Jollibee

A quick analysis of the industry that Jollibee operates in will bring to light several
important issues that it faces in different areas. The company started in 1975 and
expanded quickly throughout the Phillipines . Upto 1983, Jollibee faced no serious
challengers. The entry of McDonalds into Phillipines changed things, and it was during
this year that Jollibee first invested heavily in advertising.

Increasing globalization
Sourcing beef materials from different countries and locating in foreign markets both
introduce the company to global developments such as exchange rates and tariff and non-
tariff barriers that could potentially change how operations continue in the future.
The migration of large numbers of Fillipino workers to different countries is another
factor to consider and exploit.
Industry profitability
Minimizing the company's operating cost by creating an efficient production is one way
to increase its profitability. This can be done by adopting new technologies that can speed
up the company's operation. These can greatly help the company to capitalize on
economies of scale. The same concept forces other players to innovate and cause changes
in the industry.

Interest of the buyers for differentiated products

Differentiated products are necessary to cater to different segments and to retain the
interest of the existing customer share. Retaining the existing market share and expanding
market share , both require differentiation in terms of variety of food provided in the
menu.

Tony Kitchners Strategy- An analysis

. Tony Kitchner came to Jollibee in January 1994 and it may be argued that it appeared
he was fairly successful over his three years. During his time, there was great expansion
and increase in sales. He used a ‘plant the flag ‘strategy to expand Jollibee overseas.
Kitchner built stores in countries that had little or no fast food presence. Kitchner was of
the opinion that by expanding in countries that had little competition from well known
brands, he could build brand recognition, which would increase customer loyalty and
sales. For eg. Jollibee's often found it very difficult to enter a market where McDonald's
already existed. As a late-mover, it was difficult for Jollibee to obtain access to the
distribution channels, suppliers, and store locations which allowed it to become a cost
leader in the Philippines. Total sales, Operating income and net income doubled over the
three year period. The fact that the percentage of inventory held, fell by half is indicative
of improved operational efficiencies. These indicators although a positive sign for
Jollibee as a whole is not indicative of the success of Kitchners strategy. Once must
remember that overseas franchises would continue to pay Jollybees royalties and
franchisee fees irrespective of whether they were incurring profits. In many cases, stores
shut down due to mounting losses and Kitchners unplanned and haphazard strategy
unsupported by proper analysis and research, failed miserably. Kitchner’s idea of
“targeting expats” was aimed at allowing the company to ease its transition into an
unfamiliar market. Although there was the risk of targeting too narrow of a segment,
Jollibee’s success in the niche market would allow it to later appeal to a broader
audience. Although this sounds reasonable, results have shown that a deeper
understanding lifestyle and preferences of the expats was needed.

Jollibee-Marketing Analysis
Jollibee was started as an ice cream parlor and later discovered its
destiny as a hamburger chain in 1978. Jollibee has attained worldwide
admiration in so short a time. Today, it owns Chowking, Greenwich,
Red Ribbon, and Philippine franchise of Deli France. It has become one
of the biggest fast-food chains in the world with more than1,600 stores
worldwide.

Jollibee was able to attain a competitive advantage in Philipines over

McDonald’s by doing following things:

 Jollibee was the first to enter the market.

 Retaining tight control over operations management, which
allowed it to price below its competitor.
 Having the flexibility to cater to the tastes of its local consumers.

As Jollibee entered international markets, it faced new challenges. The

fast food industry is highly competitive and price wars and marketing
innovations are seen frequently. The rivalry is also centered on the key
success factors of the industry, which are good food, good, service and
reasonable pricing. Rivals are somewhat equal in capabilities and
opportunities, thus making the competition stiffer. Internationally well-
established players like KFC and McDonalds had high brand values that
Jollibee found difficult to compete with. The threat of substitute
products is considerable. Local street food and high-end restaurants
form two ends of a range of substitutes. Potential entrants face entry
barriers that will hinder them from entering the industry. These are
the inability to gain access to technology and specialized know-how,
brand preference and customer loyalty, capital requirements,
economies of scale, and strategically situated distribution channels.
Tony Kitchner

Tony Kitchner was hired to build the global Jollibee brand with the dual
goals of positioning Jollibee as an attractive partner, while generating
resources for expansion. In order to become one of the “top 10 fast
food brands in the world,” Kitchner implemented a two-part
international strategy which comprised of “targeting expats” and
“planting the flag.”

Targeting Expats

Kitchner’s idea of “targeting expats” allows the company to ease its

transition into an unfamiliar market. Although there is the risk of
targeting too narrow of a segment, Jollibee’s success in the niche
market would allow it generate momentum for the company’s
expansion. The concentrated marketing campaign allows the company
to generate stable revenues that can be used to support Jollibee’s
entry into other segments, while the popularity amongst expats could
generate publicity and attract walk-in traffic from non-Filipinos.

Recommendation:
“Targeting expats” will only lead Jollibee to become a global brand if:
• Jollibee correctly targets expats who have a need and want for
the product and thus avoid repeating its mistake in the Middle
East.
• The company continues to build its competitive advantage
through learning and by appealing to a broader audience.
Plant the Flag

On the other hand, Kitchner’s decision to “plant the flag” reflected a

desire to build an empire under his leadership, rather than a
strategically sound decision for the firm. Although Kitchner hoped to
leverage Jollibee’s competitive advantage by entering new geographic
market, his rapid expansion strategy was unfocused and poorly
executed. Kitchner also neglected to consider the large transaction
costs associated with establishing markets in new countries.
Kitchner’s desire to be first-mover in a number of small, undeveloped
markets would not have brought the prestige needed to win the firm
better partners. “Planting the flag” only showed that Jollibee knew
how to repeat its success.

Recommendation
Market research prior to entering new markets will help in avoiding the
unprofitable ventures as in the Middle East.
In order to compete on the level with multinationals, rather than just
being a first mover, Jollibee would have to take its performance to the
next step and prove that it could continue to build its competitive
advantage.

Internal Conflicts

Although Tony Kitchner was hired to bring more structure to the

International Division, he failed to build the rapport needed to push
forward the division’s initiatives. Kitchner began creating a “world-
class company” by stealing employees from domestic operations—a
poor first impression that lasted the duration of his career at Jollibee.
By setting the stage for competition, Kitchner ensured that his actions,
even if they were beneficial for the company, would meet criticism
from the domestic side.
Under the company’s early divisional structure, value-chain activities
such as R&D and Finance were controlled by the Philippine operations.
The failure to gain access to these resources hindered International’s
ability to modify the logo, store layout, and menu—modifications,
which were potentially beneficial for Jollibee. Kitchner fostered tension
within the organization and it was ultimately this contribution that led
to his dismissal.

Recommendation
Management should have recognized that the hostility coming from
Domestic was underscored by a fear that International division would
eclipse their division. Rather than cultivate this fear, Management
should have made it explicit that the International Division’s success
would have reflected on the company as a whole. By simply increasing
communication, Kitchner could have enlisted Domestic’s support in his
endeavors.

Noli Tingzon

The arrival of Noli Tingzon marks a critical juncture for Jollibee, where it
will begin entering the US market. The key to Jollibee’s success in Daly
City will be its ability to find a local partner that can leverage its
organizational advantage, while navigating the challenges of
conducting business in the United States.
Papua New Guinea, Hong Kong, or Daly City?

As an undeveloped market, Papua New Guinea represents the best

location for Jollibee to leverage its organizational advantage. With few
competitors, Jollibee could easily capture the market and set the
standard. However, entry into New Guinea falls under the legacy of
Kitchner’s “plant the flag” strategy and will unlikely be able to support
the critical mass of 20 stores. Although the domestic partner is willing
to front the risks (finance and location contracts), these functions
should be internalized by Jollibee because they are crucial to store-
level profitability. Since the benefits offered by the local partner are
uncertain and profit potential is low, Jollibee should not seek to enter
New Guinea at this time.

While the fourth store in Hong Kong represents a valuable learning

opportunity, it will not generate the revenues needed to build a global
empire. Catering to the local Chinese palette would allow Jollibee to
build its competitive advantage by learning to balance flexibility in
menu offerings with consistency across the global brand. Additionally,
a success in cosmopolitan Hong Kong could give Jollibee the brand
exposure it needs to attract better partners. However, given the
staffing issues and uncertainty involving the local Chinese customer, it
would be better for Jollibee to improve its current operations, rather
than to commit additional resources to a new store.

The United States is home to some of Jollibee’s most formidable

competitors. As a late-mover, it will be difficult for Jollibee to obtain
access to the distribution channels, suppliers, and store locations that
allowed it to become a cost leader in the Philippines. Additionally,
aside from its experience in Guam, Jollibee does not have any real
experience operating in a Western business environment.

On the other hand, Daly City represents a market with huge profit
potential. The diversity of the area allows Jollibee to broaden its niche
to include the Asian-Hispanic segment and to do so without having to
make major adjustments to its menu. Although its experience in
Guam is no guarantee of success, it provides a platform from which the
country can build its competitive advantage by learning to adapt its
menu for the tastes of mainstream America.

Recommendation
Given the three alternatives, Jollibee’s most viable option is Daly City
provided that it is able to obtain a partner who can help it overcome
the challenges of operating in the US. Tingzon should only follow
through with the Manila-based businessmen if they are familiar with
the fast food industry in the US; otherwise, the company will need to
find a local partner.

Additionally, heavy investments will need to be made into IT systems,

which will allow Jollibee to manage day-to-day operations from their
headquarters in the Philippines.
In order to align the goals of the various geographic divisions, Jollibee
should seek to create two strategic business units (SBU) under the
company brand: International and Domestic. This will allow the
International Division to ensure greater coordination across IT
activities, as well as pooling procurement purchases wherever
geographically possible. Since both SBUs will be under the corporate
umbrella, this should help to increase cooperation at a firm-wide level.
HR Perspective
Regardless of location or culture, effective customer brand loyalty can
be developed through human resource departments and the
company’s personnel. The most significant difference between
domestic and international human resource management (HRM) seems
to be that with domestic HRM there is a common standard practice
that most companies are familiar with, whereas with international
HRM, there are a variety of different laws and business practices that
international companies have to consider. The similarities between
these two types of HRM can be found on a more practical level of
managing employees. Both serve to fulfill the goals, needs of
employees, and to ensure that they have the necessary resources to
successfully complete their duties.
The first step to successful International HRM is an understanding of
cultural differences and developing appropriate means of addressing
these differences

Jollibee ensures that it provides top-notch services in all its outlets.

Jollibee’s success can also be attributed to its organizational culture
depicted through “fun and friendly environment”. Through stringent
recruitment and selection procedures, Jollibee ensures a service-
oriented staff to man its outlets. Willing to pay above-average
compensation, Jollibee ensures loyalty among its staff members and
this translates into better service performance and dedication toward
serving the customers. Training programs equip its staff with the
necessary skills needed to better perform their tasks. By hiring
professionals to devise strategies for its store operations, Jollibee is
able to create a working environment that boosts high standards of
professionalism and service excellence.

However, there are other problems that Jollibee faces in the

international expansion of its business

SINGAPORE
Problem- No trust between Jollibee and the local manager

Before you start a revolution, it’s essential to fully understand

the status quo.

Working with individuals and ideas from cultures different from our
own, is complex and filled with opportunities to misunderstand and
offend everyone involved. It requires time to develop trust and
understanding for all the players involved.

It was important therefore on the part of Jollibee to take the time to

learn how and why business is done in Singapore. Results cannot be
judged based upon your culture and your country’s standards.

Pushing procedures and business strategies into a new country will

surely cause divisions, it can turn into an “us versus them” situation for
employees and customers.

The creation of hybrid strategies, using elements from cultures of both

countries, will guarantee unification and understanding for everyone
involved.

TAIWAN
Problem- Conflict due to lack of trust between partners
Need for Organizational Compatibility as a Criterion for Partner
Selection

An essential requirement for the success of the cooperation scheme is

that the participating companies have the internal capacities needed
for the performance of the activity that is the object of the agreement.
The future partners should also be compatible, from the point of view
of the congruence of their objectives and motivations.

Small differences in management style and culture between the

cooperating firms may become serious problems that make it difficult
to create synergies, which ultimately lead to poor financial
performance.

Given the difficulty of identifying the organizational compatibility

between two firms, it can be convenient to use some specific
procedures to predict whether the relationship might work. One might
assess whether each company's personnel feel at ease in mutual
discussions during the negotiation stage. With daily contact, each
partner's habits and trends can be discovered

However, the appearance of cultural conflicts does not mean they

cannot be solved. The process must start by trying to understand the
partners' way of thinking and behaving.

Strained international- domestic relations

Problem-Jealousy regarding pay and benefits

The performance appraisal and reward system,' particularly when an

organization is created to develop the cooperative activity, should be
the same for all individuals, no matter which firm they come from.
Otherwise, problems of justice and equity can arise. To prevent each
partner from favourably assessing executives coming from his or her
own organization, it is advisable to create an appraisal committee
formed by members of both firms. Stereotypes about personal
behaviour must be prevented

Recommendations

Jollibee should continue to expand to areas with high Philippine

concentration and gain a foothold in such areas first

Communicate
Impart a vision of customer service to its employees that
includes clear and understandable long-term goals. “Once
employees know the direction the organization plans to take,
they are more likely to get behind the effort”
Empower
Encourage employees to exercise the flexibility and judgment that
customers’ expect. Employees need to be able to answer a customer’s
questions and to make routine decisions.
Provide the resources the staffs require to succeed, including coaching
and training. It is important to
(1) define the working positions required to implement the strategy
and
(2) determine the needs of the human resources involved and the
convenience of training or hiring them.
A flair for negotiation: The talent to analyze differences in a
creative way, to discover shared solutions.
Flexibility: The ability to give different answers and approaches,
depending on the situation involved.
Humbleness: The ability to accept others as equally worthy of
consideration.
Acceptance of risk: Not being afraid to make mistakes.
Ability to reconstruct: The ability to repair deteriorated personal
relationships.
Integrity: Natural honesty and reliability.
Sensitivity: Finding it easy to listen and observe attentively, to
capture subtle data from conversations and non-verbal
communications, and to know when and how problems must be
addressed.
Patience: The ability to perform well in unforeseen and uncomfortable
situations.
Curiosity: A permanent interest in investigating and learning.