Management 5: Business Policy and

Strategy
Case Analysis
(Quest for growth takes Jollibee Foods beyond Asia)

BSA IV

BACKGROUND OF THE CASE

From swallowing up a congee maker in China to taking a bite of a Vietnamese pho chain's ownership, Jollibee
Foods' rise as one of Asia's leading fast-food companies has been helped by acquisitions at home and abroad. Touted

as its biggest acquisition to date, Jollibee Foods announced on Oct. 13 it would buy 40% of U.S. fast casual
restaurant chain Smashburger for nearly $100 million. Jollibee has the option of fully purchasing the burger joint
from 2018 to 2026. Investors cheered the news, with shares of Jollibee Foods rising 1% that day, shrugging off the
nearly 2% slump in the benchmark Philippine Stock Exchange index. The fresh push for global expansion helped the
company's stock regain some of its momentum. Since going public in 1993, Jollibee has seen its share price rise by
21-fold from its initial public offering price of 9 pesos ($0.19). In June last year, Chairman Tony Tan Caktiong said
Jollibee had already achieved its goal of becoming Asia's largest fast-food chain by market value and was now
setting its sights on an American acquisition.
At a forum last October, Chief Financial Officer Ysmael Baysa announced that Jollibee Foods aims to become one
of the top 10 quick-service restaurant operators in the world. The list is currently dominated by Western companies
like McDonald's and KFC owner Yum! Brands,which dwarf the Philippine company in terms of sales and store
count. To achieve its ambition, Baysa said, Jollibee Foods will need to generate half of its sales abroad. Tan Caktiong
said he had only one major condition for a U.S. acquisition: It had to be "a brand that is already doing well."
Smashburger seems to fit the bill. The company, founded in Colorado in 2007, is reportedly in the black and now
boasts 339 outlets, 184 of which are company-owned while 155 are franchised. In the Philippines, almost everyone
knows about Jollibee. It has been written about in the news and is a regular topic at Tan Caktiong's speaking
engagements. Jollibee's chubby red-and-yellow bee mascot is such a familiar icon to Filipinos that Japanese clothing
brand Uniqlo used it to market its shirts in the Philippines. Many Filipino children have memories of celebrating
their birthdays at a Jollibee restaurant, while Filipino expats living in countries without Jollibee say they long for a
Yum burger or Chickenjoy.
As of the first half of 2015, Jollibee Foods had a total of 3,001 outlets across its nearly dozen brands. A third of
those were Jollibee burger restaurants -- 880 in the Philippines and 131 abroad. In China, the company has more than
400 outlets, which contribute around 12% of its systemwide sales, including those from franchised outlets. Baysa
said in June that Jollibee Foods would like to achieve its global ambitions in the next seven years. "To have a big
presence in the U.S., Jollibee Foods has to serve the mainstream consumers," he added. Jollibee Foods has 87 stores
in the U.S., mostly in Philippine communities. Though they provide 5% of the company's systemwide sales, store
openings have not been as brisk as in the Philippines and China. "This acquisition will make Jollibee Foods' presence
in the U.S. more significant, going beyond the Filipino market and serving the mainstream consumers in the $100
billion U.S. burger market," Tan Caktiong said when the company announced the deal. Jollibee Foods is also used to
acquiring a majority stake when investing in other fast-food companies so that it can control management and
operations. Its 40% stake in Smashburger will give the Philippine company only a limited say in its affairs. With
little information disclosed about Smashburgers' financial performance and business model, analysts in Manila are
finding it difficult to say whether Jollibee Foods made a wise investment. Tan Caktiong, for his part, is prepared to
take on U.S. fast-food companies. From the very start, Tan Caktiong has embraced competition. In 1981, when his
company had just 10 outlets and was threatened by the entry of McDonald's into the Philippines, friends advised Tan
Caktiong to just sell Jollibee and open a McDonald's franchise instead. He obviously did not listen.
Tan Caktiong stepped down as CEO in 2014 but, remained active in the company, including the scouting of the
U.S. investment. Soon after its initial public offering in 1993, Jollibee Foods went on an acquisition spree that, along
with a franchising scheme, allowed the company to accelerate expansion. The company has made at least six
domestic acquisitions -- pizza chain Greenwich, Chinese-Filipino restaurant Chowking, the Red Ribbon bakery
chain, Burger King Philippines and the Mang Inasal grilled chicken chain -- are all profitable and steadily expanding.
"Jollibee Foods has a good track record in further improving food quality, product offering and growing the store
network of brands it has acquired," Sarreal said, adding that this experience is something the Philippine company can
bring to the table in its dealings with Smashburger.

VIEWPOINT

Jollibee Foods management will be used as the viewpoint.

STATEMENT OF THE PROBLEM

Based on the given article about the expansion of Jollibee Foods in the U.S. and its acquisition of
Smashburger Master, the statement of the problem:

How can the management of Jollibee Foods prolong its operations outside the Philippines, particularly in the U.S.?

OBJECTIVES
To determine the stability of operations of Jollibee Foods outside the Philippines,
To determine whether the purchased of Smashburger will help Jollibee Foods maintain its operations in the
U.S, and
To establish the Jollibee Foods brand name in the U.S.

SWOT MATRIX

STRENGTHS

WEAKNESSES

-Understanding Consumer
Tastes

-Dependence on filipino
expatriates

-Affordable Prices

-Weak international

-Good quality of food and

services

promotional campaigns

-Well-trained staffs
-Good operations management
-Location of business
-Responsiveness to
competition
OPPORTUNITIES

STRENGTHOPPORTUNITY
-Acquisition of profitable food STRATEGIES
chain (Smashburger)
-Because of the acquisition of
-New product aside from local a profitable food chain, the
menu
Smashburger, Jollibee Foods
will have a new product on
-Filipino migrants in the U.S.
their local menu and the
Filipino migrants in the U.S.
will be one of the first
customers of Jollibee since it
is very well known to
Filipinos.
With
these
opportunities, it will give the
Jollibee Foods a much greater
strength because of their
business location (maybe it
will be opened near a subway
or within an office district),
understanding of the consumer
tastes, affordable prices, good
quality of food and services.
Jollibee Foods have a very
well-trained staffs because
they have a good operations
management and because
Jollibee Foods is responsive to
competitions.

WEAKNESSOPPORTUNITY
STRATEGIES

THREATS

WEAKNESS-THREAT
STRATEGIES

-Rivalry with other

international competitors (InN-Out & Five Guys)

STRENGTH-THREAT
STRATEGIES

-Since there are a lot of

Filipino migrants in the U.S.,
they will be the first customers
of Jollibee Foods. The
weakness of the dependence
on Filipino expatriates is not
going to be a problem,
because since Filipinos knew
of Jollibee, they are really the
first target market, but they
can be of help for the Jollibee
in the advertising thru the use
of word advertising, and social
medias, this way, it can also
lessen the weakness of
international
promotional
campaign. And because of the
acquisition of a profitable
food chain in the U.S., the
Smashburger, means a new
product will be added to the
local menu of Jollibee Foods
and it will also be a good
advertising scheme of Jollibee
Foods.

-Because of Jollibee Foods -Since Filipino expatriates

good operations management, know better of Jollibee Foods,

-Customers shift to more

healthy foods
-Higher cost because of
international rate than in local

its well-trained staffs, and its

responsiveness to competition
can be use to avoid the threats
such as the rivalry with other
competitors, a shift of more
healthy foods and a high cost
because of high standard of
living in the U.S.

they are the target market of

the business. Whether there is
a shift to more healthy foods,
people cannot resist the foods
that Jollibee offers (burgers
and fries).

AREAS OF CONSIDERATION

Location of the business should be considered by the management. Jollibee Foods should be in a place where
a lot of people are going, like near a subway or in an office district.
Competitors should also be considered since Jollibee Foods will operate internationally, in the U.S., the
management should take note of the stable and high earning food chains.
Cultural Differences should be considered by the management since Jollibee Foods will operate
internationally, the staffs/employees would be of two different cultures that may lead to differences on
opinions.
International-Domestic Relationship should be considered as well because of cultural differences and issues
may arise like in the preference in hiring employees (whether a Filipino or American)

ALTERNATIVE COURSE OF ACTION

Alternative 1: Continue Jollibees operation together with its new acquired business, the Smashburger Master
since its brand name is already doing well in the course of business in that way, Jollibee will familiar itself
with the U.S. market and American taste. And Jollibee Foods has a good track record in further improving
food quality, product offering and growing the store network of brands it has acquired
Alternative 2: Jollibee should not operate within the U.S. for the reason that it is not familiar with the U.S.
market and American taste. And as we all know, U.S. market is very huge, Jollibee will have a difficulty as
new entrants because they will compete with established brands like In-N-Out and Five Guys. And there is

only little information disclosed about Smashburgers financial performance and business model, so it is
difficult to say whether Jollibee Foods made a wise investment.
RECOMMENDATION

I recommend to the management of Jollibee Foods to use alternative 1which is to start their operations
together with its new acquired business, the Smashburger Master. Since Smashburger Master is a brand that is
already doing well in the U.S. it will allow Jollibee to familiarize itself with the U.S. market and American taste. The
Jollibee can prolong its operations in the U.S. with the help of course of Smashburger and with the help as well of its
Filipino expatriates in the U.S., because they can be the means as well for Jollibee to be well-known with the
Americans. And that Jollibee Foods has a good track record in further improving food quality, product offering and
growing the store network of brands it has acquired. This experience is something the Philippine company can bring
to the table in its dealings with Smashburger.