Graduate School of Business Management

Philippine Christian University

Graduate School of Business & Management
Masters in Business Administration

INDIVIDUAL CORPORATE STRATEGIC PLAN

STRATEGIC MANAGEMENT 2

SUBMITTED BY:
PARAS, CLAIRE DEMENG A.

NOVEMBER 2021

Professor: BERNADETTE O. VILLALUZ, Ph.D

 Graduate School of Business Management

Executive Summary

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 capitalized 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 firm’s
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.
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Business Landscape:

Company History;

1975 Jollibee started as an ice cream parlor owned and run by the Chinese-Filipino Tan
Family.

1977 Jollibee had diversified into sandwiches after company President Tony Tan Caktiong
realized that events triggered by the oil crisis during this year, that would double the price
of the ice cream.

August 1977 all of the Chinese managers had resigned leaving Jollibee with only Filipinos
in Store- level management positions. Shih was afraid this would further undermine
Jollibee's ability to hire crews, as Chinese preferred to work for Chinese.

1978 with five stores in Metropolitan Manila, the family incorporated as Jollibee Foods
Corporation.

1981 the company's first serious challenge arose, when McDonald's entered the
Philippines.

Manolo P. "(NOLI)" Tingzon joined McDonald's as a management trainee and spent the
next 10 years in frustrating combat with Jollibee.

1983 McDonald's surpassed the per-store sales of Jollibee because of impressive

performance of the Big Mac, that led Jollibee to respond with a large hamburger of its
own, called the CHAMP.

Political opposition leader Benigno Aquino returned from exile and was assassinated as he
stepped off his plane in Manila. The economic and political crisis that followed that led
most foreign investors, including McDonalds to slow their investment in the Philippines.
But Jollibee pressed ahead, employing nationalistic advertising to capitalize.

1984 the appeal of McDonald's foreign brand and its advantage in per-store sales were
fading.

1985 Jollibee first venture abroad, when a friend of a Philippine Franchisee persuaded TTC
to let him open and manage Jollibee stores in Singapore.

1986 Corazon Aquino, took office as President, optimism returned to the country,
encouraging foreign companies to reinvest.
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Jollibee revoked the franchise agreement and shut down the Singapore store. They lost
each other's trust.

1988 Jollibee decided to dissolve the partnership and pulled out of Taiwan, when the
property market in Taiwan took off and store rent increased dramatically.

1989 Jollibee opened its first store in Jakarta.

1992 Customizing for local taste- the flexibility aspect of Jollibee's Five F's corporate creed
stood for a willingness to accommodate differences in customers taste, managers in the
International Division believed that menus should be adjusted to local preferences.

When a manager was dispatched from Philippines to respond to Indonesia franchisee’s

request to create a fast food version of the local favorite nasi lemak 3 mixture of rice and
coconut milk. Kitchner's team created an international menu item called the Jollimeal.
Although it accounted for only 5% of international sales Kitchner saw Jollimeal as an
important way to localize the Jollibee image.

1993 Jollibee went public in an initial, public offering raised 216 million pesos
(approximately U.S. 8 million.

with four successful stores in Brunei TTC identified a key difference in the Brunei entry
strategy.

TTC decided that Jollibee's international operations required greater structure and more
resources. Because most of his management team was more interested in the fast
growing domestic side of the business.

1994 the conflict between the local partners and the managers they had hired paralyzed
the operation to a new franchisee.

TTC decided to hire an experienced outsider as Vice President for international

operations Tony Kitchner, a native of Australia, who spent 14 years in Pizza Hut's Asia
Pacific regional office in Hong Kong.

Kitchner's choice of market rested on two main themes that he had formulated during
planning session in the fall 1994 targeting expats and planting the flag.

Manolo P. Tingzon took on the challenge to launch Texas Chicken another U.S. fast food
chain, in its Philippine entry.

The acquisition of Greenwich Pizza Corporation.

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1995 formation of joint venture with Deli France.

1996 diversified the company's fast food offerings.

TTC realized that he could no longer support Kitchner as the expansion strategy was
costing heavily and they were losing a lot of money. In February 1997, Kitchner left
Jollibee. After Kitchner, Manolo P (Noli) Tingzon took over.

1997 Shih's Chinese managers had suggested serving tea the Hong Kong way -using tea
dust rather than tea bags and adding evaporated milk.

July 1997 Manolo P. Tingzon was intrigued by the opportunity offered by his old nemesis
and joined the company as General Manager International Division.

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 organization has to address various issues mentioned below under
the various functional heads:

Human Resource Issues

1. Strained International – Domestic Relationship: The international and domestic

operations of Jollibee Food corporation lacked cooperation and coordination
among them. They had several issues between them like recruitment, pay
structure and issues of menu adaptation.

2. The organizational structure of Jollibee was not supporting it in the international

business.

3. Cultural Differences: There were Cultural differences among teams working at

domestic end and at international end which led to disagreement on various
opinions. For example, the suggestions from Chinese managers were not
considered by management.

4. Management issues at Hongkong: There were many management issues at

Hongkong branches of Jollibee which were affecting its operations, quality and
revenue collection. Some of them are enlisted below:
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a. Staffing Issues: Less Chinese staff members leading to reduction in Chinese

customers as Chinese customers were not very comfortable with Philippine
and Nepalese staff.

b. Cultural incompatibility among staff i.e. between Chinese staff and Philippine
staff working at Hongkong stores.

Operational management issues

In Jollibee Inc, several disputes where rising in operational management due to the
following reasons, Improper coordination between the parent company and the
international operations lead several disputes in franchising, menu card (standardization)
and absence of research and development center as such to scan the taste buds of
localities of individual regions.

1. When Mr. Kitchner was as a change driver for international operations, he gave
responsibility of running day today activity of the store to an individual person for
every store called FSM. This led to an incongruent strategy alignment between
the parent company and franchises.
2. Menu card standardization was absent which essential in a global food chain to
give customer the same level of satisfaction no matter whichever store he steps
in.
3. Research and development privilege were wholly vested with the parent
company.

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.
2. Inventory turnover has improved showing an improvement in working capital
management over the years.
3. Based on the financials, 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.
4. Cash on hand is continuously increasing which is very positive sign however EPS
has decreased 19% from 1994-96 largely on account of a bank loan. Therefore,
the cash at hand should be put to better use and help ensure early repayment of
loan.
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The aforementioned aspects have put the company in a better stead. But there are a few
other facets that create concerns:

1. Accounts receivable as a proportion of Sales has increased over the years.

2. Long term debt outstanding has increased dramatically and the servicing of the
same has put a pressure on the solvency position of the company.
3. Cost of sales has increased over the years. This is a natural fact, but the alarming
part is that the growth in cost of sales has been much higher than the sales itself,
putting a pressure on the margins of the company.
4. The global expansion of the company has been extra-rapid and made in haste to
capture the market as a part of the “plant the flag” strategy. As evinced by the
statement made by TTC in late 1996, this has put a serious pressure on the
financials of the firm and the firm did not have the financial muscle like global
giants to go for the loss-leadership strategy. Thus, the budget allocation and
management were in a grey area.
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
7. Number of competitors is very high. McDonald's is one of the most famous fast
food joints in the world. McDonald's became No.1 in every country of more than
100 countries in the world except Philippines where JFC has been overwhelming
strength against
8. McDonald's. In 1981, JFC faced serious challenges from McDonald’s when they
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entered Philippines which forced JFC to change their existing strategy of targeting
only the domestic market with a standard local fare.

Porter’s 5 forces model for JFC

Firm Analysis

Strengths:
• Leadership in local Philippine market.
• Strong financial resources.
• Expertise in doing business in international markets.
• Well-developed operations management capability (ability to provide quality
products at affordable prices).
• Diversity in product offering after the acquisition of Greenwich Pizza and joint
venture with Deli France.
• 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 Rivalry among Competitors: HIGH Rivalry stems
from Price wars, marketing innovations, good food, good service. Most rivals are
equal in capabilities and opportunities which make competition stiffer Threat of
Substitute PRODUCTS-LOW TO MODERATE. Products from local street food is a
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threat but Jollibee has advantages in terms of brand name, superior service and
reasonable price Threat of new entrants to Industry- LOW High entry barriers in
the form of brand preference of consumers, technological know-how, access to
strategic locations and distribution channels, capital, economies of scale etc.
Bargaining power of suppliers: LOW Strong relations with existing suppliers,
trade restrictions for imported raw materials, food standards etc. limit power of
suppliers Bargaining Power of Consumers: VERY HIGH Consumer traffic and
loyalty determines profitability of firm
• Innovative recipes e.g. rice-based meal

Weaknesses:
• The expansion of business in international markets based on the flawed strategy
of ‘Planting the Jollibee flag’.
• Absence of proper methods to select franchisees.
• Too much dependence on Filipino expatriates and inability to cater to the needs
of the local residents of other countries.
• Weak promotional campaigns in international markets to promote Jollibee as a
global brand.
• Based on the graph: 1(Refer Appendix), it can be seen that the operating profit
margin is very low over the period from 1992 to 1996. Operating margin is around
11% to 13% over the years which mean Jollibee could not improve its operational
efficiency.
• Based on the graph: 3 (Refer Appendix) it can be seen that the inventory cycle of
Jollibee is around 25 to 30 days from 1992 to 1996 which is very high for a fast
food business. It means that company is taking longer time to sell its products.
• Based on the graph: 2 (Refer Appendix) it can be seen that Jollibee could not
utilise its assets productively as Return on assets had decreased from 28% in 1992
to 17% in 1996. It means that the new stores abroad did not give the desirable
results.
• As per the Graph: 4 (Refer Appendix) it can be seen that the average payable
period had been increased from 74 days in 1992 to 111 days in 1996 which means
that they are delaying the payment of suppliers. This can damage the long-term
relationship with the suppliers.
• Lack of communication within the organization during the formation of
International Division which led to infighting amongst the two divisions.
• Bias towards friends and relatives while selecting local franchisee partners.
• Lack on in-depth planning and research in the expansion to foreign markets.
• Rift between international division and Home division - no consensus could be
reached • Lack of global brand recognition
• Bureaucratic structure. Lengthy process for approvals to be sanctioned • Over
reliance on the Filipino market (targeting the expat strategy)
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External Analysis:

Opportunities:
• Untapped locations with fewer or negligible competition from fast food chains.
• Widen product range to include more local food items.
• Make new acquisitions of profitable food chains in other countries.
• Create differentiation by cost advantage, customer experience etc.
• Impart global culture by hiring non-Philippine managers
• Locating commissaries in the same country through joint ventures could be a
potential source of success for the company
Threats:
• Political Instability.
• Competition from local well-established food chains.
• Dining habits of local people e.g. More preference to dining than fast food.
• Shift of preferences of people to more health-conscious items.
• Epidemics like Bird flu, Mad cow diseases that make procuring of raw material
difficult.
• High set up cost due to high standard of living.
• Reduction in entry barriers like favorable policies, tax incentives etc. lead to
increase in foreign competition.
• Downturn in economy.
• Rise in operational cost like cost of power, labor etc.
• Tough competition from both international companies and local small-hold SMEs
in the food industry.
• Rapid expansion plan may backfire
• Philippines division might slow their implementation
• Increase in transportation costs and the prices of transported materials and
products.

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
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Multidomestic strategy often involves having very different lines of products, yet there is
no real cost pressure. Both strategies perfectly align to Jollibee’s 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 firm’s core competencies. The proponents
of the model have suggested that the strategy of a firm should evolve over time among
these four strategies to be in better stead in facing global competition.

Existing strategy of Jollibee

Jollibee entering the markets without any clear-cut idea, since Mr. Kitchner strongly
believe in gaining the first mover advantage, Jollibee is expanding into the markets where
the competitors little are no presence, to “plant the flag” without any long-term
perspectives. The company’s strategy can be more identified with the international
strategy where the locus of power lies with the parent company in the Philippines. With
much of happening in the international arena too. After Kitchners got hired, he
encouraged localization by separating international business completely from the
domestic ones.
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Recommendations for Decision making

Papua New Guinea

As evident from the data given in the case, it is quite evident that the company is
having immense opportunities in Papua New Guinea. As the market there is untapped
and the only competitor there is an unorganized and unprofessional local company,
Jollibee can literally get a first mover advantage. So the company should go for Papua
New Guinea, but proper background research about the prospective partner as well as
assessment of the credibility of the fundraising proposed needs to be carried out.

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 transamination 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 arm’s length dealing, trust was lacking in
the relationships. A holistic coordination is required to transfer core competencies or to
pursue experience curves and location economies. Which is possible only in a
transamination entity. This smooth transition can be enabled by inter unit cooperation,
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.
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Human Resource revamp plan

• Balance between centralization and decentralization of power: Jollibee should
allow certain level of decentralization of power for its franchises in other
countries for operating decisions related to product, marketing and human
resource management. Also, certain number of R&D centers could be opened in
other countries to facilitate localization of some products. At the same time
decisions regarding overall firm strategy, financial decisions and quality control
must be taken care by headquarters in Philippines.
• Reforming Organization Structure: Jollibee should adopt an organization
structure which enables it to transfer its core competencies and global learning
across the stores. Also, it should support value creation activities in the value
chain for more efficient operations. One of such kind of structure is flexible
matrix structure which provides a common vision and culture. This structure will
enable the cooperation and coordination among domestic and international
operation units.
• Training: In order to facilitate cooperation among units the staff members who
are required to coordinate with other units must be given training on cultural
differences and adaptability in workshops. By adopting this practice Jollibee
would support its staff to understand the cultural diversity among nations and
different market needs.
• Hongkong Management issues: Hongkong management issues can be sorted by
adopting above mentioned strategies. Certain level of decentralization of power
will enable the managers at Hongkong stores to take decisions on various aspects
of product, operations and marketing as per the local requirement. The staff
members who are trained in culture diversity workshops must only be sent from
Philippines to Hongkong for supporting the operations and training of locals.
Also, there must be recruitment drive to hire local Chinese managers with
attractive compensation. This will enable hiring of Chinese crew members and
hence increase in customer traffic. Also, initiatives like team work and cultural
diversity workshops must be conducted to increase compatibility among
Philippine and Chinese workers. This plan would enable Jollibee to implement
operation, marketing and quality control mechanism effectively and enhance the
market share.
Operations revamp plan
• Polycentric establishment of research and development center. 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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Financial Revamp Plan

• 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 McDonald’s, 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.
• There has been a year on year increase in cost of sales from 13% in 1992/93 to
46% in 1995/96, however sales during 1995/96 has only increased by 24%.
Suitable ways must be found in order to decrease cost of sales.

Year on Year Sales Cost Increase.

• 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 efficiency.
Marketing Revamp plan
• 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
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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 McDonald’s which came up with Mc Aloo Tikki Burgers for
India and which was a big hit.

Appendix
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Graph: 1

Graph 2

Graph: 3

Graph 4
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References

• International Business, By Charles W L Hill and Arun K Jain (McGraw Hill

Companies), 6th Edition
• Transnational Management, By C.A Bartlett and S Ghosal 3rd edition
• Jollibee website 0% 10% 20% 30% 1992 1993 1994 1995 1996 Asset Utilization
Asset Utilization 0 10 20 30 40 1992 1993 1994 1995 1996 Days in Inventory Days
in Inventory 0 50 100 150 1992 1993 1994 1995 1996 Payment period Payment
period