global case study 2 jollibee(dolah).docx

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1. What global factors confront Jollibee as it pursues international expansion? How do

these factors benefit or impede Jollibee in its expansions?

EXTERNAL ENVIRONMENTAL FACTORS-which are acting as driving force for

growth of Jollibee

INCREASING GLOBALIZATION:

Sourcing beef materials from Brazil and locating in foreign markets both introduce the company

to global developments such as crude prices and tariff and non-tariff barriers that changed how

operations continued. The forging of tastes of the global market was an opportunity. This was

possible because of the increasing trend of migration and the trend for global trade and

investments.

INDUSTRY PROFITABILITY

Minimizing the company's operating cost by creating an efficient production is one way to

increase its profitability. This was done by adopting new technologies speeded up the company's

operation.

This in turn greatly helped the company to capitalize on economies of scale. The same concept

forced other players to innovate and cause changes in the industry.

INTEREST OF THE BUYERS FOR DIFFERENTIATED PRODUCTS

Across the seas, there is only one use for Jollibee products, that is, to be eaten. It was found in

due course of time, a need has to develop for new products that can appeal to different interests.

The development of the 'need' is a major driver of change in the industry. Right now, in the local

market, as Jollibee do, they continue to add new products to their menu, still maintaining the

pinoy taste that they have patented.


1. Tony Tan Caktiong

Expanding into fast food: The oil crisis of 1977 increased the production cost and also

decreased people`s spending power. As a result they were unwilling to spend on non

essential items of consumption. This acted as a positive reinforcement for TTC`s

decisions.

DANGER: McDonald`s after tasting success in different parts of the world and

especially after being successful in Canada, which has a huge Asian population, turned

its focus towards the Asian Tigers in the early 80`s. Philippines was the natural target as

it is the third largest English speaking country in the world. Flanked by the Pacific

Ocean and the South China Sea, its strategic location makes it a critical entry point to

some 500 million people in the ASEAN market—offering vast trade opportunities—and

an ideal base for business.

However to counter this Tan took a leaf out of the Chinese military tactician Sun Tzu and

flew to US to learn more about his future enemy. Returning to the Philippines armed

with first-hand knowledge of what a major American fast food chain looks like, Tan

reinvented his store using everything he had learned in the US. He introduced a friendly

cartoon mascot, bright and cheerful uniforms for the staff, a child-friendly ambience, a

menu of deep fried favourites, and the belief that there’s no such thing as too much

marketing.

Going international: This was a strategic move by TTC possibly looking at the

geographic spread of Filipinos around the world. There are around 8.7-11million

overseas Filipinos worldwide representing 11% of the population of Philippines. Most of

them work as doctors, physical therapists, nurses, accountants, IT professionals,

engineers, architects, entertainers, technicians, teachers, military servicemen, seafarers,

students, caregivers, domestic helpers and household maids making them a good target

market for Jollibee.

Going against McDonald`s: Tan’s friends and associates warned him that his store

would be eaten alive, unless he considered selling his business to McDonald’s, or be its

franchise holder. However Jollibee succeeded in positioning itself firmly in the


Philippine market before McDonald came in. In addition to the special understanding of

the Filipino palate, this national favourite had also mastered the country’s culture and

lifestyle. They’d succeeded in capturing the youth demographic with in-store play

activities and a cast of captivating characters. Their mascot with orange jacket and the

blonde spaghetti-haired girl are better known and loved in the Philippines than Ronald

McDonald. In fact by the time McDonalds came in the local franchise already had nine

branches

2. TONY KITCHNER

Separate International division: Having spent fourteen years in such an eminent

position in a pioneer in fast food like Pizza Hut, it’s all but obvious that Kitchner would

look for autonomy to operate. This brought in international practises in the company

mostly borrowed from the western culture (wearing ties etc). This is quite natural

considering Tony is from Australia. However the culture change wasn`t in sync with

Jollibee Philippines operations, neither was the culture change delivering on the

international fronts

“Plant the Jollibee flag strategy”: This was conceptualised to tap markets with

potential and which has not yet been captured by the established players. However

somewhere down the line the actual philosophy was lost in a ego battle as to how fast

Jollibee can establish itself in the international market and in doing so prove themselves

to the Philippines business. Also Tony tried to apply Pizza Hut`s strategy to Jollibee.

Now there was a couple of major areas which differentiated Pizza Hut from Jollibee:

o Pizza Hut was already well established and had no shortage of funds

o Pizza as a product per se doesn`t need so much of modifications and

customizations-it’s a Italian food and people who like it like it for what it is.

However Jollibee is positioned as a “fast food” chain. So it has to adapt according

to the definition of “fast food” in different markets. This would have required to

expand slowly which they didn`t leading to a strain in the financials which

eventually led to souring of the relationship with the Philippines division.


2. Identify the various challenges that Jollibee has faced across the different countries and

regions of operation (that is, the United States, the Middle East, Brunei, China, and

Vietnam). What are some of the common problems that Jollibee has faced? What are the

issues unique to each country? How had Jollibee adopted its strategy in each case?

Jollibee Foods Corporations (JFC) had established 35 restaurants in five key countries, which are

United States, Brunei, Hong Kong, China and Vietnam. Jollibee also acquired the local franchise

for Delifrance, a bakery chain and Greenwich, a rival Pizza Hut. All in all, in 2008 JFC had

1652 outlets in nine countries and had adopted a multi-brand strategy, gradually cementing its

position in the fast food industries.

The United States

The United States was seen by Jollibee as a lucrative market due to the growing Filipino

community there, providing for a sizeable consumer base. Instead of seeing itself as a direct

rival to McDonald’s and KFC, Jollibee wanted to break into the market as an alternative. Thus,

Jollibee characterized its menu as American fast-food favorites with an Asia-Pacific flavor.

Jollibee’s unique offerings to foreign consumers tented to be relatively sweeter and seasoned

with more spices than traditional U.S. fast-food chain dishes. Jollibee’s success in the U.S.

market could also attributed to its wider variety of menu items. Apart from the usual fries and

burgers, Jollibee’s fare include spaghetti, rice-based JolliMeals, and hot dog sandwiches. Before,

the opening of the first outlet in Daily City, California, a city heavily populated by Filipino

immigrants, Jollibee chose not to hire local specialists. Instead, the company sent a team to live

in San Francisco for two years to study the market and its industry. This resulted ultimately in

adaptations of Jollibee’s operations to complement the habits and lifestyle of Americans. The

team found out that American’s main mode of transport was cars and translated this into having

more drive-through outlets compared to its outlets in the Philippines.


China

Philippines had been occupied by the United States in the early 20 thcentury, Philippine firms are

heavily influenced by Western ways of management. JFC is no exception , operating from a

bottom-up approach the same approach it uses in its management of Yonghe King. Previous

management of the noodles enterprise did not have departments performing business analysis,

decision support, and performance management. After acquisitions, marketing, network

development, and R&D sections, which were previously understaffed or non-existent. JFC

hoped that with the recruitment of locals, it would gain a more intimate understanding of the

Chinese consumer market, enabling it to established Yonghe King’s foothold in China. Over

time, JFC realized that operations in China and Jollibee’s domestic market differed in terms of

external issue such as legal matters and relations with franchisees. However, internal

management of the staff, taste preferences of both consumer markets, and operational matters

are similar in both countries.

Middle East

The Middle East is another market that Jollibee thrives in due to the large number of Filipinos

working as domestic workers there. JFC successfully opened Chowking stores in Guam, Dubai,

the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia. The Chowking food chain

in the UAE operates very differently from that in the Philippines. Catering to the Filipino group

in the UAE who frequent the outlets for gatherings or celebrations of special occasions, a

number of Chowking restaurants in the UAE have function rooms, unlike in the Philippines.

Aside from the traditional Chowking offering of rice and noodles, Chowking in the UAE also

sells signature Filipino dishes such as kare-kare. The Chowking menu in the UAE is slightly

different from that in other outlets, due to the perceived desire of Filipino in the UAE to have a

taste of home.


Brunei

The year 2008, Jollibee opening 10th and 11th branches in Brunei. Jollibee did not perceive

Brunei’s small market size as a barrier to its expansion plans. Founder Tony Tan believed

instead, that efficient company operations and successful marketing strategies would overcome

this limitation to growth. He also held that Jollibee fast-food chains possessed a competitive

edge in terms of the company’s understandings of Asian taste preferences. Rice-based meals

offered in Jollibee’s Brunei outlets feature foods apply suited and familiar to the Asian consumer

market, differentiating it from Western counterparts. The products offered include chicken curry,

nasi lemak, and burger steak with mushroom sauce, all of which cater to consumer in Brunei.

Vietnam

Recognized as the Pacific Rim’s fastest growing economy after China, Vietnam was another

market that Jollibee wanted to capture. With economic growth rates at an average of 8 percent

and rapid development of the Western fast-food industry, Vietnam is a strategic source of

growth in Jollibee’s foreign operations. Jollibee opened five stores in Vietnam in 2007 and

expanded its outlets in the country to nine in 2008.


3. You have been hired by Jollibee as a consultant to advise them on their international

operations. What steps should they take next to ensure success in the international arena?

Primary aim of Tingzon is to find a fine balance between the expansion and reduction in cost of

sales of the company. If we look at cash in hand, the company is in a stable position.

Opening multiple stores at the same time will increase the operating income and thus reducing

bottom line of the company, it is better if they look into one market at a time instead of being

greedy.

From a stable position the company shouldn’t go into debt, with differences in the internal

departments it is better if Jollibee is cost conscious and careful in its expansion plans in the

coming years.

HR PERSPECTIVE

The Human Resources has played a significant role in the success of Jollibee. The HR practices

prevalent are very powerful.

Strengths

To start with, the Five Fs in Jollibee’s philosophy are very strong, particularly ‘fun atmosphere’

and ‘friendliness in the organization. Having an open and friendly culture is a hygiene factor

which goes a long way in retaining employees and facilitating high productivity.

The recruitment and selection procedure prevalent in Jollibee is very stringent thereby ensuring a

service-oriented staff. In any store of Jollibee, the store managers are the key to motivate and

control crew members. They facilitate efficient use of their time which not only enables faster

service but also reduces the number of crew members needed.

In both the Domestic as well as International division of Jollibee, a lot of focus is given on

training, which is a prerequisite in an industry as competitive and dynamic as a fast food

industry. For every new store that it opens in every new market, Jollibee conducts extensive


training programs for the local store managers and crew members with a view to impart

necessary skills that may be different from the domestic requirement.

Flaws

Having said all this, however, there exist a few loopholes in the organisation. For example, when

President and CEO, Tony Tan Caktiong, decided to create a distinct International Division, the

need for this change was not communicated clearly to the domestic Philippine management. This

led to a sense of uncertainty among the Philippine staff resulting in their indifferent attitude

towards the newly created division. Such differences led to a lack of coordination between the

two divisions.

The most significant difference between the domestic and international division’s HR was that

the practices and procedures followed in domestic division were very conventional; while those

in the international division were more professional and modern in accordance with the

requirements of an international operation. For example, VP of International Operations, Tony

Kitchner, created a more professional work atmosphere by introducing a ‘dress code’ in his

Division. Also, the Philippine organisation was considered bureaucratic and slow-moving by the

modern International Division.

Because the two divisions did not get along well, personal issues also started cropping up like

early promotion and better pay and benefits to the International Division staff. One of the major

reasons for such a wide pay gap could be that Tony Kitchner had hired new managers for

marketing, finance, quality control and product development. These new managers were all

experienced outsiders; hence it required better perks to retain them. On the other hand, the

Philippine management primarily consisted of the Tan family members.

WAY FORWARD

While entering into any new market, Jollibee should capitalise on its strengths and should try to

overcome its shortcomings.

The issue of lack of coordination between the two Divisions occurred due to the difference in

culture and HR policies. However, with the arrival of Manolo Tingzon, General Manager,

International Division, the tension between the divisions might cease because—(1) he is a fellow

Filipino who has worked for U.S. fast food chains in Philippine, and is hence more accepted by


domestic division; and (2) he was a management trainee in Jollibee for 10 years, and hence is

believed to be familiar with the organisation culture.

Papua New Guinea

Since this would be its first store in Papua New Guinea, Jollibee will have to incur huge

expenses in terms of conducting market research about consumer preferences, hiring competent

staff and its training. Thus, there has to be availability of sufficient funds to carry out an

effective recruitment drive across the franchisee, right from Franchise Services Manager (FSM)

to the crew members.

Hong Kong

Jollibee’s existing stores in Hong Kong are already struggling with management issues. Instead

of aggravating the differences between the Chinese and Filipinos, the Store Managers are

required to motivate the staff to achieve a common goal. They should strive to create a friendly

and harmonious work culture within their stores. A few retention techniques can be applied like

organising informal get-together of all the staff members. This way, people from both the

regions can mingle with one another outside the work environment and may try to resolve their

personal differences themselves.

California

Being able to successfully run a store in California would be a significant milestone in the

growth of Jollibee. However, it will not be a cake walk. So far, Jollibee has been banking on its

human capital. But in order to succeed in this market, it needs to upgrade its technology as the

labour cost is enormously high in this part of the world. Thus, having sophisticated equipments

and cooking devices is a necessary and not sufficient condition to be at par with competition. In

order to make a mark, Jollibee needs to invest heavily on promotional campaigns and

meanwhile, needs to keep doing what it is best at – modifying the recipe to prepare exactly what

the consumers wanted.


EXPANDING OPERATIONS

R&D to focus more on finding methods to customize local food to fast food production

techniques.

Involve franchisee in all the decisions during the start up to increase trust between the

company and the franchisee and also to gain from his knowledge about the local area.

Papua New Guinea

Using of blue ocean strategy Jollibee can take over the Australian chain’s market share with

quality improvement. With very few competitors, Jollibee could easily capture the market and

set the standard that would block new entrants for time being.

But the operational cost being very high including set up cost have no guarantee that will be able

to allow expansion in future in a new market. At the same time the franchisees are also ready to

provide full financial support to reduce Jollibee’s risk and also they have made a treaty with a

petroleum retailer for combined operations.

PNG was about to receive $350 million from many lenders including Australian Govt, Japanese

Import Export Bank , etc for infrastructural development which may allow the organization to

get support in developing fast food in the nation. Moreover abundant natural resource based

industries (palm oil processing, tourism coffee, cocoa, coconuts, palm kernels, tea, sweet

potatoes, fruit, vegetables, poultry, pork) will allow cheaper raw material and decrease

dependency on external suppliers.

Hong Kong

Expanding to fourth store in Hong Kong is not an issue of financial terms but more of manpower

requirement (Chinese) and also of local perceptions related to food. Chinese are very health

conscious and also have a liking for rice and steamed food items also. Hence if the menu can be

customised in a way it suits the Chinese people and not only Philippines taste. Perhaps Chinese

employee people not getting interest in the operations might be as they feel alienated to the food.


Quality and promotional strategies must also be taken into consideration and can centralise to

main office or FMSes before opening the next store in Hong Kong. Large working population

and importance of the Kowloon can also give branding and high sales opportunity to Jollibee.

California

Entering into this market will bring a high branding opportunity although it may face tough

competition and high cost being part of States. But looking at the high immigrant Pilipino

population the sales may be largely supported by their tastes.

With a franchising partner ready to serve as an investment of about 40% the starting operation

may be easy but still the presence of global competitors like Mc Donald may hinder as the

entrance as Jollibee was not having such a global brand name.

Well connected with international air and sea routes the state can provide fast and effective

logistics (examples:-Los Angeles International Airport and San Francisco International Airport

are major hubs for trans-Pacific and transcontinental logistics)

RECOMMENDATION FOR OPERATIONAL UTILIZATION AND

IMPLEMENTATION STRATEGIES

Looking at the situation there is a need of heavy investments into IT systems, which will

allow Jollibee to manage day-to-day operations from their headquarters in the Philippines

and also help in collection real time sales and inventory data across the organization.

Moreover there is a need to clearly divide the organization into two strategic business

units (SBU) under the company brand (International and Domestic) in order to align the

goals with respect to the various geographic divisions. This will allow the International

Division to ensure greater coordination across IT activities such as ERP at global level,

as well as pooling procurement purchases wherever over wide geographical areas.

http://en.wikipedia.org/wiki/Los_Angeles_International_Airport

http://en.wikipedia.org/wiki/San_Francisco_International_Airport


A clear distinction of responsibilities, resource sharing and area of control between the

SBUs will help to increase cooperation at a firm-wide level.

High level of menu customisation is needed in stores which cater to non Philippines

customer. Countries like China where the expected taste varies according to local needs

customization will be highly helpful. Competitors like Mc Donald’s China division also

taken menu customization into consideration.

Philippines is an agricultural nation hence Jollibee was able to integrate sourcing of raw

materials especially imported beef patties could be a solution till world transportation

and sanitary issues does not affect the operations.

For international markets, locating commissaries in the same country through joint

ventures could be a potential source of success for the company. Jollibee could provide

the technology while the partner deals with appropriate techniques to sell in the foreign

market. This will bring down the logistic cost of importing to many nations far from

domestic sources.

Use of Hub and Stake model will help faster turnover of logistics and reduction in cost.

Formation of hubs will also help in achieving economies of scale in transportation and

warehousing of raw material, thus optimising the supply chain value.

For the local market, an increase in the number of commissaries could potentially

decrease the transportation costs and the duration of shipments. Allowing the company to

focus on the quality of product only.

Based on the above analysis, Jollibee should go ahead with opening their new store in

Daly City, California. Daly City’s large Filipino expatriate population will be helpful in

supporting the business initially. Also, Jollibee’s successful venture in Guam will come in handy

to cater to the local U.S. people. The option of adopting cost effective process instead of labour

intensive methods as used elsewhere will help in making a cost differentiation against their


competitors.

In Hong Kong, the company should concentrate on the existing 3 stores first before opening a

new fourth store. Jollibee will have to customize its menu in Japan in order to attract the Chinese

population. Also, the conflict between local Chinese managers and Filipino managers has to be

resolved. Jollibee can give the entire Chinese operation to the local franchisee and FSM being

the contact point between the franchisee and the company. In the presence of a dominant player

like McDonald’s in the market, Jollibee can learn its techniques of catering to the local tastes and

try to make the existing stores less dependent on Filipino expatriates.

In Papua New Guinea, in spite of negligible competition the market, the small population of 5

million is not attractive enough to put in a substantial investment to set up at least 5 stores which

will be needed to recover the set up costs. Jollibee also does not have enough understanding of

the tastes of the locales. Though the franchisee is ready to undertake the equity costs, sole

dependence on him can be risky as already seen by their ventures in Singapore and Taiwan.

Here, the company has to conduct a detailed market study to understand the local food habits,

reasons for the failure of the Australian franchisee, the perception of people towards fast food

etc. Only after this factors can it take an informed decision.

With respect to the other available options, Daly City, California, is comparatively the

best option. The criteria for choosing the franchisee should also be such that each franchisee

should be evaluated based on various criteria, even in case of a potential Filipino franchisee, so

that in the end the franchisee who shares the most number of common values with Jollibee is

selected. The key to Jollibee’s success in Daly City will be its ability to find a local partner who

should not only be able to work with the International Division but also design a business model

that would address issues like personnel management, recruiting of managers, language barriers,

customization of menu items and branding which were the key factors that resulted in the

success or failure of Jollibee in other countries. In a market which dominated by Mcdonald’s,

marketing should be given more priority and franchisees should not associate achieving target

sales with promotional activities. The strategy of Filipino-Asian-Hispanic-Mainstream will be

difficult to implement, mainly if Jollibee continues with its policy of ‘standardization of menus’.

The variety in menu should not be at the cost of ‘poor operational efficiency’. If Jollibee has

long term plans with USA it can also set up a R&D department in USA for customizing the


menus. The pricing strategy should also be such that it is priced competitively with respect to

McDonald’s.

Overall, the strategic decision that is to be made is not only about choosing from the 3 available

options but also learning from their earlier mistakes in other countries, changing their business

policies and adapting to the dynamic environment of the business.

References

Jollibee Foods Corp. (A): International Expansion [Philippines Asia] (HBS 9-399-007, C.A. Bartlett and J. O’Connell)

global case study 2 jollibee(dolah).docx

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