Malaysia Country Report 2012

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Discovery Reports

Berjaya finds great wealth in diversity

Discovery Reports

PUBLISHED : Monday, 24 September, 2012, 11:47am
UPDATED : Friday, 04 March, 2016, 5:06pm

As one of Malaysia's largest conglomerates, Berjaya Corporation showcases the entrepreneurial genius of its founder and former chairman Vincent Tan. Committed to giving back to society, the corporate visionary united different business segments under the Berjaya umbrella and used the group as a platform to provide jobs, generate income and help stimulate economic growth.

The word berjaya means "success" in Bahasa Malaysian and it perfectly describes what the company has achieved since its founding in 1984. Berjaya is listed on the main board of Bursa Malaysia Securities. The company is also on the Morgan Stanley Capital International Malaysia Index.

Vincent Tan demonstrated his business savvy when he transformed Berjaya from a small holding company to a diversified corporation with more than 16,000 employees.

"My father has an exceptional vision in business," says chairman and CEO Robin Tan.

"He often challenges conventional thinking, which enables him to see some things that most people miss. With divine blessings, a majority of his decisions and strategies turned out to be successful. That is one of the great strengths of Berjaya."

With such a massive workforce, Berjaya relies on its capable leaders to foster synergy between the different segments.

Among its businesses is the hotel, resorts and recreation division. Berjaya owns and operates four- and five-star hotels in Malaysia, Singapore, the Philippines, Britain, Seychelles and Sri Lanka. Aside from managing hotels, Berjaya is also engaged in hospitality timeshare operations and the ownership and operations of golf clubs. Under this division, Berjaya also manages Berjaya Air, the airline which services the group's different island resorts. Berjaya is studying strategies for expansion of its routes.

Berjaya also specialises in gaming and lottery management. Berjaya runs the largest of three lottery operators nationwide and is the sole operator offering lotto games. Through its subsidiaries, International Lottery & Totalizator Systems and Philippine Gaming Management Corporation, the group supplies and maintains online computerised wagering equipment and systems to the Philippine Charity Sweepstakes Office.

The company is a major player in the solid waste management sector in Malaysia, being the developer and operator of the Bukit Tagar sanitary landfill in Selangor. The Bukit Tagar sanitary landfill is one of the largest, fully engineered sanitary landfills in Southeast Asia, using modern technology to optimise the protection and preservation of the environment. The landfill also generates electricity from landfill gas to feed the national grid with green and sustainable energy.

Berjaya has successfully exported its expertise in solid waste management abroad by securing a concession to develop and operate a sanitary landfill in Foshan. The project is undertaken by its subsidiary, Berjaya Environmental Engineering, under a 28-year concession from the mainland government.

Under Berjaya's vehicle business, the company distributes Mazda, Aston Martin and Skoda cars, and Mercedes-Benz multipurpose vehicles. Berjaya also has several subsidiaries which are official distributors of China-made vehicles: Changan Berjaya Auto manufactures, assembles and distributes the Chana brand motor vehicles; Berjaya Brilliance Auto assembles and distributes Era Jinbei commercial vehicles; and Berjaya Joy Long Auto assembles, manufactures and distributes Jiangsu Joylong Auto vehicles in Malaysia, Thailand, Indonesia, Vietnam, Cambodia and Laos.

The company also owns and manages educational institutions, Berjaya University College of Hospitality (Berjaya UCH) and Berjaya College of Nursing and Health Sciences (Berjaya CNHS). Berjaya UCH is one of Malaysia's premier university colleges specialising in culinary arts, hospitality, tourism and services management. Berjaya CNHS offers diploma and post-basic specialist programmes in nursing and health care.

"Berjaya is an incubator of many different businesses," Tan says. "Aside from my father's guidance, what helps boost our growth is great leadership across the companies."

Berjaya builds international brands

One core business that catapulted the Berjaya brand into the international limelight is its consumer marketing business. Since Berjaya's acquisition of Malaysian multilevel direct selling company COSWAY in 1994, COSWAY has experienced tremendous growth globally.

COSWAY was established in 1979 as a multilevel marketing company by its CEO, Al Chuah.

"From day one, COSWAY has been totally different from other multilevel marketing businesses. We distributed our products through our stockists, and supplied them on a consignment basis," Chuah says. "While other multilevel marketing businesses task their members to buy and resell inventory, our members do not carry this burden. We have retail stores where our members can shop for whatever they need and we get active members to manage these stores. They are the networkers that can pull customers in and get them to sign up as members and buy products."

COSWAY revolutionised the multilevel marketing industry with the introduction of the free store concept in 2007. In the free store concept, COSWAY's members can apply to operate their very own free store. The company bears the cost for rental space, utilities, information technology, promotions and more importantly, furnish the inventory on consignment. Members do not need to bear any risks or make any investments.

The chosen operator becomes the boss of a free franchise-like business and is then responsible for bringing in more members. COSWAY pays the operator a percentage of total store sales. COSWAY also pays profits to its members under its profitable consumer or prosumer programme. All they need to do is use the products themselves and introduce COSWAY products to other people to become new members in their COSWAY network.

After its successful launch in Hong Kong and Taiwan, COSWAY expanded this concept to other regions such as the United States, Japan, Britain, Australia and New Zealand. COSWAY will introduce the free store programme to Russia and Latin America in the first half of the year.

The company has adopted the retail business model on the mainland, while still offering the free store concept to members.

"My father has been very instrumental in pushing COSWAY to be innovative and to expand overseas," Tan says. "There were some challenges at the start before we hit on the free store model but now, it is proving to be a huge success. The numbers have been increasingly encouraging."

With over 1,800 retail stores across 15 regions, COSWAY offers more than 2,000 products in the health care, personal care, slimming, skincare, cosmetics, food and beverage, and household product sectors. COSWAY has spent the past 30 years sourcing for a wide range of high-quality, affordable, eco-friendly and non-toxic products.

Targeting a wider scope of customers, COSWAY launched a three-in-one store concept called COSWAY Pharmacy. As a revamped COSWAY store, COSWAY Pharmacy carries three product categories - pharmaceutical and other brands of personal care products, COSWAY's own range of products, and the Country Farm Organics range. The pharmacy store still adopts the free store concept, providing new options for pharmacists to venture into business at no cost or risk.

COSWAY launched its first free pharmacy store in Tokyo in December last year and is looking to expand this into Asia, Eastern Europe and Latin America.

"Those who are willing to work hard and apply the concept will become successful entrepreneurs," Tan says. "Many members start from nowhere but with hard work and dedication, they have become multimillionaires within a few years. This is why COSWAY attracts so many people."

Passion for food

Another area Berjaya is passionate about is food. Berjaya has been instrumental in bringing the franchises of well-known restaurants to Malaysia. Founder Vincent Tan brought in fast food giant McDonald's to Malaysia, and has since strived to introduce a variety of Western cuisine to the Malaysian palate.

Berjaya was granted the licence for the exclusive rights to develop and operate Starbucks Coffee retail stores. Even though the company opened the doors of the first Starbucks amid the 1998 financial crisis, the venture has flourished. It even received commendation from its United States franchisor, Starbucks which has taken a 50 per cent stake in the Malaysian operations. There are 125 Starbucks outlets in Malaysia and the company plans to open more branches.

Another successful franchise for Berjaya is Kenny Rogers Roasters (KRR). Believing in the potential of the brand, Berjaya purchased the company that owns the Kenny Rogers franchise, NF Roasters from Nathan's Famous. Subsequently, NF Roasters was renamed as KRR International.

Berjaya has been faithful to the healthy concept of Kenny Rogers restaurants. The extensive menu still upholds the less-fat, less-salt concept. The restaurant serves their signature rotisserie-roasted chicken with a variety of hot and cold side dishes, home-made muffins, jacket potatoes, vegetable salads, pasta, soups, sandwiches, desserts and beverages.

"We have had great success with the brand and we're looking at expanding it more," Tan says. "We have just opened the first company-owned store in Shenzhen and we see that we will be doing quite a lot of expansion in the region."

Berjaya chose Shenzhen for the first Kenny Rogers store because of its strategic location in southern China and its proximity to Malaysia and Hong Kong. Because of the mainland's staggering population, the company is evaluating the profile of other cities to devise the most effective strategy of penetrating the market. Berjaya is also looking at Shanghai as a future location.

Krispy Kreme Doughnuts, Wendy's and Papa John's Pizza are some of the other food franchises that are part of Berjaya. The company also runs authentic Malay cuisine restaurant Restoran Rasa Utara.

Developments in Asia

As a leader in property development, Berjaya constantly looks for investment opportunities that would yield positively for the company.

Berjaya is bullish about Great Mall of China, one of the largest mixed-use development projects in the world.

The first phase of the project is slated for completion early next year. "It took a while to convince the central committee to allow us to use the name. In the end, they loved the vision and we believe it will be the largest mall in China," Tan says.

Great Mall of China is located near the Beijing International Airport. It is a 30.75-hectare project consisting of seven main adjoining blocks. It will house modern recreational, amusement and leisure facilities in one commercial landscape.

The gross development value of Great Mall of China to date is estimated at HK$9.3 billion.

"The great thing about developing Great Mall of China is how welcoming the Chinese authorities are," Tan says. "We think it is our excellent track record that helped us earn their favour."

Recognising the growing attraction in South Korea's Jeju Island, Berjaya is also building another mixed resort-type development in the area. It will comprise resort apartments, serviced residences, resort villas, and a wellness resort.

The project will also feature a 500-room casino hotel, hotel residences, shopping complex and indoor arena. To date, the main infrastructure works have been completed, and work on the villas will commence in the second quarter of this year.

"We are a very diverse company. We have great leadership for all the different aspects of the group and this helps us grow," Tan says. "Each different division and company is still on a very expansionary phase and we are always looking for other opportunities and potential partners."