in business administration in Düsseldorf, Germany.

Company overview Best known as one of the world’s largest airline catering companies, LSG Sky Chefs is part of the LSG Group. The LSG Group is the collection of companies under LSG Lufthansa Service Holding AG, a 100% subsidiary of Deutsche Lufthansa AG. LSG Lufthansa Service Holding AG is headquartered in Neu-Isenburg (near Frankfurt), Germany and can be profilled as follows:

•

Employees: >35 500

•

Consolidated revenues: € 3.194 billion 2

3

•

Countries (present in): 50

•

Customer Service Centers: 203

•

Airports served: 209

•

Annual Meals produced: 628 million

LSG SkyChefs supports customers, such as airlines, rail operators and retailers, with a wide range of services. These include retail capabilities, lounge management and all kinds of food solutions, from traditional catering to frozen meals and packaged snacks. United under the LSG Group, the company follows an integrated approach to creating individual passenger experiences from the beginning to the end of their journeys. LSG Sky Chefs, is the core catering company in the LSG stable and is supported by the equipment specialists SPIRIANT, logistics experts SkylogistiX, innovative packaged food from Oakfield Farms Solutions, and the latest retail and technology concepts from Retail in Motion (see Figure 1).

Figure 1: Brands of the LSG Group

To illuminate this portfolio of SBU’s LSG Sky Chefs (as mentioned above) is best known as one of the world’s largest airline catering companies, but actually does a lot more than that. LSG Sky Chefs supports customers, such as airlines, rail operators and retailers, with a wide range of services. These include retail capabilities, lounge management and all kinds of food solutions, from traditional catering to frozen meals and packaged snacks.

With over 20 years of experience, Oakfield Farms Solutions serves a broad base of customers in the USA, the UK and continental Europe. Oakfield Fams Solutions provides great expertise for innovative 3

4

and customized meal concepts covering all temperature options – frozen, chilled and ambient. By providing a variety of packaged meal solutions, Oakfield Farms bridges the gap between food and beverage manufacturers and airlines.

Retail inMotion is an industry leading in-flight retail specialist. The company is a first in class product, service and solutions provider to the new breed of cost conscious and profit driven airlines. Retail inMotion is proud to be the world’s first results driven in-flight retail supplier. The company has a proven track record with some of the world’s largest and most demanding airlines.

The retail chain Ringeltaube exclusively caters to airport and airline staff all across Germany. Like a mini department store, these outlets carry clothes, cosmetics, food, housewares, travel items and a broad international selection of wine, beer, soft drinks and spirits. Even more products are offered through their website.

Getting the right products and equipment in the right quantities at the right time and to the right place can be an airline’s thorniest problem. SkylogistiX, a joint venture of SPIRIANT with international logistics provider Kuehne + Nagel, designs strategies to streamline logistics and supply-chain management. With a dedicated online platform that integrates seamlessly with a company’s own IT system, an airline can easily monitor the entire inflight supply chain from anywhere in the world.

The SPIRIANT brand was launched in 2013 to give a fresh face to the equipment division of LSG Sky Chefs. SPIRIANT partners with customers to create equipment to satisfy passengers, enhance brands and save time and money. Its product range features an array of creatively designed and intelligently engineered meal-service products, commodities, comfort items, galley inserts as well as the environmentally-friendly Enlight range.

LSG Sky Chefs acquired its comprehensive and in-depth knowledge of the in-flight service management business through almost 70 years of experience. The company was formed after the takeover of Sky Chefs, American Airlines’ former catering subsidiary, by Lufthansa’s catering division Lufthansa, Service GmbH. Over the past two decades in particular, LSG Sky Chefs has considerably expanded its worldwide presence. Through its catering expertise, LSG Sky Chefs has developed specialised skills in the planning, implementation and management of all processes related to in-flight services. This includes the design, development, procurement and logistics related to inflight services and equipment. As a logical extension of its capacities, LSG Sky Chefs has also begun a successful incursion into adjacent markets, such as train (rail) services, school and health care catering as well as retail.

4

5

In South Africa, LSG Sky Chefs was established in 1992 in Johannesburg and expanded to Cape Town and Durban in 1996 and 1998 respectively. In 2010, LSG Sky Chefs supplied the following airlines at their various locations:

·

Johannesburg: Air France, Air Mauritius, Air Zimbabwe, Cathay Pacific Airways, Charters, Delta Air Lines, Egyptair, Emirates, Ethiopian Airlines, KLM Royal Dutch Airlines, Korongo Airlines, Lufthansa, Lufthansa Cargo, Martinair, Qantas Airways, Saudi Arabian Airlines, Swiss International Airlines, TAAG Angola Airlines, Turkish Airlines, Virgin Atlantic

·

Cape Town: Air France, Air Mauritius, Charters, Condor, KLM Royal Dutch Airlines, Lufthansa, TAAG Angola Airlines, Turkish Airlines, Virgin Atlantic

·

Durban: Charters, Comair, Emirates, Kulula.

Moreover, LSG Sky Chefs is constantly evolving in order to meet the challenges set by rising passenger expectations and pressure from airlines to cut costs. By providing innovative, best-in-class products it ensures that customers remain ‘one step ahead of market demands and expectations’. In the early days of becoming a truly global firm LSG Sky Chefs considered the following aspects very important for the future of the firm:

·

culinary excellence and innovation

·

authentic regional dishes from our network of international chefs

·

consistent service quality worldwide

·

innovative and appealing menu design

·

full range from premium made-to-order meals to cost-efficient snacks

Over time these aspects has evolve into the values proposition reported later in this document.

SWOT analysis In a strategic planning session at the end of 2014, the executive team described the strenghts, weaknesses, opportunities and threats of LSG in South Africa as follows:

Strengths LSG Sky Chefs is currently the largest and most experienced airline caterer with 60 years’ experience in the industry. It offers high-quality products and hires 600 culinary chefs to ensure that the utmost quality is maintained. The company conforms to BEE policies, putting it in a positive light with business customers. LSG Sky Chefs has an integrated product portfolio which allows it to adapt products to the needs of its customers. Because LSG Sky Chefs is so large, it has a well-developed supply chain characterised by highly collaborative relationships with its suppliers.

5

6

Weaknesses Being a leader in the industry, LSG Sky Chefs needs to guard against becoming complacent. Because LSG Sky Chefs is large and well integrated with the operations of its clients, co-ordination problems may arise within the organisation if management fails to oversee the integrated operations accurately. Double counting of costs and expenses may occur through inaccurate communication between divisions within the company. Due to cultural variations, extra costs may be incurred when adapting marketing communications to meet various market requirements.

Opportunities The company may move into other transportation industries where catering is also required, for example trains and cruise liners. Due to the increase in air travel, the emergence of new airlines provides LSG Sky Chefs with the opportunity to form many strategic partnerships. There is a gap in the market for cost-effective meals that can be served on budget airlines like Kulula and Mango. The development of space travel in the future may open up an entire new market for transport-related catering – an opportunity for LSG Sky Chefs to innovate and penetrate this new market.

Threats The biggest threat to LSG Sky Chefs relates to instability in the airline industry (industrial action, terrorist activities etc.) which may result in decreased demand for airline travel. Currently, cheaper airlines that are increasing in popularity do not serve meals – this will also translate into decreased demand for LSG Sky Chefs meals as people choose cheaper airlines over more expensive ones. Fluctuating oil prices will adversely affect the price of air travel and increase demand for cheaper airlines that do not serve meals. Changing consumer food preferences may adversely affect the operations of LSG Sky Chefs should it fail to monitor consumer trends accurately.

Marketing Product LSG Sky Chefs delivers consistent and superior product quality, variation in menu options and customisation according to airline consumers’ preferences. LSG Sky Chefs’ meals are custom designed products as they are altered as per airline specification and are ‘created to meet the needs of one or a small group of customers’. Its customer website contains an online portal where customers are able to order products from a catalogue-type menu. Additionally, LSG Sky Chefs knows that it is imperative for a supplier to educate its customers on its product offerings, the usage of the product, the benefits obtained from using the product, and the ways in which to place orders and communicate with the supplying company. This support from LSG Sky Chefs is provided via well-trained company representatives and the many specialists in the firm.

6

7

The LSG Group product portfolio can be described as follows

·

Food: Meals snacks and beverages, chilled or frozen, ethnic or regional, as well as halal and other special dietary requirements.

·

Equipment: All the material and equipment necessary for food and other service offerings.

·

Logistics: Expert logistics for streamlined logistics and supply chain management optimisation

·

Onboard retail: All the know-how and technology to increase revenue, reduce costs and satisfy customers

·

Lounge Management: From basic food-and-beverage provisioning to across-the-board lounge mangement

·

Innovation & Consulting: Market Intelligence, trend analysis and concept creation adapted to your (the customers’) brand and needs.

Price The pricing approach followed by LSG Sky Chefs looks at the list price, which is the price that the company sells to its customers, and the discount structure of prices. LSG Sky Chefs’ prices can be competitive due to the large quantities purchased by customers at one time. However, with profit margins in the airline industry under pressure, the purchasing power of customers and the relationships between LSG Sky Chefs and its customers seem to have become key drivers of the pricing policy. If customers place their orders via its e-channel (the online portal), they receive a 10 per cent discount on the quantity ordered. This is possible because of reduced administration costs and the relationship between LSG Sky Chefs and its customers. This provides an incentive for customers to order more frequently (ordering is easy) and online (discount incentives).

Distribution LSG Sky Chefs argues that this is the key component of its marketing mix as the airline business is largely driven by schedules and the integration of many supplying firms. Hence, it relies on its customer information and ordering system to ensure that it delivers its products in time and correctly. LSG Sky Chefs also needs to ensure that it meets the individual needs of its customers and it has to make sure that its distribution has the flexibility to adapt to changing airline needs.

Promotion LSG Sky Chefs says that the nature of the airline business requires a functional approach to promotion where costs and benefits should be communicated to clients. Therefore, LSG Sky Chefs mostly relies on word-of-mouth to get its message across to customers in the trade. Promotion budgets are therefore aimed at building and maintaining strong customer relationships. There is a degree of ‘lock-in’ in this market and once a company has located a reputable and trusted supplier, at a low cost and suitable 7

8

quality, it is likely to re-use that supplier in the future. Hence, each account is allocated a competent account manager who addresses customer complaints and contributes to relationship building.

Customers LSG Sky Chefs are indeed very proud of their customer base. Table 1 lists the companies major clients in each category of business in which they participate. Table 1: Major customers Aeroflot Russain Airlines Air Canada Air China Air France KLM Emirates airlines Etihad airways Eurowings airlines Finnair airways New Zealand airlines

Alsaka Airlines Alitalia Airlines American Airlines ANA airlines Asiana Airlines British Airways Cathay Dragon airlines

China eastern airlines China Southern airlines Copa Airlines Delta airlines Korean Air Latam airline Lufthansa

Monarch airlines Qatar airways Ryanair Singapore Airlines TAP Portugal airlines

Thomson airlines

Airlines OJSC Aeroflot – Russian Airlines, commonly known as Aeroflot, is the flag carrier and largest airline of the Russian Federation Air Canada is the flag carrier and largest airline of Canada. The airline, founded in 1937, provides scheduled and charter air transport for passengers and cargo to 182 destinations worldwid Air China Limited is the flag carrier and one of the major airlines of the People's Republic of China, with its headquarters in Shunyi District, Beijing. Air China's flight operations are based at Beijing Capital International Airport. Air France–KLM is a Franco-Dutch airline holding company incorporated under French law with its headquarters at Charles de Gaulle Airport in Tremblay-en-France, near Paris. Emirates is an airline based in Dubai, United Arab Emirates. The airline is a subsidiary of The Emirates Group, which is wholly owned by the government of Dubai's Investment Corporation of Dubai. Etihad Airways is a flag carrier and the second-largest airline of the UAE. Its head office is in Khalifa City, Abu Dhabi, near Abu Dhabi International Airport. Etihad commenced operations in November 2003. Eurowings GmbH is a German low-cost airline headquartered in Düsseldorf and a fully owned subsidiary of the Lufthansa Group Finnair is the flag carrier and largest airline of Finland, with its headquarters in Vantaa and its main hub at Helsinki Airport. Finnair and its subsidiaries dominate both domestic and international air travel in Finland. Air New Zealand Limited is the national airline of New Zealand. Based in Auckland, the airline operates scheduled passenger flights to 21 domestic and 31 international destinations in 19 countries around the Pacific rim and the United Kingdom. Alaska Airlines is an American airline based in the Seattle metropolitan area of the state of Washington. The company was founded in 1932 as McGee Airways, offering flights from Anchorage, Alaska. Alitalia – Società Aerea Italiana, operating as Alitalia, is the flag carrier of Italy. The company has its head office in Fiumicino, Rome, Italy. American Airlines, Inc., commonly referred to as American, is a major American airline headquartered in Fort Worth, Texas. All Nippon Airways Co., Ltd., also known as Zennikkū or ANA, is the largest airline in Japan. Its headquarters are located at Shiodome City Center in the Shiodome area of Minato. Asiana Airlines Inc. is one of South Korea's two major airlines, along with Korean Air. Asiana has its headquarters in Asiana Town building in Seoul. British Airways, often shortened to BA, is the flag carrier and the largest airline in the United Kingdom based on fleet size. When measured by passengers carried, it is second- largest in the United Kingdom behind easyJet. Hong Kong Dragon Airlines Ltd, operating brand as Cathay Dragon and previously as Dragonair, is a Hong Kong-based international regional airline, wit h its corporate headquarters, Cathay Dragon House, and main hub at Hong Kong International Airport. China Eastern Airlines Corporation Limited is an airline headquartered in the China Eastern Airlines Building, on the grounds of Shanghai Hongqiao International Airport in Changning District, Shanghai, China China Southern Airlines Company Limited is an airline headquartered in Baiyun District, Guangzhou, Guangdong Province, China. Compañía Panameña de Aviación, S.A., is the flag carrier of Panama. It is headquartered in Panama City, Panama, with its main hub at Tocumen International Airport. Delta Air Lines, Inc. is a major American airline, with its headquarters and largest hub at Hartsfield–Jackson Atlanta International Airport in Atlanta, Georgia. Korean Air Lines Co., Ltd., operating as Korean Air, is the largest airline and flag carrier of South Korea based on fleet size, international destinations and international flights. L...