Bernas Strategy Case Study

Have you allocated ample resources to strategy-critical areas? If so, explain how these investments have contributed to good strategy execution and improved company performance?

Following the rice crisis of 2008, the government has increased the national stockpile. This move has increased public confidence on food security as well as placed BERNAS in a better position to stabilize market. On 18 September 2012, BERNAS signed an agreement with the Government of Malaysia (BERNAS Agreement) for the extension of its concession business for a further period of 10 years commencing from 11 January 2011 to 10 January 2021. Based on the agreement, BERNAS shall perform a number of obligations including maintaining and managing the Government’s rice stockpile of 292,000 MT at its cost, and comply with the security, safety and other standards as required by the Government.

BACKWARD INTEGRATION STRATEGY

Bernas local paddy market share increase to 33.3% in 2014, compared to 32.2% recorded in the previous year. Paddy is purchased through Bernas Rice Mill 32 (KBB) and 51 purchasing centers (Scheme Purchase Center) throughout the country. Through this network, as well as the involvement of 'Skim Upah Mengering dan Kisar (UMK), Bernas managed to buy 800,000 tonnes of rice from local farmers at tahun2014: an increase of 1.1% compared to 2013. Bernas continued to buy local rice at a market price that is much higher than the price guaranteed minimum RM750 per tonne set by the Government.

HORIZONTAL INTEGRATION STRATEGY

Strategies to hold shares in competitors that Bernas can control competitors. On 11 November 2011, Bernas acquire an additional 29% share in Ban Heng Bee Holdings Sdn. Bhd. (HBH) to increase its stake to 49% . Bernas has been added to the 100% equity stake in PT Berkat Beringin. Bhd.

VENTURE STRATEGY

To broaden participation in the operation of the production and distribution of rice and local rice, Bernas has taken initiatives and measures so that business deal can grow. Among the strategies are :

• Bernas has signed a joint venture agreement with KNC Fame Sdn. Bhd. on January 10, 2011,
•  Cooperate in operations Beringin Sdn. Bhd. for purchasing activities and rice milling and packing rice
• Bernas signed a Memorandum of Understanding with the Lembaga Kemajuan Pertanian Muda (MADA) to work together to develop commercial activities EPP10 Project: Strengthening and Improving Productivity of Rice Cultivation.
• Memorandum of Understanding with Vietnam in October 2011 for the supply of up to 800,000 tonnes of rice when it's needed.

DISPOSAL STRATEGY

Dispose of some operating subsidiary of Bernas as closing unprofitable retail operations 'Save More' which led to pre-tax profit for The Year 2011 decreased by 2.9% to RM238.73 million from RM245.78 million recorded in 2010

MARKET SEGMENTATION

 Segmentation of the various product Bernas. Through market segmentation, business segment rice Group contributed 84% of the total, while non-rice business segment contributed 16% of the acquisition, which is 34.4% higher than that recorded in the previous year.

REEINGINEERING

• Bernas exploit the opportunities the synergy that exists under the auspices of the Group's corporate Tradewinds (M) Berhad, which is among the biggest food business and is listed on the bottom of the Main Market of Bursa Malaysia Securities Berhad. Strategic focus of each company in the group is a force that contributes to the productivity, efficiency and overall profitability Bernas

• Acquisition strategy from a variety of sources and long-term purchasing strategies to reduce the impact of higher international prices dramatically or the possibility of supply disruptions caused by the weather. In 2011, the number of Bernas rice imports increased by 14.2% to 1,068,224 tonnes, compared to 935.244 tonnes in the previous year. The bulk of it imported from Vietnam, Thailand and Pakistan.

MARKET PENETRATION STRATEGY

Bernas create brand presence in the retail market by creating brand preferences along with partners such as Jasmine Food Corporation, Serba Wangi, and Spinach Era in Gaza City; Sazarice and Sabarice in Sabah and Liansin Trading in Sarawak. The brands they already made a name in the rice industry, and they also support high value Bernas in line with the benchmark for high quality rice produced per product.

RESEARCH AND DEVELOPMENT

Bernas allocate more funding to improve facilities and uses the latest technology in all stages of the supply chain. Bernas-UPM laboratories upgraded from laboratory to laboratory analysis of food technology research and Development (R & D) fully. Now it is known as UPM-Bernas Research Laboratory that is focused on the effective use of resources and innovation in upstream and downstream activities, as well as research byproduct of rice that can be commercialized in the future. Establishing Quality Management Division, composed of qualified and experienced supervisors. They carry out inspections and analysis in compliance with the methodology of sampling and analysis contained in ISO 13690 and ISO 7301, which is recognized internationally. ISO 13690 specifies the general requirements regarding sampling for quality assessment of cereals, pulses and milled products, while the ISO 7301 outlines the minimum specifications for rice which are subject under international trade.