International Expansion:Jollibee

EXECUTIVE SUMMARY

Jollibee was able to attain a competitive advantage over McDonald's by doing two things: (1) Retaining tight control over operations management, which allowed it to price below its competitor and (2) Having the flexibility to cater to the tastes of its local consumers. While Tony Kitchner was hired to develop these competitive advantages abroad, his international strategy of "planting the flag" and "targeting expats" was executed haphazardly and resulted in losses for the firm. His eventual dismissal was largely due to his inability to manage intra-firm tensions.

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.

I. Creating Competitive Advantages in the Filipino market

Jollibee's success in its home market developed as a result of its ability to better meet the needs of the Filipino customer. Although its success was mediated by the political and economic crises of 1983, Jollibee was still able to deliver a product that was both cheaper and better tasting than that of McDonald's. The ability of Jollibee to adopt its menu to local tastes, as well as the "5 Fs" of its operations management are two organizational capabilities that led the company to develop a competitive advantage over McDonald's.

The ability to push forward the Champ burger highlights another source of competitive advantage that was recognized by Tom Kitchner: flexibility. As one of the "5 Fs," flexibility was an asset that Jollibee, could leverage more easily than McDonald's. As a younger company, Jollibee has the ability to adapt its menu items without jeopardizing its brand image. It also has the advantage of having a flatter organizational structure that allows it to respond to changes in the market more quickly. It is important for the company to recognize flexibility as a competitive advantage, since it will become a foundation for Jollibee's international strategy. Yes but with a lot of difficulties... not much "flexibility" after all..

Tight operations management and the flexibility to adapt to local tastes increases the wedge between customer willingness to pay and supplier opportunity cost. These savings in cost are then passed onto the customer, who is also receiving a product that better meets his or her needs. The ability of Jollibee to continue creating value for its customers by leveraging these activities will be the key success factor for its international expansion. The brand name at home was achieved also through some trade barriers that helped JB a lot!

II. Tony Kitchner's International Strategy

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."

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. However, "targeting expats" will only lead Jollibee to become a global brand if: (1) Jollibee correctly targets expats who have a need and want for the product and thus avoid repeating its mistake in the Middle East, and (2) The company continues to build its competitive advantage through learning and by appealing to a broader audience.

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. Ok but planting the flag had also significant FMA!! (lack of competitors) The unprofitable ventures in the Middle East could have been easily avoided had Kitchner researched the market prior to entering. 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. In order to compete on the level with multinationals, Jollibee would have to take its performance to the next step and prove that it could continue to build its competitive advantage. Yes, this phrase needed to be unpacked a bit more...

IV. The Breakdown of the Organization

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. Kitchner should have recognized that the hostility coming from Domestic was underscored by a fear that their division would be eclipsed by International. Rather