1. What global factors confront Jollibee as it pursues international expansion?

How do
these factors benefit or impede Jollibee in its expansions?

EXTERNAL ENVIRONMENTAL FACTORS-which are acting as driving force for growth

of Jollibee

INCREASING GLOBALIZATION:
Sourcing beef materials from Brazil and locating in foreign markets both introduce the company
to global developments such as crude prices and tariff and non-tariff barriers that changed how
operations continued. The forging of tastes of the global market was an opportunity. This was
possible because of the increasing trend of migration and the trend for global trade and
investments.
INDUSTRY PROFITABILITY
Minimizing the company's operating cost by creating an efficient production is one way to
increase its profitability. This was done by adopting new technologies speeded up the company's
operation.
This in turn greatly helped the company to capitalize on economies of scale. The same concept
forced other players to innovate and cause changes in the industry.
INTEREST OF THE BUYERS FOR DIFFERENTIATED PRODUCTS
Across the seas, there is only one use for Jollibee products, that is, to be eaten. It was found in
due course of time, a need has to develop for new products that can appeal to different interests.
The development of the 'need' is a major driver of change in the industry. Right now, in the local
market, as Jollibee do, they continue to add new products to their menu, still maintaining the
pinoy taste that they have patented.

1. Tony Tan Caktiong

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Expanding into fast food: The oil crisis of 1977 increased the production cost and also
decreased people`s spending power. As a result they were unwilling to spend on non
essential items of consumption.

This acted as a positive reinforcement for TTC`s

decisions.
DANGER: McDonald`s after tasting success in different parts of the world and especially
after being successful in Canada, which has a huge Asian population, turned its focus
towards the Asian Tigers in the early 80`s. Philippines was the natural target as it is the
third largest English speaking country in the world. Flanked by the Pacific Ocean and the
South China Sea, its strategic location makes it a critical entry point to some 500 million
people in the ASEAN marketoffering vast trade opportunitiesand an ideal base for
business.
However to counter this Tan took a leaf out of the Chinese military tactician Sun Tzu and
flew to US to learn more about his future enemy. Returning to the Philippines armed with
first-hand knowledge of what a major American fast food chain looks like, Tan reinvented
his store using everything he had learned in the US. He introduced a friendly cartoon
mascot, bright and cheerful uniforms for the staff, a child-friendly ambience, a menu of
deep fried favourites, and the belief that theres no such thing as too much marketing.

Going international:

This was a strategic move by TTC possibly looking at the

geographic spread of Filipinos around the world. There are around 8.7-11million overseas
Filipinos worldwide representing 11% of the population of Philippines. Most of them
work as doctors, physical therapists, nurses, accountants, IT professionals, engineers,
architects, entertainers, technicians, teachers, military servicemen, seafarers, students,
caregivers, domestic helpers and household maids making them a good target market for
Jollibee.

Going against McDonald`s: Tans friends and associates warned him that his store
would be eaten alive, unless he considered selling his business to McDonalds, or be its
franchise holder. However Jollibee succeeded in positioning itself firmly in the Philippine
market before McDonald came in. In addition to the special understanding of the Filipino
palate, this national favourite had also mastered the countrys culture and lifestyle. Theyd
succeeded in capturing the youth demographic with in-store play activities and a cast of
captivating characters. Their mascot with orange jacket and the blonde spaghetti-haired

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girl are better known and loved in the Philippines than Ronald McDonald. In fact by the
time McDonalds came in the local franchise already had nine branches

2. TONY KITCHNER
Separate International division:

Having spent fourteen years in such an eminent

position in a pioneer in fast food like Pizza Hut, its all but obvious that Kitchner would
look for autonomy to operate. This brought in international practises in the company
mostly borrowed from the western culture (wearing ties etc). This is quite natural
considering Tony is from Australia. However the culture change wasn`t in sync with
Jollibee Philippines operations, neither was the culture change delivering

on the

international fronts

Plant the Jollibee flag strategy:

This was conceptualised to tap markets with

potential and which has not yet been captured by the established players. However
somewhere down the line the actual philosophy was lost in a ego battle as to how fast
Jollibee can establish itself in the international market and in doing so prove themselves to
the Philippines business. Also Tony tried to apply Pizza Hut`s strategy to Jollibee. Now
there was a couple of major areas which differentiated Pizza Hut from Jollibee:
o Pizza Hut was already well established and had no shortage of funds
o Pizza as a product per se doesn`t need so much of modifications and
customizations-its a Italian food and people who like it like it for what it is.
However Jollibee is positioned as a fast food chain. So it has to adapt according
to the definition of fast food in different markets. This would have required to
expand slowly which they didn`t leading to a strain in the financials which
eventually led to souring of the relationship with the Philippines division.

2. Identify the various challenges that Jollibee has faced across the different countries and
regions of operation (that is, the United States, the Middle East, Brunei, China, and
Vietnam). What are some of the common problems that Jollibee has faced? What are the
issues unique to each country? How had Jollibee adopted its strategy in each case?
Jollibee Foods Corporations (JFC) had established 35 restaurants in five key countries, which are

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United States, Brunei, Hong Kong, China and Vietnam. Jollibee also acquired the local franchise
for Delifrance, a bakery chain and Greenwich, a rival Pizza Hut. All in all, in 2008 JFC had 1652
outlets in nine countries and had adopted a multi-brand strategy, gradually cementing its position
in the fast food industries.
The United States
The United States was seen by Jollibee as a lucrative market due to the growing Filipino
community there, providing for a sizeable consumer base. Instead of seeing itself as a direct rival
to McDonalds and KFC, Jollibee wanted to break into the market as an alternative. Thus, Jollibee
characterized its menu as American fast-food favorites with an Asia-Pacific flavor. Jollibees
unique offerings to foreign consumers tented to be relatively sweeter and seasoned with more
spices than traditional U.S. fast-food chain dishes. Jollibees success in the U.S. market could also
attributed to its wider variety of menu items. Apart from the usual fries and burgers, Jollibees fare
include spaghetti, rice-based JolliMeals, and hot dog sandwiches. Before, the opening of the first
outlet in Daily City, California, a city heavily populated by Filipino immigrants, Jollibee chose not
to hire local specialists. Instead, the company sent a team to live in San Francisco for two years
to study the market and its industry. This resulted ultimately in adaptations of Jollibees operations
to complement the habits and lifestyle of Americans. The team found out that Americans main
mode of transport was cars and translated this into having more drive-through outlets compared
to its outlets in the Philippines.

China
Philippines had been occupied by the United States in the early 20 thcentury, Philippine firms are
heavily influenced by Western ways of management. JFC is no exception , operating from a
bottom-up approach the same approach it uses in its management of Yonghe King. Previous
management of the noodles enterprise did not have departments performing business analysis,
decision support, and performance management. After acquisitions, marketing, network

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development, and R&D sections, which were previously understaffed or non-existent. JFC hoped
that with the recruitment of locals, it would gain a more intimate understanding of the Chinese
consumer market, enabling it to established Yonghe Kings foothold in China. Over time, JFC
realized that operations in China and Jollibees domestic market differed in terms of external issue
such as legal matters and relations with franchisees. However, internal management of the staff,
taste preferences of both consumer markets, and operational matters are similar in both countries.
Middle East
The Middle East is another market that Jollibee thrives in due to the large number of Filipinos
working as domestic workers there. JFC successfully opened Chowking stores in Guam, Dubai,
the United Arab Emirates (UAE) and the Kingdom of Saudi Arabia. The Chowking food chain in
the UAE operates very differently from that in the Philippines. Catering to the Filipino group in
the UAE who frequent the outlets for gatherings or celebrations of special occasions, a number of
Chowking restaurants in the UAE have function rooms, unlike in the Philippines. Aside from the
traditional Chowking offering of rice and noodles, Chowking in the UAE also sells signature
Filipino dishes such as kare-kare. The Chowking menu in the UAE is slightly different from that in
other outlets, due to the perceived desire of Filipino in the UAE to have a taste of home.

Brunei
The year 2008, Jollibee opening 10th and 11th branches in Brunei. Jollibee did not perceive
Bruneis small market size as a barrier to its expansion plans. Founder Tony Tan believed instead,
that efficient company operations and successful marketing strategies would overcome this
limitation to growth. He also held that Jollibee fast-food chains possessed a competitive edge in
terms of the companys understandings of Asian taste preferences. Rice-based meals offered in
Jollibees Brunei outlets feature foods apply suited and familiar to the Asian consumer market,

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differentiating it from Western counterparts. The products offered include chicken curry, nasi
lemak, and burger steak with mushroom sauce, all of which cater to consumer in Brunei.
Vietnam
Recognized as the Pacific Rims fastest growing economy after China, Vietnam was another
market that Jollibee wanted to capture. With economic growth rates at an average of 8 percent
and rapid development of the Western fast-food industry, Vietnam is a strategic source of growth
in Jollibees foreign operations. Jollibee opened five stores in Vietnam in 2007 and expanded its
outlets in the country to nine in 2008.

3. You have been hired by Jollibee as a consultant to advise them on their international
operations. What steps should they take next to ensure success in the international arena?

Primary aim of Tingzon is to find a fine balance between the expansion and reduction in cost of
sales of the company. If we look at cash in hand, the company is in a stable position.
Opening multiple stores at the same time will increase the operating income and thus reducing
bottom line of the company, it is better if they look into one market at a time instead of being
greedy.

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From a stable position the company shouldnt go into debt, with differences in the internal
departments it is better if Jollibee is cost conscious and careful in its expansion plans in the
coming years.

HR PERSPECTIVE
The Human Resources has played a significant role in the success of Jollibee. The HR practices
prevalent are very powerful.
Strengths
To start with, the Five Fs in Jollibees philosophy are very strong, particularly fun atmosphere
and friendliness in the organization. Having an open and friendly culture is a hygiene factor which
goes a long way in retaining employees and facilitating high productivity.
The recruitment and selection procedure prevalent in Jollibee is very stringent thereby ensuring a
service-oriented staff. In any store of Jollibee, the store managers are the key to motivate and
control crew members. They facilitate efficient use of their time which not only enables faster
service but also reduces the number of crew members needed.
In both the Domestic as well as International division of Jollibee, a lot of focus is given on
training, which is a prerequisite in an industry as competitive and dynamic as a fast food industry.
For every new store that it opens in every new market, Jollibee conducts extensive training
programs for the local store managers and crew members with a view to impart necessary skills
that may be different from the domestic requirement.
Flaws
Having said all this, however, there exist a few loopholes in the organisation. For example, when
President and CEO, Tony Tan Caktiong, decided to create a distinct International Division, the
need for this change was not communicated clearly to the domestic Philippine management. This
led to a sense of uncertainty among the Philippine staff resulting in their indifferent attitude
towards the newly created division. Such differences led to a lack of coordination between the
two divisions.
The most significant difference between the domestic and international divisions HR was that the
practices and procedures followed in domestic division were very conventional; while those in the
international division were more professional and modern in accordance with the requirements of

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an international operation. For example, VP of International Operations, Tony Kitchner, created a

more professional work atmosphere by introducing a dress code in his Division. Also, the
Philippine organisation was considered bureaucratic and slow-moving by the modern International
Division.
Because the two divisions did not get along well, personal issues also started cropping up like
early promotion and better pay and benefits to the International Division staff. One of the major
reasons for such a wide pay gap could be that Tony Kitchner had hired new managers for
marketing, finance, quality control and product development. These new managers were all
experienced outsiders; hence it required better perks to retain them. On the other hand, the
Philippine management primarily consisted of the Tan family members.
WAY FORWARD
While entering into any new market, Jollibee should capitalise on its strengths and should try to
overcome its shortcomings.
The issue of lack of coordination between the two Divisions occurred due to the difference in
culture and HR policies. However, with the arrival of Manolo Tingzon, General Manager,
International Division, the tension between the divisions might cease because(1) he is a fellow
Filipino who has worked for U.S. fast food chains in Philippine, and is hence more accepted by
domestic division; and (2) he was a management trainee in Jollibee for 10 years, and hence is
believed to be familiar with the organisation culture.
Papua New Guinea
Since this would be its first store in Papua New Guinea, Jollibee will have to incur huge expenses
in terms of conducting market research about consumer preferences, hiring competent staff and its
training. Thus, there has to be availability of sufficient funds to carry out an effective recruitment
drive across the franchisee, right from Franchise Services Manager (FSM) to the crew members.
Hong Kong
Jollibees existing stores in Hong Kong are already struggling with management issues. Instead of
aggravating the differences between the Chinese and Filipinos, the Store Managers are required to
motivate the staff to achieve a common goal. They should strive to create a friendly and
harmonious work culture within their stores. A few retention techniques can be applied like

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organising informal get-together of all the staff members. This way, people from both the regions
can mingle with one another outside the work environment and may try to resolve their personal
differences themselves.
California
Being able to successfully run a store in California would be a significant milestone in the growth
of Jollibee. However, it will not be a cake walk. So far, Jollibee has been banking on its human
capital. But in order to succeed in this market, it needs to upgrade its technology as the labour
cost is enormously high in this part of the world. Thus, having sophisticated equipments and
cooking devices is a necessary and not sufficient condition to be at par with competition. In order
to make a mark, Jollibee needs to invest heavily on promotional campaigns and meanwhile, needs
to keep doing what it is best at modifying the recipe to prepare exactly what the consumers
wanted.

EXPANDING OPERATIONS

R&D to focus more on finding methods to customize local food to fast food production

techniques.
Involve franchisee in all the decisions during the start up to increase trust between the
company and the franchisee and also to gain from his knowledge about the local area.

Papua New Guinea

Using of blue ocean strategy Jollibee can take over the Australian chains market share with
quality improvement. With very few competitors, Jollibee could easily capture the market and set
the standard that would block new entrants for time being.
But the operational cost being very high including set up cost have no guarantee that will be able
to allow expansion in future in a new market. At the same time the franchisees are also ready to

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provide full financial support to reduce Jollibees risk and also they have made a treaty with a
petroleum retailer for combined operations.
PNG was about to receive $350 million from many lenders including Australian Govt, Japanese
Import Export Bank , etc for infrastructural development which may allow the organization to get
support in developing fast food in the nation. Moreover abundant natural resource based
industries (palm oil processing, tourism coffee, cocoa, coconuts, palm kernels, tea, sweet
potatoes, fruit, vegetables, poultry, pork) will allow cheaper raw material and decrease
dependency on external suppliers.
Hong Kong
Expanding to fourth store in Hong Kong is not an issue of financial terms but more of manpower
requirement (Chinese) and also of local perceptions related to food. Chinese are very health
conscious and also have a liking for rice and steamed food items also. Hence if the menu can be
customised in a way it suits the Chinese people and not only Philippines taste. Perhaps Chinese
employee people not getting interest in the operations might be as they feel alienated to the food.
Quality and promotional strategies must also be taken into consideration and can centralise to
main office or FMSes before opening the next store in Hong Kong. Large working population and
importance of the Kowloon can also give branding and high sales opportunity to Jollibee.

California
Entering into this market will bring a high branding opportunity although it may face tough
competition and high cost being part of States. But looking at the high immigrant Pilipino
population the sales may be largely supported by their tastes.
With a franchising partner ready to serve as an investment of about 40% the starting operation
may be easy but still the presence of global competitors like Mc Donald may hinder as the
entrance as Jollibee was not having such a global brand name.
Well connected with international air and sea routes the state can provide fast and effective
logistics (examples:-Los Angeles International Airport and San Francisco International Airport are
major hubs for trans-Pacific and transcontinental logistics)

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RECOMMENDATION FOR OPERATIONAL UTILIZATION AND IMPLEMENTATION

STRATEGIES

Looking at the situation there is a need of heavy investments into IT systems, which will
allow Jollibee to manage day-to-day operations from their headquarters in the Philippines
and also help in collection real time sales and inventory data across the organization.

Moreover there is a need to clearly divide the organization into two strategic business
units (SBU) under the company brand (International and Domestic) in order to align the
goals with respect to the various geographic divisions. This will allow the International
Division to ensure greater coordination across IT activities such as ERP at global level, as
well as pooling procurement purchases wherever over wide geographical areas.

A clear distinction of responsibilities, resource sharing and area of control between the
SBUs will help to increase cooperation at a firm-wide level.

High level of menu customisation is needed in stores which cater to non Philippines
customer. Countries like China where the expected taste varies according to local needs
customization will be highly helpful. Competitors like Mc Donalds China division also
taken menu customization into consideration.

Philippines is an agricultural nation hence Jollibee was able to integrate sourcing of raw
materials especially imported beef patties could be a solution till world transportation and
sanitary issues does not affect the operations.

For international markets, locating commissaries in the same country through joint
ventures could be a potential source of success for the company. Jollibee could provide the
technology while the partner deals with appropriate techniques to sell in the foreign
market. This will bring down the logistic cost of importing to many nations far from
domestic sources.

Use of Hub and Stake model will help faster turnover of logistics and reduction in cost.
Formation of hubs will also help in achieving economies of scale in transportation and
warehousing of raw material, thus optimising the supply chain value.

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For the local market, an increase in the number of commissaries could potentially decrease
the transportation costs and the duration of shipments. Allowing the company to focus on
the quality of product only.
Based on the above analysis, Jollibee should go ahead with opening their new store in Daly

City, California. Daly Citys large Filipino expatriate population will be helpful in supporting the
business initially. Also, Jollibees successful venture in Guam will come in handy to cater to the
local U.S. people. The option of adopting cost effective process instead of labour intensive
methods as used elsewhere will help in making a cost differentiation against their competitors.
In Hong Kong, the company should concentrate on the existing 3 stores first before opening a
new fourth store. Jollibee will have to customize its menu in Japan in order to attract the Chinese
population. Also, the conflict between local Chinese managers and Filipino managers has to be
resolved. Jollibee can give the entire Chinese operation to the local franchisee and FSM being the
contact point between the franchisee and the company. In the presence of a dominant player like
McDonalds in the market, Jollibee can learn its techniques of catering to the local tastes and try
to make the existing stores less dependent on Filipino expatriates.
In Papua New Guinea, in spite of negligible competition the market, the small population of 5
million is not attractive enough to put in a substantial investment to set up at least 5 stores which
will be needed to recover the set up costs. Jollibee also does not have enough understanding of
the tastes of the locales. Though the franchisee is ready to undertake the equity costs, sole
dependence on him can be risky as already seen by their ventures in Singapore and Taiwan. Here,
the company has to conduct a detailed market study to understand the local food habits, reasons
for the failure of the Australian franchisee, the perception of people towards fast food etc. Only
after this factors can it take an informed decision.
With respect to the other available options, Daly City, California, is comparatively the best
option. The criteria for choosing the franchisee should also be such that each franchisee should be
evaluated based on various criteria, even in case of a potential Filipino franchisee, so that in the
end the franchisee who shares the most number of common values with Jollibee is selected. The
key to Jollibees success in Daly City will be its ability to find a local partner who should not only
be able to work with the International Division but also design a business model that would
address issues like personnel management, recruiting of managers, language barriers,

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customization of menu items and branding which were the key factors that resulted in the success
or failure of Jollibee in other countries. In a market which dominated by Mcdonalds, marketing
should be given more priority and franchisees should not associate achieving target sales with
promotional activities. The strategy of Filipino-Asian-Hispanic-Mainstream will be difficult to
implement, mainly if Jollibee continues with its policy of standardization of menus. The variety
in menu should not be at the cost of poor operational efficiency. If Jollibee has long term plans
with USA it can also set up a R&D department in USA for customizing the menus. The pricing
strategy should also be such that it is priced competitively with respect to McDonalds.
Overall, the strategic decision that is to be made is not only about choosing from the 3 available
options but also learning from their earlier mistakes in other countries, changing their business
policies and adapting to the dynamic environment of the business.
References
Jollibee Foods Corp. (A): International Expansion [Philippines Asia] (HBS 9-399-007,
C.A. Bartlett and J. OConnell)

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