Reinventing the San Miguel Corporation
Eduardo Cojuangco, the CEO of San Miguel Corporation, is re-assessing the company‟s business strategy. The flagship product of this century–old conglomerate, San Miguel Beer, is expected to post a slower growth rate in its volume share because of its large market share. Th e company has operations in only three product areas – food, beverage and packaging, and has a modest international presence. In this regard, Cojuangco announced in 2007 that the company would diversify into non-allied businesses in the Philippines such as energy, mining, infrastructure and other utilities. With the goal of establishing presence in industries that present fast and high growth, it sold off its international assets and started acquiring shares in Meralco and Petron Corporation. The company also ventured into telecommunications and infrastructure. Credit rating agencies were uncertain about this new business model, and this resulted to a downgrade of San Miguel‟s credit rating and lead to a fall in the company‟s stock price. As of 2009, the com pany‟s reinvention was far from complete and Cojuangco needs to evaluate whether or not San Miguel‟s radical diversification plans were indeed the right step for the company. Point of View: Eduardo Cojuangco - CEO of San Miguel Corporation Problem Statement:
How should San Miguel adapt to the current changing times when it comes to its company strategy?
For San Miguel corporation, (and not exclusively as a beverage entity), to expand market share, to multiply their current scope, to grow their products-services portfolio, and to increase sales.
To assess whether the current business strategy is appropriate given the current business situation and determine the right business strategy
To achieve business growth and ensure profitability of business operations Areas of Consideration
Expertise/core competency of the company – San Miguel is known for its food product line – but more on its beverage line. It does not have the expertise in oil, energy, infrastructure and telecommunications. Will a company that did very well in the production of beverage also perform satisfactory in their non-beverage related ventures? Is the management equipped with enough appropriate data to make the right strategic moves? Life Cycle of the product and organization– The growth of San Miguel Beer‟s sales is currently slowing given its large market share. This flagship product of San Miguel Corporation and the company itself are already nearing maturity stage and San Miguel Corporation needs to look at introducing new products and entering new markets through diversification.
Business environment - Business entry regulations to various unrelated industries are less stringent in the current business climate. This paved the way for consolidation of businesses (where the company's product/service is offered in a one stop -shop) and globalization of business operations. The country also permitted the entry of foreign beers, which heightened competition.
A decision should be made on whether they should invest their budget on inte rnal expansion (making more beverage variants) or external expansion (getting into non -beverage related industries such as telecom, etc.)
The nature of the industry that San Miguel belongs to is very competitive and dynamic. In such an industry, strategic management and competitive advantage are essential for the company's sustainable survival. Theories have shown that in cases such as this, copying the strategies of other successful companies will not be as effective as creating their own distinctive and competitive strategy that will set them apart from rivals, while adapting to the trends of the current market.
A company's competitive advantage would depend on:
a) greatly differentiating themselves from competitors by doing what their competitors are not capable or are not...
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