International Expansion

UGBA 178 International Business, Bennet Zelner

Monica A. Tran, 164780!
"ection 1, #e$ruar% &, 00!
Tran, Monica
EXECUTIVE SUMMARY
Jollibee was able to attain a competitive advantage over McDonalds by doing two
things: (1) Retaining tight control over operations management, which allowed it to price below
its competitor and () !aving the "le#ibility to cater to the tastes o" its local cons$mers% &hile
Tony 'itchner was hired to develop these competitive advantages abroad, his international
strategy o" (planting the "lag) and (targeting e#pats) was e#ec$ted hapha*ardly and res$lted in
losses "or the "irm% !is event$al dismissal was largely d$e to his inability to manage intra+"irm
tensions%
The arrival o" ,oli Ting*on mar-s a critical .$nct$re "or Jollibee, where it will begin
entering the /0 mar-et% The -ey to Jollibees s$ccess in Daly 1ity will be its ability to "ind a
local partner that can leverage its organi*ational advantage, while navigating the challenges o"
cond$cting b$siness in the /nited 0tates%
I. Creating Competitive Advantages in the Filipino market
Jollibees s$ccess in its home mar-et developed as a res$lt o" its ability to better meet the
needs o" the 2ilipino c$stomer% 3ltho$gh its s$ccess was mediated by the political and economic
crises o" 1456, Jollibee was still able to deliver a prod$ct that was both cheaper and better tasting
than that o" McDonalds% The ability o" Jollibee to adopt its men$ to local tastes, as well as the
(7 2s) o" its operations management are two organi*ational capabilities that led the company to
develop a competitive advantage over McDonalds%
The ability to p$sh "orward the 1hamp b$rger highlights another so$rce o" competitive
advantage that was recogni*ed by Tom 'itchner: "le#ibility% 3s one o" the (7 2s,) "le#ibility was
an asset that Jollibee, co$ld leverage more easily than McDonalds% 3s a yo$nger company,
Jollibee has the ability to adapt its men$ items witho$t .eopardi*ing its brand image% 8t also has

Tran, Monica
the advantage o" having a "latter organi*ational str$ct$re that allows it to respond to changes in
the mar-et more 9$ic-ly% 8t is important "or the company to recogni*e "le#ibility as a
competitive advantage, since it will become a "o$ndation "or Jollibees international strategy% :es
b$t with a lot o" di""ic$lties%%% not m$ch ("le#ibility) a"ter all%%
Tight operations management and the "le#ibility to adapt to local tastes increases the
wedge between c$stomer willingness to pay and s$pplier opport$nity cost% These savings in cost
are then passed onto the c$stomer, who is also receiving a prod$ct that better meets his or her
needs% The ability o" Jollibee to contin$e creating val$e "or its c$stomers by leveraging these
activities will be the -ey s$ccess "actor "or its international e#pansion% The brand name at home
was achieved also thro$gh some trade barriers that helped J; a lot<
II. Ton !it"hner#s International Strateg
Tony 'itchner was hired to b$ild the global Jollibee brand with the d$al goals o"
positioning Jollibee as an attractive partner, while generating reso$rces "or e#pansion% 8n order
to become one o" the (top 1= "ast "ood brands in the world,) 'itchner implemented a two+part
international strategy which comprised o" (targeting e#pats) and (planting the "lag%)
'itchners idea o" (targeting e#pats) allows the company to ease its transition into an
$n"amiliar mar-et% 3ltho$gh there is the ris- o" targeting too narrow o" a segment, Jollibees
s$ccess in the niche mar-et wo$ld allow it generate moment$m "or the companys e#pansion%
The concentrated mar-eting campaign allows the company to generate stable reven$es that can
be $sed to s$pport Jollibees entry into other segments, while the pop$larity amongst e#pats
co$ld generate p$blicity and attract wal-+in tra""ic "rom non+2ilipinos% !owever, (targeting
e#pats) will only lead Jollibee to become a global brand i": (1) Jollibee correctly targets e#pats
who have a need and want "or the prod$ct and th$s avoid repeating its mista-e in the Middle
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>ast, and () The company contin$es to b$ild its competitive advantage thro$gh learning and by
appealing to a broader a$dience%
?n the other hand, 'itchners decision to (plant the "lag) re"lected a desire to b$ild an
empire $nder his leadership, rather than a strategically+so$nd decision "or the "irm% 3ltho$gh
'itchner hoped to leverage Jollibees competitive advantage by entering new geographic mar-et,
his rapid e#pansion strategy was $n"oc$sed and poorly e#ec$ted% ?- b$t planting the "lag had
also signi"icant 2M3<< (lac- o" competitors) The $npro"itable vent$res in the Middle >ast co$ld
have been easily avoided had 'itchner researched the mar-et prior to entering% 'itchner also
neglected to consider the large transaction costs associated with establishing mar-ets in new
co$ntries% 'itchners desire to be "irst+mover in a n$mber o" small, $ndeveloped mar-ets wo$ld
not have bro$ght the prestige needed to win the "irm better partners% (@lanting the "lag) only
showed that Jollibee -new how to repeat its s$ccess% 8n order to compete on the level with
m$ltinationals, Jollibee wo$ld have to ta-e its per"ormance to the ne#t step and prove that it
co$ld contin$e to b$ild its competitive advantage% :es, this phrase needed to be $npac-ed a bit
more%%%
IV. The $reakdo%n o& the 'rgani(ation
3ltho$gh Tony 'itchner was hired to bring more str$ct$re to the 8nternational Division,
he "ailed to b$ild the rapport needed to p$sh "orward the divisions initiatives% 'itchner began
creating a (world+class company) by stealing employees "rom domestic operationsAa poor "irst
impression that lasted the d$ration o" his career at Jollibee% ;y setting the stage "or competition,
'itchner ens$red that his actions, even i" they were bene"icial "or the company, wo$ld meet
criticism "rom the domestic side% 'itchner sho$ld have recogni*ed that the hostility coming
"rom Domestic was $nderscored by a "ear that their division wo$ld be eclipsed by 8nternational%
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Rather than c$ltivate this "ear, 'itchner sho$ld have made it e#plicit that the 8nternational
Divisions s$ccess wo$ld have re"lected on the company as a whole% ;y simply increasing
comm$nication, 'itchner co$ld have enlisted Domestics s$pport in his endeavors%
/nder the companys early divisional str$ct$re, val$e+chain activities s$ch as RCD and
2inance were controlled by the @hilippine operations% The "ail$re to gain access to these
reso$rces hindered 8nternationals ability to modi"y the logo, store layo$t, and men$A
modi"ications, which were potentially bene"icial "or Jollibee% 'itchner "ostered tension within
the organi*ation and it was $ltimately this contrib$tion that led to his dismissal%
VI. The )*estion Fa"ing +oli Ting(on, -ap*a +e% .*inea/ 0ong !ong/ or 1al Cit
3s an $ndeveloped mar-et, @ap$a ,ew D$inea represents the best location "or Jollibee to
leverage its organi*ational advantage% &ith "ew competitors, Jollibee co$ld easily capt$re the
mar-et and set the standard% !owever, entry into ,ew D$inea "alls $nder the legacy o"
'itchners (plant the "lag) strategy and will $nli-ely be able to s$pport the critical mass o" =
stores% 3ltho$gh the domestic partner is willing to "ront the ris-s ("inance and location
contracts), these "$nctions sho$ld be internali*ed by Jollibee beca$se they are cr$cial to store+
level pro"itability% 0ince the bene"its o""ered by the local partner are $ncertain and pro"it
potential is low, Jollibee sho$ld not see- to enter ,ew D$inea at this time%
&hile the "o$rth store in !ong 'ong represents a val$able learning opport$nity, it will
not generate the reven$es needed to b$ild a global empire% 1atering to the local 1hinese palette
wo$ld allow Jollibee to b$ild its competitive advantage by learning to balance "le#ibility in men$
o""erings with consistency across the global brand% 3dditionally, a s$ccess in cosmopolitan
!ong 'ong co$ld give Jollibee the brand e#pos$re it needs to attract better partners% !owever,
given the sta""ing iss$es and $ncertainty involving the local 1hinese c$stomer, it wo$ld be better
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"or Jollibee to improve its c$rrent operations, rather than to commit additional reso$rces to a new
store%
The /nited 0tates is home to some o" Jollibees most "ormidable competitors% 3s a late+
mover, it will be di""ic$lt "or Jollibee to obtain access to the distrib$tion channels, s$ppliers, and
store locations which allowed it to become a cost leader in the @hilippines% 3dditionally, aside
"rom its e#perience in D$am, Jollibee does not have any real e#perience operating in a &estern
b$siness environment%
?n the other hand, Daly 1ity represents a mar-et with h$ge pro"it potential% The
diversity o" the area allows Jollibee to broaden its niche to incl$de the 3sian+!ispanic segment
and to do so witho$t having to ma-e ma.or ad.$stments to its men$% 3ltho$gh its e#perience in
D$am is no g$arantee o" s$ccess, it provides a plat"orm "rom which the co$ntry can b$ild its
competitive advantage by learning to adapt its men$ "or the tastes o" mainstream 3merica%
Diven the three alternatives, Jollibees most viable option is Daly 1ityAgiven that it is
able to obtain a partner who can help it overcome the challenges o" operating in the /0% Ting*on
sho$ld only "ollow thro$gh with the Manila+based b$sinessmen i" they are "amiliar with the "ast
"ood ind$stry in the /0E otherwise, the company will need to "ind a local partner%
3dditionally, heavy investments will need to be made into 8T systems, which will allow
Jollibee to manage day+to+day operations "rom their head9$arters in the @hilippines% 8n order to
align the goals o" the vario$s geographic divisions, Jollibee sho$ld see- to create two strategic
b$siness $nits (0;/) $nder the company brand: 8nternational and Domestic% This will allow the
8nternational Division to ens$re greater coordination across 8T activities, as well as pooling
proc$rement p$rchases wherever geographically possible% 0ince both 0;/s will be $nder the
corporate $mbrella, this sho$ld help to increase cooperation at a "irm+wide level%
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Tran, Monica

Gery well done, yo$ analysis is solid and so$nd<
:o$ ma-e a very good $se o" the "acts< 3n analysis sho$ld not "oc$s on s$mmari*ing "acts which
8 do already -now, on the contrary "acts have to be $sed to s$pport yo$r arg$ment%
:o$r "inal recommendations are well str$ct$red, in line with analysis, and yo$ provide
ab$ndance o" evidence% &hat is partic$larly important, is that yo$ ac-nowledge the e#istence o"
co$nterarg$ments% (@reventive 0tri-e) is a very good strategy in these -ind o" assignments, there
is always a second side o" the story that needs to be addressed, and when yo$ do this
convincingly, yo$ gain credibility<
'eep it $p<<
:o$r grade is 3
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