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Autor:  anton  03 June 2011
Tags:  Jollibee
Words: 1875   |   Pages: 8
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Jollibee Foods Corporation: International Expansion

1.1. What sources of competitive advantage was it able to develop against McDonald's in its home market?

Firstly, Jollibee was the first mover in the sector of burgers in Philippines, shaping customer preferences and expectations, instead of McDonald's or KFC.

Secondly, Jollibee was young, and very small in comparison of McDonald's whose force worldwide is standardization. The burger company serves millions of exactly identical sandwich each year in dozen of countries so that McDonald's customers can find their favourite BigMac taste wherever they go. McDonald's is used to reducing costs by having huge economies of scale. But on new markets, such as Philippines, this strength can turn into a weakness. Indeed, as we said the tastes were not shaped by McDonalds, and the American juggernaut is not flexible enough to adapt to local customer needs.

Jollibee, thanks to its smaller size, its local resources and understanding of the local tastes, took advantage of McDonald's lack of flexibility. The substantial creative menus with unique Filipino recipes and reasonable price brought fantastic consumer feedbacks and a good reputation to the company.

1.2. How was Jollibee able to build its dominant position in fast food in the Philippines?

Back to the oil crisis in 1977, Jollibee handled the difficult situation with smart solutions. At the earlier period, when Jollibee realized that an increase in oil prices has a direct impact on controlling its production cost, the firm decided to change its existing business from ice cream to burgers. This shows that the management was clearly aware of the climate changes and was able to make strategic decisions accordingly. In addition, the company success is mediated by the political and economic crises occurred in 1983. While McDonald's and other foreign investors were slowing down in their investment and business development, Jollibee kept pressing ahead and investing more and was still able to deliver its products with cheaper price and better taste than those of McDonald's. As a result, during the crisis Jollibee intrepidly developed to occupy the market with 31 stores and dominantly created brand awareness against the famous foreign brand like McDonald's.

They financed the growth internally but supplemented their management with professional expertise however! (Marketing and Finance). There is the base of the Jollibee successful structure: awareness of the management and assistance of professionals.

In order to consolidate their business they ran into diversification of their offer by taking Greenwich Pizza Co. over and having a joint venture with DeliFrance.

When McDonald's entered the market, Jollibee management proceeded rationally: В‘what advantage do we have over the giant?' They knew that the locals did prefer their sandwich and that McDonald's could not easily adapt. They, however, tried to understand why McDonalds was gaining market shares, and attacked their American competitor with their own weapons: big burgers called В‘Champ' to compete with the BigMac's success.

As a younger company, Jollibee was much more flexible than its American competitor. The firm faced its rival bravely without jeopardizing its brand image.

2. How would you evaluate Tony Kitchner's effectiveness as the first head of Jollibee's International division? Does his broad strategic thrust make sense? How effectively did he develop the organisation to implement his priorities?

First, he focuses on creating the new image for Jollibee as the world class company. Besides paying attention to all aspects, even small details such as the company's dress code which represents the business confidence and trust, Kitchner highlights his belief in В‘World Class', not В‘Local' in Jollibee's productivity. He does the research on each target market and then mainly focuses on the local preferences. Consequently, he comes up with the adjusted menus and new marketing strategies to attract each target differences.

Second, opening the new division of Franchise Services Managers (FSM) is also a good idea. It helps all operations become more effective in quality and standard controlled with the useful suggestions according to the frequent working report from the local project manager at the new opening stores to the head office. It is the direct market research and the survey on problems and solutions in each new market.

Finally, Kitchner's idea of fast-mover advantages in the fast food industry is suitable for a market that needs fast progress and wide recognition. It is an effective idea in terms of marketing strategy to attract the customers steady because according to this idea advertising and promotion are needed to gain the brand awareness and remain the brand position. The faster Jollibee enters the market, the more efforts it has to put on the plan. Therefore, it might be considered as the effective and progressive idea which requires enthusiastic and consistent plan of works.

For the broad strategic thrust, it might make sense just in the short term of the peak time. He could address the concept of В‘planting the flag' only when Jollibee entered the new competitive market to create brand awareness. However, Jollibee's menu and marketing strategy need to be adjusted to its target customers. Well researched information and enormous budget are needed to implement all action plans. As a result, it might not work well in long-term business. For a long-run business, it would eventually settle on the idea of going step-by-step with the concise plans to gain profits in return. Nevertheless, another strategy which focuses on the expats, even though it is quite a narrow plan to focus on the Filipino expats, it is a good way to start a business in the overseas markets. At least there is a ready customer base in such countries.

He implements his priorities effectively as he is innovative in trying to make the brand international and develop organization by forming international division, including modifying the uniform, logo, store decoration, slogan, packaging and so many more. Kitchner has good skills in management and pluricutural idea. He gets through the research of the new market directly and recruits the qualified people to be in the right positions. Kitchner did not make the same mistakes as McDonald's. He hired local managers highly involved in the decision process. He insisted on adapting the design of the franchisees to the local tastes and habits. Jollibee restaurant were thus an interesting mix of Jollibee standard design and functionality and local arrangement, created by both locals and managers from the international division of Jollibee. This В‘Global' (globally locally focused) approach and culture were very relevant, especially in the food retail sector allowing Jollibee to enjoy large economies of scale without hurting too much the local mentalities and habits. Furthermore, the TTC's view of franchisee (assisting more than controlling), allowed creativity and flexibility. This approach should generate valuable ideas and techniques for the company. The Jollimeal and other adaptable menus are good examples of that successful mix.

However, Kitchner did not pay enough attention to the Philippines feeling about the international operations. As a result tensions arose between the international division and other department. But that brickbat should more concern TTC himself than Kitchner since he was responsible for the whole organization.

3. As Noli Tingzan, how would you deal with three options described at the end of the case? How would you implement your decision?

The 3 options described are: Planting the flag in Papua New Guinea, Expanding the base in Hong Kong, and Supporting the settlers in California.

1. Planting the flag in Papua New Guinea

Papua New Guinea is a small country of five million people currently served by one poorly managed 3-store fast-food Australian chain. By entering the market, Jollibee could raise the quality of service and food in order to capture the Australian chain's market share while discouraging further entrants. There were however fears that Papua New Guinea could not support the 20 stores that were target critical mass for new markets.

2. Expanding the base in Hong Kong

The initial proposal is to expand to a fourth store in Hong Kong. The issue in that case is that the new store would be located in an area which saw far fewer Filipinos than in the previous areas and, as a result, would have to depend on locals. Appealing to the locals had however proven to be very difficult in Hong Kong. Several factors may explain this failure:

В• Jollibee had been unable to hire many local Chinese as crew members. Chinese customers who did not speak English well were worried that they would be embarrassed if they were not understood by the predominantly Philippine and Nepalese counter staff.

В• The weak brand recognition among locals compared to McDonalds or KFC

В• The rigidity over menu offerings. Franchises are not allowed to adapt menu to Chinese preferences.

3. Supporting the Settlers in California

The Californian market is interesting for several reasons:

В• California is the birthplace of fast food. Jollibee could win enormous prestige and publicity by gaining a foothold in the birthplace of fast food

В• Large Filipino community

В• The traditional menu could appeal to other groups of Americans based there

(South American)

The plan was to branch out geographically to the San Francisco, San Diego regions, and demographically to appeal to other Asian-American and Hispanic-American consumers. One big issue should be mentioned: because Jollibee would deal with a new labor cost and highly competitive environment, it should adapt its labor-intensive Philippine operating methods by developing new equipments and cooking processes.

A question of priorities....

All of the 3 options seem promising. But in order to take a decision, Noli Tingzon should clearly define his priorities. Does he want to go on with the "Planting the flag Strategy" (Papua New Guinea, California) or rather concentrate on the newly entered markets (Hong Kong)?

Papua New Guinea and California could enforce Jollibee as a world class player, but concentrating on current market could be seen as more efficient. A lot of work has indeed still to be done in Hong Kong in order to be competitive with the other current players. For instance, Jollibee should hire and promote Chinese managers. As Chinese workers prefer to work for Chinese, it will be then easier for Jollibee to hire Chinese counter staff. Also, Jollibee should allow more flexibility over menu offerings and increase the Hong Kong marketing budget in order to increase brand awareness.

If Jollibee wants to go on with the В‘Planting the Flag Strategy', it had better go first to Papua New Guinea, where it can replicate its current business model and will benefit from the first mover advantage. California is also promising due to the local Philippine community which could be targeted by Jollibee. But as Jollibee would not be able to benefit here from the first mover advantage, and that the competition on this market appears unlikely to change in the 10 coming years, it should be the last step to be undertaken.

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