Summative Assessment 1

B-BMD005 Strategic Management

PESTEL, Porter’s Five Forces,

And Competitor Analysis of

Jollibee Foods Corporation

Submitted by:

Baccay, John Richard

Bundalian, Paul Matthew

De Leon, Cristin Kyra

Francisco, Carl Andrea

Kim, CJ

HRD31

March 25, 2022

 PESTEL Analysis

PESTEL is an acronym for Political, Economic, Social, Technological, Environmental,

and Legal Analysis. This environment scanning tool is mainly used to understand the external
macro-economic influences on the industry, a particular sector, business, and its product or
service offerings. These environmental forces are considered external as they cannot be
controlled by a firm. Jollibee Foods Corporation's PESTEL Analysis will assist the company in
making strategic decisions while keeping external trends and considerations in mind. However,
an in-depth PESTEL analysis of Jollibee Foods Corporation can enhance the companies’
readiness to handle external environmental turbulence. It is one of the most widely used strategic
planning and management tools that help management in assessing the impact of different
environmental factors on the business and identifying the threats and opportunities that reside in
the external environment.

1. Political
 Due to COVID-19 pandemic, JFC has led to tighter food safety, quality and implement
safety protocol, which are exhibited through careful food preparation, handling and
proper store sanitation
 Jollibee Food Corp. has set aside PHP1 billion as emergency response fund for its own
employees as well as those of its partner-enterprises amid the COVID-19 pandemic
 Jollibee Group launched its own vaccination program which covers employees from
Jollibee, Chowking, Mang Inasal, Greenwich, Red Ribbon and its commissaries and/or
distribution centers
 Jollibee stores nationwide achieved their Safety Seal certifications from their respective
local government units, allowing them to have an additional capacity for dine-in
customers
 Jollibee Group promotes work-life balance and professional productivity of its employees
by offering flexible work hours and telecommuting options
2. Economical
 There has been a dramatic rise in the cost of food raw materials which affected JFC
directly resulting to a decline in their profit margins
 JFC’s net income in 2021 stood at PHP5.9 billion, a reversal from the massive PHP11.5
billion in losses in 2020 – its losses incurred due to the pandemic as mobility restrictions
eased worldwide and consumer spending picked up
 Jollibee Foods Corporation is allocating PHP 17.8 billion in capital spending this year,
(2022) pursuing an aggressive expansion after profit in the fourth quarter last year
 Jollibee Group prioritize partnering with local suppliers by considering the availability of
commodities in the Philippines – Hence, 80% of its current supplier pool is local and they
only source outside the Philippines for commodities where requirements cannot be met or
sourced locally as well as risk mitigation purposes
 Jollibee Group invested in numerous training programs for their benefit and reached PHP
30 million as these foster personal and professional growth and development, well-
trained employees tend to be more engaged and productive, hence positively impacting
the company as well

3. Social
 JFC gained the trust and comfort of its consumers for they value family relationships,
which is a notable value of Filipinos; they relate their advertisements to Filipino
experiences
 The said company focuses more on their target markets which is the children, they use
tie-in promotion by selling toys and introducing mascots
 The Jollibee Group offers promotional discount for vaccinated customers as a way to
encourage more Filipinos to get added protection against the COVID-19 virus
 To help local farmers, JFC implemented the Farmer Entrepreneurship Program (FEP)
through its foundation and this program aims to help smallholder farmers improve their
financial stability by organizing and equipping them for collective marketing to become
viable direct suppliers for corporate buyers
 JFC captures the voice of the people, and it focuses on their needs and expectations. For
this, they have come up with two channels to obtain the voice of the customer –
Customer Satisfaction Survey and Feedback Management System; they disseminate the
customer satisfaction surveys, feedbacks, complaints, inquiries, and commendations

4. Technological
 JFC developed a website that contains the products they offer, the location of various
branches nationwide and their hotline in case of delivery
 They have partnered with different banks and online payment providers such as G-Cash
and Paymaya which allows consumers to practice cashless transactions
 The company has tied up with different online couriers such as Grab, Lalamove and
Foodpanda to meet consumers’ needs
 JFC’s Supply Chain processes are linked to a centralized digital data management system
to help in data analysis and store monitoring – it is an end-to-end food safety model from
suppliers to commissaries and store levels
 Jollibee has launched its online delivery application for free on the App Store and Google
Play Store which includes new features such as cashless payments, customizing, tracking
and time of arrival of your order

5. Ecological
 Jollibee stores have piloted installations of solar panels which reduces electricity
consumption from non-renewable energy resources
 The transportation unit of JFC practices truck route optimization and conducts delivery
load efficiency measure to lessen fuel consumption and such practices help to lessen the
 idle time of transport vehicle on the road and other operations that would cause unwanted
fuel consumption
 Jollibee stores nationwide are setting reduction targets in power consumption to lessen
environmental impacts and its manufacturing division moves to enhance the energy
tracking methods in measuring the total energy consumed per product line
 The establishments across all value chains utilize city water as a main source and proper
monitoring, segregation of water consumption is being explored by the company and
effluents are being discharged in sewage treatment plants
 JFC continuously innovate and venture into more sustainable packaging through Eco-
watch and its researchers recommends alternatives that are guided by local and national
government policies to provide eco-friendly and sustainable packaging options while
managing store profitability

6. Legal
 JFC’s policies on anti-discrimination and sexual harassment are in place to protect all of
its employees and to provide them with a safe and open work environment
 Jollibee Group strives for a win-win approach in its labor-management relations by
conducting a regular dialogue with the employee representatives through a monthly
meeting between the Human Resource Department and union officers, held to discuss
different concerns, open consultations on policies or programs that may affect the labor’s
working condition
 Policies on data privacy and security are governed in the Global Information Security
Policy (GISP), where various areas of Data Privacy form a subset in the various
Information Security Standards
 On top of government-mandated benefits, perks such as healthcare coverage (HMOs),
monetization of unused leaves, retirement fund, company stock options, further education
opportunities, telecommuting and flexible working hours, are also provided
 Jollibee Group’s Code of Business Ethics (COBE) provides a value-based framework to
guide the decisions as they carry out the business. The company holds the code in high
 regard and expect its employees and contractors to abide by it; policies against corruption
are stipulated in the COBE

Porter’s Five Forces Analysis

Threat of Entrant

The introduction of new competitors has an impact on the competitive climate for existing
competitors and on existing enterprises' capacity to attain profitability in the industry.

They maintained their market dominance. It contributed a significant percentage among other
food chains, but despite their growing popularity, new aspiring food chains and local restaurants
emerge that offer foods and services that are similar to those of Jollibee, for example, when
McDonald's first entered the country, it made Jollibee competitive by forcing them to learn
McDonald's sophisticated operating systems, which enabled them to identify weaknesses and
rout competitors.

• Existing regulations encourage new companies to enter the market.

• Due to low/no brand loyalty, consumers can readily swap brands.

• The initial capital outlay is substantial.

• For new participants, establishing a distribution network is simple.

• The threat of retaliation from established market actors is not a deterrent.

Another factor:

• Entering the industry necessitates a significant financial and resource investment. When
product differentiation is high and clients place a high value on the unique experience, this drive
weakens.

• If the existing regulatory framework imposes specific hurdles to new enterprises interested in
entering the market, Jollibee Foods Corporation will face a low threat of new entrants. New
participants will be forced to meet stringent, time-consuming regulatory procedures in this
situation, which may deter some from entering the market.

• The threat will be low if consumers have a high psychological switching cost and existing
brands have a devoted client base.

• If access to distribution outlets is restricted, new entrants will be discouraged.

Competitive Rivalry

JFC is in a market that has a lot of competition. Jollibee’s top brand competitors are
McDonald’s corp. and Yum! Brands Inc. operates KFC. There is also another industry that is a
high rivalry for Jollibee such as Max’s Restaurant, Shakey’s, and a lot more food industries.

The threat of new entrants reflects how new market competitors impose threats to the
existing market competitors. If the industry will be profitable and barriers to entering the
industry will be low, it will attract more competitors and hence, the threat of new entrants will be
high.

For Jollibee Foods Corporation, for example, there are various characteristics that
promote Rivalry among existing firms. For example, if market competitors are strategically
varied and target the same market, the company will confront strong Rivalry among existing
firms. Customers who are not loyal to established brands will face fierce competition, and it will
be simpler to acquire new customers due to reduced switching costs. Competitors of similar size,
selling undifferentiated products, and experiencing moderate industry growth are more likely to
pursue aggressive measures against one another. All of these reasons combine to make current
firm rivalry a major strategic worry for Jollibee Food Corporation.

The Rivalry among existing firms shows the number of competitors that give tough
competition to the Jollibee Foods Corporation. High rivalry indicates that JFC may experience
significant pressure from competitors, who may limit each other's growth potential. As a result of
aggressive targeting and pricing techniques against one another, profitability in these businesses
is low.

Existing company rivalry will be minimal for Jollibee Foods Corporation if there are few
competitors in the market, the industry is growing quickly, there is a clear market leader, and the
exit barriers are low, meaning firms can simply quit the industry without incurring significant
losses.

Competitors:

McDonald's, which has been in the Philippines since 1981, is the main competition.
McDonald's chooses the location for a restaurant and negotiates the acquisition or lease of that
facility. Locations are chosen depending on a number of criteria, including population density,
traffic patterns, and competition.

KFC, an American fast-food restaurant that specializes in fried chicken, is the second
primary competitor. KFC is a popular eating establishment with millions of customers, making it
the world's largest fast food restaurant chain. KFC continues to be one of the largest restaurant
chains in terms of the number of locations, employees, and revenue generated.

Max's Restaurant, founded in 1945 in the Philippines, serves fried chicken and Filipino
meals. Max's Restaurant serves a variety of dishes, including Max's fried chicken, pancit, lumpia,
and rice, as well as soups, salads, and desserts. Today, dynamic individuals interested in and
ready to invest in Max's Restaurant's long-standing legacy of quality can do so.

Shakey's Pizza is a popular pizza joint in the United States. Shakey's first opened its
doors in the Philippines in 1975. Shakey's is a prominent pizza parlor in the Philippines and one
of the country's leading fast casual restaurant operators, specializing on family casual dining.

Power of Suppliers

Based on the analysis, Jollibee Foods Corporation must focus on having the high hand
and maintaining low power of their suppliers to prevent losses coming from their inventories
account and for JFC to have high potential for increase of profit and growth. Although the
Pandemic in 2020 caused the suppliers to increase their demand due to unforeseeable events,
inflation, and sudden price surge of raw materials. But Jollibee quickly responded to the situation
and promoted take-out and delivery services to observe the health protocols for COVID-19. They
also introduced new products for Jollibee in the year 2020.

Jollibee must do the following if they want to maintain low power of suppliers:

 They must have different suppliers for different areas as Jollibee has franchises
nationwide, they must cut transportation and cargo expenses for their supplies as much as
possible.
 Jollibee should have a list of different suppliers for backup that sells their supplies cheap
with best quality for wholesale. They must be prepared to switch costs that has low or no
risks for the company when their main supplier changed prices due to events that might
still happen in the future like shortage and hoarding of supplies.
 Jollibee must conduct frequent market analysis so that they have adequate knowledge to
position themselves around their suppliers for bargaining and they need to conduct this
analysis per area where their suppliers are residing so that they can be highly sensitive in
their pricing.
 They must develop long term contractual relationships for their suppliers in different
areas and regions to improve their supply chain efficiency. This will help Jollibee to
improve their product as they have long term contracts with their suppliers with a fixed
payment for their supplies.

Threats of Substitutes

Being in the field of food industry, specifically fast-food, there are numerous amount and
type of products and services that are in rival with Jollibee. To which, McDonald's is known as
Jollibee's main competitor here in the Philippines. Additionally, with the growth of food delivery
and social media exposure during this pandemic, a lot of other fast-food chain and restaurants are
being known and are reaching the consumers' attention. As of 2019, a number of 92,011 food
service establishments are operating in the country. In which, a lot of these food establishments
offers the almost the same set of products and services while also having the same price range as
Jollibee.

However, JFC remained on its spot as the top food service company here in the
Philippines despite the pandemic, facing one of the most challenging years for their company in
2020. JFC continued to thrive not just locally but internationally as well. They still chose to put
in efforts and take actions in improving their products and services through adding new products
to their menu and adapting to the new setup that this pandemic has brought in our lives.

Based on their performance, Jollibee is able to surpass the challenges that the food
industry throws to the company even when given a sudden change in the way things work for
everyone, at a short period of time. However, a shift to a higher amount of consumers who now
opt for healthy and even lower cost products that will make them prefer home-cooking than
buying in a fast-food chain will put a higher threat in substitutes for JFC. There is nothing much
to worry about when it comes to the threats of substitutes in products and services, strictly when
it is all about fast-food chains. Instead , maintaining their performance as well as the products
and services quality is something that should not be overlooked by JFC

In order to do that, JFC should:

 Continuously improve their products and services while retaining the essence of their
original products that captures the heart of almost every Filipino
 Widen the range of products and services for their consumers to try
 Explore new yet possibly better ways to deliver their products and services
 Engage with their loyal customers through different programs

Power of Buyers

Since there are a lot of other options that are considered as substitutes for what Jollibee
offers, the bargaining power of buyers is high. In which, JFC should develop new strategies that
will make their customers loyal to their products and services.
 When it comes to the pricing, Jollibee has the same range of pricing in their products as
what other fast-food chain has. Since there is a low cost of switching, customers can easily
choose to those fast-food chains over Jollibee whenever they want to, especially when they offer
the same variety of products that Jollibee does.

To which, JFC could do the following to maintain their customers' loyalty to their products and
services:

 Create diversity in their products in a way that there is little to no other food company
does
 Build loyalty to their customers and listen to their demands

Through this, it can help the company to create a way in having a higher cost of switching, which
will then lead to a balanced and consistent connection with the customers and the company itself.

Competitor Analysis

Jollibee Food Corporation (JFC) primary business is the development, operation, and
franchising of quick service restaurants, “Jollibee”, “Chowking”, “Greenwich”, “Mang Inasal”
and many more are acquired companies of JFC. Jollibee is a famous fast-food chain that became
a household name in the Philippines. By the end of 2020, there are 1,184 Jollibee locations
around the country, 711 of which are franchised and 473 of which are owned by the company.
Jollibee has 294 locations worldwide, included 46 in the United States and 14 in Canada and
other more countries.

Jollibee has become one of the most well-known and popular brands in the Philippines. It
is now the market leader among fast food chains, with a market share of more than half of the
industry. Its main competitors are McDonalds and KFC. These two (2) are its top competitor
since these other fast-food chains also continues to expand their target market in the Philippines.
Additionally, it offers same products and meals. They are all convenient and affordable. For the
revenue size, the revenue of JFC in the Philippines was valued at approximately 129.31 billion
Philippine pesos in 2020. While on the other hand, the revenue of McDonald's Philippines
amounted to approximately 19.8 billion Philippine pesos. In KFC it generated a revenue of
approximately 2.27 billion U.S. dollars in the year 2020. Moreover, the market share of Jollibee
is 37.5% while McDonalds accumulated 20.8% and KFC got 5.0%. For the pricing strategy,
Jollibee uses competition-based pricing, McDonalds uses store-level pricing, and KFC uses
market penetration pricing.

References

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