You are on page 1of 3

Jollibee was founded in 1975 by a Filipino businessman by the name of Tony Tan Caktiong.

had big plans to bring Jollibee into the global scene, and he hired Manolo P. Tingzon in 1997 to
replace the outgoing Tony Kitchner to spearhead his corporations international ventures. Tingzon
was immediately faced with 3 investment options shortly after joining the company (Bartlett and
Beamish, 2011).
The-first-option-is-for-Jollibee-to-set-up-operations-in-Papua-New-Guinea (PNG). The-country-
has-a-population-of-5-million-people, served-only-by-one-3-store-fast-food-chain. The-
possibly-open-Jollibee-stores-in-5-petrol-stations. He-also-said-the-food-standards-in-PNG-are-
relatively-poor, and-believes-Jollibee-can-intervene-and-capture-the-fast-food-market.
Nevertheless, Tingzon-was-sceptical-as-to-whether-PNG-had-the-potential-to-support-the-
opening-of-his-targeted-20-stores, and-worried-that-the-franchisee-would-only-be-covering-his-
costs-with-the-addition-of-more-stores-quickly-after-opening-the-first-store (Bartlett and Beamish,
Despite that, entering PNG seems to be a practical alternative for Jollibee. There are significant
first-mover advantages in the absence of larger fast food chains like McDonalds, which will
enable Jollibee to quickly build its brand and set the standards for quality fast food in the market.
Furthermore, hefty financial risks associated with entering a new market are obviated since the
franchisee is willing to fully fund the venture, allowing Jollibee to earn royalty fees without
making any initial investments. Besides that, if the prospect of setting up stores in petrol stations
were to be successful, it would greatly enhance Jollibees visibility and awareness in the country.
Also, food like pork, chicken, and rice are considered as part of the staple diet of the people in
PNG (Diversicare, 2012). This information is highly beneficial to Jollibee, as this suggests that its
products like the Chicken Joy, Grilled Pork Tenders and Crispy Pork Steak from its regular
Philippines menu will be well-received in the venture, eliminating the need for costly menu
customization (Jollibee Foods Corporation, 2013).
However, doing business in PNG has its drawbacks. In a recent study, PNG ranked 91
in ease of
starting a business and 159
in dealing with construction permits out of 185 economies. Also, its
corporate tax rate is considerably high, at a staggering 42.2% (The World Bank, 2013).
Furthermore, the tax rate could weigh heavily on the franchisee, which runs contradictorily to
Jollibee founder Tans vision of sustainable growth and helping the firms franchisees to earn
long-term profits. In another study, it was found that the disparity between rural and urban
populations in PNG is rather significant. The urban population in PNG is at a meager 13%, and
crime rates and social problems are on the rise. Living-conditions-are-also-relatively-poor, access-
to-modern-conveniences-difficult-and-transportation-linkages-limited (Diversicare, 2012). The-
political-and-economic-climate-also-looks-bleak, with-long-term economic-development-
affected- by-governmental-corruption-and-a-lack-of-institutionalized-open-market-policies (The
Heritage Foundation, 2013). Furthermore, Jollibee has had a history of documented failures with
utilizing the plant-the-flag strategy as it plans to do with PNG.
After detailed considerations, PNG does not seem like a viable option for Jollibee to pursue its
international expansion plans. Jollibee could perhaps make an entry in the future when the country
is more economically prepared.
Moving-on, the-second-option-for-Jollibee-is-to-open-a-fourth-store-in-the-heart-of-Kowloon-
district-in-Hong-Kong (HK). The-first-store-in-Central-opened-to-instant-success, although-
majority-of-sales-were-contributed-by-Filipino-expatriates. Also, the-proposed-store-is-
strategically-located-in-one-of-the-busiest-business-sites-in-HK, where-many-people-travelled-
by-train-to-go-to-work. But-Tingzon-had-his-qualms-about-this-proposal, as-there-was-operating-
problems-with-the-3-existing-stores, and-this-led-to-uneven-food-quality-problems-and-
difficulties-in-attracting-locals-to-the-store. Also, Jollibees-rigid-menu-offerings-did-not-suit-
the-tastes-of-the-mainstream-Chinese-particularly-well. Its-brand-recognition-is-also-weak-in-a-
market-dominated-by-McDonalds, and-proposed-advertising-campaigns-to-gain-brand-
awareness-collapsed-due-to-insufficient-funds (Bartlett and Beamish, 2011).
Despite those problems, Kowloon presented itself as an attractive business site with huge market
potential. With the Kai Tak cruise terminal set for completion later this year, many-tourist-
recreational-facilities, sport-centers-and-residential-areas-are-expected-to-be-constructed-
alongside-it. This-development-will-also-bring-a-considerable-amount-of-tourists-and-increase-
the-population-in-Kowloon, which would help Jollibee gain the widespread visibility and
awareness it craves (Kong and Choy, 2013). Furthermore, HK is ranked 2
in the world in terms
of ease of doing business, and its corporate tax rate at just 23% would mean the profit potential of
conducting business there is very high (The World Bank, 2013). Also, since the proposed outlet
would be more dependent on the support of the local Chinese compared to its earlier outlet, it
could provide the platform for Jollibee to better learn their customers behaviors to address
problems in its existing stores. In-addition-to-that, there-is-growing-demand-for-Asian-food-
served-in-a-western-concept-fast-food-environment-in-HK, where Jollibees rice and noodles
menu fits the bill (Euromonitor International, 2012).
However, there are unresolved issues in Jollibees existing stores in HK. The root of it started
with the rifts between Jollibees Filipino reps and its local managers. A study revealed that the
Chinese-like-to-run-operations, have-a-compulsive-need-for-autonomy, and-possess-different-
working-styles-from-Filipinos, which probably explains why both groups cannot get along (Po,
2010). This situation wreaks worryingly of dj vu, as Jollibee had its fair share of failed ventures
like that of Singapore and Taiwan where local managers resisted control from the Filipino reps.
Also, Jollibee stores in HK have difficulty appealing to the locals, and with the proposed store
even more reliant on business from locals coupled with the domestic side resisting changes to
menu items, the situation is unlikely to improve. Even major fast food chains in HK like
McDonalds and Maxim are consistently adapting and innovating their products to suit the tastes of
the locals (Euromonitor International, 2012).
Therefore, the proposal of HK looks unattractive at the moment. Jollibee should focus on
resolving existing issues first and learn to accept customization to its menu to convince the locals.
A-third-option-is-to-establish-operations-in-Daly-City, California-in-the-United-States (US).
expats-there. Jollibee-even-discovered-their-menu-appealed-to-other-Americans-in-Guam, and-it-
without-modification. However, Tingzon-worried-that-managing-a-store-so-far-away-could-pose-
problems, and-also-questioned-the-profitability-of-the-Filipino-to-Asian-to Hispanic-to-
mainstream-strategy (Bartlett and Beamish, 2011).
Firstly, a-report-revealed-that-Filipinos-are-now-the-2
-largest-group-of-Asians-in-the-U.S, with-
their-numbers-reaching-approximately-4-million-people. Furthermore, California-is-well-known-
as-the-gateway-into-the-U.S. for-Asian-immigrants, and-their-numbers-currently-stand-close-to-
6-million-in-that-region (Rueda, 2012). Judging by this, it may be encouraging for Jollibee to start
initial operations in Daly City, given the large market potential they can capture in California
based on the first 2 phases of its Filipino- to-Asian-Americans strategy. Besides that, there is no
need for modification to Jollibees current menu. Statistics-reveal-that-consumers-tastes-for-
burgers-in-the-U.S-are-not-fading, whilst-fried-chicken-also-experienced-renewed-growth-
(Euromonitor International, 2013). Also, findings-revealed-that-the-market-for-ethnic-cuisines-is-
untapped, and-North-America-presents-itself-as-the-strongest-growth-proposition-for-fast-food-
chains-in-the-immediate-future (Euromonitor International, 2012). If statistics are anything to go
by, Jollibees diverse menu that comprises of burgers, fried chicken, and ethnic rice with meat
servings suggests that they are primed for success in the U.S. Another encouraging factor to
proceed with this option is the fact that equipments and procedures developed in Guam can be
used in the new store to offset high labor costs.
On the downside, Jollibee would be considered as a late-mover into the North American fast food
market. With major fast food chains such as McDonalds, Subway and Wendys in the fray, it
could be difficult for Jollibee to obtain strategic locations and quality suppliers to realize its
eventual plan of opening one store per quarter in California. Also, it will be costly to constantly
perform routine monitoring checks on the performance of stores in the region given its distance
from the Philippines, which might hamper food quality and the streamlining of operations. Lastly,
the targeting-expats strategy has its risks as well, as illustrated by Jollibees frustrating ventures
into the Middle East.
However, on the balance of facts and figures, opening a store in Daly City still looks like the most
profitable option. The market potential is huge, growth proposition strong, and the global
recognition Jollibee would get by succeeding there is enormous. Previous successes in Guam also
inject confidence into this proposal, and the support of Jollibee founder Tan and local investors in
this venture is encouraging. To succeed in the U.S, Jollibee-should-invest-in-IT-systems-that-will
enable-it-to-track-its-U.S-operations-from-their headquarters-in-Philippines, and practice-pooling-
procurement-purchases-of-raw-materials in strategic-geographic-locations to drive down costs.
Additionally, the organizational goals of both the domestic and international divisions should also
be re-aligned-to-maximize-cooperation-at-a-firm-wide-level.

(1096 words)