Jollibee Foods Corporation

IB Assignment
Deblina Dutta (46), Deepak Ray (48), Dinu Chacko (51), Esha Verma (54), Flavia Rodrigues (57)

Jollibee Food Corporation is a Filipino fast food retail chain that began in 1975. The company wanted to expand itself globally. The case discusses how the entry of a global company like Mcdonalds in Philippines influenced Jollibee. The entry of such a high level competitor forced them to rethink their strategies and change them accordingly. This helped them expand both domestically as well as globally. The company went public in 1993 and has been pursuing their global expansion program since then. Some of their strategies to go global failed miserably due to loopholes in the strategies. The company, as the case suggests has appointed a new International wing chief who is faced with the challenge of making decisions regarding their new opportunities in places such as Papua New Guinea, Hong Kong and California. Some of the things that the company has to consider is the financial instability that they were facing along with the conflict that they had to face within their divisions as well as the growing challenge of other franchisees and joint ventures in the market. In the case study analysis we have tried to focus on the effectiveness of the new strategies that they have adopted. In our analysis we have tried to incorporate the competition environment that the company has along with its industry analysis. We have also covered the internal analysis of the company along with the firms strategies on competition, investment and products/services. We have tried to identify the key change drivers and the external environment. We believe that the company before making the international expansion plan has to address the issues that we have mentioned above. The company owes its current status to the poor vision and lack of overall integration of the strategies. There is little or no co-operation between the international wing and the domestic wing which has proved to be a major road block for their success. The company is fighting for its place in a highly competitive environment and has to develop strategies that will help attain sustainable competitive advantage. It is thriving on franchisees and Joint ventures and needs to define the operating relationship with the global associates to avoid the disputes that keep arising. As for the marketing perspective of the case, Jollibee was competing with Mcdonalds in the fast food industry but the food they made was completely localized. They also had a tight hold on the operations management and was one of the first to enter the market, hence, benefitted from the first mover advantage. It also priced its food products below the competitors and most importantly catered to the local taste. According to us the company must adopt a strategy that is a right mix of both global and local glocalisation. This will help the company to save on costs as well as carve a global image.

ENVIRONMENT ANALYSIS GEOGRAPHIC As per the local Philippines taste context, the million consumers of Philippines Jollibees stores preferred the customized taste of Jollibees spicy burger over the pale taste of other competitors. The uniqueness of the geographical landscape of Philippines store of Jollibee had also made it a challenge for fast-food companies. Globally, there are many Filipinos workers situated in the overseas market who were the major target for their product but they did not limit their focus to them only and have also attracted other Asians to eat at their restaurants. .

SOCIAL They had to adopt themselves to different social and cultural preferences of the customer because foreign consumers did not like the traditional taste of Jollibees food, as compared to bigger global players such as McDonalds. TECHNOLOGICAL No information regarding the technological segment in the case POLITICAL: The political environment was quite favorable for both domestic and overseas operations. LEGAL No evidence in of technological segment in the case

INDUSTRY LEVEL ANALYSIS The fast food industry characteristics: Low cost, low margin business High degree of standardization Quality of food is very high Faster delivery time Profitability dependent on high customer traffic Stiff competition from close competitors A capital intensive industry High efficiency in operation management

Threats of new entrant is low to medium

Bargaining power of buyer is high Buyers purchase in small quantities Brand of the seller is important Sellers product quality and its delivery efficiency is important Switching cost is high Information readily available to buyers Bargaining power of supplier is low Items are readily available from many suppliers Switching cost is low Strong and long term relationship with the suppliers Threat of substitute With So many local and global competitors available threat of substitute is from high to medium. Rivalry among Competitors: HIGH Rivalry stems from Price wars, marketing innovations, good food, and good service. Most rivals are equal in capabilities and opportunities which make competition stiffer.

Vision Jollibee Foundation envisions that every Filipino is able to access basic community services and live a life defined by dignity, purpose and active participation in nation-building. Mission Together with our partners, we help our communities through: Improved access to Education for the youth Leadership development for local organizations Livelihood programs for small farmers Environment-friendly initiatives Decent Housing and Disaster Relief for calamity-stricken regions.

Values Our work is guided by the JFC corporate values, namely, excellence, honesty and integrity, frugality, teamwork, humility to listen and learn, respect for the individual, spirit of family and fun, and customer-focus. We partner with communities and find synergy with other institutions to ensure that our programs are strategic and sustainable. Jollibee Foundations projects are mainly in the categories of Education, Leadership Development, Livelihood, Environment-friendly initiatives and Housing and Disaster Relief.

SWOT: Strengths Leadership in Philippine local market and Strong operations management capability Ability to provide quality products at affordable prices Consistency in terms of quality .taste and preferences Efficient and flexible personnel High degree of responsiveness towards local needs and customization Weakness Absence of proper methods for selection of franchisees place of operation and partners Dependence on the flawed strategy Planting the Jollibee flag for expansion of international market Weak promotional strategy resulted in low global brand recognition Lack of cross cultural management Diversity in menu items at the cost of operating efficiency Lock of coordination between international and home division people Lack of resources for expansion and operations

Opportunities To enter market which has potential customers and which is not tapped by other players yet To add more customized menu for their international offering To create differentiation through their cheap and cost effective products Hire local manpower to make an appeal to the customers

Threats: Presences of tough competitors at local and global level Political and Economic instable environment

Lack of adaptation capability to local need due to an effort for maintaining consistency and frequent changes in the customers taste and preference Failure of expansion strategies might lead to high operational cost

BUSINESS ANALYSIS Financial: Since its inception as a corporation in the late 70s, Jollibee has seen strong financial growth. As seen in the financial data provided. The organization went public in 1993 acts as a catalyst for the rapid expansion of its stores locally and internationally. But the main draw back was that despite all this they lacked financial resources for funding their expansion plan. Physical: A diversification of food products enabled the organization to reach out to a variety of customers and making themes a market leader in the Philippines. Due to the geographical structure of the country, they are the only fast food chain that operated nationwide, and in some locations face no other competitions. Risk Management: The acquisition of several new brands such as Greenwich and Delifrance allow the diversification of its products into different market niches. It proved to be a hedge against downturns and competition and as seen in the case study, most of the acquisitions are the leader in their respective market segment. Product Development: the main draw for customers into Jollibees restaurants is the appeal for local styled food catered to Filipinos preferences. This is evident as they are constantly adding its product range on top of their already popular favorites menu, in order to allow its local customers to experience the traditional Filipino way of having local flavored taste in a comfortable setting. Marketing: Jollibee projects itself as being closer to Filipino families as compared to its competitors. There is already widespread awareness locally that Jollibee is a local Filipino establishment, which in turn appealed to the mass population whom felt more comfortable in a familiar setting. But overseas due to lack of promotional strategies it became difficult for them to get access to a greater market.

ISSUES FACED BY JOLLIBEE :While going for international expansion, Jolibee faced many issues. They are a) Jolibee expanded very quickly and the expansion was financed internally, which put a lot of pressure on the domestic business for cost cutting. b) Relationship between the domestic and the international operations was strained. Domestic operations believed that the international department was spending funds unnecessarily and they believed that they were better than the employees in domestic operations. Whereas employees in international operations believed that the domestic department is not coordinating with them and supporting them.

c) Jollibee faced cultural issues with their franchisee in international markets which led to conflict between them. d) The global expansion of the company has been extra-rapid and made in haste to capture the market as a part of the plant the flag strategy. As evinced by the statement made by TTC in late 1996, this has put a serious pressure on the financials of the firm and the firm did not have the financial muscle like global giants to go for the loss-leadership strategy. Thus the budget allocation and management was in a grey area e) Jollibees international strategy was majorly focused on the expatriates due to this they were not able to understand the local market. f) Setting up of a goal which is not attainable is basic strategy flaw. Kitchen wanted to set up 1000 Jollibee stores by 2000, without even considering the resources required for it. g) Food chains throughout the world have to follow the same level of quality as well as service and cleanliness, which Jollibees franchises were not able to maintain. h) The domestic department as well as the R&D department were stringent about the menu of Jollibee. They were some changes but the menu itself was not standardized i) Jollibee did not have free flow of ideas throughout the firm as ideas given by local managers were either no approved or take long time to get approval, in that time opportunity is lost. j) Jollibee needs to have a formal process of choosing the international market they want to enter. They can hit an arrow in the dark, thinking it will hit the mark. Entry into the market should be backed with the facts such as whether the market is growing or saturated. k) Jollibee should be clear about the market they want to target, whether expatriates or the local. This strategy should be backed with the decisions like location, positioning, advertisement etc. l) Deciding to what extent the standard menu can be modified to suit taste of local consumers.

HYPOTHESIS Jollibee has three markets which can add to their profits and provide for rapid growth. For Papua New Guinea, they can tie up with the petroleum pumps or they can set a JV with a local partner and open their outlet, positioning themselves as a premium brand. In Hong Kong, Jollibee should hire local managers who know the local practices as well as taste. This will help them in gaining the trust of the locals. Expansion in California can be very profitable for Jollibee, but they have to take cautious steps in order to gain a market share.

Testing the Hypothesis

We have three different locations to choose from. Each location has its own pros and cons. We recommend following three different strategies for all the three locations. Papua New Guinea This location had a distinctive advantage of vitually zero competition. There was no single major player. The last one was a failure due to poor management. There was the opportunity to become the numero uno, if handled carefully. So getting a location there was not a big issue and the franchisee, a local entrepreneur, was being proactive and more than helpful than any other franchisee. Infact, he was willing to minimize the risk of loss for Jollibee by increasing the equity. Though it could pose a threat to the control that Jollibee could exert. He was also willing to tie up with a large petrol retail. The opportunity was knocking on Jollibees door. Despite, poor credentials of the country, the propositions look more beneficial than loses. The major benefit here was low cost pressures and low local responsiveness. This was an ideal condition

for the International Strategy. Jollibee had the opportunity to build a customer base and then call the shots. So this strategy looks ideal for New Guinea. Hong Kong Jollibee had already been in Hong Kong. It was not a good operation there. The image had been tarnished. The location, the partners, the operation, everything had gone wrong. But there was a new opportunity and that was moving into a strategic location within HK. It was based in Kowloon district, which means a high potential for an increased eyeballs and footfalls. There was a problem that the number of Filipinos were less. But then again this problem in itself was a solution. One of the reasons for their previous failure in HK was lack of localised menu. This all boils down to the organizational culture. Was the parent company willing to flex the menu? If it has to succeed in HK, localization is a must. Hence, a cultural shift was required at the top management level. Jollibee had to go the McDonalds or MTV way. For this location Localization Strategy was required. California This was not only a strategic location but also TTCs personal wish to succeed in McDonalds own backyard. As usual there were issues specific to this location like the American managemenet culture, difference in timezones,etc. Despite of all these they had one advantage Guam. Guam had been the test market for US operations and the results were more than overwhelming. They found out that the menu was liked by Americans apart from that the operational activities were no different from Manila. Hence, the transfer of skills was very easy. Thus, without any any doubt Jollibee can move forward with a Globalized strategy. Recommendations for Decision making As evident from the data given in the case, it is quite evident that the company is having immense opportunities in Papua New Guinea. As the market there is untapped and the only competitor there is an unorganized and unprofessional local company, Jollibee can literally get a first mover advantage. So the company should go for Papua New Guinea, but proper background research about the prospective partner as well as assessment of the credibility of the fundraising proposed needs to be carried out. Currently all the three stores established in Hongkong are facing lot of management issues as mentioned in the problem statement hence it is required that first this management issues must be sorted out rather than putting additional resources in expansion plans. California expansion seems to be the good option for several reasons. United States is the largest fast food market in the world. They discovered from their outlets in Guam that there were many elements of their restaurants that appealed to Americans. They have a large and diverse population who like experimenting food of different culture. They also had great support from Filipino-Americans. So, the company has to start

with focusing on both the Filipinos as well as local people and design the menu that would help maintaining the brand identity along with catering to the local interests. To put it simple and straight, Company needs to adapt a trans-national strategy. Management Development: International Business is increasingly using Management Development as a strategic tool. Jollibee needs a strong corporate culture, and informal management networks to assist in coordination and control. It also needs to understand local cultures before expansion. All this can be achieved through a proper emphasis on Management Development. An effective MDP can build a unifying corporate culture by socializing new managers and partners into the norms and value systems of the firm. Personal culture should be stripped; the company culture must be donned. Tony Kitchner was exhibiting his personal culture throughout. The organizational culture was forgotten. How else could friendliness, one of the pillars of the Jollibee brand be replaced by scathing competition, in the short three year period he was in charge? Facilitate inter unit cooperation: The R&D wing of Jollibee was not forthcoming in its interactions with International. The creation of departmental silos' have often resulted the fall of Goliaths in business. Intra and inter unit communication cannot be ignored. Knowledge Management cannot occur in its absence. Various out bound and internal training exercises should be carried out in the Jollibee facility to iron out differences and inflict comradeship. The use of external corporate trainers in this regard would definitely be a plus.

Implementation Plan Implementation plan for human resource Jollibee should allow certain level of decentralization of power for its franchises in other countries for operating decisions related to product, marketing and human resource management. Also certain number of R&D centres could be opened in other countries to facilitate localization of some products. At the same time decisions regarding overall firm strategy, financial decisions and quality control must be taken care by headquarters in Philippines. Jollibee should adopt an organization structure which enables it to transfer its core competencies and global learning across the stores .Also it should support value creation activities in the value chain for more efficient operations. One of such kind of structure is flexible matrix structure which provides a common vision and culture. This structure will enable the cooperation and coordination among domestic and international operation units. In order to facilitate co operation among units the staff members who are required to coordinate with other units must be given training on cultural differences and adaptability in workshops. By adopting this practice Jollibee would support its staff to understand the cultural diversity among nations and different market needs.

 Hongkong management issues can be sorted by adopting above mentioned strategies. Certain level of decentralization of power will enable the managers at Hongkong stores to take decisions on various aspects of product, operations and marketing as per the local requirement. The staff members who are trained in culture diversity workshops must only be sent from Philippines to Hongkong for supporting the operations and training of locals. Also there must be recruitment drive to hire local Chinese managers with attractive compensation.

Implementation plan for operations

Polycentric establishment of research and development centre. The flag can be planted in regions where people have similar taste buds as strategic business units (SBU). So that the menu can be varied according to regional taste. Once the company starts to follow transnational strategy, location economies and operational efficiency should be taken into consideration so as to reap the benefits of both cost structure and differentiation. Lessons learned should be internalized, so that lack of operational efficiency problems as in Singapore, transparency issues as in Taiwan can be avoided in the future international expansion. Implementation plan for finance Slow down the global expansion to sustainable levels. This means that the international wing should slow down a bit and the domestic wing should buck up a bit so that the entire organization can move ahead together. The financial management should be done effectively so as to provide enough budgets for the R&D and associated activities that are needed for the global expansion. Also sufficient funds should be made available for the marketing and positioning activities for these are highly imperative in creating an identity for the firm and thereby helping in capture the market. Opening multiple stores at the same time will hurt the bottom line and will increase debt.

Even for a global giant like McDonalds, it took 20 years for their international operations to account for 50% of total sales. Also, they must reduce cost of sales. This can be done by devising a proper strategy of global expansion that can reduce cost and bring in economies of scale.

Also the relations with franchisees and other associates should be clearly defined and the degree of control of the financials should be clearly defined to avoid future confusions. The ramifications of poor relations are clear in the closing down of many franchisees abroad.

Implementation plan for marketing

Jollibee had been following the first mover strategy under Mr. Kitchner and had concentrated on Planting the Flag i.e. opening a lot stores in countries in a short span of time irrespective of financial constraints. Jollibee should instead follow a differentiated strategy wherein it should target those markets with high potential with an economy similar to that of Philippines like Papua New Guinea and observe the first mover strategy to capture these markets first. For established market with high potential such as USA, Europe, it should go for joint ventures and acquisitions with established firms in these nations. The focus target segment in every country has been expats from Philippines which has been largely successful. But it should not exclude the local populace of the host nation. Its marketing initiatives should target the local populace and it should position itself as a global fast food brand which offers exotic Filipino cuisine for everyone. Its core competency should be authentic Filipino fast food with good service and quality