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Jollibee Foods Corporation International Expansion: A Case Study
Jollibee Foods Corporation International Expansion: A Case Study
ENTREPRENEURSHIP
Jollibee Foods
Corporation
International
Expansion
A Case Study
By:
Jaspreet Singh-51
Jenkin J S-52
Jnanashankar H-53
Kalyani Burman-57
Kamini Sharma-58
Contents
Executive Summary............................................................................................... 3
Problem Statement................................................................................................ 4
Human Resource Issues...................................................................................... 4
Operational management issues........................................................................4
Financial issues................................................................................................... 4
Marketing Issues................................................................................................. 5
Supporting Arguments........................................................................................... 5
Industry Analysis................................................................................................ 5
Fast food Industry............................................................................................ 5
Porters 5 forces model for JFC................................................................................... 6
Firm Analysis...................................................................................................... 7
SWOT Analysis of JFC....................................................................................... 7
Alternative Strategies............................................................................................ 8
Choosing the right strategy................................................................................ 8
Existing strategy of Jollibee................................................................................9
Recommendations for Decision making.................................................................9
Papua New Guinea.............................................................................................. 9
Hong Kong.......................................................................................................... 9
California............................................................................................................ 9
Implementation Plan.............................................................................................. 9
Human Resource revamp plan..........................................................................10
Operations revamp plan...................................................................................10
Financial Revamp Plan...................................................................................... 11
Marketing Revamp plan.................................................................................... 11
References........................................................................................................... 11
Executive Summary
Jollibee Food Corporation is a Filipino fast food retail chain that was started in
1975 and from then on the company was on an expansion trend. It capitalised
the changes in the political scenario in the country and thrived the competition
from global players like McDonalds. It went public in 1993 and has been pursuing
an aggressive global expansion strategy most of which backfired due to the
problems in strategies followed by the company.
The newly appointed International wing chief of the firm is facing the challenge
of making a prudent decision regarding three new opportunities that the firm has
in the offing, namely expansion to Papua New Guinea, Hong-Kong and California.
But before making a move in this direction, the company has to address all the
issues that have been prevalent in the organization for a long time owing to lack
of long term vision and overall integration of the organization strategies. The firm
has been functioning like two parallel organizations with no co-operation and
coordination between the international wing and the domestic wing which has
proved detrimental in various issues that the firm has been facing.
The organization is operating in a highly competitive industry and has to develop
an overall firm strategy to attain sustainable competitive advantage. It is mainly
thriving on Franchising and JVs and needs to define the operating relationships
with the global associates effectively in order to prevent the disputes that have
cramped the firms operations many a times.
For crafting out an efficient direction for the firm, the four strategy model for
international expansion was analyzed and the firm was plugged in to the model
and it turned out that the present strategy of the firm is falling in a grey area
between the international strategy and localization strategy. Our suggestion is
that the firm should adopt a fully fledged transnational strategy so that it can
effectively reap the benefits of cost saving as well as local adaptation and there
by carving a global image for the firm that has impeccable operations, financial
and marketing strategy.
Also, we recommend the firm to go ahead and capture the opportunities in Papua
New Guinea as well as California and hold the fire for some time when it comes
to the expansion plans for Hong-Kong and look for expansion options in
Hongkong only when the prevailing management issues in Hongkong are sorted
out. Also, the implementation plan for revamping the operations of various
functions have been suggested in the main body of report.
Problem Statement
The newly appointed head of International division Mr Manolo .P. Tingzon is pondering into three
key opportunities that the firm Jollibee Food Corporation is having for further global expansion
namely Papua New Guinea, Hong Kong and California. For taking the above decisions the
organisation has to address various issues mentioned below under the various functional heads:
Financial issues
For the long term success of any firm, it is highly imperative to have a stable and prudent financial
management system. The focus should be on a strategy that takes the long term as well as shorter
objectives of the firm in tandem. As identified from the case, the following are the noteworthy
financial aspects of the firm:
1. Company revenues, net income, operating income, and royalties and franchise fees have been
increasing rapidly for the period under consideration.
Marketing Issues
1. Choosing which international markets to target first and decide on an optimal strategy to enter
these markets.
2. Identifying target segment in each country.
3. Choosing a core competency.
4. Deciding to what extent the standard menu can be modified to suit taste of local consumers.
Supporting Arguments
Industry Analysis
Fast food Industry
The fast food industry has a lot of unique characteristics:
1. Quality of food and time of service is of utmost importance
2. Each firm in the industry has a standard set of cuisine. The menu is limited and items are
cooked in bulk in advance, kept hot, finished, packaged to order, and available to take-out,
drive-thru, and dine-in.
3. Profitability is dependent on high consumer traffic, location of stores and tight operation
management.
4. Firms mostly operate through franchisees and expansions of critical mass is required to
achieve economies of scale
5. Highly capital intensive.
6. Chain wide consistency and reliability are major factors of success
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Bargaining power of
suppliers: LOW
Strong relations with
existing suppliers, trade
restrictions for imported
raw materials, food
standards etc. limit
power of suppliers
Threat of Substitute
PRODUCTS-LOW TO
MODERATE. Products from
local street food is a threat but
Jollibee has advantages in
terms of brand name, superior
service and reasonable price
Bargaining Power of
Consumers: VERY
HIGH
Consumer traffic and
loyalty determines
profitability of firm
Firm Analysis
SWOT Analysis of JFC
Strengths
Speed and timeliness of deliveries
because of the locations of the
commissaries.
Portfolio can serve various segments of
the market and pass the winning
culture of Jollibee on the other business
units.
Highly motivated and well-trained
personnel
Good operations management
High domestic market share
Quality consistence in terms of taste
and availability
Responsiveness to competition
Opportunities
Innovative
receipies e.g. rice based
The
me
al potential for international
markets and the migration of Filipinos
in certain countries.
Impart global culture by hiring nonphillipine managers
locating commissaries in the same
country through joint ventures could
be a potential source of success for
the company
Weakness
Lack on in-depth planning and
research in the expansion to
foreign markets.
Financial Constraints for
expansions
Rift between international division
and Home division - no consensus
could be reached
Lack of global brand recognition
Beuracratic structure.lengthy
process for approvals to be
sanctioned
Over reliance on the Filipino
market ( targeting the expat
strategy)
SWOT
Threats
Alternative Strategies
Choosing the right strategy
When analyzing the case study it is clear that Jollibee Inc has higher pressure to respond to local
wishes in Philippines due to the entry of global giants like McDonalds. This is due to the fact that
Jollibee had a strong presence in Philippines but at the same it should tackle the adaptation pressure
from McDonalds. This is also supported by the fact that Jollibee was franchising their brand to foreign
countries on very strict terms which do not allow any changes to the menu.
According to the grid below this would mean eliminating the international strategy and the global
strategy. Now analyzing the strategies which require standardization (provides cost benefits) and
differentiation, the transnational strategy is applied by large firms such as car manufacturers, they
have to adopt the cars to local wishes or they will not sell. The Multidomestic strategy often involves
having very different lines of products, yet there is no real cost pressure. Both strategies perfectly
align to Jollibees business model, so the four grid model is used for evaluation in the sense that
Jollibee is correctly placed in the vertical axis of the model.
On the horizontal axis Jollibee has two distinctly different moments. During the expansion plans to
become a multi domestic the company enjoys low responsiveness pressure because the target
segments are expats and Hispanic population. Once it is established the company is in need to adopt
the local taste buds so there is an increase in the responsiveness consideration. Since Jollibee needs to
maximize return on investment after establishment, it has to follow a transnational strategy to keep the
competition at the bay and tackle the competitive pressure.
The above diagram describes the four strategies which a firm needs to follow for international
expansion depending upon the market requirements, pressure from competitors, firm specific
motivation driven by firms core competencies. The proponents of the model have suggested that the
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strategy of a firm should evolve over time among these four strategies to be in better stead in facing
global competition.
Hong Kong
Currently all the three stores established in Hongkong are facing lot of management issues as
mentioned in the problem statement hence it is required that first this management issues
must be sorted out rather than putting additional resources in expansion plans.
California
California expansion seems to be the good option for several reasons. United States is the
largest fast food market in the world. They discovered from their outlets in Guam that there
were many elements of their restaurants that appealed to Americans. They have a large and
diverse population who like experimenting food of different culture. They also had great
support from Filipino-Americans. So, the company has to start with focusing on both the
Filipinos as well as local people and design the menu that would help maintaining the brand
identity along with catering to the local interests. To put it simple and straight, Company
needs to adapt a trans-national strategy.
Implementation Plan
It is the very evident that transnationational is the only way forward for jollibee, When going for
multidomestic as a strategy only a certain amount of flexibility and autonomy be provided to partners.
This becomes more of an arms length dealing, trust was lacking in the relationships. A holistic co
ordination is required to transfer core competencies or to pursue experience curves and location
economies. Which is possible only in a transnationational entity. This smooth transition can be
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enabled by inter unit co operation, decentralizing the organizational structure and following a
geocentric approach. Also to implement this strategy and carry out expansions following schemes of
actions must be taken in various functional departments.
Polycentric establishment of research and development centre. The flag can be planted in
regions where people have similar taste buds as strategic business units (SBU). So that the
menu can be varied according to regional taste.
Once the company starts to follow transnational strategy, location economies and operational
efficiency should be taken into consideration so as to reap the benefits of both cost structure
and differentiation.
Lessons learned should be internalized, so that lack of operational efficiency problems as in
Singapore, transparency issues as in Taiwan can be avoided in the future international
expansion.
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Slow down the global expansion to sustainable levels. This means that the international wing
should slow down a bit and the domestic wing should buck up a bit so that the entire
organization can move ahead together. The financial management should be done effectively
so as to provide enough budgets for the R&D and associated activities that are needed for the
global expansion.
Also sufficient funds should be made available for the marketing and positioning activities for
these are highly imperative in creating an identity for the firm and thereby helping in capture
the market.
Opening multiple stores at the same time will hurt the bottom line and will increase debt.
Even for a global giant like McDonalds, it took 20 years for their international operations to
account for 50% of total sales. Also, they must reduce cost of sales. This can be done by
devising a proper strategy of global expansion that can reduce cost and bring in economies of
scale.
Also the relations with franchisees and other associates should be clearly defined and the
degree of control of the financials should be clearly defined to avoid future confusions. The
ramifications of poor relations are clear in the closing down of many franchisees abroad.
Jollibee had been following the first mover strategy under Mr. Kitchner and had concentrated
on Planting the Flag i.e. opening a lot stores in countries in a short span of time irrespective
of financial constraints. Jollibee should instead follow a differentiated strategy wherein it
should target those markets with high potential with an economy similar to that of Philippines
like Papua New Guinea and observe the first mover strategy to capture these markets first.
For established market with high potential such as USA, Europe, it should go for joint
ventures and acquisitions with established firms in these nations.
The focus target segment in every country has been expats from Philippines which has been
largely successful. But it should not exclude the local populace of the host nation. Its
marketing initiatives should target the local populace and it should position itself as a global
fast food brand which offers exotic Filipino cuisine for everyone.
Its core competency should be authentic Filipino fast food with good service and quality
The menu of Jollibee should have a mix of standard food items as well as items specific to a
host nation. To achieve this, they should set up R&D divisions in each country and come up
with new dishes to cater to local consumers like McDonalds which came up with Mc Aloo
Tikki Burgers for India and which was a big hit.
References
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