COMM498_203_6_Handout

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University of British Columbia *

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203

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Management

Date

Apr 3, 2024

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pdf

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2

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Team 6: Carlsberg and San Miguel Corp. Overview Carlsberg Group is a multinational brewing company which serves over 150 markets Organic revenue (9.2%) and profit growth (5.2%) continue into 2023 Recent expansions in Canada (Waterloo) and China (Jing-A) 2023 goal: Better serve the Asian market through expansion (2023 report) Strategy What strategy do we propose? Carlsberg strategically collaborates with San Miguel Corp. (SMC) located in the Philippines through a contractual licensing agreement. In this agreement, SMC facilities produce Carlsberg specialty beers in exchange for profit (and experience producing specialty beers). How should this be executed? Step 1: Go through local Philippine regulations and connect with related associations. Step 2: Make the offer, and potentially negotiate four main details with SMC: 1. Investment channel Carlsberg: financial and technology support: costs, expertise, and advanced equipment SMC: asset and technology support: local knowledge, facilities, and reputations. 2. Ingredients: using SMC’s existing supply chain and Carlsberg paid in PHP 3. Marketing and distribution: SMC’s existing channels 4. Labor: Carlsberg: skilled labor for expertise support SMC: skilled and unskilled labor Key Factors 1. This is a market not yet served by Carlsberg 2. Large market size with relatively high beer consumption 3. Geographical access to East and South-east Asian markets 4. Large population and base for skilled and unskilled labour 5. SMC has near market dominance in the Philippines (over 90% market share) a. Ability to use SMC’s local production facilities and supply chain through partnership 6. SMC offers only 8 beers, mainly low-cost pilsners a. Carlsberg Group can provide craft/premium beers to the Philippine market 7. High and increasing foreign beer import tax of 43PHP per litre ($0.77 USD)
a. Increasing 6% annually 8. Limited cultural separation between Denmark/EU and the Philippines a. Both countries with strong western influence b. Christianity dominant religion 9. Growing middle class and urbanization in Philippine society a. Poverty rate declined from 23.3% in 2015 to 18.1% in 2021 Risks and Mitigations Foreign Exchange Rate-Related Risk: Fluctuations in exchange rates can affect the company's revenue and expenses in terms of conversion and translation. Mitigation strategies: financial hedging, diversification Long-term planning: FX risk management policy that aligns with Carlsberg's long-term business goals and risk tolerance Operational Risk: Technical failures, quality control issues, and workforce management challenges Mitigation: Establish clear production standards, quality control processes, and regular audits Provide training and technical support to SMC staff involved in production Environmental and Social Risk: Higher resource consumption, including water, energy, and raw materials Waste generation in brewing and packaging processes Noise, traffic, waste disposal to the local communities Mitigation: Environmental impact assessments and eco-friendly technologies Waste management plans to reduce, reuse, and recycle waste generated during production and packaging Wastewater treatment systems Engagement with local communities through transparent communication, community consultations, and stakeholder engagement initiatives Contribution to local development projects Supply Chain-Related Risk: Simply reliance on SMC's supply chain exposing Carlsberg’s supply chain to possible disruptions or delays Mitigation: Diversify suppliers and maintain contingency plans for alternative source Collaborate with SMC to optimize supply chain efficiency and reduce lead times
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