Case 1 San Miguel Corporation 1 Defining The Problem PDF Free PDF
Case 1 San Miguel Corporation 1 Defining The Problem PDF Free PDF
Case 1 San Miguel Corporation 1 Defining The Problem PDF Free PDF
San Miguel Corporation was concerned about the issues regarding their company. I have
encountered three problems. First is the company’s satisfaction in their ability to adopt or
respond to changing environmental conditions. How will they respond to the rapid changes in the
environmental conditions? Second, during their implementation phase, the planning process was
much time consuming which would really involve more work. And lastly, I have noticed that
there were some Business Family and Business Elements who were asking for “hand-holding” to
2. Developing a Model
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San Miguel Corporation has three core businesses: Beverages -- beer, hard liquor, soft
drinks, bottled water, fruit juices; Food & Agribusiness – chicken, feeds, pork and beef,
processed meats, dairy, oils and fats; and Packaging --glass, metals, plastics, paper products,
Its beverage sector is San Miguel’s largest business segment, comprising over 58% of its
total sales in year 2000. Its Food & Agribusiness sector contributed 27% and its Packaging
Sector contributed 15% of its total sales. In terms of operating income, the beverage segment
likewise contributed the largest, at 70%, with packaging coming in second at 22% and food &
agribusiness at 8%.
In 1999, it was ranked ninth in total revenues and registered the third highest reported
profit. Thus, it is not surprising to note that it is a major contributor to the Philippine economy,
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In 1997, the company was tottering under P47.1 billion of debt, high fixed costs and
weighed down by large-scale expansion projects in China. Its three breweries in the said country
To realize the much-needed cash-infusion, Cojuangco sold off SMC’s 45% stake in
Nestle Philippines in 1998. Additional cash was raised when its affiliate Coca-Cola Amatil
divested its Europe operations. These sales brought in a cash war-chest of about $1.2 billion
(P42.1 billion).
4. Developing a Solution
Under the leadership of Cojuangco and Ang as Chairman and President, respectively,
SMC has undergone a major strategic shift, streamlining and broadening its business portfolio,
The sale of both Coca-Cola and Nestle was part of the new management’s effort to
restructure the San Miguel Group and focus its technological, managerial and financial strengths
to ventures where it believed it could add the most value. The proceeds of the sale of these assets
provided it with a cash warchest that it later on deployed into substantial diversification program.
rightsizing program.
While the company has stayed in its traditional business of food, beverage and packaging
and expanded through regional acquisitions and integration, it also made inroads into nonrelated
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1. Economic - Asia has an emerging economy. Asia is widely known provide its cheap labor.
When China and Taiwan were admitted into the WTO in 2002.Beer could now be compiled and
The South Korea mostly brewed from rice.Only the Hite’s Max Prime brand contains
100% barley malt.San miguel beer could into Korean market with its rice made of harvest.
2. Political, Legal and Regulatory - Although foreign beers are popular within the country, the
Thai government seeks to shelter its domestic breweries through the imposition of import duties;
in addition, all imported beers must bear an import sticker on their bottle caps. As a result, Thai
brewers have struck partnership deals with western brewers, such as San Miguel Beer.
3. Socio-Cultural - The similar of the cultures around the Asia affect the sales of SMC.
4. Technological - The rapid technological advancement will affect the price of beer.
rated favorably by most government offices. They are recognized for taking proactive measures
in preventing negative environmental, health and safety impacts. Recycling and recovery are key
factors which cut waste disposal costs. Reducing gas emissions that contribute to global climate
change also lower costs. Pollution prevention is a discipline practiced in SMC plants which
program. It was the first Filipino company that published an Environmental Update in 1996, a
report which was well received by the local business community and its stakeholders, as well as
by business and environment groups abroad. The uniqueness of SMC’s environment program is
its dual focus on both the external and internal environment. The Corporation not only takes care
of the natural environment, but also of its own people and domain.
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5. Testing the Solution
SMC’s Management has been explicit about its overarching goal and direction to
maximize the Company’s value and profitability. In the 2013 Annual Report, Chairman
Cojuangco rationalized and explained why it has aggressively pursued its diversification
program:
“As one of the country’s largest conglomerates, with a history that stretches back 124 years, we
recognize that the value of our business lies in sustaining the Philippines’ growth. It is precisely
for this reason that we have anchored our diversification on projects that will help improve the
This is an explanation why SMC had ventured into infrastructure development and
concessions, power, oils and fuels, airlines, mining and banking. These are areas where SMC had
heretofore not engaged in as businesses prior to 1998 when the new management team came on
board. In the initial years following its diversification into non-core businesses, SMC showed
SMC’s initial foray into expansion in the 1990s after it divested itself of its holdings in
Nestle and Coca-Cola had been in Purefoods, a processed meats manufacturer. Based on the
resource-based view analysis, the acquisition is value-creating in all four aspects of the proposed
framework. This acquisition has resulted in SMC’s undisputed position in the food business with
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Purefoods is allied to SMC’s meats and chicken business, and the expansion into an
iconic processed meats brand creates synergy not only in terms of marketing and sourcing, but
also across SMC’s supply chain and distribution management. In addition, SMC executives and
staff are very knowledgeable in the food manufacturing and has linkages with its commercial
feeds business.
SMC’s subsequent entry and investment into non-core businesses are, on the other hand,
The beer industry in the Philippines is almost monopoly by San Miguel Corporation.
The competitors of San Miguel Corporation in the Philippines are low. Its main rival is
Asia Brewery Inc. The SMC is the leader in the beer industry in the Philippines.
San Miguel has a significantly high bargaining power to its customers due to the
monopoly in the Philippines. Now in the modern life, there is heavy pressure from life and work.
As a result, the role of the San Miguel beer generally provides one way to slow the pressure.
The suppliers of the company hold a major role. Without its presence, the company could
not produce its products, and basically, could not offer anything to customers. The suppliers of
San Miguel to each country are being standardized, thus, it could not purchase its supplies
locally, unless it has been approved and has passed the company’s standards.
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Threat of Substitute Products and Service
With the local and multinational companies offering products and campaigning for a
fallow lifestyle to consumers, they can chat with each other during drink the beer and eat
Edith Penrose (The Theory of the Growth of the Firm, 1959) was one of the early
scholars who espoused the Resource-Based Theory in firm behavior and strategic management.
She argued that a business organization will seek to achieve the full potential from all its
resources. Penrose’s view was that firms possess excess resources, which can be used for
Firms grow as long as there are unused resources, diversifying when they can no longer
grow with existing products, services and markets. Growth continues until it is halted. Changes
can free the limit, and growth continues until the next limiting factor appears.
To create an International Division in the SMC, this office will attend to the needs and
problems only of the businesses outside the Philippines. The Manager of this Division will report
to the President. If he has problems or needs with a particular country, the time to find a solution
To strengthen its business activities in the Philippines but try to build up businesses in other
Asian countries with good prospects and to maintain constant communication with its workers in
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