This action might not be possible to undo. Are you sure you want to continue?
This report is an attempt to analyze the case oI 'Jollibee Foods Corporation (A) International
Expansion. In this study we have Iirst analyzed the case background so that we understand
the scheme oI things. In this section we have laid emphasis on the inception oI Jollibee
Foods Corporation, their expansion in various countries like Singapore, Honk Kong, Brunei,
Taiwan, Indonesia, CaliIornia etc.
Further we have discussed the Strengths, Weaknesses, Opportunities and Threats to Jollibee
in the Iast Iood industry. We have dealt with diIIerent problems like the management issues,
the market issues, business expertise, Iinancial resources, inventory management etc. This
would help in better understanding oI Jollibee`s present condition and Iuture sustainability in
the modern and Iast changing business world.
AIter the SWOT analysis we identiIied certain issues with Jollibee which concerned the
Management, business, expansion etc. There were issues like improper utilization oI Iinancial
resources, lack oI promotional campaigns, communication gap between the diIIerent wings oI
Jollibee and between the Management and the employees. Keeping in mind these issues we
have come up with a Iew recommendations. We have discussed them through Human
Resource, Marketing, Financial and Operations perspective.
Then we have discussed the Strategic decisions with regards to expansion in the Iuture in
CaliIornia, Hong Kong and Papua New Guinea. We have studied various pros and cons oI
expansion in each oI the above mentioned countries and reached the conclusion that
CaliIornia is the most Iavorable location. The reasons Ior the location being that there is a
huge Philippine population in Dale City oI CaliIornia which will help in the establishment oI
the store. Also they have successIully catered to the taste buds oI the people in Guam which
will help them serve the Americans better and thus the expansion could be a success.
Later we have conversed about the implementation plan and how to go about it.
At the end oI the document we have attached appendix Ior the reader`s Iacilitation. It contains
certain tables and graphs Ior better understanding oI the Iinancials oI Jollibee Food
Jollibee Food Corporation began as an Ice- cream parlour in the year 1975 and was run by the
Chinese Filipino Tan Family. But later they diversiIied in to sandwiches when the 1977 oil
crisis occurred and the President Tony Tan Caktiong (TTC) expected the ice cream prices to
soar. The hamburger recipe developed Tony`s CheI Iather became Iamous and a year later
they opened Iive store in Manila, where the Iamily incorporated as Jollibee Food
TTC`s vision was to see that the employees enioy while working and are eIIicient. Jollibee
expanded quickly throughout Philippine Iinancing all growth internally until 1993. Most oI
the operations oI the business were run by the Tan Iamily and Ior expert opinion they brought
in outsider especially in the Marketing and Finance Department.
Until 1981it was a smooth sailing Ior Jollibee, but then came Mc Donald`s to Philippines. But
the group was Iearless and had conIidence in the spicy taste oI their Hamburger which
appealed to the Philippine customers.
Slowly Jollibee Iorayed in to the Ioreign markets and began with its investment in Singapore
in 1985 in 1988 with the help oI some Iamily Iriends. However the relations between Jollibee
and the local manager started to deteriorate. Their next venture was in Taiwan again with the
help oI Iamily acquaintance, but this also did not last long and the transaction came to an end
on the basis oI distrust between the local manager and Jollibee management in 1988. Brunei
was another ioint venture that they entered into in 1987 August. Then they Iorayed in to the
Indonesian Market in the year 1989, opening a store in Jakarta but due to conIlicts with the
local manager again this store also had to be closed down.
In 1994 the International Division was created with Tony Kitchner, an Australian native as
the Vice President. Kitchner went about diIIerentiating the International Division Irom the
Philippine part oI Jollibee and tried to create a more Iormal culture Ior the division.
Kitchner`s strategy rested on two themes: 1) Targeting expats 2) Planting the Flag
He realized that there are a lot oI Filipino expats in Middle East, Hong Kong, Guam and
other Asian Territories and this would provide a good market Ior Jollibee.
The other strategy was to have a Iirst mover advantage. They started with planting the
company`s Ilag in those countries where there was no or little competition.
But these strategies had their own constraints. First oI all there was a strain on the resources
as they were expanding rapidly and then there was no enough advertising budget.
Kitchner was responsible Ior the Franchise Service Managers (FSM) and they acted as a point
oI contact between the company and its Iranchise. Kitchener asked the FSM to work on the
ambience oI the store and customize it on the basis oI the local consumers taste. to ensure a
good local crowd turn up.
Kitchner and Visco ( Marketing Director) discovered that Jollibee needed a world presence
and the present logo did not serve the purpose. So they changed the background Irom red to
orange so that it is distinguished Irom Coke and KFC and also added the tag line great
burgers, great chicken so that people have a clear identity about the brand.
They also customized the menu according to the tastes oI the local consumers.
But as the international business grew, the relation between the International Division and the
Philippine operations started turning sour. There was lack oI coordination and cooperation
between the two groups.
In 1996, TTC realized that he could no longer support Kitchner as the expansion strategy was
costing heavily and they were losing a lot oI money. In February 1997, Kitchner leIt Jollibee.
AIter Kitchner, Manolo P (Noli) Tingzon took over.
He came with the conclusion that in order Ior Jollibee to be proIitable it should earn an
annual sales oI US$ 8,00,000/-
He wanted to analyze the existing strategies to discover the scope Ior improvement. There
were conIlicting opinions Irom the staII on Plant-the-Flag. Some thought it was ill conceived
and some though it was a wonderIul way oI expansion. He also analyzed whether targeting
expats is narrowing down their scope or image.
Now he is considering the three options Ior proIitable expansion. They are: Papua New
Guinea, Honk-Kong and CaliIornia. Papua New Guinea has no much completion Ior Jollibee.
In Hong Kong there are several management issues and in CaliIornia things seem to be quiet
O Leadership in local Philippine market.
O Strong Iinancial resources.
O Expertise in doing business in international markets.
O Well developed operations management capability (ability to provide quality products at
O Diversity in product oIIering aIter the acquisition oI Greenwich Pizza and ioint venture with
O The expansion oI business in international markets based on the Ilawed strategy oI Planting
the Jollibee Ilag`.
O Absence oI proper methods to select Iranchisees.
O Too much dependence on Filipino expatriates and inability to cater to the needs oI the local
residents oI other countries.
O Weak promotional campaigns in international markets to promote Jollibee as a global brand.
O Based on the graph: 1(ReIer Appendix), it can be seen that the operating proIit margin is very
low over the period Irom 1992 to 1996. Operating margin is around 11° to 13° over the
years which mean Jollibee could not improve its operational eIIiciency.
O Based on the graph: 3 (ReIer Appendix) it can be seen that the inventory cycle oI Jollibee is
around 25 to 30 days Irom 1992 to 1996 which is very high Ior a Iast Iood business. It means
that company is taking longer time to sell its products.
O Based on the graph: 2 (ReIer Appendix) it can been seen that Jollibee could not utilise its
assets productively as Return on assets had decreased Irom 28° in 1992 to 17° in 1996. It
means that the new stores abroad did not give the desirable results.
O As per the Graph: 4 (ReIer Appendix) it can be seen that the average payable period had been
increased Irom 74 days in 1992 to 111 days in 1996 which means that they are delaying the
payment oI suppliers. This can damage the long term relationship with the suppliers.
O Lack oI communication within the organization during the Iormation oI International Division
which led to inIighting amongst the two divisions.
O Bias towards Iriends and relatives while selecting local Iranchisee partners.
O Lack oI cross cultural management.
O Increased diversity in menu items came at the cost oI operating eIIiciency and complicated
the task oI store level operating control.
O The involvement oI the Iranchisees in the important decisions during the start up was varying
Irom country to country. Most oI the decisions were being made by FSM and proiect
O Untapped locations with Iewer or negligible competition Irom Iast Iood chains.
O Widen product range to include more local Iood items.
O Make new acquisitions oI proIitable Iood chains in other countries.
O Create diIIerentiation by cost advantage, customer experience etc.
O Political Instability.
O Competition Irom local well established Iood chains.
O Dining habits oI local people eg. More preIerence to dining than Iast Iood.
O ShiIt oI preIerences oI people to more health conscious items.
O Epidemics like Bird Ilu, Mad cow diseases that make procuring oI raw material diIIicult.
O High set up cost due to high standard oI living.
O Reduction in entry barriers like Iavourable policies, tax incentives etc lead to increase in
O Downturn in economy.
O Rise in operational cost like cost oI power, labour etc.
The weaknesses oI Jollibee (as mentioned above) section have been addressed in detail as relevant to
O Jollibee`s strategy oI Planting the Jollibee Flag` Ior entry in new markets was narrowly
Iocused on absence oI competition. They were expanding too Iast without giving a thought to
alternative strategies to be adopted in case their Iood items are not accepted by the locals. So,
beIore entering a new market various other Iactors like demographics, local dining habits, per
capita income etc should also be considered.
O Jollibee should have proper procedures to select Iranchisees to evaluate their suitability Ior
the company. Various Iactors like their Iinancial background, previous business ventures etc
should be checked even iI they are Filipinos, Iriends or relatives.
O As seen in the market in Middle East, all the Filipino expatriates were not attracted to their
oIIerings. Also, in Hong Kong, the standard menu was not attracting the local Chinese
customers. This shows the pressing need Ior Jollibee to customize their menu to include local
O Jollibee should identiIy the right communication channel to promote its brand cost eIIectively
with optimum results to promote itselI as a global brand.
O Synergy creation is oI utmost importance Ior success oI any ioint venture. DiIIerences in
management style and culture between the Iirms may pose serious problems that make it
diIIicult to create synergies, which ultimately lead to poor Iinancial perIormance.
O There has been a year on year increase in cost oI sales Irom 13° in 1992/93 to 46° in
1995/96, however sales during 1995/96 has only increased by 24°. Suitable ways must be
Iound in order to decrease cost oI sales.
ear on ear Sales Cost Increase.
1992/93 1993/94 1994/95 1995/96
46° 34° 28° 13°
O Cash on hand is continuously increasing which is very positive sign however EPS has
decreased 19° Irom 1994-96 largely on account oI a bank loan. ThereIore the cash at hand
should be put to better use and help ensure early repayment oI loan.
O Based on the Iinancials, Jollibee has a good cash position so it should use the cash to pay its
suppliers regularly which will build a long term relationship with the suppliers.
O Twenty Iour stores in Ioreign countries account Ior roughly US $9 million in sales. Present
cash Ilows indicate that paying oII debts will not be diIIicult however they must slow down
their expansion plans.
O Opening new stores requires a lot oI Iinancing. ThereIore once a store is opened one must
give it time to grow and generate sustainable proIits beIore it is used to Iinance the opening oI
a new store. Moreover opening multiple stores at the same time will hurt the bottom line and
will increase debt and Iailure oI such stores may take several years to recover the investment.
This will help Jollibee to improve its asset utilisation.
O Jollibee has been expanding rapidly in the international market which is a good sign but the
company`s operations are not well managed as the inventory period is very high which means
inventory is kept idle so as to avoid it, company should improve its operating eIIiciency.
O The international division was distinct Irom the Philippine division:
The look oI the international department was distinct Irom the Philippine counterpart. They
tried to distinguish it so that the international department is not conceived as simple and basic
and in order to give it a more international look.This approach oI being diIIerent created
hostility. Here there was a communication gap. The need Ior the international department
should have been communicated properly and portrayed as a part oI the Jollibee Iamily. The
HR department should have convinced the domestic division to be more accepting about the
O Mixing oI Iriends and Iamily with business:
It is to be noted that the Singapore and Taiwan partners were Iamily Iriends and yet they
could not sustain the relationship. The pros and cons oI the relationship were not well
evaluated beIore the venture began. The terms and conditions oI any business relationship
should be explicitly stated to prevent any mistrust and conIlict in the Iuture.
O Lack oI Cross Culture Management:
There was a lack oI training in cross cultural team management which resulted in clashes
between the workers oI diIIerent cultures. A proper training programme on cross culture
behaviour and management should be developed Ior the employees oI the international
O R&D to Iocus more on Iinding methods to customize local Iood to Iast Iood production
O Involve Iranchisee in all the decisions during the start up to increase trust between the
company and the Iranchisee and also to gain Irom his knowledge about the local area.
Strategic decisions: PNG. Hong Kong or California
a) Papua New Guinea
O First mover advantage
O Jollibee would risk no equity
O Stores at service stations
O The Iailure oI the previous Iast Iood chain in the country might linger in the minds oI the
customers. To overcome this, Jollibee might have to do enough branding to convince the
O The target market is also smaller compared to Philippines. Hence the proIit potential is very
O Opening up oI many stores, to cover Iranchises` costs, requires huge investments and
thereIore the loss would be high, iI the business Iails.
O Local player has not been developed and it does not have brand equity in PNG.
O Since no previous experience in this market, uncertainty oI the acceptance oI Jollibee Iood
items by locals.
-) Hong Kong
O Earlier presence in the country will help Jollibee in speedier setting up oI business in HK. It
already had 3 stores in Hong Kong.
O It also provides JB an opportunity to learn Irom the mistakes oI other Iranchisee units.
O Location advantage (one oI the busiest in Hong Kong).
The other Iranchisee units had a lot oI management issues.
It did not have a global image there, as it employed local Chinese employees with no English
Jollibee Iailing to change the menu items to cater to the local needs oI the customers.
Managerial problems (conIlicts between Chinese and Filipino staII) led to uneven product
Kowloon district had Iewer Filipinos so new store would have to depend on locals but
already some issues were going on so Chinese did not use to preIer coming to Jollibee stores
and Jollibee strategy was to cater to the expats oI the Philippines.
Dominant presence oI McDonalds.
O Availability oI diIIerent equipments to compensate Ior comparatively high labour costs.
O Presence oI Filipino population. (CaliIornia having more than 1 million Filipino populations
provides a huge opportunity Ior JB.)
O The diversity oI the area allows Jollibee to broaden its niche to include the Asian-Hispanic
segment and to do so without having to make maior adiustments to its menu.
O Already success in Guam (only 1 store and revenue is 1771202).Its menu also appealed to
Americans as well so they don`t have to do many variations.
O Country oI origin oI McDonalds. Though JB`s items appealed a Iew American customers,
competing with McDonalds Ior market share poses a big risk.
O As a late-mover, it will be diIIicult Ior Jollibee to obtain access to the distribution channels,
suppliers, and store location.
O Logistical problems (12 hrs by plane & 8 time zones away) would put constraints in rendering
support Irom the headquarters in Philippines.
#ecommended plan of action:
Based on the above analysis, Jollibee should go ahead with opening their new store in Daly City,
CaliIornia. Daly City`s large Filipino expatriate population will be helpIul in supporting the business
initially. Also, Jollibee`s successIul venture in Guam will come in handy to cater to the local U.S.
people. The option oI adopting cost eIIective process instead oI labour intensive methods as used
elsewhere will help in making a cost diIIerentiation against their competitors.
In Hong Kong, the company should concentrate on the existing 3 stores Iirst beIore opening a new
Iourth store. Jollibee will have to customize its menu in Japan in order to attract the Chinese
population. Also, the conIlict between local Chinese managers and Filipino managers has to be
resolved. Jollibee can give the entire Chinese operation to the local Iranchisee and FSM being the
contact point between the Iranchisee and the company. In the presence oI a dominant player like
McDonald`s in the market, Jollibee can learn its techniques oI catering to the local tastes and try to
make the existing stores less dependent on Filipino expatriates.
In Papua New Guinea, in spite oI negligible competition the market, the small population oI 5 million
is not attractive enough to put in a substantial investment to set up at least 5 stores which will be
needed to recover the set up costs. Jollibee also does not have enough understanding oI the tastes oI
the locales. Though the Iranchisee is ready to undertake the equity costs, sole dependence on him can
be risky as already seen by their ventures in Singapore and Taiwan. Here, the company has to conduct
a detailed market study to understand the local Iood habits, reasons Ior the Iailure oI the Australian
Iranchisee, the perception oI people towards Iast Iood etc. Only aIter this Iactors can it take an
Implementation of Strategic Decision
With respect to the other available options, Daly City, CaliIornia, is comparatively the best
option. The criteria Ior choosing the Iranchisee should also be such that each Iranchisee
should be evaluated based on various criteria, even in case oI a potential Filipino Iranchisee,
so that in the end the Iranchisee who shares the most number oI common values with Jollibee
is selected. The key to Jollibee`s success in Daly City will be its ability to Iind a local partner
who should not only be able to work with the International Division but also design a
business model that would address issues like personnel management, recruiting oI managers,
language barriers, customization oI menu items and branding which were the key Iactors that
resulted in the success or Iailure oI Jollibee in other countries. In a market which dominated
by Mcdonald`s, marketing should be given more priority and Iranchisees should not associate
achieving target sales with promotional activities. The strategy oI Filipino-Asian-Hispanic-
Mainstream will be diIIicult to implement, mainly iI Jollibee continues with its policy oI
standardization of menus. The variety in menu should not be at the cost oI poor
operational efficiencv. II Jollibee has long term plans with USA it can also set up a R&D
department in USA Ior customizing the menus. The pricing strategy should also be such that
it is priced competitively with respect to McDonald`s.
Overall, the strategic decision that is to be made is not only about choosing Irom the 3
available options but also learning Irom their earlier mistakes in other countries, changing
their business policies and adapting to the dynamic environment oI the business.
1992 1993 1994 1995 1996
CperaLlna proflL 0 0 0
neL proflL 01 0 0
8evenue 0 0 1 0
ÞroflL Maraln ŦƷ 10Ŧ1Ʒ 11Ŧ1Ʒ 11Ŧ0Ʒ ŦƷ
CperaLlna proflL maraln 1Ʒ 1Ʒ 1Ʒ 1Ʒ 11Ʒ
CperaLlna proflL 280 364 458 590 780
1oLal AsseLs 101 1 1
AsseL uLlllzaLlon Ʒ Ʒ Ʒ Ʒ 1Ʒ
CosL of sales 1 1 1 10
lnvenLorv 11 1 1 01
lnvenLorv 1urnover 1Ŧ 1Ŧ1 11Ŧ 1Ŧ11 1Ŧ11
uavs ln lnvenLorv Ŧ Ŧ 0Ŧ0 Ŧ1 Ŧ11
Account payab|e Þer|od
CosL of Sales 1 1 1 10
AccounLs pavable 1 1
Þavable Lurnover Ŧ1 Ŧ10 Ŧ11 Ŧ0 Ŧ100
ÞavmenL perlod Ŧ1 0Ŧ Ŧ0 1Ŧ1 111Ŧ
1 1 1 1 1
1 1 1 1 1
1 1 1 1 1
Days |n Inventory
uavs ln lnvenLorv
1 1 1 1 1
This action might not be possible to undo. Are you sure you want to continue?
We've moved you to where you read on your other device.
Get the full title to continue listening from where you left off, or restart the preview.