CASE STUDY

San Miguel Corporation and A. Soriano Corporation Term Requirement

Submitted By: John Patrick Villaruz Carl Michael Wu Submitted To:

Table of Contents

Introduction.1

The Implementation of Strategic Planning...2

The Objectives of Management.......4

The Major Problems.......5

Steps taken to address the problems......6

Results.....................7

Conclusion..8

Introduction
During 1981, Andres Soriano Jr. of San Miguel Corporation (SMC) and A. Soriano Corporation (ANSCOR) Group of Companies addressed a long felt need for an effective formal planning system. The companies had developed their budgeting and long range planning systems several years ago and gave the two companies the benefits to grow. In spite of the growth they achieved through their own strategies they still seek out for a process that would enable them to upgrade their planning capability. Both the ANSCOR Group and SMC are engaged in a wide range of business. The ANSCOR Group, with its 24,000 employees and P3.8 billion sales in 1981, is engaged in very diverse business ranging from mining to fertilizer, paper, travel, trading and insurance. SMC is a very large beverage, food, and agri-business conglomerate with 19,000 employees and P5.2 billion sales in 1981. Although management of these two large companies was very cautious in planning and budgeting, they still must face up with the challenge of keeping their portfolios of business in demand. SMC and the ANSCOR Group sought professional advice from a team experts headed by Dr. Peter Lorange. In November 1982, Dr. Lorange addressed a joint dinner-meeting of SMC and the ANSCOR Group to discuss his insights on the implementation of the strategic planning of the two companies. Through the efforts of the hired professional team and the own management of SMC and ANSCOR Group, both the organizations now have a better support for operating in a more supple manner. They now have the ability to respond more promptly when the opportunity knocks, and to stand firm on whatever changes and innovations they may encounter.

The Implementation of Strategic Planning

The Strategic Planning Approach A. A Hierarchy of Strategies 3 Levels a. At the Corporate Level, the issue is to identify the companys businesses (to be denoted as Business Families) as to determine the balance among the various businesses. b. The Business Family level is concerned with determining how to compete within a broader business area. It is based on identifying a meaningful set of product/ market niches (to be denoted as Business Elements) with the Business Family, and determining possible synergies among these niches. c. The Business Element level, the task is to develop clear competitive strategies for a particular product/ market niche so as to beat specific competitors in reaching the targeted set of customers. B. Major Phases of the Strategic Planning Process a. Objective Setting Phase the key issue is to determine what kind of business the company should be in and what the future direction of each business should be. b. Strategic Programming is concerned with the development of programs to pursue these objectives. c. Budgeting is concerned with the development of a more detailed set of action steps to be undertaken during the coming year so as to implement the parts of the strategic programs scheduled to be achieved during this period. A strategy cannot be implemented unless it is firmly reflected in the budget and resources are allocated do that the organization can carry out its strategic program activities in parallel with the day-to-day operating tasks. C. The Strategic Structure The Business Family and Business Element Team are composed of people drawn from across the organization. The intention is to get the best combination of insights, talents, and brains to meaningfully work out the objectives and strategic programs for each business. Those members also have other job assignments, either in operating line functions or as staff members. D. A pattern of interactive and iterative Steps of the planning process All the concepts discussed must be put together as a process to form a vehicle for management to delineate strategies and decide on these. Accordingly, a framework for the pattern of interaction and iteration has been developed, spelling out the tasks of each item at each strategic level and in each phase of the planning process. This has come to be known as the Snake Diagram in the companies popular jargon. 2

Implementation of the Steps A. Commitment of top management The broad commitment among upper management is very important and the clarification of the concepts to ensure that the management are comfortable with the approach. Conducting a number of workshops and seminars on strategic planning process will help elucidate various definitions and notions underlying the planning process. B. Strategic structure The actual steps in the selection of people for the various strategy teams are as follows: The CSG nominates the Chairman of each Business Family. Each Chairman proposes the members of his Business Family Team, but discusses this with the CSG and seeks its formal approval. Each Business Family nominates the Chairman of its Business Element Teams, but must have these reviewed and approved by their Business Family Team. C. Planning Calendar A planning calendar identifies in detail the steps that need to be undertaken in each phase. D. Process Consultants This is the final and important issue in the implementation of this planning process. These people are the important catalyst in getting the process going and functioning. One task they undertook was to arrange for various logistical aspects, such as establishing the planning calendar, developing suitable guidelines for presentation of plans, among others. Another aspect was to act as advisers to the strategy teams, in clarifying for them aspects of the process that might seem unclear and unfamiliar.

The Objectives
The ANSCOR Group and SMC spent many years in developing and strengthening their budgeting systems in order to have an organize plan over their short term goals. Their next step is to develop and implement a long range planning process. The long term budget is the key for this objective. It must be a detailed plan, expressed in quantitative terms, that specifies how resources will be acquired and used during a specified period of time. The purpose of a budget is to quantify a plan of action. The budgeting process forces the management who makes up the organization to plan ahead. To be effective, each manager throughout the organization must be aware of the plans made by other managers. A budget is a plan, and plans are subject to change. Nevertheless, a budget serves as a useful benchmark with which actual results can be compared. Comparing actual results with budgeted results also helps managers evaluate the performance of the individuals, departments, divisions, or entire companies. These systems assisted both companies in planning for the future but they are still threatened by the increase competition in the market and this led them to adopt strategic planning approach. Long term planning requires more than paying close attention to an organizations markets. Even more important is the ability to identify and prioritize new market opportunities. A long term financial plan begins with a strategy. The top management must construct a strategic plan, a long term plan or multiyear action plan for the major investments and competitive initiatives that they believe will drive the future success of the enterprise. The management must know what markets give them a sustainable competitive advantage. How their strengths cross in an existing market which they do not currently compete and lastly, the threats that exist in their current business and how they handle those threats.

The Problem
The first problem was that the planning process has been time consuming and involved more work than what was expected. The burden of the planning was done by the same managers who also tended to be the busiest ones handling the pressures of day-to-day operations since they are more familiar about all the information necessary for the strategic planning. The second problem encountered was that sometimes there was a tendency to gravitate towards too much internal focus in developing the objectives and strategic programs. The management also lives on the success of past strategies without recognizing any other factors that differs their past experiences from the problems in front or ahead of them. Finally, a third problem experienced by both companies was that there were some Business Family and Element Teams who were asking for hand holding to guide them through the process . The ANSCOR Group and SMC purposely did not issue a planning manual to minimize cost.

Steps taken to address the problems

First Problem The team members recognized the planning phase as part and parcel of their responsibilities as managers. This is consistent with Mr. A. Soriano, Jr.s management philosophy on delegation and greater participation of key people throughout the organization. The managers also realized the need to take an active role in deliberating on their strategies for the future in parallel with their day-to-day operating activities. Eventually, by anticipating and responding to strategic issues early and at the right time, they can expect that there will generally be less time needed for ad-hoc fire-fighting activities. There was a lot of encouragement from the CEO and other CSG members of both companies. Practical problems relating to setting both strategic and operating activities were handled in pragmatic and straight forward manner and in good spirit.

Second Problem Strategic traditions that had worked well in the past were at times overshadowing new thinking. A key aspect of the new planning process, however, is that Business Family and Element Teams were forced to closely examine critical environmental assumptions they have implicitly or explicitly made with respect to their business attractiveness, their competitive strengths and the expected response of their customers and competitors. Thus, the planning teams were encouraged to re-examine the environment and analyze changes in their assumptions rather than merely extrapolate from past trends.

Third Problem The teams were expected to work their way through the problems and develop the strategies on their own, based on acquiring their own hands-on sense of what these challenges really involved. When occasional stumbling blocks were encountered, however, the teams were encouraged to seek informal help from members of the Corporate Planning Departments. As a result, there was in general a great sense of pride and ownership of the plans that were finally developed. The process did not become an exercise in mechanically filling out forms but has led to true thinking, forcing people to internalize their strategies. Each team had to come to grips with what this meant in their own way.

The Results

The two organizations responded remarkably well in finding the time to carry out the new tasks, which the members found interesting and challenging. The top management was exposed to broader information that they can use not only in a particular situation but in different faces of problems that they will encounter. The strategic planning process also helps the management to formulate action or steps necessary when introducing new products, penetrating new markets and succeed in a never stopping changing environment. The management of two companies also developed a more involved, keener team spirit, and a sense of responsibility for successful implementation of the objectives and strategic programs. The success of strategic planning for the company is an issue that concerns a broad set of managers. The ANSCOR Group and SMC has accordingly responded to the challenge of making sure that the shortage in personnel are fully utilized not only by getting the right people into the right jobs, but also by attempting to attract and develop more management talent. The overall results is probably better strategies , a more realistic understanding of what it will take to succeed and what might be areas of potentially negative exposure, and most important of all, better business decisions.

Conclusion

The ANSCOR Group and SMC proved that they are not afraid of the challenges in finding new ways to improve their stands in a never ending changes and innovations of a competitive market. The factors that helped them won in this competition are their committed and skilled management under the leadership of Mr. Andres Soriano Jr. The strategic planning approach that they adopted helped them cope in every challenge and changes they encountered. I believe that the experience of these two companies gave other big organizations an idea on how to gear their own management in order to anticipate and respond wisely on the pressures of environmental changes. This case also proved that to be able to stay on the track, like ANSCOR Group and SMC, an organization must not stop discovering new strategies with willingness and being prepared for every threats and risks they may encounter. Leaders and top management must not look at problems as a dead end but as a challenge in proving that they have no limits in gaining and seeking knowledge on how to surpass whatever they may encounter on their way to the top. The goals of big companies today are not just to survive but be on top. Success brings more success and more opportunities and more challenges. Being one of the top companies is not easy and staying in that position requires a lot of competitive strength and confidence. Management must welcome rooms for improvement and correct the areas where wellness lack and fine tune operations if thats what is needed. I also believe that taking care of organizations employees is very important in a long range planning process. They play a very important role in making the strategic planning a success. The organization is responsible in the development of their employees talents not just for the benefit of the latters own but also for big benefits and growth of a company.