San Miguel Corporation

November 14, 2017 | Author: anandrulz | Category: San Miguel Corporation, Mergers And Acquisitions, Strategic Management, Economies, Investing
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San Miguel Corporation Case Analysis

Submitted by: Blessed Viswanathan J. Fundador Pete Nicdao Roxas

Submitted to: Prof: Earl Zar Calingacion

Introduction San Miguel is South East Asia’s largest food and beverage company. Traditionally

diversified among three main products, which are food, beverage and packaging. Its flagship product San Miguel beer Pale Pilsen maintained the lead in its industry and owns seven of the top the selling beer brands in the Philippines. Meaning with its large market share the volume of its sales has started to pose a slow growth and started to depend on the Philippines population growth for more volume. Facing these and other new economic realities San Miguel Corporation started to re-think and change its business model as the first decade of the millennium drew to a close. San Miguel decided to pursue and shift into non-allied businesses in the Philippines following important trends for its and the Philippines future growth such as energy, mining, infrastructure and other utilities, forgoing its international expansion plans. San Miguel Corporation before its diversification into non-allied businesses in the Philippines pursued growth through international expansions. In has invested in a number of countries such as China, Indonesia, Australia, Vietnam, Thailand and other countries although it dropped its Australian assets in 2008 in pursuit of its new change in direction. Its strategy had allowed san Miguel to maintain its space among the top ten beer companies in the Asia Pacific region but remain a relative minor player on a global scale and soon dropping its market share in the Asia-Pacific region in the late 2000’s. When San Miguel started to reinvent the company and focus on a new direction it sold off its Australian Assets which were National Foods in 2007 to its strategic partner Kirin Holding and J. Boag & Son in 2008 at a higher price than when it was purchased and 42.2% stake in its joint venture with NutriAsia group. It also started to reorganize its food business, concentrating and placing a deeper focus on the brands it fully owned and finally turning its beer division into a separate subsidiary called San Miguel Brewery becoming a separate entity in the Philippine stock exchange. This was done in order to raise capital and isolate the beer business

from the potentially negative impact of the company’s new direction. After San Miguel has diversified into a number of businesses such as energy, oil, telecommunications and even proposed on a project which involved the construction of a dam, hydropower plant and water treatment and storage facilities. In 2008 in acquired 27% of Meralco but later had to unload its stock due to PLDT’s continued pursuit for the said company. It also acquired 50.1% of Petron and upon its takeover implemented a number of changes, transferring key personnel to Petron. Lastly it pursued a joint venture with Qtel and in 2009 acquired 32.7 percent stake in Liberty Holdings, Inc. Aside from its successful acquisition it also had numerous failed attempts in acquiring other business concerning energy. During the late 2000’s San Miguel has already began gaining most of its profits from its new businesses. Having the Philippines largest and most dominant oil company and becoming the largest electric power producer in the Philippines despite its few setbacks the previous years failed attempts in acquiring contracts. But this does not mean that the company has left its traditional businesses to rot. Improving sales both nationally and internationally in its beer operations and gaining revenue growth in both its food and packaging operations. San Miguel however was not successful in all its new divestitures. Its telecommunication business was still a small player in its industry and a few of its infrastructures are still at its infancies. Recently San Miguel had acquired Exxon Mobil Malaysia and 49% of Philippine airlines and plans of investing heavily in both businesses.

History San Miguel Corporation is one of the oldest and largest company in the Philippines. In its 100-

year history, it has a clear leadership position in the Philippine beer industry, as well as, established successful forays into other related and unrelated product areas. In the late 2000s, found Eduardo Cojuangco, CEO of the San Miguel Corporation, South Asia was the largest food and beverage companies to. Caught in a dilemma Cojuangco wanted San Miguel in industries that scale and good future growth opportunities had to move, would build leadership positions in key industries that drive growth not only for San Miguel, but also for the Philippines. At the same time, San Miguel company would reverse its international expansion plans. The case concerns the discussion of this strategy, tracing issues of internationalization compared to a focused domestic product growth in non-related companies in the Philippines, such as energy, mining, infrastructure and other utilities. Objective  To expand the market share to multiply their current scope  To grow their products-services portfolio and to increase sales  To assess whether the current business strategy is appropriate given the current business situation and the determine the right business strategy  To achieve business growth and ensure profitability of business operations

Define the Problem

1. Planning process is much time consuming which involved more work than one might reasonably expect of people. 2. Need to re-assessed and emphasized in developing the objectives and strategies programs led to past strategies outweighing the new strategies. 3. There were some business family and elements teams who were asking for “holdholding” to guide the process. 4. They have to search for a process that would enable them to upgrade their planning capability. 5. The root cause of re-invention : credit rating downfall (stocks), slow growth rate, financial crisis and the competitors.

Identify the Areas of Consideration 1. Examine loopholes in the planning process 2. Develop a strategy for an efficient planning 3. Study the pros and cons of the involvement of past strategies in developing the objectives and strategic programs 4. Determine the effects of having no planning manual for the planning process or “hand-holding” 5. On the need for developing a planning manual for the planning process


Globally well known, enable to penetrate and compete with international market

Ability to merge and involve into non-allied business (diversification)

Large group of company (corporation)

Enable to developed their budgeting and long-ranged planning systems/upgrade their planning capability

Strong and competitive company, one of the top 10 Corporations of the Philippines WEAKNESSES •

Suffered from a credit rating downfall and slow growth rate

Losing its international assets (UK & Australia)

Dynamic market environment

Immediate acquisition without analyzing the its external factors and implication to the business

Domestic businesses was left behind, focus on international market


New ventures, investments and acquisitions for the company

Penetration to other regions / market around the world

Can merge into non-allied business, can engage into more profit oriented businesses

Successful and effectiveness of diversion plans : profitability THREATS

Huge local and international competitors (e.i Asian Brewery; Beer na Beer and Western Influences : Heineken)

Incorrect analysis and evaluation and plans (Strategic Planning)

Losing of other contracts, acquisitions, investments to other country/market due to credit rating downfall and slow growth rate (financial crisis)

Social, culture and government differences, rapid changes in the environment

Alternative Courses of Action

ACA NO. 1 1. Constitute a more active team of managers in the planning process, develop new strategies based on the past and provide planning manuals to all Business Family and Element Team.


The capabilities and skills of the personnel will be evaluated.

The performance efficiency and effectiveness will be determined.

Plans are materialized and initiated at a small time frame

Loopholes within the organizational strategy, goals and mission will be resolved.


The provision of manuals to all managers will be costly

Inefficiency and ineffectiveness caused by the old strategies may be carried over to the new strategies

ACA No. 2

Conflict of perception between the managers and the bosses

Optimizing the capabilities and skills of the personnel may be time consuming

2. Formalize a decision team, formulate all new strategies and resist giving plan manuals. ADVANTAGES •

New strategies may lead to enhance performance.

The formation of a decision team would lead to better decision making and plan Implementation

Innovation of new ideas lead to greater employee motivation and participation

Loopholes within the organization strategy, goals and mission will be resolved


The formulation of new strategies may lead to even more loopholes

Hand-holding will not be listened without plan manuals

The reformation of the strategies may be time consuming and costly

The time frame in making a decision is lengthened


We, therefore conclude, San Miguel management should change their marketing strategy, as well as their planning programs, especially that the business had meet its slow growth rate. They can use “twist” to make their product more presentable. Such as, the improvement of their product packages. They can also add some flavor to their current selling beers. Making new mixes to have new and attractive flavors. As well as, they can also use the gimmick approach to try if the response from the market and projected customers will be great help. Advertisements using celebrities to catch the attention of people and customer’s patronization. Recommendation As our alternative course of action, we strongly recommend and chose #1.Constitute a more active team of managers in the planning process, develop new strategies based on the past and provide planning manuals to all Business Family and Element Team. 1. Managers will be more active in the organizations and learn firsthand how the organizations operate. 2. The more active managers are within the organization, the more aware they become of the inefficiencies and ineffective aspects of the operations. . 3. The more active managers are within the organization, the more aware they become of the inefficiencies and ineffective aspects of the operations. . 4. A more active team of managers would generate better decisions made through employee cohesion, collusion and synergy. 5. A manager is responsible for resources and methods at his disposal. He is to use these resources to reach his objectives.

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