Jollibee Foods Corporation

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

Jollibee was competing with Mcdonalds in the fast food industry but the food they made was completely localized. 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. Some of their strategies to go global failed miserably due to loopholes in the strategies. This will help the company to save on costs as well as carve a global image. The uniqueness of the geographical landscape of Philippines store of Jollibee had also made it a challenge for fast-food companies. We have tried to identify the key change drivers and the external environment. We have also covered the internal analysis of the company along with the firm‟s strategies on competition. We believe that the company – before making the international expansion plan – has to address the issues that we have mentioned above. 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. 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. investment and products/services. The case discusses how the entry of a global company like Mcdonalds in Philippines influenced Jollibee. The company wanted to expand itself globally. ENVIRONMENT ANALYSIS GEOGRAPHIC As per the local Philippines taste context. They also had a tight hold on the operations management and was one of the first to enter the market. . benefitted from the first mover advantage. In our analysis we have tried to incorporate the competition environment that the company has along with its industry analysis. Globally. The company owes its current status to the poor vision and lack of overall integration of the strategies. In the case study analysis we have tried to focus on the effectiveness of the new strategies that they have adopted.Jollibee Food Corporation is a Filipino fast food retail chain that began in 1975. the million consumers of Philippines Jollibee‟s stores preferred the customized taste of Jollibee‟s spicy burger over the pale taste of other competitors. This helped them expand both domestically as well as globally. As for the marketing perspective of the case. The company went public in 1993 and has been pursuing their global expansion program since then. The entry of such a high level competitor forced them to rethink their strategies and change them accordingly. 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. The company is fighting for its place in a highly competitive environment and has to develop strategies that will help attain sustainable competitive advantage. Hong Kong and California. 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. 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. . hence.

LEGAL No evidence in of technological segment in the case INDUSTRY LEVEL ANALYSIS  The fast food industry characteristics:  Low cost. TECHNOLOGICAL No information regarding the technological segment in the case POLITICAL: The political environment was quite favorable for both domestic and overseas operations.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 Jollibee‟s food. 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 . as compared to bigger global players such as McDonalds.

purpose and active participation in nation-building. Mission Together with our partners.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. 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. 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. Rivalry among Competitors: HIGH Rivalry stems from Price wars.

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

Risk Management: The acquisition of several new brands such as Greenwich and Delifrance allow the diversification of its products into different market niches. Jolibee faced many issues. Marketing: Jollibee projects itself as being closer to Filipino families as compared to its competitors. But overseas due to lack of promotional strategies it became difficult for them to get access to a greater market. It proved to be a hedge against downturns and competition and as seen in the case study. But the main draw back was that despite all this they lacked financial resources for funding their expansion plan. Domestic operations believed that the international department was spending funds unnecessarily and they believed that they were better than the employees in domestic operations. most of the acquisitions are the leader in their respective market segment. . and in some locations face no other competitions. There is already widespread awareness locally that Jollibee is a local Filipino establishment. 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.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. As seen in the financial data provided. Jollibee has seen strong financial growth. which put a lot of pressure on the domestic business for cost cutting. in order to allow its local customers to experience the traditional Filipino way of having local flavored taste in a comfortable setting. Whereas employees in international operations believed that the domestic department is not coordinating with them and supporting them. This is evident as they are constantly adding its product range on top of their already popular favorites menu. they are the only fast food chain that operated nationwide. b) Relationship between the domestic and the international operations was strained. which in turn appealed to the mass population whom felt more comfortable in a familiar setting. The organization went public in 1993 acts as a catalyst for the rapid expansion of its stores locally and internationally. They are a) Jolibee expanded very quickly and the expansion was financed internally. Product Development: the main draw for customers into Jollibee‟s restaurants is the appeal for local styled food catered to Filipinos‟ preferences. ISSUES FACED BY JOLLIBEE :While going for international expansion.

positioning themselves as a premium brand. Jollibee should hire local managers who know the local practices as well as taste. . 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. k) Jollibee should be clear about the market they want to target. thinking it will hit the mark. without even considering the resources required for it. j) Jollibee needs to have a formal process of choosing the international market they want to enter. 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 Hong Kong. advertisement etc. This strategy should be backed with the decisions like location. As evinced by the statement made by TTC in late 1996. They can hit an arrow in the dark. but they have to take cautious steps in order to gain a market share. This will help them in gaining the trust of the locals. Entry into the market should be backed with the facts such as whether the market is growing or saturated. they can tie up with the petroleum pumps or they can set a JV with a local partner and open their outlet. whether „expatriates‟ or the local. in that time opportunity is lost. positioning.c) Jollibee faced cultural issues with their franchisee in international markets which led to conflict between them. Thus the budget allocation and management was in a grey area e) Jollibee‟s international strategy was majorly focused on the „expatriates‟ due to this they were not able to understand the local market. h) The domestic department as well as the R&D department were stringent about the menu of Jollibee. f) Setting up of a goal which is not attainable is basic strategy flaw. For Papua New Guinea. Expansion in California can be very profitable for Jollibee. l) Deciding to what extent the standard menu can be modified to suit taste of local consumers. Kitchen wanted to set up 1000 Jollibee stores by 2000. which Jollibee‟s franchises were not able to maintain. g) Food chains throughout the world have to follow the same level of quality as well as service and cleanliness. HYPOTHESIS Jollibee has three markets which can add to their profits and provide for rapid growth. 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.

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

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

The use of external corporate trainers in this regard would definitely be a plus.Also it should support value creation activities in the value chain for more efficient operations. Various out bound and internal training exercises should be carried out in the Jollibee facility to iron out differences and inflict comradeship. To put it simple and straight. Jollibee needs a strong corporate culture. At the same time decisions regarding overall firm strategy. The creation of „departmental silos' have often resulted the fall of Goliaths in business. By adopting this practice Jollibee would support its staff to understand the cultural diversity among nations and different market needs.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. Also certain number of R&D centres could be opened in other countries to facilitate localization of some products. . An effective MDP can build a unifying corporate culture by socializing new managers and partners into the norms and value systems of the firm.  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. Tony Kitchner was exhibiting his personal culture throughout. The organizational culture was forgotten.  Jollibee should adopt an organization structure which enables it to transfer its core competencies and global learning across the stores . Knowledge Management cannot occur in its absence. One of such kind of structure is flexible matrix structure which provides a common vision and culture. one of the pillars of the Jollibee brand be replaced by scathing competition. Company needs to adapt a trans-national strategy. and informal management networks to assist in coordination and control. the company culture must be donned. All this can be achieved through a proper emphasis on Management Development. marketing and human resource management. This structure will enable the cooperation and coordination among domestic and international operation units. Personal culture should be stripped. Intra and inter unit communication cannot be ignored. It also needs to understand local cultures before expansion. 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.  Management Development: International Business is increasingly using Management Development as a strategic tool. How else could friendliness. financial decisions and quality control must be taken care by headquarters in Philippines. 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.

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. Certain level of decentralization of power will enable the managers at Hongkong stores to take decisions on various aspects of product.  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. The flag can be planted in regions where people have similar taste buds as strategic business units (SBU). Hongkong management issues can be sorted by adopting above mentioned strategies.  Opening multiple stores at the same time will hurt the bottom line and will increase debt. Also there must be recruitment drive to hire local Chinese managers with attractive compensation. location economies and operational efficiency should be taken into consideration so as to reap the benefits of both cost structure and differentiation. Implementation plan for operations  Polycentric establishment of research and development centre. . So that the menu can be varied according to regional taste. so that lack of operational efficiency problems as in Singapore. 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.  Lessons learned should be internalized. Implementation plan for finance  Slow down the global expansion to sustainable levels. operations and marketing as per the local requirement.  Once the company starts to follow transnational strategy. 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. transparency issues as in Taiwan can be avoided in the future international expansion.

Kitchner and had concentrated on “Planting the Flag” i. it should go for joint ventures and acquisitions with established firms in these nations. 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. Also. Implementation plan for marketing  Jollibee had been following the first mover strategy under Mr. opening a lot stores in countries in a short span of time irrespective of financial constraints.Even for a global giant like McDonald‟s.  The focus target segment in every country has been expats from Philippines which has been largely successful. This can be done by devising a proper strategy of global expansion that can reduce cost and bring in economies of scale. But it should not exclude the local populace of the host nation.  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.e. Europe. The ramifications of poor relations are clear in the closing down of many franchisees abroad.  Its core competency should be “authentic Filipino fast food with good service and quality” . For established market with high potential such as USA. 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. they must reduce cost of sales. it took 20 years for their international operations to account for 50% of total sales.

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