JOLLIBEE FOODS

CORPORATION
INTERNATIONAL
EXPANSION

IB CASE ANALYSIS
Submitted To: Prof C.P Ravindranathan
SUBMITTED BY:
Aastha Yadav(01)
Abhirup Mukhopadhyay(02)
Aditya Mohan(04)
Aniket Singh Mahara(10)
Dileep M(31)
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EXECUTIVE SUMMARY
Jollibee Foods Corporation, a company which started as an ice-cream parlor, now has about 1804
stores worldwide under its aegis with total sales exceeding $1 billion. The company now wants to go
for diversification and expansion to increase its presence in international markets and compete with
global fast food giants like McDonalds and KFC. In our analysis of the case we have taken into
consideration all the aspects needed for an organization to work in a fruitful way i.e. Finance,
Marketing, Operations and Human Resource.

Under its belt the company has many famous brands like Chowking, Greenwich, Red Ribbon, and
Manong Pepe's. Initially the company went for expansion by innovating new products like
“Yumburger” and “Chickenjoy” and also by acquiring companies like Greenwich pizza and Chowking.

As the fast food industry is highly competitive they face stiff competition from already established
players like McDonalds and KFC along with the street food that is of much significance in countries
like Papua New Guinea and Hong Kong where its wants to expands. To face this competition it needs
to design a strategy that gives it an edge over the competitors. One of the ways can be
customization of menus so that the services provided by Jollibee attract the customers to its stores.
Jollibee has tried to do this by making the menu to suit tastes of the people living in different parts
of the world, e.g. they targeted the Filipino expatriate population in US which is in big number.
However they need to take care of a certain factors like government policies and the stability of
political system in a country. Also if they can procure raw material at cheaper rates and do some
technological advancements then that would give them an edge over their competitors.

Because of increasing globalization and improved supply chain, Jollibee has been able to reduce its
cost. Also, a trend has been that the customers want to eat different food and not repeat and
Jollibee has an exciting new menu, names and flavors. Also they have been able to implement latest
of the technologies for the processing and cooking of the food in the restaurants which has reduced
the costs to quite an extent and also people consider it to be more hygienic. These decisions are a
result of people like Tony Tan Caktiong and Tony Kitchner who have helped Jollibee in designing
the strategies which have been implemented in a proper way and hence have been giving rich
dividends and profits.

Now the company wants to enter new markets like Papua New Guinea, California and Hong Kong
and each market in itself poses a different problem. Papua New Guinea poses a significant problem
in the form a high political and country risk and also they need to modify their menu according to
the taste of people over there. In California they have to compete with companies like KFC and
McDonalds who have home advantage and hence Jollibee don’t need to westernize their products
and services and rather concentrate on keeping them more Filipino because in that way the people
over there will get something new and different to eat. They have to very careful over there as it is a
much matured market compared to the markets in the east where they have been concentrating till
date. In Hong Kong they need to put in a lot of money to hire Chinese speaking staff and establishing
the brand over there by taking locals into account.

Jollibee has been spending a lot for expansion as of late as is visible from its balance sheet and hence
the Earning per Share is also going down. They have been consistently increasing their net sales and
net income at a very high rate along with the number of stores opened. Also the HR of the company

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has played a very important role as is needed to control the organization of the size of Jollibee. The
recruitment and selection procedure is very sound and the organization culture and structure is such
that it promotes a friendly environment in the company. But HR division also had some issues like
giving better pays and fast increments to international division employees than the domestic
employees

Thus the need is to find a balance between expansion and reduction in cost of sales. Thus the
company should be careful in its expansion plans and should not invest abruptly so that it does not
go from a cash rich company to a debt carrying company. Thus the company must try to develop and
exploit its strength and overcome its shortcomings.

In Papua New Guinea, because it would be their first store, hence they will have to work and spend a
lot for creating the brand and for advertising campaign over there. Because they have a very high
risk in that market because of the instable political situation, hence they can have their franchisees
over there that are ready to take all the risk as they know the country in and out.

In Hong Kong the management structure is in a bad shape as there is a lot of conflict between the
managers in a kiosk and the employees over language and pay issues. Thus managers need to
motivate the employees to work hard by having informal get-together. Also they can have a menu
that serves for Chinese taste and interests.

Opening a store in California would be the most challenging as they would have to face an
increasingly mature customer and also compete with giants like KFC and McDonalds. But the high
density of Filipino population in the state would help them a lot as they would like the original
Filipino food. Also setting up joints in US would give them a global recognition.

Other recommendations include:-

1. Heavy investment in IT infrastructure

2. Having two different SBU for international and domestic markets
3. Having high level of menu customization
4. Having joint ventures with local dealers when entering into international markets
5. Use the cheap labour available in home to produce low cost raw material to bring down the
costs

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PROBLEM STATEMENT
Jollibee after venturing into the fast food business wanted to expand their presence in international
markets. Here it was confronted by two major issues:

 Whether to go ahead with its blue ocean strategy of “plant the flag ” and keep on expanding
its presence in diverse geographical locales which would lead to extensive customization of
menu and other operational changes or concentrate on consolidating its existing businesses
and focus on making the business profitable and have a centralized operational model
 If Jollibee chooses to continue with its strategy of expanding its business base into potential
markets then it will have to decide upon the future markets where it can enter taking into
consideration the different pros and cons. The markets in consideration are Papua New
Guinea, Hong Kong and California.

BUSINESS LANDSCAPE ANALYSIS

1. PORTER’S FIVE FORCES MODEL:

Bargaining power of
suppliers

Threat of new Threat of

Industry rivalry substitutes
entrants

Bargaining power of buyers

Fig1: Porter`s five forces model

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Fast food industry is highly competitive.

 Industry rivalry – Jollibee has had to face severe competition within the fast food industry.
The source of rivalry mainly stems from price wars and marketing innovation. Some of its
major competitors being multinational giants like McDonalds KFC as well as cheap local fast
food chains operating in countries like Indonesia.
 Threat of substitutes – It is low to moderate. The substitutes range from local street food to
high end restaurants. However, street food is unhygienic, whereas in restaurants the service
was not quick. Hence, service and cleanliness was an advantage for Jollibee.
 Threat of new entrants – There exist quite a few barriers for new players intending to enter
the bandwagon. Hence there is a lower threat of these. Entry barriers are:
 Inability to gain access to necessary technology and specialised know-how
 Brand preferences among the customers for already established names.
 Customer loyalty
 Capital requirements
 Economies of scale
 Distribution channels
 Bargaining power of buyers – The bargaining power of customers was quite high. The
‘customer first’ policy of Jollibee shows it all. At the same time although they had other
options available like McDonalds and KFC, the extent of customisation of menu provided by
Jollibee attracted customers to its stores.
 Bargaining power of suppliers – The bargaining power of suppliers was low. Though some
raw materials are imported, the country’s stock of technically skilled people was an
advantage. Moreover, Jollibee’s policy of training the staff at every location makes it feasible
to hire even non-technical staff.
2. ANSOFF’S MATRIX

Fig 2: Ansoff`s matrix

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In the Philippine market, Jollibee started off with market penetration. Later, due to
competition from multinational giants like McDonalds, it resorted to the ‘product
development’ strategy.

In the context of its international operations, Kitcher’s approach of ‘targeting expats’ and
‘plant a flag’ was primarily a ‘market development’ strategy. They wanted to target the
Filippino expatriates with the local Filippino taste. Through expansion in international
markets, Jollibee has been able to spread its risks.

Jollibee has devoted a considerable amount of resources in identifying the consumers’ taste
and preferences as well as in the R&D, manufacturing and marketing of new products. It has
extended its product line to include all the market segments. Existing products are improved
and re-launched with a local touch. Thus, ‘diversification’ has been a major (rather the
primary) factor in Jollibee’s success, especially offshore.

INDUSTRY LEVEL ANALYSIS

1. SWOT ANALYSIS:

Strengths Opportunities
 Understanding local tastes  Growing nuclear families
 Quick service  Growing urban lifestyle
 Affordable prices  More disposable income
 Strong quality control
 Competent/well-trained staff

Weaknesses Threats
 Weak brand name  Increasing consciousness about healthy
 Financial constraints diet
 Confusing logo (logo signified a toy  Opposition on non-vegetarian items
chain or candy store) from organisations like PETA, NGOs,
Religious organisations
 Availability of healthier options like
Ready-to-eat food

2. PEST ANALYSIS:
Political – Government policies and regulations may hamper the future prospects of the fast
food industry in certain countries.

Economic – Availability and affordability of the factors of production particularly land and
labour. Differentiation of products, distribution channels etc.

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Social – Customer preferences, fast-paced lives

Technological – Technological up-gradation is a necessity in achieving the economies of

scale. Technology like automated assembly line will ensure more consistency in the products
offered. Touch-screen menu will eliminate the need for personnel to take down orders from
customers, thus saving a lot of time and cost.

COMPANY ANALYSIS

Jollibee is a fast-food restaurant chain based in the Philippines. It also includes many popular brands
like Chowking, Greenwich, Red Ribbon, and Manong Pepe's. Since its inception, Jollibee has become
an increasingly profitable fast-food chain with 686 restaurants in the Philippines and 57 in other
countries employing 29,216 workers. Including all its brands, JFC has 1,804 stores worldwide and
total sales of more than US$1 billion as of December 2008.

The Jollibee mascot was inspired by local and foreign children's books. Jollibee created the product
names "Yumburger" and "ChickenJoy". The company was incorporated and leased a house on Main
St. in Cubao, Quezon City as the first headquarters. Lumba (supporting consultant) formulated a
long-term marketing strategy that is listing up a number of consumer promotions and traffic building
schemes.

The commissary system is responsible for the value adding processes done to produce genuine
Jollibee products. Being part of the value chain, the manufacturing process is highly technology
dependent to ensure that the food is consistent to Jollibee standards and is produced safely and
cheaply without sacrificing the quality.

The key to handling the complex commissary operations is state-of-the-art automation,

computerization and continuous improvement in manufacturing equipment and processes. Jollibee's
automated operations not only cut production time and ensure consistent quality from batch to
batch but also ensures food safety by minimizing handling and maintaining the highest standards of
cleanliness.

Expansion and acquisitions

The company acquired 80% of Greenwich Pizza in 1994, enabling it to penetrate the pizza-pasta
segment. From a 50-branch operation, Greenwich has established a strong presence in the food
service industry. In early 2006, Jollibee bought out the remaining shares of its partners in Greenwich
Pizza Corp., equivalent to a 20% stake, for P384 million in cash.

In 2000, the company acquired Chowking, allowing Jollibee to be part of the Asian quick service
restaurant segment. In 2007, Jollibee acquired the Chinese fast-food chain Hongzhuangyuan. On
October 19, 2010, it has been announced that Jollibee intends to acquire a 70 percent share of Mang
Inasal, a fast-rising fast food chain specializing in barbecued chicken.

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Jollibee purchased 70% of Taipei restaurant Lao Dong in June and Chun Shui Tang tea house in 2006.
In 2004, Jollibee acquired Chinese fast food chain Yonghe Dawang for $22.5 million. Jollibee entered
into a joint-venture contract with US-based Chow Fun Holdings LLC, the developer and owner of
Jinja Bar Bistro in New Mexico, in which Jollibee will have a 12% stake for $950,000.

On August 26, 2008, Jollibee formally signed a P2.5 billion ($55.5 million) deal with Beijing-based
Hong Zhuang Yuan through its wholly owned subsidiary Jollibee Worldwide Pte. ltd. The sale is
subject to the approval of China's Ministry of Commerce.

On October 2010, Jollibee acquired 70% of Mang Inasal, another Filipino food chain, for P3 billion
($68.8 million). Currently the largest fast-food chain in the country, it also has locations in the United
States, Saudi Arabia, Hong Kong, Vietnam, Malaysia, Indonesia, Dubai and Brunei

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.

KEY DRIVERS AND ISSUES BEHIND THE DIFFERENT DECISIONS TAKEN

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.

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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

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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.

NEW MARKET ANALYSIS AND RECOMMENDATIONS

PAPUA NEW GUINEA: Marketing to the populace here will be of major challenge as it is one of the
most diverse countries of the world with over 850 languages being spoken by a population of just
seven million. 85% of the people here depend on agriculture for livelihood. At the brink of Papuan
independence in 1975, there were 40,000 expatriates (mostly Australian and Chinese) in Papua New
Guinea.

Taking into account these factors the marketing strategy should be adapted to communicate to the
predominantly rural and heterogeneous crowd. PNG follows recognition of bonds of kinship with
obligations extending beyond the immediate family group. Thus Jollibee should position itself as a
place to bond over food rather than the functional qualities of Champ, Jollimeal etc. Also PNG will
require major customization of the menu as it was required to serve a crowd which was a mixture of
Australians and Chinese. The operational aspects will also have to be tweaked around to incorporate
more equity participation from the company so as to help develop the market first and then go into
product development. The price point will also have to be adapted to cater to a larger population in
PNG. It`s doubtful whether it will be able to support the 20 stores plan of Jollibee. However this can
be achieved if they take over the existing operations and business of the Australian Chicken
restaurant chain.PNG meanwhile was going through a civil war through 1990s and only post 1997 it
tried to restore peace. Considering the high risk involved from both a target market perspective and
political instability we would suggest that Papua New Guinea will not be a viable market

CALIFORNIA: Having successfully established themselves in Guam, a territory of the US, Jollibee
have fair enough knowledge about the US customer`s food habits and preferences. California is a
good choice as it is the most populous province in the US. A highly diversified economy of California
makes it less vulnerable to environmental risks. In 1997 the GDP for the state was approximately one
trillion. Annual growth rates in 1998 and 1999 averaged 7.75. Also Dala City in California has a large
concentration of Filipino with one of the highest concentration of Filipino expatriates. All these
favourably weigh in favour of California.

The marketing strategy will have to be adapted radically to market to the predominantly urban
California crowd. Jollibee will have to in particular focus on the product features, packaging, sales
promotion etc. to adapt to Californian market. New age tools like web marketing, promotions via

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TVCs, magazines, flyers etc will have to be integrated in the entire marketing plan. This has to be
supported by sufficient branding exercise to break the clutter and position itself differently
compared to the incumbents (McDonalds, KFC etc). Instead of trying to westernise its offerings it
should position itself as an authentic oriental Filipino fast food chain. They won`t be able to break
the clutter if they dish out the exact same items that McDonalds or KFC offer-they have the first
mover advantage here and also a greater brand equity in their backyard. A service oriented
architecture and good supply chain mechanism are required to support the highly competitive
market in California. Also they will have to adhere to FDA norms and come up with the required
ecolabelling practises and composition specification standards. Their communication strategy must
also take care of the following features which are radically different from eastern cultures:

 Individualistic western vs Collectivist eastern culture

 Low power distance of west vs high power distance of east
 High risk taking of west vs low risk taking of east

Going ahead as a JV with the Manila based business man may dilute the risk of Jollibee but it should
look at favourable partners in US to succeed. According to us this is a market with high risks but also
which offers a very matured market and fast food awareness is arguably the best in the world...”fast
foods Silicon Valley”. So Jollibee as a fast food chain will get to learn a lot from this location which
can help it better run its overall business.

HONG KONG: It’s one of the freest 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 respect a very international province with very high
foreign investments and is consistently ranked very high in the Ease of Doing Business Index.

Given such a scenario it should be very profitable to be a part of the booming economy. However
right after it got independence from the United Kingdom in 1997 it was severely hit by the Asian
financial crisis. Also given that 95% of the population are Chinese complicates matters. To market to
the dominant Chinese population Jollibee will have to modify its offerings. At the same time it should
get more local staffs in the operations and have a Chinese at the helm. It will need to pump in lots of
money to survive in the face of the financial crisis and also to build a brand amongst the locals. So it
will first have to market to the locals and have an internal branding exercise for their employees to
communicate their preference and interest of working with the locals and be responsive and
sensitive to their culture. However considering the rigid organisational structure and attitude of
Jolibee it looks highly improbable that they will tamper with their menu which rules out this option.

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OUR HYPOTHESIS: Although Jollibee`s market share and sales were increasing because of
internationalisation of its business yet it was becoming less profitable because of such ventures.
This can be proved by a financial analysis of Jollibee:

FINANCIAL ANALYSIS OF JOLLIBEE:

Jollibee is on an expansion spree, especially in the last 3 years (1994,1995, 1996). One of the
hidden reasons which is supporting Jollibee is almost constant exchange rate (shown in Fig-
1)

Pesos/Dollar EPS
30 1
25 0.8
20
0.6
15
0.4
10
5 0.2
0 0
1992 1993 1994 1995 1996 1992 1993 1994 1995 1996

Fig-3 Fig-4

In the first glance at the balance sheet it might be alarming to see that the Earnings per
share of the company is decreasing from an increasing trend (Fig-2), but it is perfectly fine as
the company expanded a lot in the years 1995 and 1996 (refer Table-1).
Company Each Franchise Each Each
Year owned year s year Total Year

1992 25 4 89 9 112 13

1993 30 5 96 7 124 12

1994 44 14 106 10 148 24

1995 55 11 113 7 166 18

1996 84 29 124 11 205 39

1997 96 12 134 10 223 18

Table-1

There is a big jump of company owned stores from 5 to 14 in the year1994 and in 1995

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again they expanded by another 11 stores. Even the Franchise number increased
considerably during these years.
When we looked into the sales and net income of Jollibee for the past years the data looked
encouraging.

sales in pesos Net income in Pesos

8000000000 700000000
7000000000 600000000
6000000000 500000000
5000000000
400000000
4000000000
300000000
3000000000
2000000000 200000000
1000000000 100000000
0 0
1992 1993 1994 1995 1996 1992 1993 1994 1995 1996

Fig-5 Fig-6
Both sales and Net income were increasing at a CAGR of 31.6% and 31.5% respectively. But
when we looked deep into the financials it is not all that good, from 1995-1996 Total sales
of the company increased by about 24.4%, but the cost of sales increased by a staggering
46.2%. Along with this the debt of the company increased a lot too, sum of advances and
prepaid expenses almost doubled compared to the previous year.
This situation can further be proved by looking at the current ratio of the company:

Current ratio
2
1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
1992 1993 1994 1995 1996

Fig-7

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Current ratio of the company is falling drastically for the last two years, which is alarming.

RECOMMENDATION:
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 organisation’. 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

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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.

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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

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.

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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.

 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.

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 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.

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