CENTRAL PHILIPPINE UNIVERSITY

JARO, ILOILO CITY

CASE STUDY ANALYSIS

SAN MIGUEL CORPORATION

SUBMITTED BY
JANEEN V. AZARCON
CHRISTINE MAE R. MENDOZA
CHERIE BELLE Y. PAUCHANO
KAYESHA MARIE A. PINEDA
JHONA MAE J. RAYMUNDO

SUBMITTED TO:
PROF. GILDA C. MONSOLE

APRIL 23, 2019

CENTRAL PHILIPPINE UNIVERSITY
JARO, ILOILO CITY
 SAN MIGUEL CORPORATION CASE

I. Statement of the Problem

Human capital is a large investment for any organization.

Management of this capital is a necessary task to ensure strong

return on the investment. Human resource management requires

strong strategy to effectively and efficiently achieve goals,

objectives, and – in turn – better performance. Compensation or

benefit is a major factor in job quality, most organizations can

consider the possibility of offering competitive salary and

benefits to attract and employ the best staff. Administering

benefit programs is a costly and time consuming effort and not

an immediately profit-making venture. All businesses contend

with issues common to provision of employee benefits. San Miguel

Corporation find the challenge of juggling cost management

objectives on how to maintain the “social concern” practice of

the company without incurring too much costs. Administering a

one sack-of-rice a month policy requires a lot of expenditures

such as warehousing, staff, transportation and handling costs.

Also, when there is a shortage of supply there will be an

increase in the price of rice which leads to a large capital

needed to maintain the policy. Thus, there will be greater

outflow of resources which will only benefit the employees and

will compromise the company’s profit.

II. Objectives

Generally, As the Chairman of the Board, the aim is to find

out what are the things that should be considered in approving

and evaluating all compensation plans, policies and programs, as

well as the philosophy and strategy in controlling and managing

the cost of the employee benefits to generate a cost-efficient

strategy.

Specifically, this case study aims to:

 To find a cost-saving strategy to implement the policy for

the welfare of the employees;

 To critically assess the findings about the costs that will

incur in the implementation of the policy;

 To identify the pros and cons of each alternative;

 To evaluate alternatives which are beneficial to both

parties;

 To make recommendations to improve the company’s employee

benefits program while minimizing costs.

III. Areas of Considerations

  The costs in administering the policy includes not only the

cost of the rice itself, but also the ordering and the

carrying cost;

 There should be a large capital needed in purchasing rice

when supplies are low;

 Eliminate the use of warehouse by distributing the rice on

the agreed specific date with supplier.

 Conduct a survey about other compensations that the

employees might consider;

 Evaluating other alternatives that could possibly replace

the policy;

 Implementing the best alternative which is cost-efficient

and can benefit both parties.

IV. Alternative Courses of Actions

1. Abandon the policy and instead add the cash equivalent of

the first-class rice to the employee’s monthly paycheck;

2. Instead of one sack-of-rice a month policy, issue an

equivalent gift certificate per employee;

3. Continue the one sack-of-rice a month policy and set an

agreement with the supplier to have a specific date of

distribution;
 4. Instead of rice, the employees can choose San Miguel

Products equivalent to first-class rice.

V. Analysis of Alternative Courses of Actions

1. If the company will implement the first alternative which

is to abandon the one sack-of-rice a month policy and

change into an equivalent additional cash on their monthly

paycheck, they will incur a total of 40 million pesos as a

subsidy, that is P2,000 for each 20,000 employees. This

alternative is convenient for the both parties since the

company will not incur any additional expenses and they

will save (150 x 20,000) 3,000,000 pesos for the carrying

and handling cost of rice.

Advantages:

 The company could save 3,000,000 annually. That is,

savings from ordering and carrying costs;

 They can’t incur additional capital due to lower

supplies.

Disadvantages:

 The availability of cash is not guaranteed;

 They might consider it as a pay raise instead of a

social concern.
2. If the company will choose the second alternative, the

company will incur a 40 million pesos worth of gift

certificate as an exchange to the one sack-a-month policy.

Also, additional expenses of 1,500,000 (P50 per gift

certificate multiplied by 20,000 employees. That is,

1,000,000 plus 500,000 which is the miscellaneous expense

in partnership with Sodexo which is an authorized agency of

gift certificates). The company will incur a total of

41,500,000 in implementing this policy.

Advantages:

 The company will be recognized by Sodexo which is the

only agency who caters corporate clients by offering

incentive and motivation programs;

 The employees can buy whatever they need using the gift

certificate.

Disadvantages:

 Additional costs may incur due to partnership with

Sodexo;

 The gift certificate could be use against social welfare

such as vices.

3. For this alternative, the company will continue the one

sack-of-rice a month policy but they will eliminate the use

of warehouse since they will set an agreement with the

 supplier to have a specific date of delivery in the

distribution of the rice. The company will have a total

cost of 40,150,000. That is, 40 million worth of rice and

the 150,000 for the delivery charges of supplier.

Advantages:

 The company could also save 2,000,000 annually from

eliminating the warehouse and staff;

 The social concern practice of the company would be

maintained in a minimal cost.

Disadvantages:

 The supply of rice is not guaranteed and it affects the

price;

4. If the company will implement the fourth alternative, the

employees are free to choose San Miguel Products equivalent

to first-class rice worth 2,000 each. The company will have

a monitoring staff and also for the inventory of goods. It

will incur a total of 40,020,000 for the cost of goods and

labor of the staff.

Advantages:

 The company could also save 3,000,000 annually from

eliminating both ordering and carrying costs. No

additional costs may incur.

  It is more convenient since the products are already

available within the company.

Disadvantages:

 The availability of San Miguel products is not

guaranteed.

 The company will be required to have a separate

inventory for the employees.

VI. Conclusions

After a critical evaluation of all alternatives, this case

study shows that the most effective and cost-efficient choice is

to abandon the policy and instead add the cash equivalent of the

first-class rice to the employee’s monthly paycheck. This policy

will minimize the cost by 3,000,000 through savings from

carrying and ordering cost. Also, the company will not need

additional capital because of low supply of rice. It will be

convenient for the company and beneficial for the employees.

Thus, the one sack-of-rice a month policy should be replaced by

a cash equivalent of first class rice to the employee’s monthly

pay check.
VII. Recommendations

Based on the conclusion, the following are recommended:

 To present the results of this case study to the members of

the board;

 To inform the management of the changes in the policy;

 To implement the cash equivalent of first class rice to the

employees monthly paycheck;

 To maintain a budget primarily for the policy;

 To inform the employees that there will be a shift from one

sack-of-rice policy to cash equivalent thus they will be

receiving an additional cash that is intended for the

social concern;

 To monitor each employee if the additional cash given is

spent on social concern purposes.