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San Miguel Brewery Hong Kong Limited
The major problem of San Miguel Brewery Hong Kong Limited is the sudden change of the preferences and tastes of the Hong Kongers with regards to the beer. It had been affected by the major force which is the culture change due to the improvement of living in the said country. The said change had affected the overall image of the product, therefore had affected the sales and demands of the said brand. The said event had also affected the position of the company and the brand name in the industry as the leading brand and the most popular beer in the Hong Kong beer industry.
One of the primary solution that can be done by the company in order to save the image of the brand name as well as to improve the position of the product in the market is to improve their market research about the needs and preferences of their target customers as well as to improve the quality of their product. Another important aspect is to improve the cheap image of San Miguel beer in the market by means of innovation. It will be better if they will change the packaging as well as the presentation of their product, together with the different marketing strategy that will help them to build and change the image of the product.
It is also important to introduce something new about the product in frequently manners in order to catch and gain the attention of the customers, eventually; it will help to gain sales of the product. But it is not necessarily means that the company will have to drop down their cheap image. They must consider the social status of their customers as their primary market segmentation, and this must be considered in the target market strategy of the company.
Table of Contents
There are many aspects inside the company that can affect the overall performance as well as transaction of the company. Primarily, those factors focus on the behavior and participation of different stakeholders in the company in terms of sales, financial flow as well as the flow of information.
In addition to the said information, the environment is also an additional factor because it serves as the major element that can affect the overall performance of the company. Internal environment, or the environment inside the company or the workplace; and the external environment which pertains to the different political, technological, economical as well as social factors outside the working environment that has a direct as well as an indirect effects to the performance of the company.
In general, management, marketing, operation and finance activities and plans of the company are also important aspect that helps the company to pursue their visions, missions as well as their goals.
1.1 Company History and Background
San Miguel Brewery Hong Kong Limited belongs to the industry of food and beverages and involved in brewers as its sub industry (WrightReports 2007). It is a brewer and a non-wholly owned subsidiary of San Miguel Corporation of the Philippines. It is a franchise of the said corporation that gives them the right to manufacture as well as sell San Miguel Beer in different part of the world such as Hong Kong, Macao and provinces in mainland China, such as Hainan. The company headquartered in Shatin New Territories in Hong Kong (Datamonitor 2007). The company employs 168 employees (Business Week 2008)
San Miguel Beer has been exported from the company’s main headquarters in Manila to Shanghai, Hong Kong as well as Guam. The company had become one of the pioneers in Asia for establishing its brewery in Hong Kong in 1948, and it has been considered as the first local brewer in the crown colony (San Miguel Corporation 2008).
The company is involved in manufacturing as well as distributing bottled, canned and draught beers. It is also into investments and other property holdings. Currently, the company is handling its different major brands such as San Miguel Pale Pilsen, San Miguel Light, San Miguel Dark, Lowenbrau, Blue Ice Beer and the Valor (WrightReports 2007).
Aside from Hong Kong, the company is also carrying out their operations in British Islands as well as the People’s Republic of China (WrightReports 2007). The brewhouse of the company can produce a total of 1,200,000 cans of beer in on a daily basis (Datamonitor 2007).
As of now, San Miguel has been described as the most famous beer in Hong Kong and being enjoyed by different generations of drinkers ever since the brand was brought to the country (Sun Lik Beer n.d.). In addition to that, San Miguel Beer is also considered as the best selling beers along with the top 20 beer brands in the world (San Miguel Corporation 2008).
1.2 Vision and Mission
San Miguel Brewery Hong Kong Limited follows the same vision and mission of the San Miguel Corporation. The vision and mission of the company focuses on its core values: their passion for their success; their teamwork; their respect for their people or employees; their focus to their customers; their innovations; their integrity; and their social responsibility (San Miguel Corporation 2008).
One of the most important core values of the company is their passion for success. The said core value pertains to the mission and vision of the company as a whole. It serves as their motivator to do their best. It also focuses on being practical or positive as well as entrepreneurial that is driven by sense of importance, competitiveness as well as total commitment to the result (San Miguel Corporation 2008).
The company also gives focus on the team work or the presence of trust and respect for each and every individual or employees inside the company that will result to harmony through common goals and objectives, exceeding limitations along functional and organizational lines (San Miguel Corporation 2008).
The company is also into human resource management. The company is committed in nurturing and encouraging the capabilities and skills of their employees. The said mission can be done by uplifting the dignity of labor and supporting them to be the best people in their field. The company also focuses on the creation of a better working environment by implementing open communication, companionship as well as professionalism (San Miguel Corporation 2008).
The next most important aspect of the company is their customers; the company will apply their innovativeness as well as their integrity in order to gain the attention and maintain the loyalty of their customers to their products and maintain their position in the industry (San Miguel Corporation 2008).
Last, but not the least, is their social responsibility. Social responsibility is considered as one of the most effective marketing strategy of many corporations and companies. This is due to the fact that it has a great impact or appeal to the customers. It also helps the company to become committed in improving the lives of the people in their communities in which they live and work (San Miguel Corporation 2008).
2 Internal and External Environment
Beer has been considered as the alcohol for masses in Hong Kong. It is considered as the choice of alcohol drink that does not carry class stigma, it is readily affordable. In addition to that, different brands signify different symbols in terms of social life. There are some drinkers who believe that beer has a health benefits.
2.1 Consumer Buying Behavior
In 1970s the demand of the Hong Kongers towards beer had grew forcefully. That is due to the fact of the import of the labor from the mainland China. Unfortunately, by 1980s, the economy of Hong Kong had begun to succeed and helped the Hong Kongers to become more educated as well as wealthy; eventually it had helped to drop the ration of the blue-collar workers. The said event had affected the beer industry in Hong Kong, that had lead to a slow and no growth at all (cited in Speece & Kawahara 1994, p. 10).
The per capita consumption of beer of the Hong Kongers is comparatively low when compares to the standards of the Western people (see appendix 1 for the comparison). In 1992, the average consumption of beer of the Hong Kongers has reached 29.8 liters. The said demand for beer had decrease compare to its demand from 1990 that ranges from 28 to 35 liters (cited in Speece & Kawahara 1994, p. 11).
The buying behavior of the customers towards beer depends on occasions as well as to the brand of the beer. Tsingtao beer is considered as the lowest of them all, tourists are just availing the said beer in order to feel and experience the real China. On the other hand Carlberg that is made in Denmark is considered as the beer of the bar as well as the beer of the night. It is belong to the social rank that is higher from San Miguel (Matthews & Lui 2001, p. 122).
San Miguel Beer is considered as the mediocre beer, meaning it does not belong to the lowest social status, or the upper class. Beer is considered as part of the life of the Hong Kongers. It generally perceived as the cheap brand. Primarily, it can be said that San Miguel is one of the most affected beer brand in Hong Kong, by the affluence of the Hong Kongers. It had slowly but steadily lost its market share in Hong Kong (cited in Speece & Kawahara 1994, p. 11).
According to the study that was conducted by Speece & Kawahara (1994), the blue-collar respondents are the one who drinks most per in a month. Unfortunately, it also had showed that their average of 12.5 bottles or can per month is not sufficient to stand for high consumption. In addition to that, it had also showed that the professionals or those respondents who are from the upper management had resported to consume about 9.4 bottles or cans in a month, 7.9 for the white collars or those clericals and 4.1 for the students (p. 13).
2.2 Market Segmentation
The market segmentation of San Miguel Beer in Hong Kong is divided into the demographic variables: age and gender. With accordance to the age, due to the fact that beer is categorize as liquor or alcoholic drink, the age of their consumer start from the age of 18, as the legal age.
With relation to market segmentation in terms of gender, it is divided between male and female customers. This is due to the fact that the said two categories have two different preferences when it comes to beer. Another matter is that women Hong Kongers are not into alcoholic drinks than the man.
2.3 Target Market Strategy
Due to the fact that Hong Kong economy had been thriving and flourishing and the citizens had become affluent and professional, it had affected their taste when it comes to any product, more particularly to their beer consumption. Together with this, most of the consumers are now starting to look up to the brand name than to the taste or the price of the beer. Beer has become a symbol of the social status. San Miguel had been tagged as the beer for construction workers (Matthews & Lui 2001, p. 123). In order to maintain their position in the market, the company had begun to brew the German Löwenbräu under the license in 1980. In order to improve their line of products, they had signed a license about the production agreement with the Kirin, a Japanese brewer. The said strategy had been done in order to defend the product from other imported beers, specially the Carlberg (cited in Speece & Kawahara 1994, p. 11). Unfortunately, the said strategy had not been successful due to the fact that the brand Löwenbräu is still mainly viewed as German, and Kirin as Japanese, and not local (Speece & Kawahara 1994, p. 11).
In addition to that, the company is still targeting their customers by means of the traditional culture of the country. The commercial of the products pertains to the local and familiar settings that evolved in the culture of the Hong Kongers. In addition to that, it also uses clear narrative storylines (Matthews & Lui 2001, p. 123).
During the 1980s, San Miguel Beer had been considered as the most popular brand of beer in the entire Hong Kong. The said beer is originally based in the Philippines, but due to its acting local approach, where in the company had used different TV commercials that shows the rich culture and rewarding life in Hong Kong. The said approach had made a great appeal for the Hong Kongers to accept the brand and embrace it as if it’s their local product (Matthews & Lui 2001, p. 123).
Compare to other European brands of beer, San Miguel beer had always been considered as the brand for the masses or the ordinary people. The said event brings San Miguel as the leading beer brand in Hong Kong. Unfortunately, 1990s the brands of beer in Hong Kong had been change and become a multi-level hierarchy. It had made San Miguel as the most popular beer in Hong Kong during the 1970s, to become less popular beer during the 1980s. The position of the said beer had been replaced by Heineken (Matthews & Lui 2001, p. 123).
San Miguel is considered as the mediocre beer, after Carlsberg. In terms of social ranking, the next to the ranking of the first two said brand are the Heineken, Budweiser, Corona, Col and Guinness (Matthews & Lui 2001,p. 124) (see appendix B for the complete details of the social ranking of beers in Hong Kong).
In order to make sure that the officers and different entities who are involved in the important decision-making activities of the company, a compliance system had been implemented. This is to make sure that they are protecting the interest of the company as a whole as well as those employees who are into the lower level of management as well as to protect the integrity of the company for the sake of their customers. In addition to that, the company also focuses on creating their audit committee that will assist the board of the Company in order to accomplish it corporate governance as well as to prevent different flaws and mistakes with connection to the responsibilities in financial reporting, internal control structure, the risk management system as well as the internal and external audit functions (sanmiguel.com.hk 2007).
3.1 External Audit
External audit is important safeguard in the stewardship of public money. It is used in order to deliver via carrying out the different reviews that are designed to test the sufficiency of the authority’s financial system, as well as the provision that will help to avoid as well as to become aware of different activities that will lead to fraud and corruption (Finance 2005).
In order to make sure that the integrity of the internal audit of the company will be maintained, they have created a position that will handle the different processes of the external audit. The external auditor will handle the different issues of the company that pertains to the maintenance of good corporate governance that eventually reflect to the financial records as well as the reports of the company. In addition to that, the external auditor will be selected as well as appointed by the company’s stockholders via the recommendation of the Audit Committee (San Miguel Corporation 2008). The company appointed KPMG as the External Auditors. They are the one to report about what is going on about the external audit of the company.
The company had allocated a total of .3 million from the 2005 financial statements of the San Miguel together with its subsidiaries for the KPMG’s 2005 legal audit services. The quantity that was paid by the company for other non-audit services provided by KPMG for the Company and its subsidiaries during the year under review such as taxation computation review as well as corporate governance review was .4 million (San Miguel Brewery Hong Kong Ltd. 2005, p. 24).
Furthermore in order to help the external auditors to manage the external audit of the company, the audit committee will be responsible in monitoring the independence of the auditor as well as the effectiveness and objectiveness of the auditing process with accordance to the standards and rules that governs the company as a whole.
3.2 Internal Audit
In order to maintain the integrity of the internal audit of the company, the company had decided to have a position or place for an independent internal audit that will be performed by internal auditor or group of internal auditor. With accordance to the said responsibility, it is the role of the senior management as well as the stockholders to provide the reasonable assurance to the organization that the internal auditor will be able to control the different procedure of the company in efficient, suitable as well as compiled manner (San Miguel Corporation 2008).
The audit committee will be the one to handle and monitor the reports of the internal auditors. The least amount of the internal control mechanisms for the overall operational responsibility of the management will focus on the CEO, due to fact that he or she is the primary person or authority who is accountable for the organizational controls and procedural controls of the corporation (San Miguel Corporation 2008).
Above all, the different scope as well as the details about the system that is characterized by effective organizational and procedural controls are all based on the standardized factors such as: the nature and the density of the business, together with the culture of the business; the level, size as well as the difficulty of different transactions; the level of the different risks; the level of the centralization as well as the allocation of power; the point and the efficiency of the information technology or IT; and the point of the regulatory compliance (San Miguel Corporation 2008).
The implementation process involves the most important actual processes and transactions that have a direct connection with the company. This are the most essential aspect or part of the company that deals with the competitive advantage of the company and can help to increase the sales as well as to improve the image of the company, together with the brand name. It can also help the company to maintain its position in the industry.
Management can be considered as one of the vastest activities inside the organization. It is composed of different activities such as planning, organizing, leading or directing as well as the process of controlling. It is important for the company because it serve as the connection between the different internal entities of the company such as the employees, the stockholders, the suppliers and company itself or the upper management.
In order to make sure that each and every member of the company or the stakeholders of the company are following the goals as well as benefiting from the management of the company, the corporate governance had been made. It is the long standing commitment of the company to the good corporate governance practices that takes the leadership role in processes of instituting as well as maintaining the different practices that will provide a significant framework within that will make sure that the Board, together with the Directors and the management can follow the different strategic plan and activities of the company and will eventually make sure that the company will meet the long-term vitality for the sake of the stockholders (San Miguel Corporation 2008).
In addition to that, the company is also focusing on its Human Resources as one of the major strategies that will help them to maintain and improve their position in the industry. The company is investing money for their people. The company is implementing different training as well as capable support from their coworkers and focuses on the spirit of team work in order to achieve the goal and aim result in the highly competitive business environment (San Miguel Brewery Hong Kong Ltd 2005, p. 9).
Above all, the company believes that their human resource is the key for their competitive advantage that is why they are doing some programs and plans that will focus on the benefits and sake of their employees in order to maintain their loyalty and will motivates them to work at their best. The company offers their fringe benefit that is consists of medical and insurance coverage as well as the retirement benefits for each and every employee (San Miguel Brewery Hong Kong Ltd 2005, p. 9).
The operation of the company can be said as one of the most important aspect of the implementation activity of the company. This is due to the fact that the industry of beer in Hong Kong had been weak during the past few years of the company’s operation. As a matter of fact, in 2005, the total volume of the industry has decrease by 1% from the past year. In addition to that, the company is also facing the challenges of changes in the preferences of the customers from the low or cheap price and high quality beer, to economy-priced brands. This is according to the retail audit, where in shows that the segment share of the economy brands had raised from 2004, having 37.3% to 2005, gaining the 40.7% share (San Miguel Brewery Hong Kong Ltd 2005, p. 8).
In addition to the said statistics, the sales of the company had declined in 2005 by 0.8%. In order to develop as well as maintain the position of the brand in the market, the company had set and implemented different strategies. The said strategic programs aim to reinforce the connection of the brand to the consumers (San Miguel Brewery Hong Kong Ltd 2005, p. 8).
As part of the company’s operation, it had launched their new marketing campaign for the brand that focuses on the theme Our City Our Beer. The said campaign had been implemented via the use of different television commercials and advertisements, different point of sales visibility blitz, online communications, together with the public relation programs. Different independent marketing research had showed that the said campaign of the company was received well by the consumers of the brand (San Miguel Brewery Hong Kong Ltd 2005, p. 8).
In addition to that, the company also focuses its operation in their San Miguel WildDayOut that has been successful for two years straight in 2005. The said operation has been done in order to target or communicate with the younger segment of their target customers (San Miguel Brewery Hong Kong Ltd 2005, p. 8). The said program has been done by sponsoring series of shows and at the end of the year, the company had also launched their grand concert that are held with the appearance of different popular local as well as international artists. The entire invited cast of artist had helped to build the image of San Miguel Beer (San Miguel Brewery Hong Kong Ltd 2005, p. 8).
Due to the continuous effort of the company by reaching their customers as well as their effort to give their customers their best, the company is still the major player in the beer industry in Hong Kong. In 2005, the company is still the largest player in the said category. In addition to that, the company also focuses on the re-visitation of their product cost that will help the company to maintain the profitability of the company regardless of the volume mix change (San Miguel Brewery Hong Kong Ltd 2005, p. 8). The export volume of the company had grown to 61% compare to the last year (San Miguel Brewery Hong Kong Ltd 2005, p. 8).
Part of the operation of the company is to share their blessings to the society of Hong Kong. San Miguel is considered as good corporate citizen in Hong Kong. It is because the company is continuing its activities in contributing to the Hong Kong economy as well as the citizens of the said country, together with South China (San Miguel Brewery Hong Kong Ltd 2005, p. 8). Corporate responsibility is considered nowadays, as one of the most important aspect of many businesses, this is due to the fact that it gives many benefits such as building the image of the products. The company is giving their regular donations to different charities as well as non-profitable organizations or NGOs. In 2005, the company had been able to participate in different events in the community of Hong Kong (San Miguel Brewery Hong Kong Ltd 2005, p. 8).
Another important aspect of the corporate social responsibility of the company is their concern with the nature or the environment. The company is implementing different standards and rules that handle the environmental friendly manufacturing processes (San Miguel Brewery Hong Kong Ltd 2005, p. 8).
Marketing had been one of the most important factor in any companies and organization in the world. It serves as the primary transaction and process that connects and bonds the customers and the company.
The primary marketing strategy that has been applied by the company to their relationship with their customer is their ability to act as local, where in the customers had been able to feel that the company has originated or owned by their country. Another important thing is that the company also uses the settings and the culture of the Hong Kongers in creating and implementing their different marketing strategies such as their advertisement.
The company had been able to had famous people or personalities to represent their brand, for example is the hilarious television advertisement of Stephen Chow that shows the sensuality of a girl, at the same time, bringing out the sense of humor of Stephen Chow (See appendix C for the preview of the TV ad). In addition to that, the company had also included Jet Li to the list of their endorser, together with the boxing icons Manny Pacquiao and Erik Morales. It shows the movements of Jet Li that woo a gorgeous and stunning woman using the bottle of San Miguel (Yin 2007). The campaign had been launched via the way of print, outdoor, the direct marketing as well as the activation executions (Yin 2007). The company had also changed their tagline from Come Together With San Miguel Beer to Camaraderie like No Other (Yin 2007).
In addition to the said strategy, the company is also into sponsorship and other related strategy. They are engaging into different gigs and celebration in order to show or the represent their products to their customers.
Another important marketing technique of the company is their pricing. San Miguel beer is considered as one of the cheapest brands of beer in Hong Kong. It had been a great help for the company since it can be availed by those consumers who are into blue-collar job or those who belong to the lower level of management. Unfortunately, the said strategy had caused the company some disadvantages, and that is due to the fact that price of beer had caused to create a social status division among the brands of the beer. It had affected the image of the brand, due to the major change of the standard of living in Hong Kong.
Finance or account is considered as the blood of the company. It is the life of the company due to the fact that it is the primary concerned of the upper management whether to continue or not their plans. The production, processing as well as the marketing of the products, together with the monetary issues of all the activities of the company is somewhat connected with the parent company or the San Miguel Corporation that is located in the Philippines (p. 7).
In addition to that, the company had also implemented their different accounting policies and principles, in order to make sure that the company is maintaining their integrity in terms of monetary flow.
4.5 Research and Development
Research and development pertains to the innovation and improvement of the company. It is one of the most important activities because it focuses on the improvement and development of the company as a whole.
One of the primary focuses of the research and development activity of the company is the environment friendliness of their manufacturing and processing activities. The company is focusing on improving the safeness of their different manufacturing activities and processes against the environment. One of its primary concerns is the consumption of different energies that are spent in major machineries for their manufacturing process. It has been done in order to help to prevent global warming. The bottle is also another factor, due to the fact that it can help to manage the waste in the country.
With connection to the development of the company, they are also focusing on connecting with their customers by deploying their own market research that can help them to ensure the competitive advantage.
In addition to that, the company is also focusing their research and development in connecting to their young or youth customers.
Another factor is that the company is also focusing in developing or launching new products that will serve as the counter part of the upper social class brand of beer in the industry. The said strategy is to make sure that the brand name of company will maintain its position in the market.
Based on the data and information that has been gathered with connection to the company and the different aspects or activities that are important to the company, the primary problem of the company is the negative impact of their image to their consumers, together with the sudden change of the standard of living and culture of the Hong Kongers that had affected their preferences as well as taste in beer. The said change in the standard of living of the Hong Kongers had affected the image of the product in negative way. Another important thing is that, the marketing strategies as well as the research and development activities of the companies is somewhat not enough to handle the current problem of the company that causes for their sales to fall.
All of the said factors can affect the position of the company in the industry.
San Miguel has been considered as the most popular beer in the history of Hong Kong, as a matter of fact, the said brand is also available in different part of the world. San Miguel had become the leading brand of beer in Hong Kong from its launching. It is considered as the most successful multinational companies in Hong Kong beer industry. Unfortunately, the company had become a victim of globalization and the change of the preferences and standard of living of their target market. Due to globalization, their competitors in the beer industry had grown and affected their sales and position in the market.
San Miguel beer had been considered as the beer for the mass, it can even be tagged as the national beer of Hong Kong, this is due to the fact that San Miguel beer is cheap and it has a high quality. The said brand had been part of the life of the Hong Kongers. Another important strategy of the company is that they had been able to build or establish their own brewery in Hong Kong; it gives the Hong Kongers the feeling that the company is their own or considered the company as local. The said success of the company had continued until the economy and the financial status of Hong Kong in the world change. The said change had made Hong Kong as one of the central market in Asia; therefore it had affected the social status of the citizens. The Hong Kongers had become more educated, more professional and eventually became wealthy and affluent.
The said major change in the social status of the country as a whole had affected the demand of the people to the product. The Hong Kongers had become more conscious with the brand name, especially those beers that are from Europe and America. The image of the San Miguel had become cheap. The said event had affected the sales of the company due to the fact that some of the Hong Kongers prefer to buy beers that are included in the upper class of beer brand. The said event happen because, the image of the brand had been labeled as beer for the poor or for the blue-collar job. Another important thing is that, although the Hong Kongers prefer the taste of San Miguel beer, there are some occasions where in they prefer to have other brand, such as for their visitors and other important occasions.
Another important factor that affected the sales of the said beer is that many bars or the likes prefer to sell the upper class of beer brand rather than San Miguel. This is because they see San Miguel beer as the beer in street occasions or street parties rather than in the bar.
The primary problem of the company focuses on the image and the preferences of their customers or their consumers. With accordance to their problem, the company can continue their partnership with different International companies that will help them to expand or extend their brand names. With connection to the said strategy, it is also important to maintain the old image of San Miguel as cheap but high quality beer. This will serve as their marketing strategy as a part of their market segment. The said strategy will handle the lower income segment of their customers. By maintaining the said strategy, it helps the company to reach the masses as well as to maintain its strategy of acting local.
The company must also focus on their professional or their upper management customers. This is due to the fact that it can affect to the overall sales and performance of the company. It will be helpful if they will be able to launch new product that will meet the demand and taste of the customers. New packaging style will help the company to rebuild their image.
It will also help if they will expand their brand name by engaging into expansion of product such as soft drinks. This will help the company to maintain and improve their sales. It will also help the company to resolve their problem regarding the health consciousness of the Hong Kongers.
With regards to their marketing strategy, the company must continue their campaigns that use big stars and celebrities. It will help them to lift up the image of their brand. Their communication and connection with the youth is also important matter, it will be helpful if they will continue to plan different gatherings that will be sponsored by the company. In that case it will be helpful to create a community of the customers that will eventually help them to use the word-of-mouth strategy.
In terms of their marketing campaign, using different usable items such as T-Shirt, cups, beer mugs as well as bottle opener will help the company to spread the goal of the company to their customers, therefore building more strong connection with them. It will be a great help to the major advertisement of the company such as billboards and television advertisements.
Above all, it will be helpful if the company will be able to bring their product in other part of the world, that is outside Asia, like for example America and Europe. If they will continue to pursue their position in the beer industry of the said countries, it will serve as a big publicity for the brand and it will eventually affect the global image of the brand.
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