Major Consumer Group Served

Regarded as the world's top gin producer and a market leader for domestic hard liquor, Ginebra
San Miguel Inc. (GSMI) continuously offers quality and excellence in the food and beverage
industry. With its flagship product Ginebra San Miguel, the Company has evolved into a more
progressive and dynamic organization while sharing its proud heritage, unwavering dedication
to alcohol production, and the "Never Say Die" attitude to all Filipinos. The Company has many
products that cater to the varied taste preferences of their local and international markets. Their
partnership with San Miguel Corporation, which started in August 1987, paved the way for the
firm's bright future in continuing its vision of becoming a diversified beverage company.
GSMI ensures that all its products are widely available across the archipelago. The Company
devised a strategic distribution plan composed of territorial distributorships and sales offices.
The Company directly serve on-premise (e.g., restaurants, bars, and hotels) and off-premise
outlets (e.g., supermarkets, sari-sari stores, and convenience store) through their ninety-one
(91) dealer sites and twelve (12) sales offices. GSMI's dealer sites are responsible for selling
and distributing the Company's products within specified locations and outlets. For areas with
no appointed dealers, their sales offices offer products to wholesale and retail customers.
Likewise, in light of the COVID-19 Pandemic, the Company utilized distribution on e-commerce
platforms to further widen its reach and the availability of its beverages.
To ensure the smooth delivery of their products, the Logistics Group of GSMI carefully plans
and coordinates the management and transport of the beverages to various dealers,
wholesalers, retailers, and sales offices. Trade partners then serve many retail touch points and
eventually to customers locally and internationally.
Because of the age restriction imposed on alcoholic drinks in the country, GSMI's main
consumer base focuses on drinkers aged 18 and above. However, their customer base mainly
targets the middle-aged and older generation and those from the provincial areas. Regarding
the socio-economic class, the Company's leading consumer group falls in Classes D and E, as
their most popular product is still perceived as a poor man's drink. In recent years, GSMI has
been trying to capture the younger generation of drinkers and cater to more customers by
expanding its product portfolio with new and innovative beverages. Throughout the years, they
have also captured the hearts of many Filipinos with their PBA Basketball Team. Furthermore,
GSMI continues to build on its success throughout the years by giving importance to its timeless
brand and reputation among the Filipino masses. Even going international with their market
reach, they will pursue their mission of providing world-class liquors and making every occasion
a celebration.
Macro-enviroment Assessment (Political)
Ginebra San Miguel Inc. (GSMI) is a famous liquor company both locally and internationally.
The company has been in business since 1902 until San Miguel Corporation formally acquired it
in 1987. In its operations here in the Philippines, GSMI has been heavily regulated by various
government agencies and regulatory bodies to ensure the company's compliance with relevant
rules, regulations, standards, and frameworks in the country. As required for the conduct of the
company's various businesses, the company has to obtain all necessary permits, licenses, and
government approvals. Examining these political factors, including government policies, foreign
trade policies, tax regulations, and anti-competition issues, helps companies like Ginebra San
Miguel make innovative and strategic decisions that benefit its growth in the industry.
Primary agencies regulating Ginebra San Miguel include the Food and Drug Administration
(FDA) for the company's manufacturing, sale, and distribution functions. The FDA is a regulatory
agency working under the Department of Health (DOH). R.A. No. 9711, or "The Food and Drug
Administration Act of 2009", established the agency intending to ensure the safety, efficacy, or
quality of health products or consumer products that may affect human health. Therefore,
Ginebra San Miguel needs to comply with all the regulations and safety inspections of the FDA
to ensure that all the company's products will not be detrimental to the health of its consumers.
Primarily since the company mainly sells liquor products, GSMI should follow these guidelines:
 All alcoholic beverages should only be accessible to consumers of legal age;
 The company's authorized distributors should not sell these alcoholic beverages to
underaged drinkers; and,
 The company should advertise alcoholic beverages to the public with the necessary
information regarding the product's alcohol content.
These guidelines are under Article III Section 5(f) on Food Safety Requirements under Republic
Act No. 10611 or the Food Safety Act of 2013 and the FDA Circular No. 2019-006.
Regarding employment and labor, Ginebra San Miguel must comply with all labor regulations
issued by the Department of Labor and Employment (DOLE). Formally becoming a department
in 1933 through Republic Act No. 4121, this government agency aims to promote gainful
employment opportunities, develop human resources, protect the workers, and promote their
welfare. The company ensures the safeguarding of its employees' rights and provides
mandated wages and benefits. GSMI continuously strives to comply with DOLE's implementing
rules, regulations, and issuances, including the Occupational Health and Safety Law, the Social
Security Act of 1997 as amended, the National Health Insurance Act of 1995 as amended, the
Safe Spaces Act, and other relevant legislations. With the company's engagement of third-party
service providers, GSMI ensures that these providers comply with applicable provisions and
issuances of DOLE relative to contracting or subcontracting arrangements.
Businesses' operations may also affect the environment. Since Ginebra San Miguel mainly
engages in manufacturing and distribution, the company exhausts its operating efforts in plants,
facilities, machinery, and delivery equipment. These fixed assets contribute to severe
environmental harm, including pollution and improper waste management. One of the elements
of being a sustainable business is the ability to minimize the negative impacts of its operations
on the local and global environment. Therefore, GSMI must meet the guidelines of the
Department of Environment and Natural Resources and other related agencies. One of GSMI's
subsidiaries, Distileria Bago Inc. (DBI), has a site near the Guimaras Strait. Understanding the
possible threats if the company improperly manages wastewater effluents and other emissions,
GSMI has implemented various measures. In general, the company ensures that those effluents
adhere to the standards of DENR prescribed under DAO 2016-08 before discharging to a body
of water. GSMI also secured a mangrove reforestation site along the shore of the Guimaras
Strait as a way for the company to preserve water quality and marine life. The company
conducts tree planting activities within the vicinity every year. These efforts made by the
company created numerous environmental benefits, including reduced risk of flooding, soil
erosion, and carbon emissions.
Likewise, GSMI also follows other relevant laws and regulations affecting the ordinary course of
its business operations. On matters relating to personal data, the company ensures compliance
with the Data Privacy Act of 2012 and issuances made by the National Privacy Commission.
These privacy laws aim to protect the fundamental human right of privacy of communication
while maintaining the free flow of information to promote growth and innovation. GSMI has
adopted a policy for personal data privacy and key personnel for data protection and
compliance for privacy to its subsidiaries. Regarding fair competition in the industry, GSMI
ensures its full compliance with the Philippine Competition Act. Passed in 2015, Republic Act
No. 10667 or the PCA aims to provide a definitive framework on competition policies,
prohibitions, and penalties on anti-competitive practices for the promotion of a fair and free
competitive market and protecting consumer welfare.

Macro-enviroment Assessment (Legal)

Ginebra San Miguel ensures that it closely monitors developments and changes in existing laws
and regulations it follows. In response to these regulatory risks, the company provides that
apply strategic planning to maintain the good standing of the business in its industry while
complying with these new regulations and mandates, which aim to help the country and the
economy. Regarding the company’s tax implications, GSMI is subject to the rules of the
National Internal Revenue Code of 1997, as amended. The company is subject to income taxes,
excise taxes, value-added tax, and other import duties for acquiring materials and goods from
foreign suppliers. However, for GSMI’s corporate income taxes in 2021, the company adapted
regulatory developments brought by the CREATE Law that reduced the income tax for domestic
corporations. Based on the amendments stated in this law, domestic corporations (in general)
are subject to either a 25% regular income tax rate or a 1% MCIT rate (from July 1, 2020, to
July 31, 2023), whichever is higher. In effect to the company’s financial performance, the
reduced income tax rate resulted in a higher net income after income taxes, growing by 51.6%
from the previous year. Also, the company achieved a higher total for comprehensive income –
net of taxes, growing by 57.9% from the prior year. Aside from the changes in income tax rates,
another development made by the government is the imposition of higher excise taxes on sin
products such as distilled spirits and tobacco products. With specific goals to protect public
health, decrease the demand for sin products, and gain additional government funds, former
President Rodrigo Duterte approved and signed Republic Act No. 11467, which took effect last
January 1, 2020. Responding to the tax increase, GSMI strategically made price increases and
manufacturing improvements.
Another legal compliance issue that Ginebra San Miguel continues to face is the implementation
of government regulations on liquor bans. Amid the pandemic, many local government units
imposed liquor bans to ensure social distancing and prevent mass gatherings. During those
times, local governments prohibited restaurants, bars, groceries, and other establishments from
selling alcoholic beverages. Among those cities which imposed liquor bans during the pandemic
were Valenzuela, Mandaluyong, San Juan, Quezon City, and Manila. But as the situation
improved, these cities started to lift the implementation of the liquor ban with constant reminders
to the people not to engage in large public gatherings that will steer a big crowd. During the
recent national elections, COMELEC ordered a nationwide liquor ban last May 8 and 9 in
preparation for the election day. These prohibitions imposed by national and local government
units significantly affect the sales of GSMI’s alcoholic products. As noted in GSMI’s Minutes of
Meetings last June 23, 2020, sales volumes from January to March fell by 14% compared to
their performance in 2019. Income from operations was down by 30%, and the bottom figure
decreased by 23% compared to their 2019 figures. In that meeting, management was quick to
move and revive their selling operations once local governments lifted restrictions. This situation
should allow companies like GSMI to explore more options in distributing their products to the
market. Many businesses opted to shift to online means of selling and distributing goods to
consumers to compensate for the difficulties brought upon by the COVID-19 pandemic. GSMI
also used online distribution to ensure that all their current stocks would be sold and consumed.
Eventually, the company recovered and produced increasing sales volumes, growing by almost
17.5% from the company’s 2020 performance. Aside from this, last October 2021, GSMI also
introduced its ethyl alcohol product to cater the needs of families and medical institutions for
disinfectants. With these efforts, GSMI has been able to progress through the pandemic with a
sufficiently good financial stability and performance.

Opportunities and Threats (Suppliers and Distributors)

Opportunity: Abundance of Raw Materials in Local Sources
Raw materials are essential resources for a manufacturing company in producing goods and
services to distribute to the market. In the case of Ginebra San Miguel, those included in their
raw materials and supplies are distilled alcohol, sugar, flavoring agents, and bottles. Sugarcane
is the most used raw material in manufacturing alcoholic beverages sold by GSMI. Generally,
the company sources molasses from the Philippines, Thailand, Indonesia, and India, the by-
product of processing raw sugar produced in distilled alcohol. Sugar cane from Negros is
processed by DBI, a subsidiary of GSMI, turning it into molasses and eventually distilled
alcohol. As the company will use more raw materials to make new liquors in the future, there is
much opportunity for GSMI to source its ingredients from local producers in the country rather
than purchasing from our neighbors in Southeast Asia. Benefits of this strategy include:
 Incurring lower delivery costs.
 Not incurring import duties.
 Helping local producers sustain their livelihood.
 Promoting the quality of the goods produced locally. 

Opportunity: High Growth Potential in International Markets

Extending to the global market can be a huge risk for businesses. Usually, larger and more
established companies take the opportunity to make a name in the global market by introducing
their products to foreign consumers. Ginebra San Miguel has long been a reputable brand of
liquor and alcoholic products in the Philippines. In recent years, they have been trying to
penetrate the international market by teaming up or acquiring shares and licenses from existing
companies abroad to manufacture and distribute their products to foreign customers. So far, all
their international businesses from countries like Thailand have been successfully performing.
Thai San Miguel Liquor Co., Ltd. (TSML) is a foreign subsidiary of Ginebra in Thailand. In 2020,
TSML reported a growth in net sales by 8.66%, a decline in total assets growth by 6.33%, and a
net profit margin increase of 5.7%. Considering the global pandemic, the company survived by
operating and producing good figures to assess its overall financial performance. Opening more
distribution networks to penetrate international consumers will lift the operating efficiency and
overall performance of GSMI. This strategy will allow them to cater to foreign drinkers who may
have similar or different tastes than Filipinos. If they may have similar preferences, GSMI can
advertise and promote all their existing products specific to the market they will be targeting. If
they may have different tastes, GSMI should explore ways to match their product mix or
selection of beverages to the preferences of foreign drinkers. This strategy will also help the
company gain sufficient information on how liquor companies perform in these international
markets. GSMI will surely succeed if they carefully plan their every move before the execution.
The company should also get feedback about their implemented projects to gain insights, plan
countermeasures, and decide better.

Threat: Inflation on the Prices of Raw Materials

One of the economic issues experienced by the country is inflation. Headline inflation in the
Philippines in August 2022 was 6.3%, 1.9% higher than the inflation recorded in the same
month last 2021. Prices of commodities in the country increased drastically. As transportation
and fuel costs soared, raw materials prices became relatively more expensive. Inflation also
affected alcoholic beverages and tobacco products, having a higher inflation rate of 9.3% during
August. If raw materials are costly, businesses utilizing these resources must manage their
production costs and prices. Higher inflation rates will result in higher prices of goods and
services because of the increased costs of producing or manufacturing them. In the case of
Ginebra San Miguel, this continuous increase in the country’s inflation rate index is a potential
threat to the business. As mentioned, higher prices for raw materials mean that the company
will incur additional production costs, making their goods more expensive in the market. Higher
transportation costs will be a problem in sourcing goods from suppliers and distributing their
products to customers. The company will experience the same situation due to volatile fuel
prices. If this issue remains unresolved, consumers can no longer afford to buy the commodity
and non-commodity goods regularly. Eventually, the sales of businesses will experience a
decline.

Industry and Competitor Analysis (Bargaining Power of Customers)

One of the five forces in Michael Porter's Industry Analysis Framework is the bargaining power
of buyers or customers. Customer bargaining power refers to the pressure consumers can put
on businesses to provide better service, higher quality products, better customer relations,
and/or more competitive prices (Corporate Finance Institute, 2022). Ginebra San Miguel Inc.
can be analyzed using four major factors to determine whether the bargaining power of buyers
is weak or strong. The number of buyers is relatively small compared to the number of suppliers
offering the same products as GSMI. Since the company's primary target market lies under the
socio-economic classes D and E, most products have been perceived as "poor man's drink."
Other competitors target upperclassmen, who enjoy a more sophisticated taste in alcoholic
beverages. On the other hand, lowerclassmen can also access cheaper and more widely
available substitutes from small market players. In this aspect, buyers have strong bargaining
power.
The second major factor pertains to the dependence of a buyer on a particular supplier. If
buyers can easily access substitute products from similar businesses, their reliance on a
specific supplier decreases. In the case of Ginebra San Miguel, other major industry players like
Emperador, Alfonso, and Tanduay can also provide the products that GSMI offers to
consumers. The decreased dependence on Ginebra is possible because consumers shift
according to their taste preferences, the brand image, the value of the price paid, alcohol
content, and overall product quality. Because of the wide variety of products offered by other
competitors, buyers can find the drink they want to enjoy. In this aspect, buyers have strong
bargaining power.
The third major factor pertains to switching costs. These costs are what a buyer incurs due to
changing from one seller's products to another (Grant, 2020). If not many substitutes are
available in the market, switching costs are high. In the case of Ginebra San Miguel, many
substitutes are available in the market because its competitors also provide a wide selection of
products that cater to the different tastes of the consumers. Therefore, the costs of switching are
low. In this aspect, buyers have strong bargaining power.
The last major factor pertains to backward integration. This is a type of vertical integration in
which a company expands its role to fulfill the tasks done by other businesses. When buyers
begin to produce the seller's products themselves, they could expect significant cost savings.
Although, buyers need large amounts of capital to do backward integration. For Ginebra, the
company is exposed to many small-scale market players that can produce locally-known liquors
based on their regional origin. These alcoholic beverages are more accessible to locals and
drinkers who want cheaper alternatives.
Ginebra San Miguel manages these factors by implementing strategies to mitigate the strong
bargaining power of buyers:

 The company always looks to improve and evolve by adopting a product line that caters
to changing consumer preferences.
 The company tries to offer rational and competitive pricing policies aligned with the
consumers' purchasing power and operating cost levels. The company uses this strategy
to counter price wars due to the highly elastic demand between industry competitors.
 The company continues to implement strategies that result in improving its cost
structure.
 The company strengthened its brand image with innovative product launches and
increased customer loyalty.
Lower buyer bargaining power makes a company more attractive and increases profit potential.
Tangible Resources (Physical Resources)
Companies in the hard liquor industry, like Ginebra San Miguel, prioritize and carefully consider
all their physical resources. Being a manufacturing company, the GSMI takes pride in managing
all its raw materials, buildings, facilities, machinery, energy, and supplies to produce better
quality products and services. Physical resources may cover various items and objects
depending on the nature of the firm and the industry where they do business (Staff Writer,
2020). In particular, GSMI utilizes different materials and supplies in manufacturing its liquor
products. To supervise and manage the production process, the company invested in several
manufacturing plants, machinery, specialized equipment, and storage sites in different areas in
the Philippines. Aside from these properties, the company also contracted lease arrangements
to acquire different properties for operating, sales, and administrative purposes. All these
physical resources are vital in carrying out the goals and objectives of GSMI to all of its
stakeholders. Effective management of these resources will also be vital in helping the
company's executives ensure the organization's overall success.
For Ginebra San Miguel's raw materials and supplies, the company utilizes distilled alcohol as
its primary resource in producing its liquor products. From the humble sugar cane plant to raw
sugar, manufacturers further process and convert this by-product into molasses, the main
ingredient in making distilled alcohol. GSMI sources molasses from local and international
suppliers and then delivers it to Distileria Bago, Inc. (DBI), a wholly-owned subsidiary of GSMI
responsible for fermenting the molasses into alcohol. Aside from distilled alcohol, the company
also utilizes sugar and flavorings in producing its gin products. The company sources these
ingredients through local and international suppliers as well. GSMI packages its products mainly
in glass bottles, which they source through San Miguel Yamamura Packaging Corporation. The
company also maintains a network of "second-hand territorial bottle suppliers." Since glass
bottles cover a substantial amount of GSMI's cost of goods sold, the company used this
mechanism to manage the additional cost of manufacturing new bottles. Due to this program,
second-hand bottles accounted for 66% of the total bottles in 2021.
On the other hand, for Ginebra San Miguel's properties, the company both owns and rents
buildings, pieces of machinery, offices, and warehouses to support its overall business
activities. The company owns several plant sites located all over the country, from Pangasinan,
Laguna, Cebu, Isabela, Albay, and Negros Occidental. This strategy is good because the
company can cater to different markets across the country, signifying better distribution and
well-managed operating costs. Aside from manufacturing plants, the company also owns sales
offices in many strategic locations. Sales offices are part of the distribution methods of GSMI,
directly serving wholesalers and retailers in areas where there are no authorized dealers. For
the properties that are rented, most of these facilities are warehouses. Same idea with plant
sites; companies build warehouses in different locations to efficiently cater to all their customers
with ease in the distribution process. Whether wholly owned or under a leasing contract, these
properties greatly help the company accomplish its business activities successfully and with
high quality.

Capabilities and Core Competencies (Introduction)

In today’s highly competitive, challenging, complex, and ever-changing business environment,
companies strive to cultivate strategic advantages over their competitors to continue their
growth and development as an organization. Creating a competitive advantage will show how a
firm neutralizes external threats, realizes and exploits opportunities, utilizes its strengths, and
minimizes its weaknesses. Ginebra San Miguel must consistently utilize and manage its
resources throughout its operating cycle, as it will help the business grow and adapt to the
rapidly changing business environment and industry. Combining and using these resources
(both tangible and intangible) helps create capabilities. Companies use these strategic
capabilities to perform particular tasks, functions, or activities inside the organization (Managing
Research Library, n.d.). For GSMI, these capabilities help the firm provide quality products to its
customers, carry out its business within the observed rules and standards, grow successfully,
and give back to its stakeholders, like employees and the general public. Specific capabilities
must be present to form competencies that enable companies to develop and sustain
advantages against their competitors. Core competencies comprise the different resources and
capabilities businesses use to gain strategic competitive advantage in the business
environment. These competencies are a labor of hard work, cumulative learning, and careful
planning within the organization. In considering capabilities as core competencies, the activity
should provide superior value to consumers, be difficult to imitate, and be rare (Twin, 2022).
Managing these intangible matters well will give the company many advantages and lessen
risks that may arise due to various circumstances. This section will further discuss the
capabilities and core competencies of Ginebra San Miguel, Inc. and its Subsidiaries.

Four Criteria of Sustainable Competitive Advantage (Introduction)

Companies utilize different factors to gain success and be ahead of their competitors,
generating greater value for the firm and its stakeholders. Resources and capabilities can help
an entity produce more sales and superior margins than its market rivals. These factors are
called competitive advantages. These advantages make the company's goods or services more
attractive because they are exclusive and unique to the firm (Twin, 2022a). However, for a
business to thrive in the long run, the management needs to devise sustainable resources or
capabilities. The more sustainable the advantage, the harder it is for market rivals to imitate or
replicate the advantage. Therefore, companies need to understand, discover, and protect the
utility and quality of their resources and capabilities, adding more value to the firm and making
them stand out more than its competitors.
To maintain sustainable competitive advantages, a company must control its resources and
capabilities that meet four critical characteristics. In 1991, a famous educator of strategic
management, Jay B. Barney, introduced the VRIO analysis to identify those resources and
capabilities that carry a competitive, sustainable, and strategic relevance (Nicholas, 2022). This
framework was based on Birger Wernerfelt's Resource-Based View (RBV) theory. This theory
states that businesses differ on what bundle of resources they utilize and how these work when
combined. Not all resources have strategic relevance because specific resources give the
company a competitive advantage over its market rivals (Famuyide, 2017).
In using the VRIO analysis, the company evaluates its resources and capabilities based on four
characteristics: (1) value, (2) rareness, (3) imitability, and (4) non-substitutability (2.1
Introduction – Information Systems, 2015). Firstly, the resource or capability must bring value to
the company by contributing to its goals and objectives. This value is mainly achieved when the
resources exploit opportunities for revenue growth and reduce external costs. Secondly, the
resource or capability must not be readily available to competitors. Rare resources make
companies stand out more than their market rivals. Thirdly, the resource or capability must be
costly to imitate. Only resources that are inimitable in the long run will create a strategic
competitive advantage. Lastly, the resource or capability does not have readily-available
substitutes in the market. There should be no other resource that is a strategic equivalent of the
company's (Mohan, 2021). This section shows the evaluation and analysis of the tangible and
intangible resources and capabilities of Ginebra San Miguel, Inc. and its Subsidiaries based on
the four criteria for sustainable competitive advantage.

Four Criteria of Sustainable Competitive Advantage (Tangible Resources)

Based on the evaluation made using the VRIO analysis, no tangible resource of Ginebra San
Miguel met the four criteria for sustainable competitive advantage. For financial resources,
these factors are valuable and non-substitutable because GSMI earned the success of its
operating performance through the strength of its processes and strategies. However, these
factors are not unique only to GSMI, and its market rivals can imitate their financial performance
through their competitive advantages. For organizational factors, these resources are valuable
to GSMI because they ensure the company's efficiency. However, these resources are not
unique, easily imitable, and substitutable. For physical and technological resources, most of
these factors indeed bring value to GSMI because they aid in business operations, specifically
creating goods. However, some of these resources are not unique only to GSMI because they
have readily-available substitutes, or the competition can easily imitate them. According to
research by Rua and Franca (2017), sources of competitive advantage can be more associated
with intangible resources rather than tangible resources. Tangible resources are less rare and
socially complex, making them easy to imitate. Also, these resources tend to depreciate over
time. But for intangible resources, these factors are often rare and unique to companies, making
them difficult to imitate by market rivals. Also, these resources may accumulate their value over
time. These judgments and principles affected the tangible resources' analysis against the four
criteria for sustainable competitive advantage.

Porter’s Generic Value Chain Analysis (Marketing and Sales)

Holding on to the company’s flagship advertising campaign entitled “Bagong Tapang sa One
Ginebra Nation,” Ginebra San Miguel continues to prove its dominance in the markets and
industry as one of the leading gin and distilled spirits brands in the country. Upon the ease of
the strict quarantine regulations in 2021, the company implemented a quick return-to-trade
strategy. It made their products more accessible to more consumers even during restriction
measures brought about by the COVID-19 pandemic. GSMI utilizes many platforms to deliver
innovative consumer promotions, appealing and consistent campaigns, and promote brand
awareness. During these times, marketing media, such as digital and social media platforms,
helped the company actively engage with its target market. GSMI also captures the market
through basketball team sponsorships. Brgy. Ginebra has been one of the most followed
basketball teams in the Philippine Basketball Association (PBA), drawing more loyal fans to
patronize the products of GSMI along with their undying support for the team. Likewise, GSMI
continues to focus strongly on new product rollouts that cater to changing preferences of
consumers and industry trends. During the pandemic, GSMI rolled out its ethyl alcohol products
to help the high demands in hospitals, health facilities, and government units. By the end of
2020, the company distributed about 1.3 million liters of ethyl alcohol products, which the
company delivered to nearly 3,700 entities across the Philippines (Valmonte, 2021). This effort
translated into a 65% increase in GSMI’s profits in 2020. As the new normal approaches,
Ginebra San Miguel continues to offer consumers new and innovative products and services
while identifying appropriate and trendy marketing strategies to further boost their sales and
profits.

Strengths and Weaknesses (Introduction)

As part of a company's internal environment evaluation, management should also be aware of
the factors that affect the firm's performance in the market. These internal factors are called
strengths and weaknesses. These factors characterize a business' advantage or disadvantage
over its competitors in the industry. Strengths are areas of the business where the company
excels and has an advantage over its competitors (Peterdy, 2022). Meanwhile, the company's
weaknesses focus on the areas the business needs to improve and enhance to remain
competitive in the industry. These factors stop a firm from performing at an optimum level
(Kenton, 2022). This section further discusses Ginebra San Miguel, Inc.'s strengths and
weaknesses in the organization's different areas.
The strengths of Ginebra San Miguel were identified using the VRIO analysis. The group
assessed the resources and capabilities of the company using the four criteria for sustainable
competitive advantage. A resource or capability must be valuable, rare, costly to imitate, and
non-substitutable to be counted as the firm's sustainable competitive advantage. With these
characteristics, the identified internal factors benefit the business in performing well and
maintaining a competitive position over its market rivals.

Strengths and Weaknesses (Innovative Product Formulations)

A company’s research and development provides strategic knowledge and insights to help the
business form innovative improvements in its existing processes. Strong research and
development allow companies to build new products and services to survive and thrive in
competitive markets (James, 2021). Ginebra San Miguel has been committed to fortifying its
efforts to improve and expand its product selection, catering to the ever-changing market
preferences and trends. The true essence of innovation is to create new and valuable products.
Over the past years, GSMI has shown that it can adequately sustain its research and
development efforts to address its gaining popularity in the domestic and international markets.
As the company continues to cater to the younger generation of drinkers, GSMI produced and
introduced new variants of its famous products that fit the taste and preferences of younger
drinkers. The company is also willing to improve its existing products, as GSMI did in 2019 with
the Añejo Gold Rum. In addition, during the pandemic, the company launched its ethyl alcohol
products to aid in the increasing demand in health facilities and government units. These
innovative efforts help GSMI create value for its stakeholders and further strengthen its financial
performance. These efforts will also benefit the company in maintaining its competitive
positioning because of the advantages this capability gives.

Risk Assessment (Internal Risk: Failure to maintain good relationships with employees.)
Ginebra San Miguel believes that protecting the employees’ interests helps the company
recognize its greatest strength: people. In maintaining good relations and a constant line of
communication with its workers, the company commits to the following:
 The company provides programs for the employees’ personal and professional growth;
and,
 The company promotes a work environment filled with the values of teamwork, open
communication, and continuous improvement and learning. 
As of September 31, 2021, the whole San Miguel Corporation group identifies 34 labor unions
within its businesses and collective bargaining agreements consisting of 13% of all its
employees. Similar to the situation of the SMC group, GSMI has not experienced any labor
strikes, work stoppages, or other labor disruptions. However, the cases that happened in 2003
and 2020 in other businesses of the SMC group must be noted. Violations of the Collective
Bargaining Agreement (CBA), union busting, illegal dismissal of employees, and massive
contractualization were some of the reasons for the labor strikes that happened in 2003. This
issue concerns the employees of Cosmos Bottling Corporation, Campo Carne, Monterey Farms,
and La Tondeña Distillers Incorporated (LTDI) (Bulatlat, 2003). In 2020, the Petron Bataan
Refinery was under fire for alleged non-compliance with a Collective Bargaining Agreement
(CBA). The Department of Labor and Employment (DOLE) sided with Petron and issued an
order directing the striking workers to return to work (CNN Philippines Staff, 2020). Therefore,
there is no assurance that GSMI will not experience these disputes and issues with its
employees in the future. These future labor disruptions, if not appropriately resolved, could
materially and adversely affect the operations and financial conditions of the company. 

Risk Assessment (External Risk: Exposure to safety, health and environmental costs and
liabilities.)
Being a company established in the Philippines, aside from its primary business operations,
Ginebra San Miguel also has obligations to several regulatory bodies. Particularly, GSMI is
subject to a variety of rules, regulations, and laws with respect to health, safety, and
environment. Safety, health, and environmental regulations in the country have become stricter
due to recent developments made by the government in implementing limitations, prohibitions,
and standards pertaining to these aspects. These existing rules and regulations require the
company to incur additional capital expenditures or additional operating expenses to comply
with such laws. If non-compliance happens on the part of GSMI, the company will incur
additional costs brought by fines and penalties. These laws also subject companies to
administrative, civil, and criminal proceedings if they fail to meet safety, health, and
environmental standards and requirements. So far, Ginebra San Miguel has not been subjected
to any cases pertaining to safety, health, and environmental issues. However, in the future,
there is no assurance that litigations and proceedings will not happen to the company, resulting
to additional costs and temporary shutdown of operations. This compliance risk, if not resolved
appropriately, could materially and adversely affect the performance and operations of the
company.

Key Summary Findings

The internal analysis of Ginebra San Miguel, Inc. started with identifying the company's
resources and capabilities. There are two types of resources: tangible and intangible. Tangible
resources are physical assets that are measurable and identifiable. Tangible resources are
further divided into four: (1) financial resources, (2) organizational resources, (3) physical
resources, and (4) technological resources. GSMI's financial resources focus on internal and
external financing of the business. This part further expounds on the firm's capacity to generate
funds through internal operations, equity, and debt. Organizational resources are system-
sponsored sources of supply and support that aid the business in successfully reaching its
target outcomes. For GSMI, this resource pertains to the company's effective reporting
structure. Physical resources focus on GSMI's raw materials, supplies, and properties. These
resources help the company fulfill its business objectives for all stakeholders. Lastly, for
technological resources, GSMI ensures to bring innovation to the company's processes by
investing in machinery, computers, software, and systems. To provide the highest quality
products to the market, companies must manage these technological resources well to meet
their obligations efficiently and effectively.
On the other hand, intangible resources are non-physical items that bring significant value to the
company. These resources are further divided into three: (1) human resources, (2) innovation
resources, and (3) reputational resources. Human resources represent a significant part of the
company's journey toward success. How a firm treats its employees reflects the environment
and culture the management wants to adapt to inside the organization. Ginebra San Miguel
invests in having skillful employees and an esteemed Board of Directors, including effective
policies and programs beneficial for its people. In addition, innovative initiatives help a company
achieve further growth in the market and industry. These resources push firms to gain a more
competitive advantage over the competition. GSMI's innovative projects include its 'BOTEful
Project' Retrieval Program and transition to E-Commerce. Lastly, for reputational resources,
these factors help a company influence stakeholders' perceptions and conversations about the
firm and the brand. These resources include an established brand name, customer satisfaction,
review, and community service responsibility (CSR).
Combining these tangible and intangible resources helps create a company's capabilities. A firm
uses these capabilities to perform particular tasks and functions inside the organization. For
Ginebra San Miguel, these factors help the company provide high-quality products, carry out its
business objectives, grow successfully, and give back to its stakeholders. The group identified
several capabilities in the following functional areas. Firstly, GSMI utilizes a fully automated
distillery production in the manufacturing function. With this system, the company achieves
higher production rates and increased productivity. The company also has good manufacturing
practices and quality control to ensure that all products meet the qualified specifications and
consumer expectations. Secondly, GSMI employs a territorial distributorship. The company's
territorial distribution is composed of a network of dealers working cohesively with strategically
located sales offices across the country. The company also takes pride in its strong logistics
department and excellent relationships with key customers, including supermarkets,
convenience stores, bars, and hotels. Thirdly, the management style of GSMI focuses on
product quality, environment, safety, and sustainability. In addition, the company employs
sustainable use of resources and technologies. Fourthly, the marketing function of GSMI
prioritizes the effective use of various mediums and the timely and relevant deployment of
campaigns as part of their traditional strategy. Lastly, GSMI takes pride in its research and
development. The company's initiatives include constantly developing new products and
variants, innovative product formulations, and developing and maintaining a stringent quality
control system.

Using the identified resources and capabilities of Ginebra San Miguel, the group was able to
identify core competencies and competitive advantages of the company that are sustainable
and unique to the company. For businesses to thrive in the long run, the management needs to
devise sustainable and strategic resources and capabilities that are harder for market rivals to
replicate. By understanding, discovering, and protecting the utility and quality of these factors,
companies add value to their organization and stand out more than their competitors. Using the
VRIO analysis formulated by Jay B. Barnes, the group has identified three competitive
advantages and three core competencies for Ginebra San Miguel, Inc. In this framework, the
company evaluates its resources and capabilities based on four characteristics: (1) value, (2)
rareness, (3) imitability, and (4) non-substitutability (2.1 Introduction – Information Systems,
2015).
For tangible resources, no core competencies were identified using the VRIO analysis. Based
on the study of Rua and Franca (2017), sources of competitive advantage can be more
associated with intangible resources rather than tangible resources. Tangible resources are
easier to imitate and more accessible to all businesses. On the other hand, intangible resources
are often rare and unique to companies and may accumulate their value over time. For
intangible resources, there were three identified core competencies for GSMI:
 The company's esteemed Board of Directors (BOD) brings great value to the business'
success throughout its history of manufacturing liquor products.
 The BOTEful Project resulted in more efficient use of second-hand bottles and a
reduced carbon footprint.
 The brand name of GSMI has already been established, knowing that the company is
one of the leaders in the hard liquor industry.
The group also identified three competitive advantage sources for the company's capabilities. In
the management function, the company's strong commitment to product quality, environment,
and safety contributed to its success over the years. GSMI has provided high-quality products
that cater to ever-changing consumer preferences and trends. In addition, the company
acknowledged its responsibility towards its stakeholders. Their duties include their people's
safety and their business operations' impact on the environment. In the marketing function,
GSMI's award-winning campaigns have consistently drawn from the Filipino culture with the
values of unity, togetherness, and 'bayanihan.' Lastly, in research and development, GSMI's
innovative product formulations continuously deliver in the market with the commitment to
ensuring advanced and safe operations.
Another tool used in the internal environment analysis of Ginebra San Miguel is the Generic
Value Chain Analysis introduced by Michael Porter. This strategic management tool aims to
break down an organization's activities into distinct elements to see a fuller picture and create a
chain that generates more value than the costs. Manufacturing companies create value by
acquiring raw materials and supplies to produce something useful for consumers. The more
organizations create value, the more they become profitable and competitive. Through this
analysis, Ginebra San Miguel may determine its strengths and weaknesses, potential issues,
and competitive advantages.
For this tool, the group identified the primary and supporting activities of the company. Primary
activities include creating, maintaining, selling, and supporting a product or service. While
supporting activities assist the primary functions in performing their role in the company. Based
on the analysis made, the group noted the following findings:
 GSMI has an efficient logistics group that handles the sourcing, procurement, and
handling of the company's raw materials and supplies. By establishing good
relationships with its suppliers and distributors, the company was able to acquire the
needed resources for the production of goods without delays or any other issues.
 GSMI's operations have been one of the company's assets throughout the years. The
company has a diversified portfolio of liquor products that cater to the taste and
preferences of its consumers. The company also introduces new product lines
depending on the need and demands of the market. During the COVID-19 pandemic,
GSMI began producing and distributing its ethyl alcohol products to help the growing
demands in health facilities all over the country. In addition, the company also invested
in strategically located plant sites for more efficient distribution among its stakeholders.
 The territorial distributorship of GSMI serves as its primary strategy in delivering its
products to key customers. With the company's ninety-one dealer sites and twelve sales
offices, GSMI was able to cater to the demands of the market while displaying crucial
processes like inventory management and customer relations. In addition, the company
also works with third parties for efficient deliveries and warehouse management.
 GSMI has proven to be one of the leaders in the hard liquor industry throughout the
years. Equipped with effective and influential marketing strategies, the company
continues to produce incomparable financial figures with its market rivals. The company
has also taken advantage of innovative ways to market and sell its products, including
the use of digital media. Despite downtimes during the pandemic, GSMI was able to rise
and still deliver for its stakeholders.
 The company prioritizes customer care and relations as part of its operations. Because
of this strategy, GSMI has connected more with its consumers through how the company
handles feedback and concerns. In addition, this strategy boosts reputation and brand
image, increasing customer trust and loyalty to the company.
  The organization's structure has been aligned with the company's goals and objectives,
allowing them to achieve success in the industry. GSMI has utilized all its supporting
functions inside the organization to accomplish the company's daily activities.
 GSMI's human resource management focuses on employee welfare, the promotion of a
healthy work environment, and the necessary compensation for its people.
 For technology, GSMI has invested in innovative facilities to improve workflow inside the
organization. The company also utilizes automated systems to improve production rates
and increase productivity. In addition, the company prioritizes its employees' continuous
learning and development by integrating virtual learning technologies as part of the
training. Also, research and development have been critical in the product expansion of
GSMI.
 GSMI has been strategically sourcing its raw materials and supplies, making
partnerships and deals with suppliers in the country and neighboring nations in the
South East. With the consistent supply of these resources, the company was able to
manufacture products to cater to the demands of the market efficiently. With these
measures, GSMI continues to build strong relations with its suppliers to arrive at the best
prices and create optimal purchase agreements.
The company's strengths and weaknesses are internal factors that affect the firm's performance
in the market. These factors also give an idea of the firms' advantages and disadvantages over
their competitors in the industry. The strengths of Ginebra San Miguel were identified using the
four criteria for sustainable competitive advantage, where the company's core competencies
and competitive advantages were determined. On the other hand, the weaknesses of Ginebra
San Miguel also came from the VRIO analysis, considering those resources and capabilities
that failed to meet all four characteristics.
After identifying those internal factors, the group utilized a tool to evaluate the internal
environment and understand Ginebra San Miguel's strategic position. This tool is called the
Internal Factor Evaluation (IFE) matrix. Using this matrix, the company would clearly understand
the major and minor strengths and weaknesses against its market rivals. After the evaluation,
GSMI garnered a total score of 2.8, meaning that the company has a significant edge over its
competitors because it maximizes its strengths properly and addresses its weaknesses
accordingly. The table below further shows the classification of GSMI's strengths and
weaknesses into major and minor factors after the analysis using the matrix.
The last part of the internal environment assessment of Ginebra San Miguel focuses on
identifying, assessing, and managing the risks concerning the firm. This procedure is crucial in
identifying potential dangers in business operations and analyzing how to manage these
hazards' impacts on the company. Risk assessment helps identify areas where improvement is
needed to arrive at a more efficient business process inside the firm. The group has identified
risks in different business areas, including capacity, strategy, labor, regulatory, price, and
currency. These items are further classified into internal and external risks, helping the group to
have a more accurate perspective and analysis of the said potential dangers.
The group has determined six internal and five external risks for risk identification. The internal
risks include the following: (1) failure to adapt to shifting consumer preferences, (2) failure to
maintain good relationships with key accounts, (3) delays in the distribution of products, (4)
failure to maintain good relationships with employees, (5) uninsured losses, and (6) no separate
risk management department. On the other hand, the external risks include the following: (1)
increase in sin taxes, (2) ban on the sale of liquor products, (3) volatility of raw materials, (4)
exposure from business transactions denominated in foreign currencies, and (5) exposure to
safety, health, and environmental costs and liabilities.
Using a risk matrix, the group gave corresponding ratings on each item based on its severity
and likelihood for the risk assessment phase. Regarding the internal risks, one item has a low-
risk level, one has a medium-risk level, and the other four have high-risk levels. Among those
items having high-risk levels are the risk of failure to adapt to shifting consumer preferences,
failure to maintain good relationships with employees, and the risk of uninsured losses.
Regarding the external risks, two items have low-risk levels, two have medium-risk levels, and
one has a high-risk level. The item with a high-risk level is the risk of increasing sin taxes. High-
risk levels indicate that these factors will significantly impact the company, giving a heads-up to
the management to address these risks immediately using appropriate measures and controls.
After the risk assessment, the group also performed a risk management process to propose
possible treatments and remedies for these factors. Most of the identified risks have existing
controls to help the company combat their possible impacts on business operations. However,
the risks of failure to adapt to shifting consumer preferences and failure to maintain good
relationships with key accounts have no identifiable controls. Based on the assessment, those
risks that need action from the management were noted. Most of the items were noted to
require action from the management of GSMI, while three risks were not in need. Additionally,
the group included recommendations for mitigating and addressing these identified risks.
Among the more significant risks to be addressed include the following:
 For the risk of failure to adapt to shifting consumer preferences, GSMI needs to
understand consumer behavior better and utilize data in analyzing trend patterns.
 For the risk of failure to maintain good relationships with key accounts, GSMI needs to
hire new key account personnel and establish healthy relationships with clients.
 For the risk of uninsured losses, GSMI needs to practice a Disaster Management Cycle
and develop a Business Continuity Plan.
 For the risk of new additional risks unidentified immediately, GSMI needs to introduce a
separate Risk Management department inside the firm.
 For the risk of an increase in sin taxes, GSMI must establish cost-cutting strategies to
minimize the burden of additional costs that sin taxes would bring.
 For the risk of a ban on the sale of liquor products, GSMI needs to enforce the use of an
identity verification solution at the point-of-sale and delivery/pick-up of any age-restricted
goods such as alcohol.
Introduction (Chapter 4)
This section of the paper discusses the proposed alternative courses of action for Ginebra San
Miguel, Inc. The strategic formulation done by the group incorporates the strategic objectives
identified that will be advantageous to the growth and development of the company for the
following years. In addition, the resulting strengths, weaknesses, opportunities, and threats are
highlighted in this chapter to further discuss their implications for the company. Lastly, a careful
analysis of the internal and external factors determined in previous chapters presents key points
toward an effective strategy and objective formulation.

Non-Financial Objectives
To integrate more sustainable practices into GSMI's operations, prioritizing water stewardship,
energy optimization, and reducing waste, among others.

Strategies Introduction (ACA 6)

Increase Efforts of Monitoring Energy Consumption, Water Use, and Waste Management

SPACE Matrix (X-Y Analysis)

GRAND STRATEGY Matrix