San Miguel Corporation

BA205

Case Analysis:San Miguel Corporation: Facing the 1990s

Yuanhan Liu 07/26/2009

I．

Industry-Describe the industry or industries where the company operates. 1. Industry definition-define the need of the industry

San Miguel Corporation is the largest publicly listed food, beverage and packaging company in the Philippines.It has been in the industry since 1890 being founded by Don Enrique Maria Baretto.Since then,the SMC ensure that its strategy, organizational structure and processes, and external relationships were adequate to confront the expected threats and to capitalize on the opportunities facing it domestically and internationally. 2. Overview of the industry 2.1.market size and growth San Miguel Corporation has a sizable international presence. The company has over 100 facilities in the Philippines, Southeast Asia, China, and Australia. Its major operating facilities include five breweries, four glass plants, two metal closure and lithography plants, two plastic case plants, and a coconut oil mill. San Miguel is one of the Philippines' biggest private employers, with over 25,900 employees. The company reported a net income of $171 million in 2005. As of the first half of 2006, the company's net income had grown 15 percent from a year earlier to P4.36 billion 2.2.industry profitability The company reported a net income of $171 million in 2005. As of the first half of 2006, the company's net income had grown 15 percent from a year earlier to P4.36 billion 2.3.major players

The major players are Asia Brewery Inc.; Asahi Breweries, Ltd.; Tsingtao Brewery Company Limited; Foster's Group Limited. 2.4.trends and prospects  The concept of global markets was developed.  Asian beer markets were similar to the Philippine beer market, in that there was one major player, followed by a few players.  There was the perception that anything imported was probably of better quality than the local brand.  The expected payback period for a brewery is about 5-15 years depending on the market. II．

Mission/Vision/Objectives of the Company

Vision SMC’s fundamental and historical philosophy — Proft with Honor The following are SMC’s objectives:  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.

 To seek and develop export markets for new products as well as for those already being produced by the Corporation.  To generate a return on funds employed sufficient to ensure an adequate rate of growth for the Corporation, and to provide satisfactory returns to stockholders.  To provide an environment which is conducive to the development of the individual and which encourages employees to realize their full capabilities.

 To adopt a flexible and objective attitude towards change and to pursue an active policy of innovation. Mission 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. III． Strengths and Weaknesses of the Company Strengths:  It is the known leader in the beer business in the Philippines.  SMC is an ISO 9000 accredited company(Worldwide Quality Standards)  It has over 100 facilities in the Philippines, Southeast Asia, China, and Australia. Its major operating facilities include five breweries, four glass plants, two metal closure and lithography plants, two plastic case plants, and a coconut oil mill. San Miguel is one of the Philippines' biggest private employers, with over 25,900 employees.  The company is strict with the quality of its products. Weaknesses: Competition was very tough outside, especially from Japan and Taiwan. SMC would have to meet the standards for a multinational corporation. Management bench is not deep. Most managers would resist overseas assignments.  The international operations would divert attention of SMC  The company is not prepared to increase international operations.    

External Environment: 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 compled and expented to the two countries. 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. 5. Natural or Physical Environment Corporations that go beyond regulatory compliance are 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 eliminates the generation of waste at the source. SMC has pioneered a number of so-called trend-setting practices in its environment program. It was the fi rst 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. 6. Structural Analysis using the Five-Forces Model  Threat of New Entrants The beer industry in the Philippines is almost monopoly by San Miguel Corporation. There is a low competition in the market.  Intensity of Rivalry among Existing Competitors 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.  Bargaining Power of the Buyers 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 provide one way to slow the pressure.  Bargaining power of Suppliers 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.  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 something like peanuts, pork, and chicken. IV． Opportunities and Threats Opportunities: Competition is intensifying in all of SMC’s business lines and each has to be able to make it on its own  No foreign brands had any significant presence,but several were known to be increasingly interested in the Philippines market.  Asian beer markets were similar to the Philippine beer market.  Expanding in other Asian countries is a good idea.They are near the Philippines and SMC’s business managers are familiar with business conditions of the region. 

Threats: There was one major player,followed by a few players.  International beer operations had competitors.  Asia Brewery is selling cheaper beer.It continues to build breweries even if the existing breweries do not operate to full capacity.  SMC workers is increasingly getting younger, more aggressive and less reverent toward the company as an institution. 

 Other foreign investors were interested in putting their money in Asia. They may invest ahead of SMC. V．

Conclusion

 San Miguel Corporation is very particular with its brand.They are not conscious on developing a new product to compete with the other beverages.  The beer industry, and San Miguel Corporation being the biggest market shareholder in the Asia. VI． Recommendations-Company point of view 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 will be shorter because he will only refer it to the President. To strengthen its business activities in the Philippines but try to build up businesses in other Asian countries with good prospects. To maintain constant communication with its workers in order to avoid strikes and work stoppages.