San Miguel Corporation Written Report.docx

Bulacan State University Graduate School

CASE STUDY: SAN MIGUEL CORPORATION

In Partial Fulfillment of the Requirements for the Subject Decision Making and Business Policy Formulation

By Lama Grace I. Caidoy

March 2019

CASE STUDY: SAN MIGUEL CORPORATION DECISION MAKING AND BUSINESS POLICY FORMULATION

San Miguel Corporation

CASE STUDY: SAN MIGUEL CORPORATION DECISION MAKING AND BUSINESS POLICY FORMULATION

Vision We are San Miguel. Guided by a strong sense of social, environmental and economic responsibility, our businesses will lead efforts to deliver on national goals, setting the pace of progress in the Philippines.

Mission To provide goods and vital services well within the reach of every Filipino, making everyday life a celebration.

Facts about San Miguel Corporation 

One of the Philippines’ largest and most diversified conglomerates, generating about 5.2%* of the country’s GDP.

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Its direct workforce is over 24,000 employees.

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It has more than 100 major facilities in the Philippines, Southeast Asia, China, Australia, and New Zealand.

Eduardo "Danding" Murphy Cojuangco Jr. He is a Filipino businessman and politician and has been the Chairman and CEO of SMC since July 7, 1998. Cojuangco was a close adviser and personal friend to former Philippine president Ferdinand E. Marcos, which led his estrangement from his cousin, Corazon Aquino, who, after Marcos' ouster, succeeded him as president. He was a member of the group nicknamed the "Rolex 12", a group of 12 men who were closest to Marcos and allegedly were his enforcers of Martial Law.

CASE STUDY: SAN MIGUEL CORPORATION DECISION MAKING AND BUSINESS POLICY FORMULATION

History of SMC

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.

In 1889, a well-known Manila businessman, Enrique María Barretto de Ycaza y Esteban, applied for a royal grant from Spain to establish a brewery in the Philippines. He was awarded the grant for a period of twenty years. On September 29, 1890 it was declared open for business.

San Miguel Brewery, Inc. (1913–1963) By 1913, imported beer represented only 12% of the total consumption in the Philippines; San Miguel held an 88% share of the industry. By 1914, San Miguel Beer was being exported from its headquarters in Manila to Shanghai, Hong Kong and Guam.

San Miguel Corporation (1964–present) In the 1970s, then Philippine President, Ferdinand Marcos imposed a tax on the production of coconuts, a major Philippine cash crop, with the proceeds supposed to fund that industry's development. It was alleged, however, that the money was funneled into United Coconut Planters Bank, controlled by Eduardo Cojuangco Jr., which Cojuangco then used

CASE STUDY: SAN MIGUEL CORPORATION DECISION MAKING AND BUSINESS POLICY FORMULATION

much of the funds to help him purchase his controlling stake in San Miguel in 1983. The controlling interest carried nine of SMC's 15 directors seats with it.

SMC encountered its first major competitor in the Philippine beer market in 1982 with the entry of Asia Brewery, Inc.

About SMC

CASE STUDY: SAN MIGUEL CORPORATION DECISION MAKING AND BUSINESS POLICY FORMULATION

 Food

CASE STUDY: SAN MIGUEL CORPORATION DECISION MAKING AND BUSINESS POLICY FORMULATION

 Beverages 1. Beer - San Mig Light, Red Horse Beer, Cerveza Negra, Gold Eagle Beer, San Miguel Strong Ice, San Miguel Super Dry, San Miguel Premium All-Malt Beer, San Miguel Flavored Beer, San Mig Zero, and its flagship brand, San Miguel Pale Pilsen.

2. Hard Liquor - Ginebra San Miguel Gin, GSM Blue Gin, Primera Light Brandy and Vino Kulafu.

 Packaging

The San Miguel Yamamura Packaging Corporation provides a wide range of packaging solutions to various industries including food, pharmaceutical, chemical, beverages, and personal care across Asia-Pacific, Middle East, Africa and the United States. It is a major player in the domestic packaging industry with market leadership in most of its product formats. (Glass, Plastic, Metal, Flexibles, Molds, Paper, etc.)

 Properties

San Miguel Properties Inc. (SMPI) is presently engaged in commercial property development, sale and leasing of real properties, management of strategic real estate ventures and corporate real estate services.

Among its completed projects are Bel Aldea and Maravilla in Cavite, Wedgewoods in Sta. Rosa, Laguna, and Makati Diamond Residences, Dover Hill, One Dover View, Two Dover View and Emerald 88 in Metro Manila.

CASE STUDY: SAN MIGUEL CORPORATION DECISION MAKING AND BUSINESS POLICY FORMULATION

 Oil Refining and Marketing

Petron Corporation is the largest oil refining and marketing company in the Philippines and is a leading player in the Malaysian market. We have a combined refining capacity of nearly 270,000 barrels-per-day, fueling the lives of millions of Malaysians and Filipinos. Here in the Philippines, they supply about a third of the country’s total fuel requirements through the operation of our 180,000 barrel-per-day refinery in Bataan.

 Power and Energy

1. The Sual Power Plant is a 2x500 MW coal-fired power plant located in Sual, Pangasinan on the Lingayen Gulf. 2. The Ilijan Power Plant sits on a 60-acre site at Arenas Point, Barangay Ilijan, Batangas City 3. The 345 MW San Roque Hydroelectric Multipurpose Power Project in San Manuel, Pangasinan. It utilizes the Agno River for power generation and irrigation and contributes to flood control and water quality improvement for the surrounding region. 4. Greenfield Power Plants in Davao and Bataan

 Infrastructure SLEX Skyway Stage 1, 2, 3 & 4 STAR NAIA-X TPLEX Boracay Airport MRT-7 Bulacan Bulk Water Manila North Harbour

CASE STUDY: SAN MIGUEL CORPORATION DECISION MAKING AND BUSINESS POLICY FORMULATION

 Other Businesses Anchor Insurance Brokerage Corp. ARCHEN Technologies Bank of Commerce SMC Shipping and Lighterage Corporation SMC Retirement Funds Office SMC Stock Transfer Corp. SMITS, Inc. is one of the leading Information Technology (IT) companies in the Philippines today and is responsible for managing the IT operations of the country’s largest and most diversified conglomerate, San Miguel Corporation. ProSync

CASE STUDY: SAN MIGUEL CORPORATION DECISION MAKING AND BUSINESS POLICY FORMULATION

Problems Encountered by SMC  In order to become one of the 10 largest food companies in Asia, SMC revenues and profits should be dispersed around its various subsidiaries and acquisition.  SMC had to borrow money to acquire businesses. The interest limited the net income. The percentage increase was only 2%. Without the financial charges, net income would have been up by 8%.

Alternative Courses of Action 1. SMC should try to increase the profit margins of products. This can be done through Product development techniques, innovative methods and reducing the production cost and improving the efficiency of production plants and such. PROS: More revenues will be generated along with better operational profits. Innovative products tend to attract a larger consumer market. Lower production cost. CONS: Cost of Research and Development (R&D). Time required for conducting the R&D. Time lost is opportunity lost.

2. To tap into the potential of all the acquired and joint-venture companies. Globalization makes it imperative for companies to be more innovative, exact higher standards, costreduction, and increased efficiency and effectiveness. These factors play a major role in exploring the full potential of a market. Market penetration and Market development techniques are useful in such cases. Polycentric Management Orientation should be utilized for marketing efforts. PROS: Profit Generation. Higher product standards. CONS: Cost of marketing research is higher.

CASE STUDY: SAN MIGUEL CORPORATION DECISION MAKING AND BUSINESS POLICY FORMULATION

3. Market segmentation and targeting strategies should be applied when it comes to International markets. Example: Food products would sell more in the Indian Subcontinent compare to beverage. PROS: Products can be marketed more effectively depending on the targeted segment. CONS: Cost of Research is higher.

Recommendations 

To become a global giant, SMC should strengthen their marketing efforts and segmentation of market should be done more precisely.

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Polycentric marketing orientations should be utilized.

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Global market has divergent properties and a diversified customer base. Therefore, Product innovation and cost reduction methods should be used.

CASE STUDY: SAN MIGUEL CORPORATION DECISION MAKING AND BUSINESS POLICY FORMULATION

SWOT Analysis

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STRENGTHS Asset leverage

Effective communication

High R&D

Innovation

Loyal customers

Market share leadership

Strong management team

Strong brand equity

Strong financial position

Pricing

Reputation management

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WEAKNESSES Management bench is not deep

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Lack of scale

OPPORTUNITIES Acquisitions

Asset leverage

Innovation

Product and services expansion

Emerging markets

Expansion abroad

Takeovers

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THREATS Competition

Economic slowdown

Price wars

Product substitution

External changes (government, politics, taxes, etc)

CASE STUDY: SAN MIGUEL CORPORATION DECISION MAKING AND BUSINESS POLICY FORMULATION

Lower cost competitors or imports Maturing categories, products, or services

CASE STUDY: SAN MIGUEL CORPORATION DECISION MAKING AND BUSINESS POLICY FORMULATION

Data from year 2017-2018