BRAHIMS SATS CATERING - STRATEGIC MANAGEMENT PDF

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TITLE: STRATEGIC MANAGEMENT COMPANY: BRAHIMS List of Abbreviation....................................................................................................... Table of Contents List of Figures and Tables..........................................................................................

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TITLE: STRATEGIC MANAGEMENT

COMPANY: BRAHIMS

Table of Contents List of Abbreviation.......................................................................................................3 List of Figures and Tables.............................................................................................5 Figures......................................................................................................................5 Tables........................................................................................................................5 Executive Summary......................................................................................................6 1 Introduction................................................................................................................7 1.1 Industry Overview...............................................................................................7 1.2 Company Background........................................................................................8 1.3 Strategic Thinking (2016-2020)...........................................................................9 2 Environmental Analysis...........................................................................................13 2.1 SWOT Analysis.................................................................................................13 2.2 TOWS Analysis.................................................................................................15 2.3 Porter’s 5 Forces Model....................................................................................16 2.4 Competitor’s Analysis........................................................................................18 3 Strategic Capabilities...............................................................................................19 3.1 Vision & Mission................................................................................................19 3.2 VRIO Analysis...................................................................................................20 4 Strategic Initiatives...................................................................................................22 4.1 Revenue Generation Focus Shift......................................................................22

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4.2 Strategic Recommendations.............................................................................23 5 Resource Implications.............................................................................................26 5.1 Resource Audit – MANAGEMENT....................................................................26 5.2 Resource Audit – FINANCIAL...........................................................................26 5.3 Resource Audit – PRODUCTS.........................................................................27 5.4 Resource Audit – MARKETING........................................................................28 Conclusion..................................................................................................................29 References.................................................................................................................30

List of Abbreviation

BCG: Boston Consulting Group BHB: Brahim’s Holdings Berhad BKI: Kota Kinabalu Airport BSFS: Brahim’s SATS Food Services Sdn Bhd CAGR: Compound Annual Growth Rate COVID-19: Corona Virus Disease – Novel 2019 DHSB: Dewina Host Sendirian Berhad F&B: Foods and Beverages GST: Goods and Services Tax

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KCH: Kuching Airport KLIA: Kuala Lumpur International Airport KTMB: Keretapi Tanah Melayu Berhad LSG: Lufthansa Service Group (GmbH) LSGB: LSG SkyChefs-Brahim’s Sdn Bhd MAB: Malaysia Airlines Berhad MAS: Malaysia Airline System MCO: Movement Control Order NASA: National Aeronautics & Space Administration PEN: Penang Airport PN17: Practice Note 17 RTC: Ready-To-Cook RTE: Ready-To-Eat R&D: Research and Development SATS: Singapore Air Terminal Services SST: Sales and Service Tax UKM: Universiti Kebangsaan Malaysia USA: United States America USD: United States of American Dollar UV: Ultraviolet

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List of Figures and Tables

Figures Figure 1: In-flight Catering Market Growth Rate (2021-2026) Figure 2: BSFS Formation Chronology Figure 3: Brahim’s Holding Berhad Corporate Structure Figure 4: Brahim’s Financial Performance (2015-2020) Figure 5: Socio-economic vulnerabilities COVID-19 affecting Malaysians Figure 6: The Porter’s Five Forces Figure 7: Vision and Mission Statement of BSFS Figure 8: Ashridge Mission Model for BSFS Figure 9: Business Excellence Strategic Planning Figure 10: BCG Growth Matrix for BSFS Figure 11: Porter Generic Strategies & Ansoff’s Matrix for Brahim’s Figure 12: Malaysia Canned Foods Industry Players Figure 13: BSFS Resource Audit Checklist Figure 14: Rising Use of Digital Solutions in Malaysia

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Tables Table 1: SWOT-TOWS Matrix Analysis for BSFS Table 2: VRIO Analysis Schedule for BSFS

Executive Summary Report To: Dato’ Seri Ibrahim bin Haji Ahmad Executive Chairman, Brahim’s SATS Food Services Sdn Bhd (BSFS) Prepared By: Minhat Kamal / Strategic Management Consultant Title: Strategic Management Analysis and Future Direction for BSFS.

Strategic Management activity is concerned with relationships between an organisation and the environment in establishing vision, missions, and organizational goals. According to [ CITATION Ans18 \l 17417 ], strategic management is instrumental to gauge capabilities of managerial internal structure and its responsiveness towards changes in external environment. The purpose of this report is to discuss BSFS strategic management decisions for the past five years and its proceeding implications towards company’s growth. The report studies the internal and external environment factors affecting company’s development projection. Discussions also provided for current vision and mission statements, and their relationships with current strategic capabilities of BSFS. This report also provides recommendations for strategic management initiatives moving forward, harnessed by existing company’s core competencies and its

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subsidiaries’ resources. Finally, BSFS will be consulted on resource implications and business expansion potentials from the recommended strategic initiatives.

1 Introduction 1.1 Industry Overview In-flight catering service industry has been revolutionized over the years. It’s driven by demands for continuous quality and standards improvement, customer’s regional culinary preferences and cost-cutting measures by airliners [ CITATION Maz19 \l 17417 ]. From simple snacks and common cuisines prepared by airline operators, the catering industry has rapidly evolved in the hands of outsource catering companies. Focused workgroup, innovative technologies, and systematic processes has driven quality, safety, and efficiency of menus on-board each flight [ CITATION MHa21 \l 17417 ]. The main industry players include LSG SkyChefs, Gategroup, and SATS Limited.

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Figure 1: In-flight Catering Market Growth Rate (2021-2026)

The global in-flight catering service market size was valued at USD18 billion in 2018, with projection CAGR of 3.66% through 2026 [ CITATION Ani19 \l 17417 ]. However, due to COVID-19 pandemic, travel restrictions and flights suspension has caused aviation industry to slump into survival mode, directly impacting in-flight catering industry.

1.2 Company Background Brahim’s SATS Food Services Sdn Bhd (BSFS) was founded under the name LSG SkyChefs-Brahim’s Sdn Bhd (LSGB) in 2003, from divestment of Malaysia Airline System (MAS) off its in-flight catering subsidiary.

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Figure 2: BSFS Formation Chronology Actively serving 36 international airline companies, BSFS is the global leader in halal in-flight catering and the principal service provider at Kuala Lumpur International Airport (KLIA), KLIA2 and Penang International Airport (PEN). BSFS produces around 50,000 meals daily, catering over 200 flights daily. [CITATION Bra21 \l 17417 ]. BSFS is the main business portfolio for Brahim’s Holdings Berhad (BHB), a Bursa Malaysia listed company since 2011. BHB also handles warehousing and logistics (Tamadam Industries), airport restaurants, ready-to-cook food and ready-to-eat food and beverages industry (Dewina Host) and sugar refinery company (Admuda).

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Source: [ CITATION Bra18 \l 17417 ] Figure 3: Brahim’s Holding Berhad Corporate Structure

1.3 Strategic Thinking (2016-2020) Over the last five years, The Brahim’s Group has consistently recorded financial losses with worryingly shrinking assets. With its revenue ultra-dependence to aviation industry’s performance, crucially Malaysia Airlines as major customer, the group business model seems fragile and vulnerable. FY2016 Multiple key management decisions made in response to slumping performance over previous years. The focus changed to protect and strengthen balance sheet moving forward. Equity sales of Brahim’s airline catering services to SATS Limited (Singapore) by 49% with capital injection worth RM110 million, was deemed necessary to improve cashflows, manage debt and address outstanding commitments. The Group also embarked cost-cutting measures, risk management exercises and outsourcing audits [CITATION Bra17 \l 17417 ]. Strategic collaboration also benefits BSFS from SATS culinary experience, processes expertise, and attracting bigger supplier’s pools.

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Source: [ CITATION Bra211 \l 17417 ] Figure 4: Brahim’s Financial Performance (2015-2020)

FY2017 FY2016 radical management initiatives has essentially serve as foundation for a better FY2017 business performance. This added up to additional new airline customers and business expansion beyond airline catering. BSFS focus turned to provide catering services for Universiti Kebangsaan Malaysia (UKM), Hospital Pantai canteens and intercity train services (KTMB). However, slower global economic growth has impacted air travel and food-related industry, resulted in loss after tax [CITATION Bra18 \l 17417 ]. FY2018 Lower air passenger volume from major customers, goodwill allocation impairment, higher operating costs, and business restructuring of Malaysia Airlines have resulted in lower revenue and deeper financial loss. The focus was gearing for new diversification opportunities and holding strategic discussion with current partners. Bigger challenges surfaced when the company has lapsed into Practice Note 17 (PN17) status by Bursa Malaysia Securities after breaching Main Market listing compliance when its shareholder equity fell below 25% threshold [CITATION Bra19 \l 17417 ].

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FY2019 The Group’s focus was to actively engage in identifying potential opportunities, strengthening financials and business structuring to gear itself to exit PN17 status. The first domino was divestment and liquidation of 51% equity interest in restaurant and café operation subsidiaries, Dewina Host (DHSB). Successful pursuant of additional airline customers also secured by BSFS for brighter business prospect [CITATION Bra20 \l 17417 ]. Those collective restructuring decisions resulted in biggest consolidation turnover (RM306 million) since FY2014. FY2020 The COVID-19 outbreak has dampened aviation industry and BSFS airline catering business critically affected. Proposed “white-knight” head of agreement (HOA) arrangement with MRI VC, a frozen food and investment company, to exit PN17 status was terminated due to business uncertainties in pandemic period [ CITATION The20 \l 17417 ]. The group mutual separation scheme (MSS) move has reduced the workforce by 50%. The group keeps retooling and formulating survivability plan and manage to sell 12% BHB equity [ CITATION Har20 \l 17417 ] to Focus Dynamics Group, an F&B entrepreneur entity.

Figure 5: Socio-economic vulnerabilities COVID-19 affecting Malaysians

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2 Environmental Analysis

In order to analyse the external and internal environmental factors affecting BSFS as an airline caterer and general food and beverages industrialist, SWOT-TOWS analysis and Porter’s Five Forces models will be integrated in this report. It is important to have multiple indicating sticks of current scenarios for business growth potentials, risks mitigation and strategic decision making.

2.1 SWOT Analysis STRENGTH Due to high degree of operational competencies and complexity in airline catering business, BSFS has managed to monopolise the industry domestically. Strong bond to government-backed Malaysia Airlines (MAB) also ensures that BSFS longevity to stay relevance. Added on to growing international airline customers and unique worldwide leadership in Halal-certified airline caterer status, BSFS future looks securely promising.

WEAKNESS Overdependence on volatile airline industry and specific airline operator in MAB was a direct example of current financial struggles of BSFS. Although as a group, Brahim’s has multiple promising business portfolios in logistics (Tamadam), Manufacturing (Admuda), and F&B (Dewina); the businesses lack market updating, mainstream promotions, and yield low revenue.

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OPPORTUNITY The exploitation of core competencies should be the advantage for BSFS to explore strategic partnerships and business diversification. The COVID-19 pandemic is a knockdown blow but serve as a “reset button” to re-evaluate dysfunctional in internal systems. Government’s great effort in initialising economic stimulus injection, all-level monetary schemes, and introduction of MyDigital 2021 blueprint [CITATION BNM21 \l 17417 ] serves as great platform for BSFS to retool, rebound, and relaunch itself. Due to pandemic also, digital platform for business is booming, while demands for ready-to-eat food showing uptrends.

THREAT Malaysia political turmoil in recent time has resulted instability in policymaking. Tax’s structure transition between GST and SST always inviting fresh complexity for compliance and sustainability. Public travel fear, weaker purchasing power, and depreciation of labour market affected from pandemic’s movement control order (MCO) and restriction in economic activities added on to BSFS threat concern.

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2.2 TOWS Analysis

Table 1: SWOT-TOWS Matrix Analysis for BSFS

TOWS analysis will present critical evaluation of BSFS opportunities’ advantages with core strengths, while minimizing the impact of weaknesses and protection against external threats [ CITATION Rah20 \l 17417 ]. Essentially, BSFS can be dependable to its core competencies in halal in-flight catering leadership as it serves unique leadership in massive market potential. The way to protect and expand this potential is by delivering consistent products excellence and improve marketing and brand penetration. The company structure must be solid enough to attract and establish strategic collaboration with industry players from diverse markets. The company also must be flexible enough to be adaptable to ever changing government policies and laws.

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2.3 Porter’s 5 Forces Model

(Source: Google) Figure 6: The Porter’s Five Forces

2.3.1 POWER OF BUYER - 5/5 In-flight catering is one the key deciding factors for passengers selecting traveling airlines [ CITATION Bal18 \l 17417 ]. Lucrative contracts offered by airline operators means a uniquely customized and appealing dishes demanded every flight with highest quality expectations. The buying and switching power of passengers is supremely high in aviation industry whereas airliners hold decisive factors as direct customers for contracts offerings, extensions, or terminations.

2.3.2 POWER OF SUPPLIERS – 2/5 BSFS hold a great purchasing and bargaining power over F&B raw materials suppliers as they are widely available and easily substitutable. This has given healthy advantages for BSFS to demand the best available quality-to-price services from the nominated suppliers and sustain long-term business relationships.

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2.3.3 THREAT OF NEW ENTRY – 1/5 The complexity, criticality, and unparallel level of expertise to cope with aviation industry’s demands means new entrant’s threat are slim at best. However, commercial airliners may lean for a reputable service provider (which BSFS offers the best solution in Malaysian airports) or opt for self-arranged catering set-up.

2.3.4 THREAT OF SUBSTITUTIONS – 2/5 Depending on specific airliners business model, the threat of substitutions may vary. As per mainstream demands, flight operators still popularly stick to their own signature multi-class catering arrangements. Some companies, especially low-cost carriers, are moving towards retail food sales on-board aircrafts or pre-ordered packages prior check-ins.

2.3.5 RIVALRY AMONG COMPETITORS - 1/5 Since the high entry barrier, logistics burden, smaller market, and political restrictions imposed on inflight catering services industry, there are only four main players throughout Malaysia. The rivalry is considered a non-existence due to different business models focused by each participant.

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2.4 Competitor’s Analysis BSFS is the principal service providers for most of available domestic and international commercial carriers landed on KLIA, KLIA2 and PEN. Domestically, AirAsia Santan attention directed to pre-flight booked meal for their own customers, and recently diversified to on-ground restaurant and food delivery businesses. Pos Aviation catering team covers specialised cargo, Hajj operations, and VIP flights. Dnata 121 Inflight Catering focus on customisable private jet arrangements. For East Malaysia airports like Kuching (KCH) and Kota Kinabalu (BKI), in-flight catering duties provided by Mas Awana Services. As for the international powerhouses in the industry, the only way to enter the market is by joining forces to local entities. As did LSG SkyChefs in 2003 and SATS Limited in 2016 with Brahim’s.

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3 Strategic Capabilities 3.1 Vision & Mission

Figure 7: Vision and Mission Statement of BSFS Vision statement is a descriptive picture on desired future state that plays critical role in aligning company-employee goals, inspiring positive performance, and facilitating organizational change [ CITATION She16 \l 17417 ]. Analysis by [ CITATION Ale18 \l 1033 ] revealed mission statements impact on firm performance that gross revenues were linked to how the mission was articulated. It might evolve over time, reflecting variations in the activities and performance.

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Figure 8: Ashridge Mission Model for BSFS

Critical Arguments on Vision and Mission Statements VISION LACKS AMBITION: The aim on being a recognisable entity of halal standards and performance is practicably achievable especially when based in Malaysia, a world leader in halal industry standardization [ CITATION Bor19 \l 1033 ]. Rather than just being ‘recognised’, the company should leverage on nation’s specialty to become the best in aviation industry, region, or even worldwide. MISSION OFF-TRACK: The group’s mission failed miserably based on past decade’s financial performance. Revenue diversification mission structurally visible through multiple industries’ portfolio. However, imbalance of focus for the ‘cash-cow’ operation (airline catering) has hampered the R&D improvement and investment for other divisions.

3.2 VRIO Analysis

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Table 2: VRIO Analysis Schedule for BSFS

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Halal F&B Standards Leadership Driven by ultimate vision of halal-hub embodiment across its operations, BSFS realised this capability is the strongest success factor. The process complexity, enormous responsibilities, and added operational costs make halal-certified catering a hard entry for even the established in-flight c...