Jollibee Case Analysis

Jollibee – Case Analysis
Week Two Case Study Assignment
September 14, 2013

Table of Contents

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Introduction
In 1975 the business of the ice cream company Jollibee’s has begun. The Chinese-Filipino Tan family had managed it within three years to diversify into sandwiches and eventually to incorporate as Jollibee Foods Corporation. With its particular philosophy such as the “Five Fs” that stands for friendliness, flavorful food, fun atmosphere, flexibility and focus on families a successfully way was smoothed. Jollibee expanded throughout the Philippines with raising their amounts of total stores from two (1975) until 124 (1993). The expansion continued by acquisition of Greenwhich Pizza Corporation and a formation of a joint venture with Deli France. The company, however, had to face serious challenges throughout this way. McDonald’s at this time one of the biggest fast food companies recognized the opportunities in the Jollibee’s dominated market. Even though McDonald’s spent large sums in capturing the market Jollibee’s was not urged by the fast food giant. By relying on their strengths the Tan family was able to maintain in difficult. The successful times allowed them to move offshore finally. Within only two years (1994-1996) the company entered 8 new national markets and opened a lot of stores according to the franchise principle. Until today they achieved to be still the largest fast food company in the Philippines. Furthermore Jollibee’s continued expanding to Asia and USA.
This paper explores the strategy of one of the biggest fast food companies: Jollibee Foods Corporation. Especially the strategic challenges that faced Jollibee’s in terms of internal corporate weaknesses and external threats will be discussed. We will also discuss the strengths and opportunities that the Tan family was able to exploit as part of his strategy, along with an analysis of the effectiveness of that strategy. Finally, this paper will present some alternatives that could be employed to position the company even more strongly for future growth.

Background
The history of the so-called fast food reaches back to the 1940’s. The Brothers Richard and Maurice McDonald opened a barbecue drive-in in San Bernardino, California. They noticed that they gain higher profits by offering a simple menu of hamburgers, French fries, shakes, coffee and Coca-Cola. As a result they were able to produce such meals constantly and without waiting time for the customers. This was the natal hour of the fast food as it has been remaining until now .
About 30 years later Jollibee’s emerged - a family company owned and run by the Tan family. This company was acting in the ice cream market initially until it realized that the oil crisis would double the prices. As a result the Tans’ hamburger were born and became popular very quickly. The Tan family started to create an unique philosophy (Five F’s) that pulled the trigger for a successive time to come. In term of the Five F’s a senior manager explained: “It is not easy to deliver quality food and services consistently and efficiently. Behind all that fun and friendly environment that the customer experiences is a well oiled machine that keeps close tabs on our day-to-day operations. It’s one of our key success factors “ . Only 15 years after Jollibee Food Corporation has been found the company had achieved an amount of total sales of 1,229 million pesos. In 1993 it recorded 3,386 million pesos and went public. The Tan family, however, was still the owner.
The biggest challenge for Jollibee’s was probably to knockout McDonald’s. In 1981 the largest fast food company tried to enter the Philippines by spending large sums on opening six restaurants within two years and on promoting them. McDonald’s had quickly grabbed a 27 % share due to the “impressive performance of the Big Mac”, the largest and best-known sandwich. . In return Jollibee created the Hamburger called “Champ” which is larger than the Big Mac and was supposed to appeal more to Filipinos’ large appetites. Market research showed that den Filipino’s still preferred the spicy taste. But the complete knockout for McDonald’s was caused by an economic and political crisis. McDonald’s as a foreign investor was forced to slow their investments. As a result it was losing market share step by step. Due to the successive time Jollibee’s were moving offshore. In 1985 the first venture abroad began in Singapore. One year later, however, it was shut down due to discrepancies between store manager and Jollibee. Soon after this closing a 50/50 joint venture in Taiwan should be another try but it ended up the same as in Singapore. The company had been taught an early lesson: “McDonald’s succeeded everywhere because they were very good at selecting the right partners. […] we don’t have the name to generate that choice yet. […] If you’re an unknown brand entering a new country or city, you have trouble getting access to prime locations. McDonald’s name gets it the best site. People were telling us not to go international until we had solved these two issues: location and partner” .
Jollibee began to recognize to change the strategy. In Brunei and Indonesia the local partners were no longer supposed to run the operation. Instead they sent managers from the Philippines to take care of the business. The local partners had only a supporting role which turned out to be successful strategy. Furthermore Jollibee decided within its strategy moving offshore that outsiders will be necessary to enhance greater structure and more resources. As a result Tony Kitchner, former manager of Pizza Hut’s Asia-Pacific regional office, had been hired. With him a lot of things have changed. Kitchner created an International Division recruiting about 10 managers from different departments such as marketing, finance, quality control and product development. With Kitchner the word strategic became a completely new meaning. He decided to make Jollibee one of the world’s top ten fast food brand by 2000. His strategy formulated in 1994 was based on two themes: “targeting expats” and “planting the flag”. Kitchner saw thousand of expatriates Filipinos working in the Middle East and Asia. He thought it would be easier to enter these markets by focusing on the expatriates but eventually faced the problem that not all overseas Filipinos were customers due to specific circumstances within the countries. Nevertheless by following the theme “planting the flag” his pace of international expansion was remarkable entering 8 new national markets and opening 18 new stores between 1994 and 1996. .
Once Jollibee had entered a market Kitchner began to negotiate franchise agreements. Step by step the typical franchise’s organization was being built. First the International Division handed responsibility to one of the division’s Franchise Services Managers (FSM). The FSM hired a project manager, typically a native of the entered market. Both work close together and are responsible for most of the important decisions. Once the lease or purchase had been fixed local store managers had been hired. Just before the opening Assistant Managers (about 4 per store) and Crew Members are being hired. At last the stores are required to report and evaluate continuously about every aspect of operations in detail in order to keep Jollibee up to date and to get supported .
As success continued Kitchner, however, found that Jollibee has struggled at numerous entry battles. As a result the International Division decided to reposition themselves “to target a more up-market clientele” . They wanted present Jollibee as “world class”. Therefore three new stores had been developed by better lightning and high quality furniture. The new design was used for all subsequent openings. Furthermore the Jollibee logo has been redesigned, a library of promotional photographs of each food product as well as menu modifications have been created .
Due to the changes the relationship between the International Office and the Philippine Headquarter seemed to deteriorate. Cooperation reduced to a minimum so that the International Division felt that they did not get supported any more. The domestic side, however, viewed things differently. In addition TTC was extremely concerned about the International Division’s struggles. As a result Kitchner left Jollibee in 1997. Manolo P. Tingzon succeeded him one year later. He had spent much time as a manager for McDonald’s trying to battle against Jollibee and later on he had launched Texas Chicken, another fast food chain, in its Philippine market entry. Tingzon found that a fresh examination of the international strategies might reveal opportunities for improvement. But he still had to face the different opinions between his own staff (International Division) that wanted the “plant-the-flag” approach and the Philippine side that wanted to put the focus on expanding share. He eventually found three growth opportunities which were supposed to lay the foundation of the future strategy. First Jollibee tried to enter the Papua New Guinea market by opening a couple of stores in service stations of major petroleum retailer. After this opening the following advertisement has been placed in the newspaper: “Wanted urgently, dogs and cats, any breed. Will pay 40 toea (equivalent to 24 US cents) per kilo live weight. Apply to Jollibee…” . This incident reflects the tough competition. He was certain to put up all capital so that there would be no risk in equity in the venture. Second Tingzon wanted to expand the highly competitive Hong Kong market by opening a fourth store. He put his focus on resolving the managerial issues such as hiring local staff and menu variations. Third the International Division was ready to enter the California in 1998 due to the success in Guam, a territory of the U.S. Initially the concentration was on targeting the Filipinos and the hope was to expand to all customers throughout the U.S .
Today Jollibee’s sees itself as “the largest fast food chain in the Philippines, operating a nationwide network of over 750 stores” . Due to the “Five Fs” Jollibee’s managed it to build a well-loved brand throughout national boundaries. By creating various menu line-ups, marketing programs and efficient manufacturing and logistics facilities the parent company established itself as a multinational brand .

Analysis
Jollibee uses growing globalized strategy to standardize the taste of their food worldwide and try to focus on serving the unique Philippine taste to the world. With the help of foreign direct investment and franchising the expansion strategy raised to an international level. Besides they acquired the Greenwich Pizza Corporation in 1994 and formed a joint venture with Deli France in 1995. However, these diversifications are not the main focus of the company as the Jollibee stores still generate about 85% of the revenue for the company.
Jollibee follows has a quite centralized structure. As a result all of the managers report to Tan directly, including the international division. The company also uses differentiation strategy as it adapts the fast food to suit the taste of the Filipinos and fix their main menu around the world. Behind this strategies Jollibee points out their “Five Fs” that are supposed to create a competitive advantage and differentiate them from the other fast food chains.
Jollibee tried to expand in a tough environment of the fast food industry. This industry expanded globally mainly by franchising, means good decision making in terms of picking a appropriate site, good quality, low price and a well-working management are inevitable. Consistency and reliability is quite important to promote an image of one unit. The international subsidiaries are supposed to maintain or impose standardized menus, recipes, advertising themes, and store designs.
Jollibee’s strengths are completely based on the dominant position in domestic market and achieving high brand loyalty in Philippines. Within the expansion strategy Jollibee has learned to hire experienced managers who assist the franchisees to their success during the start up stages. That was especially in the beginnings a lesson that needed to be taught. In order to keep the customer loyalty at its level Jollibee values quality and their philosophy over anything.
The company biggest weakness is probably the organizational structure. Throughout the expansion a lot of issues came up between the international division and the domestic headquarter. They also got initially in trouble in picking good franchise partners and suitable locations in the international investments. Another issue came up in hiring appropriate managers abroad who should relate to Jollibee’s standard.
The opportunity for Jollibee’s lied and still lays in the globalized fast food industry. People all over the world started to accept other cultures. As a result it was getting easier to entry new markets. Another opportunity is that in times of pressure which people nowadays surely have due to different hours of labor, it is extremely important to take advantage of this fact.
Even though the global community is being urged to be a standard it there are still differences between countries that needs to be considered. Thus it is still not possible to apply a standard set of menu throughout the world. Furthermore rising food and fuel costs are putting pressure on the company to raise prices and the globalization allows Jollibee’s biggest opponent McDonald’s to gain more ground again.

Conclusion Jollibee’s showed in an impressive way how to take advantages of potential markets. Even though there were early lessons that have been taught and upcoming issues the Tan family company succeeded in a relatively short history. Jollibee’s managed it to beat McDonald’s in early times and to establish itself in the Philippine market. Based on the success in the domestic market the parent company expanded to different ways such as China, Brunei, Vietnam, Saipan, Indonesian, Dubai and the U.S.
Despite the success there are still issues that need to be resolved. First the conflict between both sides headquarter and international division. Second the management is inflexible in adapting their menus to international markets.
My recommendation is that Jollibee should create some clear cut instructions regarding the resources that the international division can utilize and its authority of decisions. With this strategy there is no drastic change required. Furthermore the management should figure out how important the international division is to them. One of their goal is to expand international. Therefore they should delegate more responsibility to the international division. A clear communication should be given so that nobody feels disappointed or overlooked.

References
Bartlett, C. A., & Beamish, P. W. (2010). Transnational Management. New York: McGraw-Hill Higher Education.
Jollibee. (2013, 09 15). Jollibee. Retrieved from http://www.jollibee.com.ph/about-us
Thompson, J. L. (2005). Strategic Management: Awareness and Chance. London: Cengage Learning EMEA.
Wikipedia. (2013, 09 11). Wikipedia. Retrieved from Fast Food: http://en.wikipedia.org/wiki/Fast_food_restaurant#History

References: Bartlett, C. A., & Beamish, P. W. (2010). Transnational Management. New York: McGraw-Hill Higher Education. Jollibee. (2013, 09 15). Jollibee. Retrieved from http://www.jollibee.com.ph/about-us Thompson, J. L. (2005). Strategic Management: Awareness and Chance. London: Cengage Learning EMEA. Wikipedia. (2013, 09 11). Wikipedia. Retrieved from Fast Food: http://en.wikipedia.org/wiki/Fast_food_restaurant#History