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san miguel case study

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Jessica Valenzuela

on 10 March 2014

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Transcript of san miguel case study

Statement of the
PROBLEM
Statement of the Objectives
Alternative Courses of Action
Background of the Study

Established in 1890 as a single-product brewery, San Miguel Corporation (San Miguel) is the Philippines’ largest beverage, food and packaging company. The company has over 100 facilities in the Philippines, Southeast Asia and China.
The company’s operations extend beyond its home base of the Philippines to china (including Hong Kong), Vietnam, Indonesia, Malaysia, Thailand and Australia.
San Miguel’s partners are world leaders in their respective businesses. Kirin Brewery Co., Ltd. Is a major shareholder of San Miguel Brewery. The company also has successful joint venture relationship with US-based Hormel Foods Corporation, Nihon Yamamura Glass and QTel, a telecommunications company in Qatar.
In the Philippines, San Miguel’s corporate strategy is at aimed capitalizing on new growth markets through acquisitions and further enhancing its competitive position by improving synergies across existing operational lines.
While the company has significantly expanded its participation in its core business of food, beverage and packaging through regional acquisitions and integration, it has also exploring entry into heavy industry such as power and other utilities, mining, energy, tollways and airports.
• Slow growth rate of San Miguel Beer.
• The credit rating downfall of the company’s stock price.

Expand the market share to multiply their current scope, develop their products- services portfolio, and increase sales.
Assess whether the current business strategy if it is appropriate to current business situation and determine the right business strategy.
Generate a return on funds employed sufficient to ensure an adequate rate of growth for the Corporation, and provide satisfactory returns to stockholders.
Seek and develop export markets for new products as well as for those already being produced by the Corporation.
ACA#1: Identify and pursue synergies across businesses through vertical integration.

Advantages
• Lead to expansion of core competencies.
• Facilitate investment in highly specialized assets in which upsteam or downstream players may be reluctant to invest.
• Reduce transportation costs if common ownership results in closer geographic proximity.
• Improve supply chain coordination.
• Provide more opportunities to differentiate by means of increased control over inputs.
• Capture upstream or downstream profit margins.
• Increase entry barriers to potential competitors, for example, if the firm can gain sole access to a scarce resource.

Disadvantages
• Capacity balancing issues. For example, the firm may need to build excess upstream capacity to ensure that its downstream operations have sufficient supply under all demand conditions.
• Potentially higher cost due to low efficiencies resulting from lack of supplier competition.
• Decreased flexibility due to previous upstream or downstream investments.
• Decreased ability to increase product variety if significant in-house development is required.
• Developing new core competencies may compromise existing competencies.
• Increased bureaucratic costs.

ACA#2: Diversifying into non-allied industries.

Advantages
• Control of inputs, leading to continuity and improved quality.
• Take advantage of existing expertise, knowledge and resources in the company when expanding into new activities.
• Provide better risk control.
• Provide movement away from declining activities

Disadvantages
• Adding management costs.
• Adding bureaucratic complexity.
• May result in negative synergies.
• Risk of not being able to manage all of these activities simultaneously.

ACA#3: Extracting synergies between its core business and its new acquisition.

Advantages
• It will create an even broader distribution network for the SMC products.
• Expand customer base by various businesses.
• Pursuing plans to integrate production and distribution facilities for its both established and newly acquired businesses to generate additional cost savings and efficiencies.
• Acquisitions provide us with a unique opportunity to expand the SMC participation in regional oil and gas sector.
• Will help the SMC to upgrade its refinery capabilities and expanding underserved areas in the fuel markets.

Disadvantages
• Increased Administrative Burden will have different levels of administrative strain.
• Credit Problems, income and profits might increase, but creditors will still recognize you as one customer.
HISTORY
Established in 1890, La Fabrica de Cerveza de San Miguel, Southeast Asia's first brewery produced and bottled what would eventually become one of the bestselling beers in the region. Within the span of a generation, San Miguel Beer would become an icon among beer drinkers
By 1914, San Miguel Beer was being exported from its headquarters in Manila to Shanghai, Hong Kong and Guam. A pioneer in Asia, San Miguel established a brewery in Hong Kong in 1948, the first local brewer in the crown colony.
Today, San Miguel Beer--the Company's flagship product--is one of the largest selling beers and among the top 10 beer brands in the world. While brewing beer is the company's heritage, San Miguel subsequently branched out into the food and packaging businesses.
The Company's manufacturing operations extend beyond the Philippines to Hong Kong, China, Indonesia, Vietnam, Thailand and Malaysia. Its products are exported to major markets around the world. Continuing a tradition of product quality, San Miguel is capitalizing on its unique strengths in brands and distribution to weave its products more deeply into the fabric of everyday life. Not just in the Philippines but in the Asia-Pacific region.
San Miguel Foundation, Inc. is committed to the empowerment of San Miguel host communities and various stakeholders by harnessing corporate social responsibility among the various San Miguel businesses in pursuing mutually beneficial programs that lead to self-reliance and sustainability.
MISSION
VISION
SMC’s fundamental and historical philosophy — Profit with Honor.
• To be constantly aware of the aspirations of the people and of the nation, and to ensure that San Miguel continues to make a major contribution towards the achievement of these aspirations.
• To manufacture, distribute and sell throughout the Philippines food products, beverages, packaging products and animal feeds, being ready at all times to add, modify or discontinue products in accordance with changes in the market.
• To diversify into fields which will ensure optimum utilization of management resources and a substantial contribution to corporate profits.

RECOMMENDATION:
We recommend the alternative course of action #2 which is to diversify into non-allied industries because It will help spur economic growth and secure its future, taking advantage of existing expertise, knowledge and resources in the company when expanding into new activities and also provide better risk control and provide movement away from declining activities. The company as significantly expanded its participation in both its core businesses of food, beverage and packaging, as well as heavy industries including power and other utilities, mining, energy, toll ways and airports. We choose ACA#2 because we believe it will answer the problem of SMC having Slow growth rate of San Miguel Beer and credit downfall of SMC’s stock price in Telecommunication and Infrastructure.
Plan of Action/Implementation
San Miguel Brewery Products:
Ginebra San Miguel Products:
San Miguel Purefoods Products:
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