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 nontariff 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 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 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 AsianHispanic 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.
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.
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.