JOLLIBEE FOODS

CORPORATION
INTERNATIONAL
EXPANSION

IB CASE ANALYSIS
Submitted To: Prof C.P Ravindranathan
SUBMITTED BY:
Aastha Yadav(01)
Abhirup Mukhopadhyay(02)
Aditya Mohan(04)
Aniket Singh Mahara(10)
Dileep M(31)

EXECUTIVE SUMMARY
Jollibee Foods Corporation, a company which started as an ice-cream parlor, now
has about 1804 stores worldwide under its aegis with total sales exceeding $1
billion. The company now wants to go for diversification and expansion to
increase its presence in international markets and compete with global fast food
giants like McDonalds and KFC. In our analysis of the case we have taken into
consideration all the aspects needed for an organization to work in a fruitful way
i.e. Finance, Marketing, Operations and Human Resource.
Under its belt the company has many famous brands like Chowking, Greenwich,
Red Ribbon, and Manong Pepe's. Initially the company went for expansion by
innovating new products like Yumburger and Chickenjoy and also by
acquiring companies like Greenwich pizza and Chowking.
As the fast food industry is highly competitive they face stiff competition from
already established players like McDonalds and KFC along with the street food
that is of much significance in countries like Papua New Guinea and Hong Kong
where its wants to expands. To face this competition it needs to design a strategy
that gives it an edge over the competitors. One of the ways can be customization
of menus so that the services provided by Jollibee attract the customers to its
stores. Jollibee has tried to do this by making the menu to suit tastes of the
people living in different parts of the world, e.g. they targeted the Filipino
expatriate population in US which is in big number. However they need to take
care of a certain factors like government policies and the stability of political
system in a country. Also if they can procure raw material at cheaper rates and
do some technological advancements then that would give them an edge over
their competitors.
Because of increasing globalization and improved supply chain, Jollibee has been
able to reduce its cost. Also, a trend has been that the customers want to eat
different food and not repeat and Jollibee has an exciting new menu, names and
flavors. Also they have been able to implement latest of the technologies for the
processing and cooking of the food in the restaurants which has reduced the
costs to quite an extent and also people consider it to be more hygienic. These
decisions are a result of people like Tony Tan Caktiong and Tony Kitchner who
have helped Jollibee in designing the strategies which have been implemented in
a proper way and hence have been giving rich dividends and profits.
Now the company wants to enter new markets like Papua New Guinea, California
and Hong Kong and each market in itself poses a different problem. Papua New
Guinea poses a significant problem in the form a high political and country risk
and also they need to modify their menu according to the taste of people over
there. In California they have to compete with companies like KFC and
McDonalds who have home advantage and hence Jollibee dont need to
westernize their products and services and rather concentrate on keeping them
more Filipino because in that way the people over there will get something new
and different to eat. They have to very careful over there as it is a much matured
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market compared to the markets in the east where they have been concentrating
till date. In Hong Kong they need to put in a lot of money to hire Chinese
speaking staff and establishing the brand over there by taking locals into
account.
Jollibee has been spending a lot for expansion as of late as is visible from its
balance sheet and hence the Earning per Share is also going down. They have
been consistently increasing their net sales and net income at a very high rate
along with the number of stores opened. Also the HR of the company has played
a very important role as is needed to control the organization of the size of
Jollibee. The recruitment and selection procedure is very sound and the
organization culture and structure is such that it promotes a friendly environment
in the company. But HR division also had some issues like giving better pays and
fast increments to international division employees than the domestic employees
Thus the need is to find a balance between expansion and reduction in cost of
sales. Thus the company should be careful in its expansion plans and should not
invest abruptly so that it does not go from a cash rich company to a debt
carrying company. Thus the company must try to develop and exploit its strength
and overcome its shortcomings.
In Papua New Guinea, because it would be their first store, hence they will have
to work and spend a lot for creating the brand and for advertising campaign over
there. Because they have a very high risk in that market because of the instable
political situation, hence they can have their franchisees over there that are
ready to take all the risk as they know the country in and out.
In Hong Kong the management structure is in a bad shape as there is a lot of
conflict between the managers in a kiosk and the employees over language and
pay issues. Thus managers need to motivate the employees to work hard by
having informal get-together. Also they can have a menu that serves for Chinese
taste and interests.
Opening a store in California would be the most challenging as they would have
to face an increasingly mature customer and also compete with giants like KFC
and McDonalds. But the high density of Filipino population in the state would help
them a lot as they would like the original Filipino food. Also setting up joints in US
would give them a global recognition.
Other recommendations include:1.
2.
3.
4.

Heavy investment in IT infrastructure

Having two different SBU for international and domestic markets
Having high level of menu customization
Having joint ventures with local dealers when entering into international
markets
5. Use the cheap labour available in home to produce low cost raw material
to bring down the costs

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PROBLEM STATEMENT
Jollibee after venturing into the fast food business wanted to expand their
presence in international markets. Here it was confronted by two major issues:

Whether to go ahead with its blue ocean strategy of plant the flag and
keep on expanding its presence in diverse geographical locales which
would lead to extensive customization of menu and other operational
changes or concentrate on consolidating its existing businesses and focus
on making the business profitable and have a centralized operational
model
If Jollibee chooses to continue with its strategy of expanding its business
base into potential markets then it will have to decide upon the future
markets where it can enter taking into consideration the different pros and
cons. The markets in consideration are Papua New Guinea, Hong Kong
and California.

BUSINESS LANDSCAPE ANALYSIS

1. PORTERS FIVE FORCES MODEL:

Bargaining power of
suppliers

Threat of
new
entrants

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Industry rivalry

Threat of
substitutes

Bargaining power of
buyers

Fig1: Porter`s five forces model

Fast food industry is highly competitive.
Industry rivalry Jollibee has had to face severe competition within the
fast food industry. The source of rivalry mainly stems from price wars and
marketing innovation. Some of its major competitors being multinational
giants like McDonalds KFC as well as cheap local fast food chains
operating in countries like Indonesia.
Threat of substitutes It is low to moderate. The substitutes range from
local street food to high end restaurants. However, street food is
unhygienic, whereas in restaurants the service was not quick. Hence,
service and cleanliness was an advantage for Jollibee.
Threat of new entrants There exist quite a few barriers for new
players intending to enter the bandwagon. Hence there is a lower threat of
these. Entry barriers are:
Inability to gain access to necessary technology and specialised
know-how
Brand preferences among the customers for already established
names.
Customer loyalty
Capital requirements
Economies of scale
Distribution channels
Bargaining power of buyers The bargaining power of customers was
quite high. The customer first policy of Jollibee shows it all. At the same
time although they had other options available like McDonalds and KFC,
the extent of customisation of menu provided by Jollibee attracted
customers to its stores.
Bargaining power of suppliers The bargaining power of suppliers was
low. Though some raw materials are imported, the countrys stock of
technically skilled people was an advantage. Moreover, Jollibees policy of
training the staff at every location makes it feasible to hire even nontechnical staff.

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2. ANSOFFS MATRIX

Fig 2: Ansoff`s matrix

In the Philippine market, Jollibee started off with market penetration.
Later, due to competition from multinational giants like McDonalds, it
resorted to the product development strategy.
In the context of its international operations, Kitchers approach of
targeting expats and plant a flag was primarily a market
development strategy. They wanted to target the Filippino expatriates
with the local Filippino taste. Through expansion in international markets,
Jollibee has been able to spread its risks.
Jollibee has devoted a considerable amount of resources in identifying the
consumers taste and preferences as well as in the R&D, manufacturing
and marketing of new products. It has extended its product line to include
all the market segments. Existing products are improved and re-launched
with a local touch. Thus, diversification has been a major (rather the
primary) factor in Jollibees success, especially offshore.

INDUSTRY LEVEL ANALYSIS

1. SWOT ANALYSIS:

Strengths
Understanding local tastes
Quick service
Affordable prices
Strong quality control
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Opportunities
Growing nuclear families
Growing urban lifestyle
More disposable income

Competent/well-trained
staff

Weaknesses
Weak brand name
Financial constraints
Confusing
logo
(logo
signified a toy chain or
candy store)

Threats
Increasing consciousness about
healthy diet
Opposition on non-vegetarian
items from organisations like
PETA,
NGOs,
Religious
organisations
Availability of healthier options
like Ready-to-eat food

2. PEST ANALYSIS:
Political Government policies and regulations may hamper the future
prospects of the fast food industry in certain countries.
Economic Availability and affordability of the factors of production
particularly land and labour. Differentiation of products, distribution
channels etc.
Social Customer preferences, fast-paced lives
Technological Technological up-gradation is a necessity in achieving the
economies of scale. Technology like automated assembly line will ensure
more consistency in the products offered. Touch-screen menu will
eliminate the need for personnel to take down orders from customers, thus
saving a lot of time and cost.

COMPANY ANALYSIS
Jollibee is a fast-food restaurant chain based in the Philippines. It also includes
many popular brands like Chowking, Greenwich, Red Ribbon, and Manong Pepe's.
Since its inception, Jollibee has become an increasingly profitable fast-food chain
with 686 restaurants in the Philippines and 57 in other countries employing
29,216 workers. Including all its brands, JFC has 1,804 stores worldwide and total
sales of more than US$1 billion as of December 2008.
The Jollibee mascot was inspired by local and foreign children's books. Jollibee
created the product names "Yumburger" and "ChickenJoy". The company was
incorporated and leased a house on Main St. in Cubao, Quezon City as the first
headquarters. Lumba (supporting consultant) formulated a long-term marketing
strategy that is listing up a number of consumer promotions and traffic building
schemes.

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The commissary system is responsible for the value adding processes done to
produce genuine Jollibee products. Being part of the value chain, the
manufacturing process is highly technology dependent to ensure that the food is
consistent to Jollibee standards and is produced safely and cheaply without
sacrificing the quality.
The key to handling the complex commissary operations is state-of-the-art
automation, computerization and continuous improvement in manufacturing
equipment and processes. Jollibee's automated operations not only cut
production time and ensure consistent quality from batch to batch but also
ensures food safety by minimizing handling and maintaining the highest
standards of cleanliness.
Expansion and acquisitions
The company acquired 80% of Greenwich Pizza in 1994, enabling it to penetrate
the pizza-pasta segment. From a 50-branch operation, Greenwich has
established a strong presence in the food service industry. In early 2006, Jollibee
bought out the remaining shares of its partners in Greenwich Pizza Corp.,
equivalent to a 20% stake, for P384 million in cash.
In 2000, the company acquired Chowking, allowing Jollibee to be part of the
Asian quick service restaurant segment. In 2007, Jollibee acquired the Chinese
fast-food chain Hongzhuangyuan. On October 19, 2010, it has been announced
that Jollibee intends to acquire a 70 percent share of Mang Inasal, a fast-rising
fast food chain specializing in barbecued chicken.
Jollibee purchased 70% of Taipei restaurant Lao Dong in June and Chun Shui Tang
tea house in 2006. In 2004, Jollibee acquired Chinese fast food chain Yonghe
Dawang for $22.5 million. Jollibee entered into a joint-venture contract with USbased Chow Fun Holdings LLC, the developer and owner of Jinja Bar Bistro in New
Mexico, in which Jollibee will have a 12% stake for $950,000.
On August 26, 2008, Jollibee formally signed a P2.5 billion ($55.5 million) deal
with Beijing-based Hong Zhuang Yuan through its wholly owned subsidiary
Jollibee Worldwide Pte. ltd. The sale is subject to the approval of China's Ministry
of Commerce.
On October 2010, Jollibee acquired 70% of Mang Inasal, another Filipino food
chain, for P3 billion ($68.8 million). Currently the largest fast-food chain in the
country, it also has locations in the United States, Saudi Arabia, Hong Kong,
Vietnam, Malaysia, Indonesia, Dubai and Brunei

EXTERNAL ENVIRONMENTAL FACTORS-which

driving force for growth of Jollibee
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INCREASING GLOBALIZATION: Sourcing beef materials from Brazil and
locating in foreign markets both introduce the company to global developments
such as crude prices and tariff and non-tariff barriers that changed how
operations continued. The forging of tastes of the global market was an
opportunity. This was possible because of the increasing trend of migration and
the trend for global trade and investments.
INDUSTRY PROFITABILITY
Minimizing the company's operating cost by creating an efficient production is
one way to increase its profitability. This was done by adopting new technologies
speeded up the company's operation.
This in turn greatly helped the company to capitalize on economies of scale. The
same concept forced other players to innovate and cause changes in the
industry.
INTEREST OF THE BUYERS FOR DIFFERENTIATED PRODUCTS
Across the seas, there is only one use for Jollibee products, that is, to be eaten. It
was found in due course of time, a need has to develop for new products that
can appeal to different interests. The development of the 'need' is a major driver
of change in the industry. Right now, in the local market, as Jollibee do, they
continue to add new products to their menu, still maintaining the pinoy taste that
they have patented.

KEY DRIVERS AND ISSUES BEHIND THE DIFFERENT

DECISIONS TAKEN

1. Tony Tan Caktiong

Expanding into fast food:

The oil crisis of 1977 increased the
production cost and also decreased people`s spending power. As a result
they were unwilling to spend on non essential items of consumption. This
acted as a positive reinforcement for TTC`s decisions.
DANGER: McDonald`s after tasting success in different parts of the world
and especially after being successful in Canada, which has a huge Asian
population, turned its focus towards the Asian Tigers in the early 80`s.
Philippines was the natural target as it is the third largest English speaking
country in the world. Flanked by the Pacific Ocean and the South China
Sea, its strategic location makes it a critical entry point to some 500
million people in the ASEAN marketoffering vast trade opportunities
and an ideal base for business.
However to counter this Tan took a leaf out of the Chinese military
tactician Sun Tzu and flew to US to learn more about his future enemy.
Returning to the Philippines armed with first-hand knowledge of what a
major American fast food chain looks like, Tan reinvented his store using
everything he had learned in the US. He introduced a friendly cartoon
mascot, bright and cheerful uniforms for the staff, a child-friendly

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ambience, a menu of deep fried favourites, and the belief that theres no
such thing as too much marketing.

Going international: This was a strategic move by TTC possibly looking

at the geographic spread of Filipinos around the world. There are around
8.7-11million overseas Filipinos worldwide representing 11% of the
population of Philippines. Most of them work as doctors, physical
therapists, nurses, accountants, IT professionals, engineers, architects,
entertainers, technicians, teachers, military servicemen, seafarers,
students, caregivers, domestic helpers and household maids making them
a good target market for Jollibee.

Going against McDonald`s: Tans friends and associates warned him

that his store would be eaten alive, unless he considered selling his
business to McDonalds, or be its franchise holder. However Jollibee
succeeded in positioning itself firmly in the Philippine market before
McDonald came in. In addition to the special understanding of the Filipino
palate, this national favourite had also mastered the countrys culture and
lifestyle. Theyd succeeded in capturing the youth demographic with instore play activities and a cast of captivating characters. Their mascot
with orange jacket and the blonde spaghetti-haired girl are better known
and loved in the Philippines than Ronald McDonald. In fact by the time
McDonalds came in the local franchise already had nine branches

2. TONY KITCHNER
Separate International division: Having spent fourteen years in such
an eminent position in a pioneer in fast food like Pizza Hut, its all but
obvious that Kitchner would look for autonomy to operate. This brought in
international practises in the company mostly borrowed from the western
culture (wearing ties etc). This is quite natural considering Tony is from
Australia. However the culture change wasn`t in sync with Jollibee
Philippines operations, neither was the culture change delivering on the
international fronts

Plant the Jollibee flag strategy: This was conceptualised to tap

markets with potential and which has not yet been captured by the
established players. However somewhere down the line the actual
philosophy was lost in a ego battle as to how fast Jollibee can establish
itself in the international market and in doing so prove themselves to the
Philippines business. Also Tony tried to apply Pizza Hut`s strategy to
Jollibee. Now there was a couple of major areas which differentiated Pizza
Hut from Jollibee:
o Pizza Hut was already well established and had no shortage of
funds

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o

Pizza as a product per se doesn`t need so much of modifications

and customizations-its a Italian food and people who like it like it
for what it is. However Jollibee is positioned as a fast food chain.
So it has to adapt according to the definition of fast food in
different markets. This would have required to expand slowly which
they didn`t leading to a strain in the financials which eventually led
to souring of the relationship with the Philippines division.

NEW MARKET ANALYSIS AND RECOMMENDATIONS

PAPUA NEW GUINEA: Marketing to the populace here will be of major challenge

as it is one of the most diverse countries of the world with over 850 languages
being spoken by a population of just seven million. 85% of the people here
depend on agriculture for livelihood. At the brink of Papuan independence in
1975, there were 40,000 expatriates (mostly Australian and Chinese) in Papua
New Guinea.
Taking into account these factors the marketing strategy should be adapted to
communicate to the predominantly rural and heterogeneous crowd. PNG follows
recognition of bonds of kinship with obligations extending beyond the immediate
family group. Thus Jollibee should position itself as a place to bond over food
rather than the functional qualities of Champ, Jollimeal etc. Also PNG will require
major customization of the menu as it was required to serve a crowd which was a
mixture of Australians and Chinese. The operational aspects will also have to be
tweaked around to incorporate more equity participation from the company so as
to help develop the market first and then go into product development. The price
point will also have to be adapted to cater to a larger population in PNG. It`s
doubtful whether it will be able to support the 20 stores plan of Jollibee. However
this can be achieved if they take over the existing operations and business of the
Australian Chicken restaurant chain.PNG meanwhile was going through a civil
war through 1990s and only post 1997 it tried to restore peace. Considering the
high risk involved from both a target market perspective and political instability
we would suggest that Papua New Guinea will not be a viable market

CALIFORNIA: Having successfully established themselves in Guam, a territory

of the US, Jollibee have fair enough knowledge about the US customer`s food
habits and preferences. California is a good choice as it is the most populous
province in the US. A highly diversified economy of California makes it less
vulnerable to environmental risks. In 1997 the GDP for the state was
approximately one trillion. Annual growth rates in 1998 and 1999 averaged 7.75.
Also Dala City in California has a large concentration of Filipino with one of the
highest concentration of Filipino expatriates. All these favourably weigh in favour
of California.

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The marketing strategy will have to be adapted radically to market to the
predominantly urban California crowd. Jollibee will have to in particular focus on
the product features, packaging, sales promotion etc. to adapt to Californian
market. New age tools like web marketing, promotions via TVCs, magazines,
flyers etc will have to be integrated in the entire marketing plan. This has to be
supported by sufficient branding exercise to break the clutter and position itself
differently compared to the incumbents (McDonalds, KFC etc). Instead of trying
to westernise its offerings it should position itself as an authentic oriental Filipino
fast food chain. They won`t be able to break the clutter if they dish out the exact
same items that McDonalds or KFC offer-they have the first mover advantage
here and also a greater brand equity in their backyard. A service oriented
architecture and good supply chain mechanism are required to support the
highly competitive market in California. Also they will have to adhere to FDA
norms and come up with the required ecolabelling practises and composition
specification standards. Their communication strategy must also take care of the
following features which are radically different from eastern cultures:
Individualistic western vs Collectivist eastern culture
Low power distance of west vs high power distance of east
High risk taking of west vs low risk taking of east
Going ahead as a JV with the Manila based business man may dilute the risk of
Jollibee but it should look at favourable partners in US to succeed. According to
us this is a market with high risks but also which offers a very matured market
and fast food awareness is arguably the best in the world...fast foods Silicon
Valley. So Jollibee as a fast food chain will get to learn a lot from this location
which can help it better run its overall business.

HONG KONG: Its one of the freest economies in the world and maintains a
highly developed capital economy. Between 1961 and 1997 Hong Kong's gross
domestic product grew 180 times while per-capita GDP increased 87 times over.
It is in all respect a very international province with very high foreign
investments and is consistently ranked very high in the Ease of Doing Business
Index.
Given such a scenario it should be very profitable to be a part of the booming
economy. However right after it got independence from the United Kingdom in
1997 it was severely hit by the Asian financial crisis. Also given that 95% of the
population are Chinese complicates matters. To market to the dominant Chinese
population Jollibee will have to modify its offerings. At the same time it should
get more local staffs in the operations and have a Chinese at the helm. It will
need to pump in lots of money to survive in the face of the financial crisis and
also to build a brand amongst the locals. So it will first have to market to the
locals and have an internal branding exercise for their employees to
communicate their preference and interest of working with the locals and be
responsive and sensitive to their culture. However considering the rigid

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organisational structure and attitude of Jolibee it looks highly improbable that
they will tamper with their menu which rules out this option.

OUR HYPOTHESIS: Although Jollibee`s market share and sales were

increasing because of internationalisation of its business yet it was
becoming less profitable because of such ventures. This can be proved
by a financial analysis of Jollibee:

FINANCIAL ANALYSIS OF JOLLIBEE:

Jollibee is on an expansion spree, especially in the last 3 years
(1994,1995, 1996). One of the hidden reasons which is supporting Jollibee
is almost constant exchange rate (shown in Fig-1)

Pesos/Dollar
30

1
0.8
0.6
0.4
0.2
0
1996
1992

20
10
0
1992

1993

1994

EPS

1995

1993

Fig-3

1994

1995

1996

Fig-4

In the first glance at the balance sheet it might be alarming to see that
the Earnings per share of the company is decreasing from an increasing
trend (Fig-2), but it is perfectly fine as the company expanded a lot in the
years 1995 and 1996 (refer Table-1).
Year

Company
owned

Each
year

Franchis
es

Each
year

Total

Each
Year

1992

25

89

112

13

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1993

30

96

124

12

1994

44

14

106

10

148

24

1995

55

11

113

166

18

1996

84

29

124

11

205

39

1997

96

12

134

10

223

18

Table-1
There is a big jump of company owned stores from 5 to 14 in the
year1994 and in 1995 again they expanded by another 11 stores. Even
the Franchise number increased considerably during these years.
When we looked into the sales and net income of Jollibee for the past
years the data looked encouraging.

sales in pesos
8000000000
7000000000
6000000000
5000000000
4000000000
3000000000
2000000000
1000000000
0
1992

Net income in Pesos

700000000
600000000
500000000
400000000
300000000
200000000
100000000

1993

Fig-5

1994 1995

1996

0
1992 1993 1994 1995 1996

Fig-6

Both sales and Net income were increasing at a CAGR of 31.6% and 31.5%
respectively. But when we looked deep into the financials it is not all that
good, from 1995-1996 Total sales of the company increased by about
24.4%, but the cost of sales increased by a staggering 46.2%. Along with
this the debt of the company increased a lot too, sum of advances and
prepaid expenses almost doubled compared to the previous year.
This situation can further be proved by looking at the current ratio of the
company:

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Current ratio
2
1.5
1
0.5
0
1992

1993

1994

1995

1996

Fig-7
Current ratio of the company is falling drastically for the last two years,
which is alarming.

RECOMMENDATION:
Primary aim of Tingzon is to find a fine balance between the expansion
and reduction in cost of sales of the company. If we look at cash in hand,
the company is in a stable position.
Opening multiple stores at the same time will increase the operating
income and thus reducing bottom line of the company, it is better if they
look into one market at a time instead of being greedy.
From a stable position the company shouldnt go into debt, with
differences in the internal departments it is better if Jollibee is cost
conscious and careful in its expansion plans in the coming years.

HR PERSPECTIVE
The Human Resources has played a significant role in the success of
Jollibee. The HR practices prevalent are very powerful.
Strengths
To start with, the Five Fs in Jollibees philosophy are very strong,
particularly fun atmosphere and friendliness in the organisation. Having
an open and friendly culture is a hygiene factor which goes a long way in
retaining employees and facilitating high productivity.

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The recruitment and selection procedure prevalent in Jollibee is very

stringent thereby ensuring a service-oriented staff. In any store of Jollibee,
the store managers are the key to motivate and control crew members.
They facilitate efficient use of their time which not only enables faster
service but also reduces the number of crew members needed.
In both the Domestic as well as International division of Jollibee, a lot of
focus is given on training, which is a prerequisite in an industry as
competitive and dynamic as a fast food industry. For every new store that
it opens in every new market, Jollibee conducts extensive training
programs for the local store managers and crew members with a view to
impart necessary skills that may be different from the domestic
requirement.
Flaws
Having said all this, however, there exist a few loopholes in the
organisation. For example, when President and CEO, Tony Tan Caktiong,
decided to create a distinct International Division, the need for this
change was not communicated clearly to the domestic Philippine
management. This led to a sense of uncertainty among the Philippine staff
resulting in their indifferent attitude towards the newly created division.
Such differences led to a lack of coordination between the two divisions.
The most significant difference between the domestic and international
divisions HR was that the practices and procedures followed in domestic
division were very conventional; while those in the international division
were more professional and modern in accordance with the requirements
of an international operation. For example, VP of International Operations,
Tony Kitchner, created a more professional work atmosphere by
introducing a dress code in his Division. Also, the Philippine organisation
was considered bureaucratic and slow-moving by the modern International
Division.
Because the two divisions did not get along well, personal issues also
started cropping up like early promotion and better pay and benefits to
the International Division staff. One of the major reasons for such a wide
pay gap could be that Tony Kitchner had hired new managers for
marketing, finance, quality control and product development. These new
managers were all experienced outsiders; hence it required better perks
to retain them. On the other hand, the Philippine management primarily
consisted of the Tan family members.

WAY FORWARD...

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While entering into any new market, Jollibee should capitalise on its
strengths and should try to overcome its shortcomings.
The issue of lack of coordination between the two Divisions occurred due
to the difference in culture and HR policies. However, with the arrival of
Manolo Tingzon, General Manager, International Division, the tension
between the divisions might cease because(1) he is a fellow Filipino who
has worked for U.S. fast food chains in Philippine, and is hence more
accepted by domestic division; and (2) he was a management trainee in
Jollibee for 10 years, and hence is believed to be familiar with the
organisation culture.
Papua New Guinea
Since this would be its first store in Papua New Guinea, Jollibee will have
to incur huge expenses in terms of conducting market research about
consumer preferences, hiring competent staff and its training. Thus, there
has to be availability of sufficient funds to carry out an effective
recruitment drive across the franchisee, right from Franchise Services
Manager (FSM) to the crew members.
Hong Kong
Jollibees existing stores in Hong Kong are already struggling with
management issues. Instead of aggravating the differences between the
Chinese and Filipinos, the Store Managers are required to motivate the
staff to achieve a common goal. They should strive to create a friendly
and harmonious work culture within their stores. A few retention
techniques can be applied like organising informal get-together of all the
staff members. This way, people from both the regions can mingle with
one another outside the work environment and may try to resolve their
personal differences themselves.

California
Being able to successfully run a store in California would be a significant
milestone in the growth of Jollibee. However, it will not be a cake walk. So
far, Jollibee has been banking on its human capital. But in order to
succeed in this market, it needs to upgrade its technology as the labour
cost is enormously high in this part of the world. Thus, having
sophisticated equipments and cooking devices is a necessary and not
sufficient condition to be at par with competition. In order to make a mark,
Jollibee needs to invest heavily on promotional campaigns and meanwhile,

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needs to keep doing what it is best at modifying the recipe to prepare

exactly what the consumers wanted.

EXPANDING OPERATIONS
Papua New Guinea
Using of blue ocean strategy Jollibee can take over the Australian chains market
share with quality improvement. With very few competitors, Jollibee could easily
capture the market and set the standard that would block new entrants for time
being.
But the operational cost being very high including set up cost have no guarantee
that will be able to allow expansion in future in a new market. At the same time
the franchisees are also ready to provide full financial support to reduce Jollibees
risk and also they have made a treaty with a petroleum retailer for combined
operations.
PNG was about to receive $350 million from many lenders including Australian
Govt, Japanese Import Export Bank , etc for infrastructural development which
may allow the organization to get support in developing fast food in the nation.
Moreover abundant natural resource based industries (palm oil processing,
tourism coffee, cocoa, coconuts, palm kernels, tea, sweet potatoes, fruit,
vegetables, poultry, pork) will allow cheaper raw material and decrease
dependency on external suppliers.
Hong Kong
Expanding to fourth store in Hong Kong is not an issue of financial terms but
more of manpower requirement (Chinese) and also of local perceptions related to
food. Chinese are very health conscious and also have a liking for rice and
steamed food items also. Hence if the menu can be customised in a way it suits
the Chinese people and not only Philippines taste. Perhaps Chinese employee
people not getting interest in the operations might be as they feel alienated to
the food.
Quality and promotional strategies must also be taken into consideration and can
centralise to main office or FMSes before opening the next store in Hong Kong.
Large working population and importance of the Kowloon can also give branding
and high sales opportunity to Jollibee.

California
Entering into this market will bring a high branding opportunity although it may
face tough competition and high cost being part of States. But looking at the
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high immigrant Pilipino population the sales may be largely supported by their
tastes.
With a franchising partner ready to serve as an investment of about 40% the
starting operation may be easy but still the presence of global competitors like
Mc Donald may hinder as the entrance as Jollibee was not having such a global
brand name.
Well connected with international air and sea routes the state can provide fast
and effective logistics (examples:-Los Angeles International Airport and San
Francisco International Airport are major hubs for trans-Pacific and
transcontinental logistics)

RECOMMENDATION
FOR
OPERATIONAL
IMPLEMENTATION STRATEGIES

UTILIZATION

AND

Looking at the situation there is a need of heavy investments into IT

systems, which will allow Jollibee to manage day-to-day operations from
their headquarters in the Philippines and also help in collection real time
sales and inventory data across the organization.

Moreover there is a need to clearly divide the organization into two

strategic business units (SBU) under the company brand (International and
Domestic) in order to align the goals with respect to the various
geographic divisions. This will allow the International Division to ensure
greater coordination across IT activities such as ERP at global level, as well
as pooling procurement purchases wherever over wide geographical
areas.

A clear distinction of responsibilities, resource sharing and area of control

between the SBUs will help to increase cooperation at a firm-wide level.

High level of menu customisation is needed in stores which cater to non

Philippines customer. Countries like China where the expected taste varies
according to local needs customization will be highly helpful. Competitors
like Mc Donalds China division also taken menu customization into
consideration.

Philippines is an agricultural nation hence Jollibee was able to integrate

sourcing of raw materials especially imported beef patties could be a
solution till world transportation and sanitary issues does not affect the
operations.

For international markets, locating commissaries in the same country

through joint ventures could be a potential source of success for the
company. Jollibee could provide the technology while the partner deals
with appropriate techniques to sell in the foreign market. This will bring

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down the logistic cost of importing to many nations far from domestic
sources.

Use of Hub and Stake model will help faster turnover of logistics and
reduction in cost. Formation of hubs will also help in achieving economies
of scale in transportation and warehousing of raw material, thus
optimising the supply chain value.

For the local market, an increase in the number of commissaries could

potentially decrease the transportation costs and the duration of
shipments. Allowing the company to focus on the quality of product only.

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