FAR EASTERN UNIVERSITY

Institute of Accounts, Business and Finance

I. EXTERNAL ANALYSIS

A. General Environment

a. Economic developments

The researchers found out that the Philippines food sector’ economic performance for the past

years continues to grow even the country encounter problems—from domestic and international, which

affected the markets, however the fast food industry remained to be resilient amid of other market’s

setbacks which affected the buying-power and lifestyle of the consumers. The local-and-foreign investors,

businessmen and entrepreneurs expected an increase in country’s food industry performance that in return

could generate a high revenue and income on their part.

b. Socio-cultural, demographic trends, lifestyle changes

The fast food industry in the Philippines sees great opportunities to consumer lifestyle change,

increase in consumer-buying power, increasing population, and fast-food dining trend. Consumers want to

maximize the value of their money so a lot of them choose fast-food restaurant which enables them to

save more by dining outside a hotel, which now largely serves as a place for guests to rest than dine.

According to Bruno, he stated that nearly six in 10 millennials (58 percent) say they eat out at least once a

week, twice the percentage of Baby Boomers (29 percent). And 30 percent of Millennials eat out three or

more times per week. The statistical information indicates a change in consumer market change—

different target market of the companies and restaurant was triggered by a shift on consumers’ lifestyle

changes and demographic trends.

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c. Technological developments

Based on researchers findings it arrives to an improvement on processing, manufacturing, and

information technology, which seeks to improve and render better goods and services that would serve as

companies’ competitive advantage and ease business environment cycle. Companies in Philippines today

d. Political, legal, governmental aspects

Every fast-food chain in the Philippines is subject to health & sanitary inspection, submit audited

financial reports, must have business permit, Securities and Exchange Commission (SEC) certificate, SSS

Employer’s Registration, PhilHealth Employer’s Registration, Pag-IBIG Employer’s Registration, DOLE

registration, payment of business/ corporate tax, and accountability in performing and operating business.

Failure to abide to governments requirements and rules may result to problems and disputes that can

affect company’s operation, image, and profitability. The government wanted to protect the good and

safety of its people.

Legal proceedings. As of December 31, 2015, JFC was involved in legal proceeding. The claim relates to

various illnesses allegedly suffered by the children of one of the customers after dining at the Jollibee

Crossroads Arcade, a franchised store owned and operated by Great Foods Corp. The customers seek for

damages amounting Php 5.3 million.

e. Ecological aspects
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The Jollibee Group of Companies remains unwavering in its commitment to bring joy to our customers,

and that means doing our part in conserving our natural resources and keeping our environment safe,

clean, and beautiful.

Tree-Planting and Nurturing Program. The JCF helps in reforestation of different damaged

forest- due to illegal mining and urban developments in the Philippines. With the help of

volunteers and other concerned Filipino people, this program was created to provide help and

remedy for the ailing-environment and for the next Filipino generations to come.

Water Management and Conservation. Part of JFC’s water management practice is the use of

hygienic waterless urinals in their stores. This odorless facility uses a special liquid sealant to

prevent odors from escaping and funnel pure urine down the drain. Each waterless urinal saves

around 150,000 liters of water a year.

Waste Management. Jollibee Food Corp. also take responsibility in waste management very

seriously, in full support and compliance to the Ecological Solid Waste Management Act. The

Jollibee Group is currently reducing its use of styro packaging by shifting to washable melaware

for dine-in services. The company also practices solid waste segregation through a

comprehensive sorting process that begins at the store and continues to secondary facilities for

material recovery and reprocessing.

f. Other external factors that may be more directly relevant to your business

The positive outlook for foodservice industry in the United States, that sets as an opportunity for

the Jollibee Food Corporation. The US food service industry is expected to continue its steady growth in

the next few years. The restaurant industry has witnessed consistent growth in sales in the past few years.

According to industry sources, the restaurant-and-foodservice sales in the country are estimated to surpass
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$780 billion in 2016, registering an increase of about 11% over 2015. The growth is attributed to stronger

economic growth in the US and the increase in demand from customers during the year.

2. Opportunities and Threats that may affect the following:

a.) Market demand and Opportunities & Threats

As one of the large company in the fast food industry, one of the obvious ways to grow their

business is through market demand development. This means increasing the number of stores they have in

existing markets and cities and increasing the number of countries that they operate in. While there is

potential to cannibalize sales of existing outlets, much of this concern is passed to the franchisee and does

not necessarily affect the parent company.

b. Types of Products and Services Offered

Products Services

- Burgers Noodles (Spaghetti) - Express delivery service

- Chicken Snacks (Chicken Joy) - Party service

- Sandwiches and sides - Drive-thru service
- Beverages and dessert - 24 hours service
- Rice Meals
- Breakfast Meals
- Desserts & Drinks

The opportunities that the researchers found are [i] product differentiation; [ii] competition based pricing;

[iii] product innovation; [iv] marketing aspects (use of in-demand celebrities, sales and promotions); and

[v] product re-launching.

While the threats are, competitors’ new product idea, new technology that the company is not aware,

foreign products, health issues, additional cost, and high inflation that causes increase in price of raw

materials.
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c. Intensity of Competition

Intensity of Rivalry is high when: High Medium Low

Number of Competitors ✔
Industry growth rate ✔
Fixed cost ✔
Storage cost ✔
Product differentiation ✔
Switching costs ✔
Exit barriers ✔
Strategic stakes ✔

The intensity of rivalry among competitors is considered to be medium-high. The fast-food industry can

be described as a lucrative segment with high profitability. Within the Philippines, there are already other

fast-food players competing with Jollibee.

d. Suppliers and Distributors

Jollibee Food Corporation works with various suppliers in accordance with JFC’s policies on

accreditation of suppliers. JFC evaluates goods and services provided by its suppliers based on the

quality, pricing and trading terms, payment conditions, and distribution channels to ensure that they are fit

for the purpose they were procured with the best value available. Accreditation is valid for one (1) year

from date of acceptance; thereafter supplier/s may file for re-accreditation.) PSC employs a third party

procurement validator for its supplies. Suppliers are also subject to regular inspection for quality control

and evaluated based on standard requirements and criteria such as good manufacturing practices,

sanitation, and product quality control.

E. Costs of Doing Business

The cost of the franchise ranges from Php 15 to 30 Million. Jollibee only grant franchise to

individual entrepreneurs only. However, if that franchisee would like to establish an organization; he/she
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can do so after being awarded the franchise but he/she must have the ownership in majority. There would

be an interview process before approval and the ROI will be one of the topics to be discussed as well as

the other important points. It will depend on the store’s income, investment, accessibility of the store and

other factors. The required lot area would be dependent on the model of the store to be put up. It always

depends on the chosen market of the franchisee. When it comes to hiring, Jollibee will be helping the

franchisee in recruitment. Jollibee expects the franchisee to pass on its well renowned vision to value

every Filipino family. The company endorses family oriented store lay outs, designs and advertisements.

Its target market is families and its importance which make it the leading store in the Philippines.

Customer satisfaction, quality food and service are what Jollibee Franchise aim to train the successful

entrepreneur (franchisee) and its management team and crew. Jollibee’s services include home deliveries,

drive thru, 24 hours on selected stores, and party packages. Being the largest food chain in the

Philippines, it is now operating more than 750 stores nationwide and it has also expanded globally

boasting of more than 70 stores operating in foreign countries.

f. Other Aspects of the business

In terms of co-branding location, JFC could expand their geographic coverage through co-

branded outlets with other significant retail offerings. For example, they could partner with a coffee chain

to have an alternative brand where both stores operate independently but out of the same location. This

has the advantage of attracting more consumers and to stay competitive with McDonalds (Mc Cafe) who

are possibly less reliant on the convenience aspect, and are likely to buy from both businesses over time.

B. Industry and Competitor Analysis

a. Market size and/ or growth rate and stage in the growth cycle

The researchers could not find a reliable and factual information about the market size and growth of JFC

and its competitors. Due to limited sources through business, research and government sites, the
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researchers decided not to place any data and information that is needed, which pertains to market share

and growth cycle to avoid incoherencies.

b. Number or players and their relative sizes; market share analysis

The researchers found Jollibee’s direct and indirect competitors in Philppine market or settings.

Jollibee’s direct competitors are [i] McDonalds; [ii] Kentuckey Fried Chicken (KFC); and [iii] Wendy’s.

While Jollibee indirect competitors are [i] Fine dining restaurant; [ii] bakeries; [iii]Andok's; [iv]

carinderias; [v] home foods; and [v] food kiosks. The researchers could not find a reliable and specific

type of information about Jollibee and its competitors market share these lead to researchers’ inability to

conduct or perform an analysis of JFC and its competitors market share analysis.

c. Market aspects (products or service, price, promotion, and channels of distribution)

d. Buyer/ Customer Profile

The Philippine food industry’s customer profile varies to social class and customers’ age as follows:

Jollibee Food
McDonalds KFC Wendy’s
Corp.
Kids (Ages 3-12)    
Teens (Ages 13- 23)    
Young Adults (Ages 24- 49)    
Adults (Ages 50 and above)    
Social Class:
A Low Low Low Low
B Low Medium Medium Medium
C    
D    
E    

The target market of the major fast food restaurant companies in the country differs to consumers’

capacity to avail the products and services of the said companies. The target market of JFC focuses on

“Filipino Family Traditions” that enables them cater a larger market with different types of social class
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and customers’ age— as they started their operations in the Philippines which is known for having “strong

family ties”.

While McDonalds, KFC, and Wendy’s target market are tied-up to “Western Type” of market strategy and

food, which also make as an advantage due to Filipinos’ “colonial mentality” that leads to patronizing

foreign companies, goods and product. JFC’s top three competitors focus more on teenagers and young

adults in high-medium level social classes. The top three focuses on higher & lower working middle class

as they have the capacity, interest, easily influenced, and brand conscious.

e. Factors affecting costs of doing business

The factors affecting costs of doing business in the food industry especially Jollibee and its

competitors are [i] economic conditions, [ii] government new rulings, decrees and tax rates; [iii] supply

and demand; [iv] marketing aspects, and [v] technology and development.

Economic conditions affect the business for instance that there is a high inflation rate in the market which

would results to a more expensive cost of doing business hence investors and lenders will demand a

higher rate of return which results to higher cost of capital. A high inflation causes an increase in raw

materials supply expense as the company need to generate more cash in able to sustain an support its

operations’ needs.

While the supply and demand have an effect on consumer’s buying power and the bargaining power of

suppliers, which affects the costs of doing business in the food industry. Companies might have to shell-

out more amounts of cash due to an increase in price of supplies and services that their suppliers render to

the companies. While the companies also may possibly adjust their products pricing if the purchasing

power of the customers’ is low- just for the companies to earn and make sales than accumulate higher

inventory and less revenue, sales and profit. In addition, government’ new ruling and tax rates reform

might as well affect the industry by obliging the companies to have a change with their capital, operation,
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and marketing structure for them to comply with the government requirements. Lastly, technology and

development have an impact within the food industry as these make standards higher when it comes to

how the companies adapt and adjust to business environment changes, corporation social responsibility

and quality of goods and services the company produces.

F.) Operations/Productions Aspects

Jollibee Foods Corporation core business is the development, operation and franchising of its quick-

service restaurant brands. It offers a wide variety of affordable and delicious dishes and great tasting food

prepared to satisfy customers of all ages and from all walks of life. Food quality, service, price-value

relationship, store location and ambience, and efficient operations continue to be critical elements of the

Company’s success in the quick-service restaurant industry.

G.) Technology Developments

Jollibee Foods Corp., the country’s largest fast food operator, said Wednesday it partnered with

US-based Cargill Inc.’s local unit to build a poultry processing plant. The investment comes nearly two

years after the best-selling Chicken Joy fried chicken briefly disappeared from its stores due to a “systems

upgrade.” “We will continue to maintain our strong relationship with key chicken suppliers in the country

and look forward to sustained long-term supply agreements with them as our businesses grow together,”

CEO Ernesto Tanmantiong said. The use of communications technology by consumers, and the evolution

of diverse retail channels require that retailers be able to sell and deliver wherever the customer is located.

Consumers expect a wider variety of products from a single source and better product value without any

loss in product or service quality.

h.) Industry Financial Analysis

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i. Problems in the industry

j. Critical success factors in the industry

2. Porter’s Five Forces Framework

• Emergence of new • Price Sensitivity

entrepreneurial players • Buyer Volume
• Brand Identity • Brand Identity
• Switching Costs • Substitute Products
Threat of Bargaining
New Power of
Entrants Buyers
HIGH MEDIUM
INDUSTRY COMPETITION

•Switching costs of Bargaining Threat of• Relative price

suppliers and firms in the Power of Substitutes performance of
industry
•Importance of volume to Suppliers substitutes
HIGH • Switching costs
suppliers
•Impact of inputs on cost
MEDIUM • Buyer propensity to
or differentiation
substitute
•Cost relative to total
purchases in the industry
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Conclusions

Threats of New Entrants. There is a high threat of new entrants in the food industry due to

emergence of new entrepreneurial businesses, wherein it offers the similar goods, products and services.

In which, new food business sometimes have a new creative ideas from their food menu to shop design.

While the brand identity of new entrants in the market especially foreign competitors is very crucial for

the food industry in the Philippines, as foreign competitors already have its strong brand identity and

capital for its operations and expansion in the country. In addition, new entrants in the market sometimes

have their competitive advantage especially if they are the who grow or make their raw materials as it

would result to lower cost, labor and other expenses.

Bargaining Power of Buyers. The pressure consumers can exert on businesses to get them to

provide higher quality products, better customer service, and lower prices is medium, as the food industry

have different aspects to consider to in lowering the price of their goods, products and services. The

business should consider their fixed cost, variable cost, and other expenses upon producing their output.

Bargaining Power of Suppliers. The presence of powerful suppliers is medium. Wherein, the

intensity of influence that the potential profit in the industry will reduce or decreased is average but still

the companies could cope with it. Suppliers moderately increase competition within an industry by

threatening to raise prices or reduce the quality of goods and services.

Threats of Substitutes. As the growth of the new entrants in the market the “threats of substitutes”

is high to the same degree that the food companies or entities have an intense competition. This results to

competition based pricing, switching cost and lead consumers to choosing.

3. Competitor Analysis

Competitive Profile Matrix

Jollibee McDonalds KFC
Weight Rating Score Weight Rating Score Weight Rating Score
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Key Factors
Advertising .10 3.00
Product Quality .20 4.00
Product Variety .15 3.00
Price Competitiveness .15 3.00
financial Position .15 4.00
Customer Loyalty .10 4.00
Global Expansion .10 3.00
Customer Service .10 4.00
Total 1.00

V. INTERNAL/ COMPANY ANALYSIS

A. Review the company’s performance in terms of key performance indicators:

1. Revenue/ Sales in the past three years

2013 2014 2015

Revenue 87,623,251 98,869,617 104,446,866
Sales 82,990,557 93,326,129 98,114,253

120.0
104.4
98.8 98.1
100.0 93.3
87.6
82.9
80.0

60.0
Sales Revenue
40.0

20.0

0.0
2013 2014 2015
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2. Profitability, other relevant performance indicators

2013 2014 2015

Operating Revenue 87,623,251 98,869,617 104,446,866
Sales 82,990,557 93,326,129 98,114,253
Gross Profit 20,564,449 23,172,697 23,854,838
Net Profit 5,080,290 5,804,597 5,702,732

3. Applicable financial ratios

2013 2014 2015

Profit Margin (%) 7.75 7.4 6.94
Gross Profit Margin(%) 23.47 23.44 22.84
Cash Conversion Cycle
Collection Period (Days) 13 29 18
Inventory Turnover 21.09 15.47 14.48

4. Value chain analysis

Porter’s Value Chain Analysis Model

Primary Activities

Inbound Outbound Marketing P

Operations Logistics Service
Logistics and Sales R
O
F
Firm Infrastructure Human Resource Management
I
Procurement Research, Technology & Development T

Support Activities
Supply Chain
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Logistics. For inbound logistics, Jollibee has an effective and efficient delivery, transport and

storage of goods for their business operations coming from the manufacturing warehouse. While for

outbound logistics, Jollibee distributes to franchises and fully-owned stores. Because of Jollibee’s

distribution system, it is an advantage to have a centralized processing and manufacturing quarters that

delivers to stores in proximity. Thus, Jollibee has a timely basis delivery for perishables and maintain its

quality until it reaches the consumers.

Procurement. Jollibee’s raw materials processed and manufactured products are imported and are

grown by their suppliers. Jollibee has developed long-term deals with these partners. This means that the

supply chain works in a reliable working environment between the supplier and Jollibee. In addition to

that, the Jollibee openly supports their suppliers like farmers- the JFC supports them financially and

technically. However, due to global trade barriers- especially for their international branches and

franchises, coupled by the increase in oil prices, it is possible that Jollibee procure its raw materials from

the country on where there are located and also process within the country. This also could lead to

reinventing the corporation’s procurement process, and obtain what is available in the country

Manufacturing

Research, Technology & Development. In order for Jollibee to have genuine products, the

corporation used centralized foodservice system which is responsible for the value adding processes that

results to lower food and labor cost. Being part of the value chain, the JFC’s manufacturing process is

highly technology dependent to ensure that the food is consistent to Jollibee standards and is produced

safely and “cost-effective” without sacrificing the quality. Jollibee's automated operations not only ensure

consistent quality from batch to batch but also ensures food safety by minimizing handling and

maintaining the “C” of the corporation’s FSC Standards which is cleanliness. Jollibee is one of the

pioneers when it comes with the use of technology especially the “information technology” that helps

their business operations. The use of technology is one of the business environment changes that a

company should adapt in-order to have a competitive advantage.

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Channel of Distributions

Operations. The JFC group’s operation performance is very effective and efficient as they able to

lower the company’s food, supply and labor costs. JFC’s operational structure leads the company to attain

effective utilization of commodities, improved ingredients control, inventory control, and scheduling of

food preparation flexibly.

Marketing and Sales. One of Jollibee’s value chain key element is marketing and effective ad

campaigns. Jollibee ads reach the customers through media by using celebrities to promote the company's

products and citizenship, and also through different social-media sites such as- youtube, facebook,

instagram and twitter. Jollibee also launch its online delivery in its webpage that allows everyone to have

an easy access upon ordering at home especially to individuals who do not have telephone at home. Also,

Jollibee’s culture of family values is very well communicated through publicity moves such as MaAga

ang Pasko which is the longest-running corporate social responsibility program by a fast food chain, and

their newest move; the Family Values Award which aims to celebrate the genuine and irreplaceable joy of

togetherness of the Filipino family. Jollibee also caters different product innovation, product bundle

pricing and low-priced value meal which budget affordable for families, friends, and individuals.

Service and Others

Firm Infrastructure. Domestic and Internationally, the JFC continues to grow and expands its

operations not just to gain revenues and profit but to impart Filipino values, culture and tradition like

“strong family ties”. The company also aims to give the sense of “feeling at home” with the overseas

contractual workers, who works abroad that longs for the taste of Filipino food and ambiance of being in

their own country. The Jollibee make sure that all of the Jollibee branches could be able to transpire

Filipino hospitality and be able to work for the betterment of the environment by forego and minimize the

use of plastics by using eco-friendly materials.

Human Resource Management. The JFC’s management make sure that the company could be

able to accommodate and provide the needs of its employees as possible they could. JFC provides training
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and scholarships to its employees who exhibits remarkable performance. It’s a must for Jollibee’s

employees to create friendly-environment in workplace.

B. Organizational Diagnosis

1. David’s functional audit to assess the different functional areas of the organization

2. McKinsey’s 7S Model

Strategy

Structure System

Shared
Values
Skills Style

Staff

Hard Elements
Strategy JFC should focus more on consistency with their performance domestic and
globally. Be careful of their “Eat your competitors” strategy as it may affect its
company performance and operations. JFC should also focus more with their
product improvement, development and innovations –as the following set as their
key competitive advantage with company’s competitors.
System
Structure JFC have a good, organize, and meticulous functional structure, which contributes
and beneficial for the success and growth of the corporation
Soft Element
Skills Proper and essential training-and-development programs need to be organized in a
systematic & right manner and thus it has to be ensured that all members of the
organization are equipped with skills necessary to achieve a high level of customer
satisfaction.
Style Jollibee’s corporate philosophy is summed up by the acronym, I CARE. [I]
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signifies personal commitment; [C]- for communication, when they keep

communication lines open within the company, they create a positive working
environment; [A] means appreciation. Letting the employees realize that their
contributions are vital to the business. A gesture of appreciation often comes free,
but it is a priceless way of giving proper recognition; [R] is for rewards and
remuneration. To attract the best and the brightest to work for them, they pay them
competitively; and [E] s for empowerment. This means giving their professional
managers the license to take charge and run the company as best as they see fit in
consonance with their corporate goals.
Staff Hiring right candidates to manage its operations and strategic planning. Training
programs for the employees that would create a friendly-environment in the
workplace; boost staffs skills and experience which helps in company growth.
Shared Values JFC's management currently have an effective set of values which are being
promoted and executed, however, there should be focus and consistency on
achieving goals, vision and mission to entire organization.

C. Identify the company’s major strengths and weaknesses

Strengths Weaknesses
 Strong presence in the food service  Legal proceedings
industry
 In-built manufacturing and logistics  Excessive dependence on the Philippines for revenue
capabilities generation
 Strong revenue growth