}ollibee Case Stuuy

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Presented by.
Shayani Barman (109)
Shelly Agarwal (113)
Sherman Ben Serrao (114)
Shirish Gandotra (115)
Shiva Kumar (116)

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EXECUTIVE SUMMARY
%his report examines the International expansion strategy oI Jollibee Foods Corporation, a major
South-east Asian Iast-Iood chain, along with its internal management policies. We have conducted an
industry level overview oI Jollibee, making use oI Michael Porter`s Five Forces Model to conduct a
360 degree study, including a very detailed SWO% analysis. We have also discussed the key
management issues that have plagued the organization, across the spheres oI Finance, Operations, HR
and Marketing.
Since the case includes a high degree oI change management, we have also included a list oI change
drivers, and based on these, have put Iorward alternate strategies that Jollibee has at its disposal.
Based on the potential market analysis oI CaliIornia, Papua New Guinea and Hong Kong that our
team has conducted, we have zeroed in on the preIerred strategy to be implemented by Jollibee, i.e.,
%rans-national strategy. %he report also contains an Upsala Model supporting our view.
We have concluded the report by providing several recommendations based on our understanding oI
the case. All these recommendations are to either address existing serious issues Iaced by Jollibee, or
to enhance its operations to make it more proIitable and/or appealing.
Finally, we have concluded our report by highlighting the implementation steps that Jollibee must
Iollow in order to obtain the best possible results. We are conIident that Jollibee will see a reversal in
its (mis)Iortunes iI these are Iollowed.

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0 Issu0s Fac0/ b 1ollib00 in its Pr0s0nt Sc0nario:
Would a Philippine Hamburger chain like Jollibee be successIul in capturing the Iancy oI a
saturated market like the US? Even iI it does enter the market, should its strategy be to Iocus
on the mainstream American consumers or the Philippine expatriates and immigrants?
Across continents, should Jollibee pursue an International strategy to maintain homogeneity
across Iranchises and regions, or should it employ a Multi-domestic strategy to adapt to the
culture oI each region? Or should it incorporate elements oI each through a %rans-national
strategy?
Should Jollibee enter the untapped Papua New Guinea market, or would that be a bad move?
Is international investment in relatively untapped markets on a large scale a good idea
(planting the Ilag`)? Or should the Iocus be on slow and steady consolidation? II stepping
into Ioreign markets is inevitable, what eIIective investment should Jollibee make in order to
penetrate Ioreign countries and expand its Ioreign market share?

In/ustr L0;0l Analsis
Port0r`s Fi;0 Forc0s Mo/0l

















Baigaining powei of
supplieis

Thieat of
new
entiants

Thieat of
substitutes

Inuustiy
iivaliy

Baigaining powei of buyeis
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%he Iast-Iood industry is highly competitive. Porter`s Five Force analysis gives the Iollowing
outcome:
Industry rivalry Jollibee has had to Iace severe competition within the Iast Iood industry.
%here could be intense price wars and marketing innovation, with some oI its major
competitors being multinational giants like McDonalds and KFC as well as cheap local Iast
Iood chains.
%reat of substitutes It is low to moderate as there is no close substitute which combines
the beneIits oI clean hygienic Iood along with quick service. %he substitutes range Irom local
street Iood to high end restaurants. However, street Iood is unhygienic, whereas in restaurants
the service was not quick and they are quite expensive too.
%reat of new entrants %here exist quite a Iew barriers Ior new players intending to enter
the industry. Hence, there is a lower threat oI these. Some entry barriers are:
O Inability to gain access to necessary technology and know-how
O Customer brand loyalty Ior their preIerred Iood outlets
O Brand Equity
O Capital requirements
O Economies oI scale
O Distribution channels
argaining power of buyers %he bargaining power oI customers is quite high. %he
customer Iirst` policy oI Jollibee shows it all. At the same time, although they had other
options available like McDonalds and KFC, the extent oI customization oI menu provided by
Jollibee attracted a lot oI customers to its stores.
argaining power of suppliers %he bargaining power oI suppliers is low in the domestic
market but high in the international markets. %hough some raw materials are imported, the
country`s stock oI technically skilled people is an advantage.

Analsis of th0 1ollib00 Foo/s Corporation
Int0rnal Analsis
$trengths
1. Five Fs` philosophy: - JFC has always Iollowed the Iive Fs` philosophy oI Friendliness`,
Flavored Iood`, Flexibility in catering to customer needs`, Focus on Iamilies` & Fun
atmosphere`.
2. Financial Resources.
3. Operational EIIiciency and strong Operations Management.
4. Leadership in local Filipino market.
5. Strong and inIluential management.
eaknesses
1. Weak selling and promotional strategies Ior expansion oI the business in international
markets, e.g. Planting the Jollibee Flag`, etc. thus showing lack oI in-depth planning and
research on the company`s part.
2. ConIlicts between managements oI the International Division and Philippine Division,
resulting in poor co-ordination between the national and international units.
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3. Weak brand power and brand recognition outside Philippines.
4. Inability to reach a proIitable tradeoII between increasing operational cost, labor issues and
inclusion oI new menu items (modiIications and additions to the menu).

Ext0rnal Analsis
554rtunities
1. Innumerable untapped markets across the globe with approximately zero Iast Iood chain
competition.
2. Improving the operational and proIitability conditions in the existing markets.
3. Prospect oI extending the list oI product oIIerings and inclusion oI local Iood items, thus
adapting to local needs.
4. Acquiring more Iood chains abroad, thus improving the revenue stream as well as eliminating
competition.
5. Increasing population oI Filipinos in other countries.
%hreats
1. Competition Irom well-established local Iood chains and corporate Iast Iood chains.
2. People moving to healthier eating options than Iast Iood.
3. Epidemics like Bird Ilu, Swine Ilu, Mad Cow disease, etc.
4. %hreat oI political and economic instability.

0 Manag020nt Issu0s
Financial Manag020nt P0rsp0cti;0

%here is an escalation in the cost oI sales which has to be brought under control as the cost oI sales
has increased each year with an increase oI about 46 Irom the end oI 1995 to the end oI 1996 but
during this same period, total sales only increased by about 28.7. Also there is an amount oI 28.9
million Pesos oI long-term debt outstanding at the end oI 1996. Accounts payable and Accrued
Expenses increased by about 156 Irom 1994 to 1996 and Earnings per Share decreased 19 to 0.68
Pesos per share Irom 1994 to 1996.

Op0rations Manag020nt P0rsp0cti;0

It is evident Irom the case that Irom the very beginning, Jollibee Foods Corporation had Iocused on
delivering quality Iood and service at an aIIordable cost to the customers which had been possible
only due to excellent operational control. But as the company started venturing abroad, they Iaced
diIIiculties in maintaining the same kind oI quality and eIIiciency in their operations. %hey also Iace
diIIiculties in addressing to all the needs oI the Ioreign consumers, e.g. Iood items that suit local
tastes, customizing Iurniture and the look oI the stores according to local expectations, etc. %here are
also doubts regarding Kitchner`s approach to put up lots oI stores in order to maximize revenue Ior
Jollibee, which %%C considered unviable in the long run. So JFC is now Iacing a dilemma oI whether
to continue with the same approach or slow down their expansion plans and make each store more
proIitable and then expand later (which %%C believed would result in good long-term relationships
with everyone concerned).
!olllbee Case Analysls
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u2an R0sourc0 Manag020nt P0rsp0cti;0

In the JFC business structure, most oI the key positions are held by Iamily members but proIessional
managers were brought on board Ior their expertise. By doing this, the cost oI value creation and
possibilities oI cultural imbalances could be reduced to a great extent. But this approach at Jollibee
did not work eIIectively when they Iorayed abroad. Firstly when we consider the Joint Ventures at
Singapore, %aiwan and Indonesia, the parent Filipino management at Jollibee was very keen on
imposing themselves on the host management and thus conIlicts arose on day to day management
issues.

Also, their partners in Singapore and %aiwan were Iamily Iriends and thus they unable to sustain the
relationship because the terms and conditions oI the business weren`t explicitly stated and that created
mistrust and conIlict between them.

AIter the Iormation oI the International Division, the look and Ieel oI the International Department
was very diIIerent Irom that oI their Filipino counterparts, thus creating hostility and animosity
between the two divisions and their employees. %his Iurther created a communication gap between
various departments concerned which otherwise should have worked together in tune. A strain was
also caused due to the recruitment oI people directly Irom the Filipino side, who were immediately
promoted to the next level with more beneIits without consulting their supervisors and causing
jealousy among peers.

Mark0ting Manag020nt P0rsp0cti;0

Jollibee was a huge success in the Philippines as it was able to attract the right quantity oI customers
to its brand and its taste, but it was unable to identiIy the right communication channel Ior the
promotion oI its brand abroad. When it tried to, it was either not cost eIIective or was unable to
provide optimum results. Consumers sometimes even identiIied JFCs logo as that oI a toy chain or
candy store. %hey were sometimes unable to understand the market well, as was the case in Indonesia
where they misjudged the spending capacity oI the masses in that country. %he marketing strategies
employed in some other countries also did not work out well Ior them- in the Middle East; their
strategy oI attracting all Filipino expatriates did not materialize, while in Hong Kong, the standard
menu was not attracting the local Chinese customers and the decision to change the menu according
to the local needs was leIt unheard.

Chang0 Dri;0rs
1. Macro environment changes: As the macro environment changed, the company had to
respond by aligning its strategy and structure according to these changes. %hese macro
environment changes included international changes such as McDonalds entry into the
Filipino market.
2. Success against McDonalds in the Philippines encouraged JFC to venture abroad.
3. DiIIerences in the interests oI %%C and his management team regarding the expansion oI
business to Ioreign markets and later the strained relationship between the Domestic and
International Divisions.
!olllbee Case Analysls
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4. Development oI need` is also one oI the key drivers oI change. %here was a need Ior JFC to
adapt to the local needs so it had to change its menu, its marketing strategy, its choice oI
location Ior opening up stores, the targeted segment Ior its product, etc.

Alt0rnati;0 Strat0gi0s
Th0 Wa Forwar/
1. Jollibee should go ahead with their expansion plans in CaliIornia with the main target segment as
the Filipino expats and slowly build brand awareness among the Americans. Here, Jollibee can
leverage on their strong Iinancial position, i.e., adequate capital Ior expansion and exploitation oI
opportunities like the high population oI Filipino immigrants and the preIerence oI American
consumers Ior Iast Iood which keeps up with their liIestyle.
2. While entering CaliIornia, Jollibee should Iocus on changing their strategy Irom Multi-domestic
(polycentric approach) to %ransnational wherein they can combine Global Strategies along with
Multi-domestic strategy. A %ransnational strategy would help in being more responsive to local needs
while retaining suIIicient central control oI operations to ensure eIIiciency and learning. %his will
enable Jollibee to have some element oI diIIerentiation as well as cost reduction and strengthen their
position on the eIIiciency Irontier.
3. Jollibee should modiIy their organizational structure to a matrix structure in order to achieve better
eIIiciency and smoothness in operations. A balance matrix structure between Iunctional division and
FSM will combine centralized and decentralized aspects oI the %rans-national strategy.
4. Jollibee can incorporate cross cultural skills amongst its employees through extensive training and
promote interdependency between the domestic and international divisions to some extent.
5. Based on our analysis, we suggest that Jollibee should start by solving their internal issues such as
management and selection oI restaurant menus, extent oI customization in each geographical area, etc.
beIore thinking about Iurther expansion in order to retain its competitiveness.
6. Jollibee currently runs a Franchising Model oI their Iast Iood outlet in which the amount oI
resources committed to the Ioreign market and level oI control over Ioreign activities is both low.
Since Jollibee has a good Iinancial capability, it should move to Joint Venture structure which will
increase the level oI control over Ioreign activities, thus standardising the Jollibee stores and
increasing the level oI control.
7. %hey should go Ior a superior internal distribution system to increase the operational eIIiciency oI
the stores and to bring down the operating cost oI the stores.
8. Opening multiple stores at the same time will increase the operating expense and reduce the
bottom-line oI the company. So, it is better iI they look into one market at a time instead oI being
greedy. From a stable position, the company shouldn`t go into debt, and with their diIIerences in the
internal departments it is better iI Jollibee is cost conscious and careIul in its expansion plans in the
coming years.

!olllbee Case Analysls
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Pot0ntial Mark0t Analsis
CALIFORNIA: In order to succeed in this market, it needs to upgrade its technology as the labour
cost is enormously high in this part oI the world. 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 modiIying
the recipe to prepare variants oI their standardised products to cater to what the consumers want.
%heir communication strategy must also take care oI the Iollowing Ieatures which are radically
diIIerent Irom eastern cultures:
O Individualistic Western culture
O Low power distance oI the West
O High risk-taking attitude oI the West
PAPUA NEW GUINEA: Marketing to the populace here will be a major challenge as it is one oI the
most diverse countries oI the world with over 850 languages being spoken by a population oI just
seven million. 85 oI the people here depend on agriculture Ior livelihood. At the brink oI Papuan
independence in 1975, there were 40,000 expatriates (mostly Australian and Chinese) in Papua New
Guinea.
However Papua New Guinea was going through a civil war through the 1990s and only post 1997 did
it try to restore peace. Considering the high risk involved Irom both a target market perspective and
political instability, we conclude that Papua New Guinea will not be a viable market.
ONGONG: It`s one oI the Ireest economies in the world and maintains a highly developed capital
economy. Between 1961 and 1997, Hong Kong's gross domestic product grew 180 times while per-
capita GDP increased 87 times over. It is in all respects, a very international province with very high
Ioreign investments and is consistently ranked very high in the Ease oI Doing Business Index.
However 95 oI the population is Chinese. %o market to the dominant Chinese population, Jollibee
will have to modiIy its oIIerings, which comes with added cost. At the same time it should get more
local staII in the operations and have a Chinese at the helm. It will need to pump in lots oI money to
survive in the Iace oI the Iinancial crisis and also to build a strong brand name with the locals. In
HongKong, the company should concentrate on developing the three existing stores and wait till they
generate sustainable proIits beIore opening a new store.

Sugg0st0/ Strat0g for 1ollib00


High

Transnational strat0g
(sugg0st0/ strat0g of 1ollib00
Low
Int0rnational strat0g
(curr0nt strat0g of McD
Multi-/o20stic strat0g
(curr0nt strat0g of 1ollib00
Low High


ressure
for cost
reduct|on
ressure for |oca| respons|veness
!olllbee Case Analysls
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R0co220n/ations
Financ0
Sales cost has increased Irom 13 in 1992/93 to 46 in 1995/96. But the sales has increased
by only 24 in 1995/96 .Hence measures are to be taken to reduce sales cost and increase
sales.
Cash on hand is satisIactory and should be put to better use like early repayment oI loans.
Opening new stores requires signiIicant Iinancing. %hereIore, once a store is opened it should
be given time to grow and generate sustainable proIits beIore diverting the initial gains Ior
opening new stores. %his will help Jollibee to improve its asset utilisation. Moreover opening
multiple stores at the same time will increase debt.
%he company should improve its operating eIIiciency in order to bring down the inventory
period.


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Level of
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AmounL of resources commlLLed Lo forelgn markeLs
!olllbee Case Analysls
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Mark0ting
Jollibee should identiIy an appropriate communication channel to market its products and
should strive to establish themselves as a global brand.
It should include local Iood items and customize the existing menu according to local tastes
and preIerences.

u2an R0sourc0
%he Human Resources has played a signiIicant role in the success oI Jollibee.
$trengths
%o start with, the Five Fs in Jollibee`s philosophy are very strong, particularly Fun
atmosphere` and Friendliness in the organisation`. Having an open and Iriendly culture is a
hygiene Iactor which goes a long way in retaining employees and Iacilitating high
productivity.
Stringent recruitment and selection processes ensuring service oriented staII.
Store managers motivating crew members successIully ensuring Iaster service and less crew
members on the job.
Extensive training.
aws
Poor communication when the decision oI creating an International Division was taken,
which lead to a lack oI trust and respect between the Domestic and International Divisions.
Personal issues like early promotion and better pay and beneIits to the International Division
staII were not addressed.
One oI the major reasons Ior such a wide pay gap could be the new managers hired Ior
Iinance, marketing, quality were all experienced outsiders; hence it required better perks to
retain them. On the other hand, the Filipino management primarily consisted oI the %an
Iamily members.
R Solutions
Even iI the partners were Iamily Iriends, there should be explicit terms and conditions to
prevent any mistrust and conIlict in Iuture.
%here was a lack oI training in cross-cultural team management resulting in clashes between
the workers oI diIIerent cultures. A proper training programme on cross culture and behaviour
management should be developed Ior the employees oI the International Division.
%he HR department should portray the International Division as a part oI the Jollibee Iamily
and convince the Domestic Division to be more accepting about it.
!olllbee Case Analysls
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Op0rations
Involve Iranchisees in all phases oI the decision making process and gain Irom them precious
knowledge regarding local tastes and preIerences.
Establish an R&D centre to Iocus on designing customized local Iood Ior local markets and
eIIective Iood production techniques.
Strat0g
BeIore entering new markets, various Iactors like demographics, local dining habits, Per
Capita Income, etc should be considered. Alternative strategies should be adopted Irom their
contingency planning in case their Iood items are not accepted by locals.
Jollibee should have a proper procedure to evaluate the suitability oI the Iranchisees Ior
alliance. Various aspects like their previous business ventures, Iinancial background, etc.
should be analysed thoroughly.
Synergy creation is oI utmost importance Ior the success oI any joint venture. Hence this
aspect should be given due importance while dealing with Iranchisees.

R0co220n/0/ Plan of Action
Jollibee should go ahead with opening their new store in Daly City, CaliIornia. %he Filipino
expatriate population will be helpIul in supporting and establishing the business initially.
In HongKong, the company should concentrate on developing the existing three stores beIore
opening new ones.
%here is no option but to customize its menu in Japan.
Jollibee can let out a signiIicant part oI operations to local Iranchisees in China, FSM being
the contact point between the Iranchisees and the company. ConIlicts between Chinese
managers and Filipino managers should be resolved at the earliest.
In Papua New Guinea, the small population oI 5 million is not attractive enough to put in a
substantial investment to set up 5 stores. Moreover they don`t have enough understanding oI
the tastes oI the locals.

I2pl020ntation of th0 Plan
%he criteria Ior choosing the Iranchisee should be evaluated thoroughly and the Iranchisee
which shares the maximum number oI common values with Jollibee should be selected.
%he key to Jollibee`s success will be its ability to Iind 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 oI managers, language barriers,
!olllbee Case Analysls
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customization oI menu items and branding which were the key Iactors in the success oI
Jollibee in other countries.
Marketing should be given more priority to establish Jollibee as a global brand rather than as
a Filipino brand.
Customization oI the menu should be adopted according to local tastes and preIerences but
not at the cost oI operational eIIiciency. %his can be addressed by opening an R&D division
Ior this purpose.
Pricing should be competitive with respect to its closest competitor, i.e., McDonalds.
Learning Irom earlier mistakes made in other countries and changing business policies and
adapting to the dynamic business environment.


















!olllbee Case Analysls
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