Business Strategy: Taj Sats Air Catering

The purpose of the report is to analyse the business strategies of the Taj Sats Air Catering Ltd. It’s a joint venture of the Indian Hotels Company popularly known as Taj Hotels and Palaces, and SATS (Singapore Airport Terminal Services). This report explains us that how the operating and functional strategies helps the Taj Sats to achieve its business strategies. It also provides the information that how the strategies of the Taj Sats implemented and compete in the huge industries of the air catering although it’s the leader in the air catering and ground handling services in Asia.

After analysing the report it has been found that Taj Sats follows the market niche strategy based on differentiation. It has been followed because the whole idea behind a niche strategy is to target the specific consumer group. The strong financial and operating strategies support the business strategies like customer services, wide range of cuisine at different occasion, and dietary preference of the customers as per their eating habits and their culture. Taj Sats built an in house microbiological laboratory monitors the food preparation and the hygienic conditions of the preparatory environment for which is ISO 22000:2005 standards. The company is planning to provide the Non airlines services including institutional and corporate catering in Asia and few states of India like Nagpur, Ahmadabad, Cochin and Calicut.

As the Taj Sats is trying to overtake the international airlines catering market but there are three huge brand and well established competitor i.e. Emirates Flight Catering, LSG Sky chefs and Cathay Pacific Catering Services in the Airlines food industry and company is well aware of all these.

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After analysing the strategy we find that the company actively research on the international Air catering industry and clearly aware of their position and reputation in the market. Vision, mission and objectives are the blue prints that lead the company to achieve its goal.

Introduction

As per the overview the Taj hotels resorts and palaces is the part of the Tata group, which is India’s leading multi business-accumulate. Tata group has nearly 100 companies across the world in approximately 80 countries. Established in 1976, Taj Sats Air Catering Ltd. is the joint venture of the Taj hotels and palaces and Singapore Airport Terminal Services(SATS), popularly known as Taj SATS. Today, TajSATS is providing the catering and other non-airline services, which includes aircraft cleaning and laundry, to nearly 50 airways company across the world.

As a competitor of Emirates flight catering, LSG Sky Chefs and Cathay Pacific Catering Services, TajSATS has its own strategy which helps to gain the competitive advantage in the air catering industry. The mission of the business is to excel and enhance the leadership in the airline catering industry and expand the business into other airport related services in India and other selected region of the world, by providing the unique, innovative, world class services and exceptional value to its customers.

According to the business strategy-making and strategy executing process, the report will deeply research on the TajSATS strategy use and the result they get after implementing the strategy in the industry.

Research Methodology

The strategic analysis technique which is used in this report is on the basis of the expansion of the business of TajSATS air catering ltd, which is a joint venture company of Taj hotels Resorts and Palaces and SATS (Singapore airport terminal services). As we knowTaj Hotles group is one of the biggest in Indian hotel industries and SATS (Singapore airport terminal services) one of the leader in airline catering in whole Asia. And their JV company is the market leader in airline catering and they are providing air catering services to the major cities of India like Mumbai, Delhi, Chennai, Kolkata, Amritsar, Goa and Bangalore and manages Airport Lounges in Mumbai and Chennai.

And as all company tries to maximizes profit and expand their business in the same way TajSATS is taking steps to expand their business effectively ( in the international Market and trying to expand their market share in India) and we can see how the company is trying to maximize their profit, through the latest News and the announcement of the company.

Company just got the catering contract with Oman air and TajSATS is the first JV company to get this contract in which they would be providing wide range of cuisine on board for the flight of Oman air for Mumbai-Muscat sector.

And in the march company announced that they will setup there catering services in goa panjim which will provide flight catering in the flights.

With the Goa set up TajSATS also announced that they will open one unit nearby Bangalore International airport and as the company M.D. elaborated they will get good business from Bangaluru set up.

TajSATS on 14th March catered the first flight for Pamir airways a private airline of Afghanistan which operates in Delhi – Kabul sector twice a week.

With the above new set ups company now have seven flight catering units in India in the major cities and planning to so they are taking steps in making their company sure market leader in the Indian market of air Catering.

Over that company have bagged the contract for managing the Lufthansa lounge (Star Alliance) and Emirates lounge in Mumbai International Airport which is also a step for giving the best services to customers not only Indian but internationally as well.

TajSATS is also maintaining its standards of good quality with the expansion of their business and that’s the sign of excellence of the company as a leader in their market.

TajSATS Bangalore has achieved the “British Airways Award of Excellence” for 2007/08. And Taj SATS Air Catering Limited which caters to Cathay Pacific Airways’ flights from Mumbai was adjudged the Best Caterer 2008 – Silver Award in the second half of 2008.

So based on the above facts and announcement of the company which is discussed in report in regards of expansion of company and maintaining the quality of their services at the sometime to become the market leader and capture the 100% share of market, even company is planning to set up their unit in cities like Ahmadabad and Nagpur to be the leader.

The secondary data for the case study is retrieved from the official website of TajSATS and Google browsers which are genuine and authentic.

EXTERNAL ANALYSIS OF TAJ SATS

Legal and Political analysis – It is very important for air catering companies like Taj Sats to follow the different policies set by the government and the international laws as it will help them to serve their customers better and also within the premises of the laws.

Economic analysis- It is very important to estimate the exact no passengers in every flight as this will help to reduce the over cost for production of food which will help them to reduce their overall costs. The price of the airfares are decreasing day by day hence it has become very important for the air catering companies to reduce their cost as the meals served by the airlines comes up to 2 % of their total operating costs. Over the last couple of years the economy has faced with a problem of inflation which has lead to an increase in the cost of the products, this is a major concern for companies like Taj Sats.

Socio-cultural analysis – Taj Sats as a company uses the best quality of food products and also customises meals to the preferred tastes of their customers and also issues different menus on the different festivals of the world. Taj Sats should concentrate on the fulfilment of the customer’s expectation and also must try to work on the complaints which come before them. Hey also achieved the Halal certificate from Malaysian airlines to meet with the customers expectation< http://www.tajsats.com/images/fact_sheet.pdf>

Technological analysis-Taj Sats is the only company which uses microbiological laboratory in monstering their food production process which is very technologically very w to this industry, also the kitchens of the Taj Sats are equipped with latest equipment which helps them to serve a meal which is very tasty and beautifully presented and which is produced in the least amount of time.

Demographic factors- over the last few years air travel is becoming cheaper day by day, this has lead to an increase in business for many air travel companies and companies related to air travel. Taj Sats is the Indian market leader in the air catering business as it provides in-flight catering at Mumbai, Delhi, Chennai, Kolkata, Amritsar, Goa and Bangalore and manages Airport Lounges in Mumbai and Chennai. As the average weight of an individual is increasing and more and more people are becoming obese this stats is very important to Taj Sats cooks as it will give them an idea of how much quantity they might provide in every meal to completely satisfy the customers.

PORTER’S FIVE FORCES MODEL

The international and national catering market is very competitive and It is important to know the different competitive forces that are driving the air catering market. It is it is very important for the companies to know what their competitors moves as this might give an advantage to them.

Rivalry between existing competitors- price is one of the main factors on which several companies compete within this industry. In the Indian market there is major competition between Taj Sats, Oberoi and Ambasssador Sky Chefs with the foreign competitors like Lufthansa Sky Chefs. The price is a factor which cuts down the margins of the companies whereas the non price factors such as quality help to increase the overall operating cost. Rivalry also arises as the companies are providing somewhat the same kind of services to the airline companies.

Threat of entry by new competitors: The entry of a new competitor causes the price and the profit margins of the companies to drop. In this case it is very important for a company to achieve economies in production as it will help them to reduce the overall cost of operations and will help them to earn a sustainable amount of profit. As the new entrants will find it difficult to sustain in this low price market, they will finally quit.

Price pressure from substitute or complementary products-In the international catering industry airlines usually have different kinds of menu’s and more choices of drinks and food for the people in the business class then for the people in the economy class. It is also very important to keep in mind the prices of the products used and any fluctuations in the price of their substitutes as it will help the catering companies to make changes which will help them to control their costs.

Bargaining Power of Buyers: Nowadays the buyers are becoming very smart they would prefer an airline which is providing a complete deal to them in relation to price of the tickets, the food and drinks provided by them, the additional services which are provided. Hence if the customer is not satisfied he has the opportunity to switch to some other airline which is providing them a better deal for them. The bargaining power of the customers is a big threat to this industry and companies like Taj Sats should do everything in their power to satisfy them.

Bargaining Power of Suppliers: The cost of inputs is labour, raw materials (food items) and services determine the profitability of this industry. According to Taj Sats an average meal in the international flight cost the 200-300 Indian rupees. There is a lot of food catering companies in this industry it depends on their strengths to bargain with the airline companies.

STRATEGIC GROUPS (COMPANY’S) IN THE AIRLINE FOOD INDUSTRY:

Emirates Flight Catering; it is one of the biggest competitors to Taj Sats, as the company has a very technologically sound catering facility which helps them to make around 115,000 meals a day and also helps to services in total of 110 airline clients. http://www.linkedin.com/companies/emirates-flight-catering

LSG Sky Chefs; this is also one of the main competitors to the Taj Sats, LSG a subsidiary of the Lufthansa airline and is one of the biggest players in the airline catering business as its global market share is 30 percent and it caters to 49 countries in the world. LSG also produces 427 million menus for its different customers every year. (http://konzern.lufthansa.com/en/themen/lsg-sky-chefs.html)

Cathay Pacific Catering Services ;it is one of the biggest competitors to the Taj Sats as it provided meals to over 30 different carriers and supplies over 20 million meals to the carriers in and out of Hong Kong (http://www.cpcs.com.hk/)

Internal Analysis

Strategic capabilities:

Valuable to customer: The customers of Taj Sats needs Hygienic and Healthy food, and they provide according to the standards i.e. ISO 22000:2005 standards.

Rare: Taj Sats constantly monitors the food production and hygienic conditions of equipment and the working environment in its microbiological lab.

Superior to Competitors: TajSATS specialises in a wide range of cuisine and serves a multi-cultural clientele. It also customizes its meals to suit the dietary preferences of their customers. It uses the best quality of raw maetrial which is audited by the in house quality team. They offer a world of choice for vegetarians and prepare exotic theme menus during festivals and special occasions.

SWOT Analysis

Strength:

Brand image: Association with the brand name of Tata group gives the company an added advantage over its competitors. And being one of the only companies in the air catering business, it helps Taj Sats in gaining the huge market share in India.

Large Market share: Being the part of the Tata group and one of its kinds in the country it has a large share of the market share. There are other airlines running their own catering for the airlines but Taj Sats stand out in comparison with them. All these facilities are equipped with state-of-the-art technology and advanced kitchen equipment for efficient and hygienic food production and handling which make Taj Sats better than the rest.

State of the art technology: All the facilities are equipped with advance technology and kitchen equipments for efficient and hygienic food production.

Weaknesses:

Lack of Facilities: Since Taj Sats is based in India, it does not have any other facilities internationally. Because of which it is not able to cater its international clients 100%.

Opportunity:

International Market: Taj Sats is currently concentrating Indian market. And looking at the current scenario and tie up with Singapore Airport Terminus Services, it is looking to go into international market. It has currently tied up with various international Airlines. It got contract from China eastern airlines, Oman airlines etc.

Different Services: Taj Sats is planning to provide non-airline services, namely, outdoor and institutional catering and corporate gifting.

Threats:

Competitors: Entrance of the new company entering into the market, it is eating up the market share of Taj Sats.

Government Regulations: Increases in the price of air turbine fuel, airlines have started to reduce cost and which is affecting Taj Sats in the major way. The airlines have started to cancel the contract to save cost.

Value chain Analysis:

Taj Sats has the infrastructure required to provide the value to their customer (in the case of Taj Sats the customers are their clients). The facilities are equipped with state-of-the-art technology and advanced kitchen equipment for efficient and hygienic food production and handling. The employees are hired based on the mission and objective of the organisation. “Mission : To excel and enhance our leadership in airline catering, and expand into airport related services in India and select regions, by delivering exceptional value to our customers through world-class quality, innovative products and services and motivated employees”. Procurement plays a vital role in Taj Sats. Taj Sats strictly adheres to ISO 22000:2005 standards, from the time food is received, prepared and produced till it is loaded onto the aircraft. Taj Sats constantly monitors the food production and hygienic conditions of equipment and the working environment in its microbiological lab. Facility temperatures are also kept conducive to meet food safety standards. Apart from in-flight catering, Taj Sats undertakes airline services such as Airline Lounge management, Aircraft Cleaning, Laundry, Airline Bonds, Catering Ramp-Handling and more.

Recommendation Strategic Options

The Taj Sats is market leader in air catering business in domestic market(in India). The organization want to expand its businesss to international boundaries. Although it has a joint venture with the Sats( Singapore Airport Terminal S) and already in internatioanl market but the market share of the comapny is very less. So to become the leader of the internatinal maket the comapany has to expand its wings. The organization have to expand globally and entered into the new region with the existing products. The organization can target new segment of a customer with existing product so as to generate more business. The organization need to use new channels so as to deliver their product.

The strategy the TAJ Sats can follow; (market niche strategy based on differentiation) concentrate on the one of the market segment by providing better quality of products than its competitor like Cathay Pacific and Emirates. This strategy will provide a good growth to the company. The company is mainly concentrated on the catering business with it the company also concentrated on the some maintenance work of the aircrafts and the lounges of different companies. The rival of the Taj Sats is less so the company has more scope as in this airline catering industry, as the crowd is less. Therefore, the company can concentrate on the services and product to deliver them in high standards and efficiently against its rival. In domestic environment (in India), the company is limited to few locations only, it can expand its business to new location as it is only limited its service to metro and some big cities. The company can adopt latest technology before than its competitor to providing services to its consumer, as it will provide a good thrust to its business. The organization can also provide new or improved product features to win the customers and can put itself one-step ahead against the rivals like the company can come with new range of cuisine. The organization can adopt the new and better idea from the other companies (from its rivals or other companies) like the company can expand its international business to new international locations and to the new international airway routes. The company can continuously hit at a particular market segments in which its rival is making big profits. The company can concentrate on the geographical location where its competitors is not present as in India the competitor of TAJ Sats, market share is very less so it can expand to the area where its competitors did not reach or reach before its competitors. The company can use guerrilla warfare to capture market share from its competitors as TAJ Sats can surprise its rival company by entering into new markets with full strength and the capacity. The company can gain from the competitor’s weakness as it can used it for its profit, Taj Sats can provide better service quality than the service which quality is less in competitors service.

Implementation

Implementation of the strategies Taj Sats can strengthen its resources in human and capital to drive them to execute the strategy. Executing some policies, which will enhance their capability to execute the strategy, neither hampers their performance and resources. Taj Sats can try reward to motivate its employee for the achievements. A good leadership can also drive them for the execution of the strategy. The internal organization has to support for the execution of the strategy. A strong and experience management team has to be there with it recruit and retain the employee whose experience and technical skill will be needed by the organization. It is necessary for the organization to analyse how much the decision-making manager will push the lower level of managers and employee to execute what they want. A better work climate that will enhance the performance of the company. Continuous motivation by the Taj Sats to its employee will increase the performance of the employee resulting in the increase of company performance. Creating a wok culture in which the employee are sincere, caring and respect each other. The company can share the strategy, financial performance, operational measures with their employees. (Thompson, Strickland, & Gamble 2007)