jollibee

BUS 488 STRATEGY Individual Assignment 1

BUS 488Strategy

Individual Assignment 01July 2011 Presentation

Submitted by:

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Question 1

Introduction

Jollibee has been a household name that is synonymous with fast food, especially in the

Philippines, where they outshine the rest of the competition by a fair bit of margin. An internal

analysis performed on Jollibee will analyse, highlight and identify their resources, capabilities and

competencies.

Business Fundamental Knowledge Analysis

Financial

Since its inception as a corporation in the late 70s, Jollibee has seen strong financial growth. As

seen in the financial data provided, Jollibee’s sales and revenue has been on the rise in the recent

years. As shown in their revenues, an amount of $12.9 billion pesos in 1998 was gradually

increased to $26.2 billion pesos in 2004, and indicating strong growth and ability to compete in

the already dense fast food market locally and internationally. The organization going public on

the Philippine Stock Exchange in 1993 acts as a foundation for the rapid expansion of its stores

locally and internationally.

Organizational Design

The decentralization of its operations in 2000 enables the organization to manage their business

on a manageable scale. Four autonomous regional business units dealing with human resources,

administration, finance and network development enabled the company to focus their operations

on a corporate level and allowing the RBUs to achieve greater efficiency.

Physical

As of June 2005, Jollibee has a total of 1200 stores locally and internationally. A diversification

of food products enabled the organization to reach out to a variety of customers and making them

as a market leader in the Philippines. Due to the geographical structure of the country, they are the

only fast food chain that operated nationwide, and in some locations face no other competitions.

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Risk Management

The acquisition of several new brands such as Greenwich, Chowking and Delifrance allow the

diversification of its products into different market niches. It proved to be a hedge against

downturns and competition and as seen in the case study, most of the acquisitions are the leader in

their respective market segment.

Product Development

The main draw for customers into Jollibee’s restaurants is the appeal for local styled food catered

to Filipinos’ preferences. This is evident as they are constantly adding its product range on top of

their already popular favorites menu, in order to allow its local customers to experience the

traditional Filipino way of having local flavored taste in a comfortable setting.

Marketing

Jollibee projects itself as being closer to Filipino families as compared to its competitors. There is

already widespread awareness locally that Jollibee is a local Filipino establishment, which in turn

appealed to the mass population whom felt more comfortable in a familiar setting. Tailoring its

menu towards the Filipino taste, it positioned itself as the favorite destination for family outings

as compared to its similar competitors.

Value Chain Analysis

Primary Activities

Outbound Logistics

Individual RBUs are able to achieve greater efficiency in the delivery of products and services,

quicker coordination, and more timely decision making due to this decentralizing.

Marketing and Sales

Portraying itself as a fast-food outlet of high-quality at an affordable price specifically tailored for

the Filipinos, the chain has appealed to patriotic locals. With its introduction of in-store play

activities for children and a cast of brand mascots, it reaches and appeals to the children and is

evidently more popular than its nearest competitors. Recognizing that a normal Filipino family’s

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weekends are normally reserved for children, the previously mentioned activities add value to

Jollibee’s position as the prime destination for family outings.

Service

The Filipino speaking crew appeals to the locals more than its competitors where their crew spoke

in English. It is also in Jollibee’s commitment that this service component of their business to

their customers must be fast and at the same time being courteous.

Support Activities

Procurement

Being a major player in the Fast-food industry in Philippines, they constantly enjoyed economies

of scale in terms of retail site selection, procurement, manufacturing, distribution, and marketing

levels unavailable to most industry players.

Human Resource Management

To attract the right talent and retaining of valuable staffs, the compensation and benefits package

at Jollibee is the highest in the Philippine fast-food industry. Employees are to undergo

comprehensive training programs based on underlying standards. Managers also received ongoing

training in the latest operations systems and people-management skills. Opportunities are

available for crew members to advance into a management role in the organization.

Firm Infrastructure

Decentralizing its organization into 4 autonomous business units, that corresponded to the

country’s major geographical markets. This enables the Head Office to focus its operations on the

key marketing, finance, restaurant systems and engineering functions and act as a support and

advice to the RBUs.

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Capabilities

Jollibee’s capabilities are derived from the integration of the set of resources as mentioned earlier

in this report and the following pointers summarize the main capabilities of Jollibee.

- Sufficient funding available to venture into global markets

- Economies of Scale

- Effective organization structure

- Ability to employ the best employees in Philippines

- Motivate, empowering and retaining employees

- Reputation of being a home grown fast food chain for Filipinos

- Appeals to local crowd with menu catered to Filipinos’ taste buds

Core Competencies

The core competencies are identified from the capabilities and are being tested for its

competiveness advantage.

Core

CompetenciesValuable Rare

Costly to

imitate

Non-

substitutes

Competitive

Consequences

Performance

Implications

Financial

StrengthYes No No No

Competitive

Parity

Average

Returns

Human

ResourcesYes No No Yes

Competitive

Parity

Average

Returns

Strategic

ManagementYes Yes Yes No

Temporary

Competitive

Advantage

Average to

above-average

returns

Large customer

base Yes No No Yes

Competitive

Parity

Average

Returns

Strong Filipino

identificationYes Yes Yes Yes

Sustainable

Competitive

Advantage

Above-

Average

returns

From testing the core competencies, we have identified that being recognized as a true Filipino

establishment with a family friendly oriented fast food joint as the main success for the

organization.

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Question 2

Success Factors of Jollibee

The key success factors that contribute to Jollibee’s success as the biggest fast-food chain in

Philippines are highlighted in the competencies classification as mentioned earlier.

Financial Strength

Jollibee’s strong financial health is evident through its expansion of its restaurants locally as well

as acquisition of other food companies. Through this strategy of diversification, they were able to

hedge against competitions and downturns in specific market niches.

Market Dominance

The financial capability of Jollibee as mentioned previously allowed them to be developed into a

dominant player in the quick-service market. They are controlling about 55 percent in this market

segment and 70 percent of the burger-based meals are being served by them. At the end of 2003,

Jollibee was able to dominate the market in 3 segments of their business. This market dominance

allowed them to ride out economic downturns and continue to show profits yearly.

Strong Branding

Its ability to associate itself as the prime Fast- food joint in Philippines enabled it to stand out

ahead of its competitors in this genre. As described in the DLSU Survey, Jollibee constantly

performed in terms of the attribute being dominant amongst Filipino consumers’ choices. They

were able to score well in both the rational as well in emotional attributes that Filipinos will look

for in choosing fast-food restaurants. It is also through this strong branding, Jollibee is able to

expand its restaurants where there is a large Filipino population to capitalize. In 2005, they have

expanded to a total of 121 stores overseas catering to different niches and market segments.

Further evidence of Jollibee’s success can be seen in the numerous awards and accolades

throughout the Asia region, establishing themselves as one of the top companies not only in

Philippines, but also in the Asia region.

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Understanding Customer Needs

Jollibee ability to understand what the customer wants enables it to be successful in this market.

From their tailored to the Filipino style menu to its promotions, it stayed true to its value of being

in the spirit of family and fun and is constantly being viewed as the preferred choice for locals as

compared to its nearest rival, McDonalds. Besides offering the good food, the food is also

reasonably priced, as well as providing superior customer satisfaction.

Weaknesses

The main weakness they are facing is the lack of in depth knowledge of markets overseas. As

shown in the case study, Tomi’s Teriyaki restaurants were not well received in the US, closing

down in just 3 years of operations. Aggressive expansion of its restaurants overseas has also seen

Chowking stores and a Jollibee store closing down in their respective locations, leading to the fact

that extensive study of the demand of the country’s market was not conducted, which ultimately

resulted in losses for Jollibee.

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Question 3

The external analysis of Jollibee allows us identify the opportunities and threats that the

organization is currently facing. By examining the business fundamentals, general, industry and

competitor environments, we would be able to understand better Jollibee’s position in the

industry.

Business Fundamentals Analysis

Economics

The uncertainties of competition from foreign players as well as downturns in specific market

niches are omnipresent in our current economic nature. Other uncertainties also come in the form

of financial crisis in the region as well as in the country it is operating in.

Stakeholders

Three groups of stakeholders of Jollibee are identified whom are affected by the strategic

outcomes and discussed below

Capital Market Stakeholders

Jollibee’s capital market stakeholders include its shareholders whom have a direct interest in the

company. Since going public on the Philippine Stock Exchange, Jollibee had been able to tap on

this key resource to expand its horizon within and beyond the local Philippine’s market. The

importance of the capital market stakeholders is also evident in the growing operations of Jollibee

over the years.

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Product Market Stakeholders

Jollibee’s product market stakeholders include its customers locally and globally, as well as

suppliers of its food sources.

Jollibee has been able to capture the market share of the fast food going customers due to its

understanding of locals’ preferences and it quality and competitive pricing of its food. An

approximate 1 million customers ate at Jollibee’s stores daily, making them an important

stakeholder in this category.

The large daily requirement of food resources had enabled Jollibee to enjoy better prices through

economies of scale from its suppliers.

Organizational Stakeholders

Jollibee’s organizational stakeholders include its large number of employees under its corporation

(26,500 employees as of 2004), its managers and its franchisees.

In maintaining its high standards, Jollibee’s compensation, benefits and comprehensive training

programs ensure they have the best employees that are available.

General Environment Analysis (PESTL)

The general environment consisting of 6 segments and the analysis of its effects on Jollibee is as

shown below.

Demographic

In the local Philippines context, the million consumers walking into Jollibee’s stores daily

represent strong demand for its products. The uniqueness of the geographical landscape of

Philippines has also made it a challenge for fast-food companies. Globally, there are many

Filipinos workers situated in the overseas market, especially in the United States where there are

estimated to be around 2 million Filipino immigrants. Besides the US, many Filipinos are also

situated in parts of Asia such as Hong Kong, Brunei and Indonesia. Not limiting to Filipinos, their

stores have also attracted other Asians to eat at their restaurants.

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Economic

The growing economic capabilities of developing countries have attracted major players in the

fast food industry to establish their stores there. Likewise for Jollibee, the growing market

possibilities in Indonesia for Chinese food enabled Jollibee to venture into the market by

introduction of Chowking Brand. The potential China market for fast food also led Jollibee to

acquire 85 percent ownership in Yonghe King Chain.

Sociocultural

The social and cultural of each country differs from one another. For example, a Chinese might

prefer to have noodles instead of rice in Japan. In our case of Jollibee, the “langhap-sara” concept

adopted by them may be hugely popular to Filipinos consumers, but this concept may not do so

well in global markets. Foreign consumers might not like the traditional taste of Jollibee’s food,

as compared to bigger global players such as McDonalds.

Technological

No evidence in of technological segment in the case

Global

The ever changing global landscape is one of the critical factors Jollibee has to consider. As

illustrated in the case study, Philippines have seen major global players entering the fast-food

market having a take on this pie. Although Jollibee have always been the dominant in this

segment, competing in foreign markets seems to be in a different story. Not only they have to

penetrate the foreign market with their proven and successful local recipe, they would also have to

compete against already established players such as McDonalds, Wendy’s and KFC.

Political/Legal

No evidence in of technological segment in the case

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Industrial Environment Analysis (Porter 5 forces)

Threat of New Entrants

Threat of New Entrants is high

when:

High Medium Low

Economies of scale

Product differentiation

Capital requirements

Switching costs

Ease of access to distribution

channels

Cost disadvantages

Government policies creating

barriers

The threat of new entrants to the industry is considered low to medium. New entrants to the fast-

food industry would need to face high entry barriers. Besides having economies of scales, high

capital requirements when opening a fast-food chain as well as products that differ from the rest

of the competition, the new entrants would also have to compete against the high standards as

well as the already present loyal customer base Jollibee has set in the industry.

Bargaining Power of Suppliers

Bargaining Power of Suppliers

are high when:

High Medium Low

Concentration of suppliers

relative to buyer industry

Availability of substitute products

Importance of customer to the

suppliers

Differentiation of the supplier's

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products and services

Switching cost of buyer

Threat of forward integration by

the supplier

The bargaining powers of suppliers are low. The availability of raw materials for the fast-food

industry is readily available not only locally, but available from neighboring countries as well. For

example, due to the high rice prices in the Philippines, Jollibee can reduce its costs and source for

rice in Thailand, Vietnam or Cambodia.

Bargaining Power of Buyers

Bargaining Power of Buyers

are high when:

High Medium Low

Concentration of buyers relative

to suppliers

Switching cost

Product differentiation of

suppliers

Threat of backward integration by

buyers

Extent of buyer's profile

Importance of supplier's input to

quality of buyer's final product

The bargaining power of buyers is medium-high. With the numerous available choices of fast-

food in Philippines buyers are able to choose which restaurants they would want to patronize.

Switching from eating at Jollibee to McDonalds has little impact on the buyers’ wallet and this

poses one of the main blocks in determining if the firm is able to earn above-average returns.

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Threat of Substitute Products

Threat of Substitute Products

are high when:

High Medium Low

Differentiation of substitute

product

Rate of improvement in price –

performance relationship of

substitute products

The threat of substitute products is considered to be medium-high. Products from local street food

can be considered a major substitute, as well as food from its direct competitors in the industry.

Intensity of Rivalry among competitors

Intensity of rivalry is high

when:

High Medium Low

Number of competitors

Industry growth rate

Fixed costs

Storage costs

Product differentiation

Switching costs

Exit barriers

Strategic stakes

The intensity of rivalry among competitors is considered to be medium-high. The fast-food

industry can be described as a lucrative segment with high profitability. Within the Philippines,

there are already other fast-food players competing with Jollibee.

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Question 4

Through examining the business fundamentals, external analysis of the general environment and

the industrial environment, we can identify the opportunities and threats that Jollibee is facing.

Opportunities

1. Although Jollibee is a success story in its native Philippines homeland, it pales in comparison

with its operations in the international markets. Their strategy of focusing certain product lines to

particular countries might work; they did not introduce the proven successful Jollibee fast-food

stores there. By focusing only on one niche in the country's market, they are potentially losing out

to fellow competitors operating in other food markets. Although they had closed a Jollibee's store

in Xiamen in a recent venture, they could try to tweak their menu to suit Chinese taste, as they did

with their successful formula in Philippines itself.

2. Besides expansion of Jollibee in China they can also look into markets in the Global region. As

of June 2005, their stores are limited to only the Philippines, Hong Kong USA, China and

Indonesia. Migrant Filipino workers are located in many parts of the world, besides expansion of

its stores to these locations; they can also capture a huge market of the fast-food industry on a

global scale.

3. As the economy recovers from the recent financial slowdown, consumers now are more willing

to spend on products and services that are considered extravagant during down times. Tapping on

this spending wave, Jollibee could venture into the higher end market. For example, the image of

Jollibee is seen as a quality fast food chain which represents affordable and high-quality food in a

clean and comfortable environment setting. We can tap on this first class image to spin off another

range of products to cater to the higher end market. Jollibee can emulate from McDonald's

success of introducing McCafe stores inside their restaurants.

Threats

1. The main threat Jollibee is facing is the constant competition it has from the global fast food

players as well as the local food operators in the country it is operating in. As mentioned in the

case study, although Jollibee have a strategy of diversification to hedge against competition and

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downturns in specific market niches, consumers have the decision to switch their taste and op for

cheaper alternatives. The main problem is to sustain customer loyalty for all its stores in

Philippines and to maintaining their market share in the fast-food industry.

2. The volatile prices of raw products Jollibee uses for its meals as while as the fluctuating crude

oil prices might have an adverse effect on its profits.

3. Lastly, their inexperience in operating in global markets remains as a threat. As seen in the case

study, many of the stores that are closed down are those that are operating in foreign locations.

This is an indication of lack of foresight and deeper market research in the foreign country.

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Question 5

a) Business Level Strategies adopted by Jollibee

Introduction

Jollibee success in the Philippines fast-food industry depends heavily on the way it is able to

differentiate its products from its competitors. Besides focusing solely on it Jollibee’s operations,

they have also ventured into different niche markets such as serving Chinese and other foods.

Various factors contribute to the way Jollibee is able to capture the bulk of the market share

available in the market.

Business Level Strategy

From the case study, it is evident that Jollibee is adopting the Differentiation Strategy as its

business level strategy. This strategy involves producing goods or services that customers

perceive as being different in ways that are important to them. In order to support this strategy,

Jollibee has implemented the following strategic actions:

1. Differentiated Menu and atmosphere from Competitors

2. Association with Filipino roots

3. Creating brand loyalty with customers

4. Competitive Costs for products

5. Offering a portfolio of food products that complement each other

Differentiated Menu from Competitors

The first competitive advantage of Jollibee is having a differentiated menu strategy from its

competitors. As mentioned in the case study, one of the favorite past times of Filipinos are eating

out with friends and loved ones in a comfortable setting. Jollibee’s understanding of this

important factor allows it to be differentiated from its competitors as the food products were

prepared with the Filipino taste in mind. Unlike other fast-food outlets like McDonalds which

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served limited and standardized menu, Jollibee is able to come up with an exhaustive menu for the

local market.

Association with Filipino roots

Continuing from the success of its favorable menu towards its customers, Jollibee is seen as a

Filipino pride, a local establishment made purely in the Philippines. The comfortable Filipino

style restaurant setting and Tagalog speaking service crew appeals to the majority of the

population, as compared to other establishment with westernized concepts.

Creating brand loyalty with customers

Tapping on the success of its distinct Filipino taste and preferences in it Jollibee’s stores has

enabled them to differentiate themselves from its competitors. This has also garnered popularity

with the local Filipinos. As mentioned in the case study, 70 percent of the burger-based meals are

being served at Jollibee’s stores, as compared to a paltry 30 percent combination of other foreign

global player together.

Competitive Costs for differentiated products

The ability to control the mass market (55% as of 2005) for fast food in the Philippines has its

advantages. One of major advantage is having economies of scales when making purchases for

raw products. These savings can in turn be passed on to its customers whom perceive value for

Jollibee products.

Offering a portfolio of food products that complement each other

Differentiating from other global fast-food players is its ability to offer a myriad menu of food

products to cater to different taste buds of Filipinos. Aside from its main flagship Jollibee store,

they have ventured into acquisition of Greenwich, Chowking, rights to Delifrance, Tomi’s

Teriyaki and Yonghe King. By being the leader in the respective food segments in the Philippines,

Jollibee can be said to offer a portfolio of food products that complement each other. This has also

enabled them to expand their businesses with different product lines and at the same time increase

their already dominant market share in the food industry.

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International Operations

In the international operations of Jollibee, they have also undertaken a similar differentiated role

in their business level strategy. For example, the Chowking brand chain of restaurants in China

solely offered Chinese styled food in Indonesia, and the Yonghe King brands exists only in

serving the China market. This created a differentiation kind of business level strategy as

Examining the Value Chain

By referencing to the value chain of a differentiation strategy firm, we will be able to determine if

the activities are creating value to Jollibee. Summarizing the value chain analyzed in question 1,

we are able to determine Jollibee’s activities in creating a differentiation strategy.

Value Chain Analysis

Support ActivitiesValue

CreatedAnalysis

Firm Infrastructure Yes Jollibee engages a RBU concept for higher efficiency.

HRM Yes Superior personnel training, good compensation and

benefits package.

Technology Development - Insufficient Evidence in Case

Procurement Yes Economies of Scale enabled them to purchase highest-

quality raw materials.

Primary Activities

Inbound Logistics - Insufficient Evidence in Case

Operations - Insufficient Evidence in Case

Outbound Logistics Yes Decentralization for greater efficiency

Marketing and Sales Yes Extensive personal relationship with buyers by

adopting the Filipino style

Service Yes Tagalog speaking crew, exceptional service.

The above summarized value chain analysis represents the differentiation strategy Jollibee is

currently heading towards.

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Conclusion

The successful adoption of the differentiation strategy by Jollibee can be seen by the rapid

expansion of its stores, acquisition of other food brands, as well as growing market share in each

individual business segments.

This strategy usage by Jollibee is further reinforced by analyzing the value chain to ascertain the

successful implementation of its business level strategy.

b) Other Strategic Actions

Introduction

Jollibee’s success story in its homeland is something all Filipinos are proud of. However, in the

global region, it has yet to gain a strong foothold as compared to its global competitors. We will

discuss the strategies Jollibee can undertake in order to compete better in the future.

Exploration of New Markets

Jollibee’s overdependence on its local Philippines market can be seen in the case study. As of

June 2005, it owns a total of 1079 stores and franchises throughout the Philippines as compared to

only 121 stores in various brands internationally. This might potentially pose a risk to Jollibee in

the event of prices of raw materials and human resources rise through inflation in its home

country. To diversify its risk and seek higher global recognition of its brand, Jollibee should look

into further expansion of its restaurants into other regions.

One fine example is the Middle East market. With the growing influence of westernized lifestyle

in the Middle Eastern region, Jollibee can look to venture into this untapped region. Although

major players such as McDonalds and KFC have already set ashore in these regions, I believe

there is still room for competition if Jollibee models its business operations in the Middle East to

the successful proven recipe back in the Philippines.

Jollibee’s success story in Philippines is about innovating of its food menus to cater to the likes of

Filipinos. Using this strategy, Jollibee can strive to attain the Halal certification in order to serve

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the mostly Muslim consumers. On top of that, they can introduce new products that the Middle

Eastern population might associate with their local delicacies.

Going Healthy

Throughout the years, fast food has always been associated with being unhealthy, fattening and

harmful to the body. Jollibee being a fast food restaurant chain were not being spared from this

conception. In order to break this common conception of fast food equaling to unhealthy food,

Jollibee can consider exploring into healthier foods.

To start off, they could engage nutritionists to design healthier menus for their products. They can

introduce food such as salads, non-fried but steamed or boiled foods, fruits and more vegetable to

their menu. There can be 2 ways of performing this strategy.

Firstly, they can introduce these healthier foods together with their normal menu in the stores.

This way, customers can have a choice of going for guilty food or eating healthily.

Secondly, Jollibee can utilize this strategy to spin off a new product concept and open restaurants

that cater to the healthy conscious in mind. With the lack of restaurants targeting the health

conscious consumers, a breakthrough in this market might prove to be lucrative. A relevant

example of a fast food concept, but healthier choice in terms of their menu would be Subway.

Conclusion

With these 2 strategic actions, Jollibee is able to achieve 3 possibilities. Firstly, they can expand

their global presence by venturing into the Middle Eastern market. Secondly, they can break off

the common conception of linking Jollibee fast food restaurants as being an unhealthy choice.

And lastly, from developing a healthy menu, they can essentially innovate and create a new

product line that other fast-food operators are currently lacking. With these options in mind,

Jollibee could compete better in the future by adopting different strategic actions in their business

model.

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References

Ireland / Hoskisson/ Hitt, (2011) Ninth Edition, The Management of Strategy Concepts. South-

Western Cengage Learning.

Singh / Pangarkar / Heracleous (2010) Third Edition, Business Strategy in Asia, a Casebook.

Cengage Learning

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