San Miguel Corporation (SMC) is the largest business enterprise in the Philippines and is among the top 2,000 global firms listed by Forbes magazine. SMC’s gross revenue was PhP 384 billion ($USD 7.6 billion approximately) in 2018 earned from its diversified portfolio that includes food & beverage products, real estate properties, and infrastructure & energy investments.
Steering the SMC behemoth is the corporation’s president and chief executive officer, Mr. Ramon Ang, who has been actively overseeing not only the growth of the corporation but also its investments in infrastructure and contributions to rural communities. Mr. Ang has received accolades for the continuing profitability of SMC but he stands out for his pursuit of high-capital projects such as construction of a new international airport and the building of an elevated expressway passing over the heart of Manila.
Mr. Ang apparently recognises the challenging responsibilities of running the largest enterprise in the country. He demonstrates that profit cannot be the sole priority. He recognises the value of SMC’s standing in society while at the same time makes sure the corporation maintains its competitive edge over rivals and continues to grow in the industries it does business in.
Every business enterprise has four (4) priorities. These are:
- accumulate wealth;
- attain & sustain competitive advantage;
- establish esteem;
- grow in influence.
Accumulate Wealth
The aim of an enterprise is not only to make a profit but to reap cash from that profit and ensure that the amount it earns exceeds the minimum rates of return of investments. Furthermore, the wealth that’s gained should translate into cumulatively higher net worth in the form of increased cash liquidity and added equity or stakeholders’ value as invested into the enterprise.
The priority of the enterprise, to put it another way, is to make money and increase it.
Attain and Sustain Competitive Advantage
A successful enterprise gains competitive advantage and maintains it. An enterprise would wither if it cannot compete versus its counterparts in the marketplace.
Michael Porter defines competitive advantage as one’s position and degree of advantage possessed by an organisation over its competition.[1]
According to Porter, an enterprise gains competitive advantage via either of the following strategies:
- Cost Leadership
- Differentiation
- Focus
Enterprises that position their products or service as the lowest cost in the market are applying the Cost Leadership strategy.
An enterprise adopts a strategy of Differentiation when it positions its products or services as superior in quality or utility versus others in the market.
Firms that target a certain group or niche of society are using a strategy of Focus. When firms use a Focus strategy, they either offer products at the lowest cost for that particular group or niche or they advertise superiority but to a specific audience. In other words, firms apply either the generic Cost Leadership strategy or a Differentiation strategy but for only a specific target market.
An enterprise can only adopt one strategy though large conglomerates may apply an exclusive strategy for each of its business divisions.
Esteem & Reputation
Enterprises have learned that public perception has bearing on how their products and services will perform in the marketplace.
How a firm presents itself in public has become a management requisite. When it comes to esteem and reputation, managers are bound to address the following:
- Corporate Citizenship
- Community Relations
- Communications
- Environmental Stewardship
- Global Citizenship
Corporate Citizenship refers to a firm’s compliance to laws and regulations. These include paying the right taxes, cooperating with regulators and government agencies, providing transparent information on finances and operations, and following the spirit and letter of the law in all manners of conduct.
Community Relations is the enterprise’s outreach to its neighbours and to charitable institutions. Enterprises receive and provide feedback from and to community leaders and with private associations especially those directly affected by the enterprise’s operations (e.g. factories and distribution centres). Enterprises also proactively donate time and resources for those less fortunate. The purpose of all of these is to establish cordial and synergistic ties with communities the enterprises co-exist with.
Communications take the form of public bulletins via media as in printed (newspapers), broadcast (television & radio), and social (internet networks). Communications may either be external or internal. Either the audience is the outside world (the external) or for the benefit of employees and their families (the internal). The purpose of communications would be to present an enterprise’s positive agenda whether it be clarifying a stand on controversial issues, or the quick dissemination of information on product issues (e.g. details on product recalls, clarifications versus rumours).
Environmental Management has has to do with the enterprise’s initiatives in regard to environmental protection. It is more than just compliance to existing laws. Enterprises are expected to show effort in appeasing the ever growing movement to protect the planet Earth and its resources. These include the participation in programs such as waste recycling, energy conservation, anti-pollution projects, and in public activities such as tree-planting, placing of artificial coral reefs, and hearings on environmental impact studies.
Global Citizenship goes one step further especially for enterprises that are involved with suppliers and/or customers in different countries and territories. Whether the involvement is foreign-based operations, partnerships or joint ventures, or sourcing of materials and labour, enterprises are expected to exercise compliance with domestic and international laws and treaties. They are also expected to respect cultural and economic differences and proactively reach out to local communities they co-exist with. It is complicated and comprehensive work but it helps the enterprise attain a reputation of admiration on a global level.
Influence & Growth
Despite the pressures to deliver results in the short-term, enterprises have to plan for long-term sustainability and growth. They also realize growth isn’t just about numbers in the balance sheet; it is about expanding their sphere of influence in the markets they compete in.
Enterprises need to have strong influence not only with their customers but also with their stakeholders, their suppliers, their employees, and with the communities they work with. Having influence assures lasting stability and sustenance. Successful enterprises therefore always plan for the long-term even as they may have to deal with the demands in the short-term.
Typical approaches for long-term influence and growth are business leadership, and vertical and horizontal integration. Business leadership includes dominating markets with superior products and services. Vertical integration means gaining influence over suppliers on the upstream and customers or distribution channels on the downstream. Horizontal integration means widening influence with firms with similar industries or expanding one’s business to new markets. This often means mergers and acquisitions of other enterprises to gain greater market share and capital.
The four (4) priorities apply to all enterprises. A start-up business may perhaps work more on wealth while a global manufacturing firm may busy itself boosting its reputation. The level of importance an enterprise gives may not be evenly spread among the four (4) priorities. Despite whatever emphasis given to each of its priorities, the enterprise should not lose focus altogether on all, lest it risks the potential downsides.
The four (4) priorities and the level of focus an enterprise places on each sets the foundation for an overall direction that inspires the subsequent strategies in operations, organisation, marketing, and finance.
[1] Michael E. Porter, Competitive Strategy, (New York, N.Y. : The Free Press, 1980), p. 35
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