CASE

STUDYon Reinventing

Anthony A. MarcosRosalinda B. Pano

Mr. Jupiter Q. WhitesideInstructor

Early Years

1889 – Don Enrique Maria Barretto de Ycaza y Esteban applied for a royal grant from Spain to brew beer in the Philippines.

September 29, 1890 – (Michaelmas, feast day of St. Michal de Archangel) La Fabrica de Cerveza de San Miguel was declared open for business.Two Sections: production of ice and beer production

June 6, 1893 – Incorporated and registered with a capital of Php 180,000.00 (corporation)

1895 – Won its 1st of many awards as a product of the highest quality at the Exposicion Regional de Filipinas.

1896 – Outselling by more than 5-to-1 all imported beers in the country.

History

Headquarters, 40 San Miguel Avenue, Mandaluyong City, Philippines

San Miguel’s old Manila Brewery

Early Years1910 – Modernization of operations, installation of electric conveyors and automatic machines.

1913 – Consumption in the Philippines: Imported Beer – 12%; San Miguel Beer – 88%

1914 – Exporting business and products to Hong Kong, Shanghai, Guam, Honolulu, Hawaii.

Enter the Sorianos1919 – Acquired Orient Brewery & Ice Co., transformed the building into an ice plant and cold storage; later the Royal Softdrinks Plant

1922 – Royal Softdrinks Plant in Manila producing Royal TruOrange, Royal Products and aerated water.

1924 – Coca-Cola bottling

Enter the Sorianos1925 – Ice cream business, purchase of Magnolia Plant on Aviles, transferred to Echague, Quiapo District Manila.

1930 – Opened a new plant to produce carbon dioxide for softdrinks products and dry ice for ice cream products. Investing business overseas: lived dairy business in Calcutta, India and Singapore (Cold Storage Creameries); breweries in US (stake in George Muehlebach Brewing Co. and Lone Star Brewing Company, San Antonio, Texas).

1932 – Produce compressed yeast for bakeries and medical use.

An ad that appeared in the Jan. 17, 1924 edition of the Manila-based Spanish-language satirical magazine Aray.

1939 – Management of the company was reorganized along the lines of corporations in the US.

1947 – Second Brewery in Pulo, Bulacan.

1949 – Farola: glass and power plant, Otis – carbon dioxide plant, IloIlo – Coca Cola Plant, Davao & Naga – softdrinks plant

1953 – Spanish beer brewing, subsidiary La Segarra, to brew and sell beer under the San Miguel brand.

Growth and Expansion1964 – San Miguel Corporation: Ayala Avenue, Makati City, PhilippinesBusiness: Philippine Airlines, Coca-Cola Franchise, mining, dairies, factories, newspaper and radio station, 5 insurance agency distributorship, Kansas City brewery that made Lone Star and Colt 45, gold mines in British East Africa, and development company in Spain.

1967 – Mandaue, Cebu brewery and glass plant.

1973 – Sales: Billion Pesos, profit topped the 100 million peso made.

1975 – new corporate logo, Escudo – symbol of royal grant, was retained for beer.

1982 & 1983 – poultry production and ice cream plant

Internationalization1984 – Mandaluyong OfficeBusiness: shrimp processing and freezing, brought coconut oil milling and refining operations

1987 – La Tondena Distillers Inc., leading producer of hard liquor in the Philippines.

Internationalization1988 – Beef and pork production; major competitor Asia Brewery (Beer na Beer).

1987 - 1993 – Reduce workforce.

1985 - 1989 – Exports grew to 24 countries: Asia’s key markets, US, Australia and Middle East.

1995 – Manufacturing Plants in Hong Kong, China, Indonesia, Vietnam, Taiwan, Guam and Nepal.

1986 - 1994 – Sales: Quintupled

1996 – San Miguel Beer Hong Kong Limited

1997 – CCBPI merge into Australian base Coca-Cola Amatil Limited.

New Cojuangco Era1995 - 1998 – Suffered a down turn in its main domestic business profits plummeted. Ice cream and pasteurized milk business merge with the operation of Nestle to form Nestle Philippines Inc. and it was sold off. Exited ready to eat meal sector and curtailed the operations of shrimp farming business.

New Cojuangco Era1998 – San Miguel Brewery International Regional Headquarters was transferred from Hong Kong to Manila. Food Group, La Tondena Distillers and international operations are capitalized. Metro Bottled Water Corporation, makers of Wilkins Distilled Water was acquired.

2001 – San Miguel control of CCBPI and Ayala Company’s Purefoods. Australian boutique brewer J. Boag & Sons acquisition.

2003 – Thai Amarit Brewery Ltd and TCC (Vietnam) Co acquisition.

2004 – Berri Ltd, Australian top juicemaker

2005 – Kirin Brewery Co Ltd, National Foods Ltd – Australia’s largest traded dairy; Singapore based Del Monte Pacific Lts., region’s largest pineapple center.

2006 – Sold CCP ventures (Cosmos Bottling and Phil. Brewer Partners) to TCC Company.

Headquarters, 40 San Miguel Avenue, Mandaluyong City, Philippines

New Cojuangco Era2007 – Sold Boag’s to Lion Natham, National Foods to Kirin.

2008 – Bought shared in power retailer MERALCO; paid up for the option to own oil refinery Petron; Liberty Holdings a Filipino Telecommunications co-owned Qatar Telecom.

2010 – Tarlac Pangasinan La Union Expressway; Universal LRT Corp Ltd (MRT7); San Miguel Energy / Global Power Holdings; Mining Industry, Australia’s Indophil Resources NL

2012 – Philippine Airlines; oil and energy: ESSO Malaysia Berhad and Exxonmobil Borneo Sdn Bhd, Malaysia; government Coconut Industry Investment Fund

HistorySan 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. 

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 it’s 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 Nutri Asia 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 business 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 take over 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 success full 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 larges and most dominant oil company and becoming the largest electric power producer in the Philippines despite its few set backs 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 how ever was not successful in all its new divestitures. It’s telecommunication business was still a small player in its industry and a few of its…

Introduction

Learning Objective :To understand and know the rationale behind the SMB strategy.

Subject Covered :Competition; Implementing Strategy; Strategy formulation

Setting :• Geographic : Philippines• Industry : Beverages consumer products• Event Year Begin: 2007• Event Year End : 2013

ObjectiveTo expand the market share to multiply their current scopeTo grow their products-services portfolio and to increase

salesTo 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 Problem1. 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 “hold-holding” to guide the process.

4. The root cause of re-invention : credit rating downfall (stocks), slow growth rate, financial crisis and the competitors.

5. The management leadership : Radical diversification, correct decision and analysis and risk taking and its solution.

6. They have to search for a process that would enable them to upgrade their planning capability.

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

Identify the Areas of ConsiderationSTRENGTHS

• 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 (e.i UK & Australia)

• Dynamic market environment• Immediate acquisition without

analyzing the it’s external factors and implication to the business

• Domestic businesses was left behind, focus on international market

Identify the Areas of ConsiderationOPPORTUNITIES

• 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 Course of Actions1. 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.

ADVANTAGES

• 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.

DIS-ADVANTAGES

• 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

• Conflict of perception between the managers and the bosses

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

Alternative Course of Actions2. 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

DIS-ADVANTAGES

• 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

Review of Related Literature

CORPORATION, defined. Section 2, A corporation is an artificial being created by operation of law, having the right of succession and the powers, attributes and properties expressly authorized by law or incident to its existence.

The Corporation Code of the Philippines

Corporate Power and Capacity1. To issue or sell stocks to subscribers and to sell stocks to subscribers and to sell treasury

stocks.2. To purchase, receive, take or grant, hold, convey, sell, lease, pledge, mortgage and

otherwise deal with such real and personal property, including securities and bonds of other corporations.

3. To enter into merger or consolidation with other corporations.4. Power to increase or decrease capital stock; incur, create or increase bonded

indebtedness.5. Sale or other disposition of assets.6. Power to acquire own shares.7. Power to invest corporate funds in another corporation or business or for any other

purpose.8. Power to enter into management contract.

Review of Related Literature

Strategic Management - Is set of managerial decisions and actions that determines the long-term performance of corporation. It includes environmental scanning (both external and internal), strategy formulation (strategic long-term planning), strategy implementation, and evaluation control.

Business Policy - In contrast has a general management orientation and tends primarily to look inward with its concern for properly integrating the corporation many functional activities.

Strategic Management, as a field of study, incorporate the integrative concerns of Business Policy with a heavier environmental and strategic emphasis.

Phases of Strategic Management1. Basic financial planning: Managers initiate serious planning when they are requested to

propose next year’s budget. Projects are proposed on the basis of very little analysis, with most information coming from within the firm.

2. Forecast-based planning: As annual budget become less useful at stimulating long-term planning manager’s attempt to propose five years plans. They now consider projects that may take more than one year.

Basic Concept of Strategic Management

Review of Related Literature

Phases of Strategic Management3. Externally oriented planning (strategic –planning): Frustrated with highly political, yet

ineffectual five-year plans, top management takes control of the planning process by initiating strategic planning

4. Strategic management: Realizing that even the strategic plans are workless without the input and commitment of lower level managers, top management form planning groups of managers and key employees at many levels from various departments and work groups.

Benefits of Strategic Management A survey of nearly 50 corporation in a variety of countries and industries found the three most

benefits of strategic management to be:

5. Clearer sense of strategic vision for the firm.6. Sharper focus on what is strategically important.7. Improved understanding of a rapidly changing environment.

Basic Concept of Strategic Management

Conclusions and Recommendations on Management

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.

Conclusions and Recommendations

We, therefor 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 his product more presentable. Such as, the improvement of his 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.

Conclusions and Recommendations on Planning And since the processes in an organization are cycles, knowing loopholes within

the planning process would lead to more efficient planning in time, and the organization will reach the zenith of its operation.

In, planning the manager attempts to bridge the gap between where the organization is at the moment and where he wants it to go. In advance, its answers the who, what, when, where, why and how of future actions.

And since the processes in an organization are cycles, knowing loopholes within the planning process would lead to more efficient planning in time, and the organization will reach the zenith of its operation.

Planning is a never ending activity, managers must examine plans regularly and if necessary modify them in view of new situations and variables.

Conclusions and Recommendations on Planning

Managers can use the tactical planning, it is reserved for the middle and lower level managers, its primary concerned with how to get where the organizations wants to go.

It concerned itself with determining the task to be done, establishing responsibilities, and accountabilities, setting quantitative measures for each task, implementing the planned actions and exercising controls.

Conclusions and Recommendations on Planning

After the recommendation on planning,;management must now consider the planning, the functions of their managers in 3 major activities1. appraise the present position of his organization to take a

complete inventory2. set objectives, decide where the organization must go, set growth and profitability and social responsibility3. develop a set of plans to achieve their objectives.

Conclusions and Recommendations on ManagementAs 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.

Managers will be more active in the organizations and learn firsthand how the organization s operate.

The more active managers are within the organization, the more aware they become of the inefficiencies and ineffective aspects of the operations. .

The development of new strategies must include the development of a planning manual in order to maintain the efficient and effective performance of the organization and the prevention of “hand-holding” by the different family and element teams.

A more active team of managers would generate better decisions made through employee cohesion, collusion and synergy.

Conclusions and Recommendations on Strategic Decision Making A manager is responsible for resources and methods at his disposal. He is to use

these resources to reach his objectives. Managers decision making is not to seek to maximize reward for endeavor, but to

arrive at a decision that “SATISFIES”. Managers of SMB must use the three different categories in decision making :

1. Policy – decisions which affect the prospect of the organizations for a very long time.2. Administrative - these decisions are made at a lower level in the organizations3. Executive – these are that have immediate results and as such are made by supervisors at the lower levels management

Bibliography• San Miguel Corporation, Wikipedia, the online encyclopedia• Reinventing The San Miguel Corporation• Transcript of San Miguel: A Case Study• The Corporation Code of the Philippines, Batas Pambansa Bilang 68• Business Policy and Strategy

Thank you for listening !

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