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Jollibee Foods Corporation - Group 1-6 finaldoc

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Jollibee Foods Corporation - Group 1-6 final

    Academic Honesty Policy Group Assignment Cover Page Group Member 1 Phone Number - Home 305-877-7853 Phone Number - Home 954-812-1550 Phone Number - Home NA Phone Number - Home 786-468-9223 Phone Number - Home 786-942-7310 Title of Assignment

JOLLIBEE FOODS CORPORATION (A): INTERNATIONAL EXPANSION

Phone Number Work NA Phone Number Work NA Phone Number Work 305-987-2218

    Phone Number Work NA Phone Number Work NA

Buniol, Arnaud

Group Member 2

Garcia, Christian

Group Member 3

Wang Qingrui

Group Member 4

Sanin, Felipe

Group Member 5

Guo Yawen

Date of Submission September 06, 2012

    CERTIFICATION OF AUTHORSHIP: I certify that I am the author of this paper and that any assistance I received in its preparation is fully acknowledged and disclosed in the paper. I have also cited any sources from which I used data, ideas or words; either quoted directly or paraphrased I also certify that this paper was prepared by me specifically for this course.

    Signature Member 1 : ________________________ Signature Member 2 : ________________________ Signature Member 3 : ________________________ Signature Member 4 : ________________________ Signature Member 5 : ________________________

JOLLIBEE FOODS CORPORATION (A): INTERNATIONAL EXPANSION Group 1

Table of Contents

INTRODUCTION Case

    Overview ............................................................................................................ 3

    1. How was Jollibee able to build its dominant position in fast food in the Philippines? What sources of competitive advantage was it able to develop against McDonalds in

    its home market? ............................. 5 1.1. Building its dominant position .......................................................................................................... 5 1.2. Sources of competitive advantage against McDonalds ................................................................... 6

2. How would you evaluate Tony Kitchners effectiveness as the first head of Jollibee

    s international division? Does his broad strategic thrust make sense? How effectively did he develop the organization to implement his

    priorities?............................................................................................................................... 7

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

    decision? ........................................................................................................... 9

    CONCLUSIONS......................................................................................................................................... 11

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INTRODUCTION Case Overview

    Company History: Started in 1975 by the Chinese-Filippino Tan family. Shifted the ice cream into sandwiches .It expanded quickly in the Philippine .It defended the McDonalds in the Philippines hamburgers markets. (Question 1)

    Industry Background: Fast food industry developed a value proposition. Store: Profitability depends on the traffic and management. Chain: chain-wide consistency and reliability is a key driver of success.

Moving Offshore: Its success brought opportunities in other Asian counties. Singapore

    Taiwan and Indonesia: It failed and closed down. Brunei: It achieved success. TTC summarized that the key of success entering the international markets is selecting the partners and location. Building an organization: TTC hired the Kitchner. He created the International Division and separated from the Jollibees Philippine side.

    He recruited experienced internationalists for him. Strategic Thrust: To increase the pace of international expansion ?they put forward the “targeting expats” and

    “planting the flag” strategies. (Question 2) Operational Management Market Entry: FSM and International Division work together. Oversight and Continuing Support: monitor financial and operational performance; support and develop the store manager; International Division concerned the quality; International vs. Domestic Practice: International team thought business model needed to be modified overseas. They also redesigned the Jollibee logo and made a lot changes.

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    Customizing and Local Taste: The International Division adjusted the menu. It expanded beyond quickly. Strained Internationl-Domestic Relations: The relation between Philippine and International Division destroyed the cooperation. Due to the financial problem, TTC no long supported Kitchner . And he left Jollibee in February 1997.

A New International Era

: NoliTingzon joined the company

    A Fresh Look at Strategy: Different opinions on the next strategy. Strategy in Action:Tingzon faced three opportunities. (Question 3) Papua New GuineaHongKong

    California

Company SWOT analysis (by 1997)

    STRENGHTS Jollibee is a leader in the fast food industry. It has long history. It has abundant experiences in some aspects, such as selecting position and partner. It can make some attempts and adjust strategy flexibly. OPPORTUNITIES It has a potential international market. WEAKNESSES It lacks some research work before entering a new market. It lacks the control ability in international market. The relation between local and international division is worse. THREATS The competition in the international markets becomes more and more fierce. The relation between local and international division may bring some disadvantages to the company.

It has a powerful national market.

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    1. How was Jollibee able to build its dominant position in fast food in the Philippines? What sources of competitive advantagewas it able to develop against McDonald’s in its home market?

    1.1. Building its dominant position In our opinion, Jollibee was able to build its dominant position in fast food in the Philippines through eight majors axes: a. The first one concerns the menu, which is culturally well adapted to Philippines

    citizens as the Tan family is Filipino-Chinese. b. As Jollibee started in 1975 they had the “First mover” competitive advantage and where able to secure suppliers, employment and more important a good brand recognition. c. The third one concerns the company itself through the CEOs vision. E: Dominance Jollibees position stands

    on five Fs: Flavor, Fun, Flexibility, Family atmosphere, Friendliness. The CEO

    s vision, thanks to a good marketing makes Jollibee looking like an happy and friendly working world. d. They chose key store locations which provides them geographic advantage and close contact with the consumers. e. The company had a well developed operations management capability and an ability to manage volume and quality to offer an affordable price for customers. f. The headquarter of the company is occupied by members of the family except for the position they knew they were not able to handle (ex : finance; marketing).

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JOLLIBEE FOODS CORPORATION (A): INTERNATIONAL EXPANSION Group 1

    g. Their economic growth is increasing every year and they projected 96 owned stores and 134 franchises in 1997. That proves how franchising investment where rentable for Jollibee as more than 58% of its stores are franchises. h. They reinforced their capital by acquiring Greenwich pizza Corporation in 1994 and they created a joint venture with Deli France to diversify their food offering.

1.2. Sources of competitive advantage against McDonald’s

    We think that Jollibee had four advantages against McDonalds: a. One was cultural because Filipinos prefer the taste of the champ than the Big Mac one. They

customized their hamburgers to Filipino market instead of McDonalds Big Mac

    standardization. b. They broadened the menu to optimize their sales. c. One is political/historical/economical, in 1983, when the political opposition leader was assassinated. The crisis due to this event made McDonalds slowing their investment

    and Jollibee took advantage of its position as a country made company” to ensure

    its position thank to a very well adapted menu (“taste-tested”). They had a “local

    pride” and nationalism advantage. d. The last one was in 1986 when McDonalds wanted

    to come back to Philippines because Jollibee had already set up 31 stores which means they weretotaly dominating the market and McDonalds had to invest much more than

    the previous time to try (with a possiblity of unsuccess) to enter the market.

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    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 organization to implement his priorities? We can summarize Kitchner effectiveness with two phrases. “What is hardest is not the getting there, but the staying there”. This is a well-recognized phrase in Latin

    American countries that would fit to Kitchners performance. Tony Kitchner developed

    a good start when he assumed the International Head Position, however, later, his blurred vision did not let him identify the actions to be taken at the right moment. At the beginning, he tried to “wash the face” of Jolibee with simple things like

    new office designs and formal dress code. These actions together with focus on attracting partners with excellent connections glimpsed a bright future. His objective of “Making Jolibee one of the world’s top ten fast food” which stood on two main topics “targeting expats”and “planting the flag” was terrific at the early stage. The first one was the initial step to support the expansion of the company, focusing on a niche market. The second part of his strategy (planting the flag) reflected his ambitious desire to be the first mover. He believed that the first mover has tremendous advantages difficult to get when you are not the first one.Even though, there were some problems related to potential market (not all overseas Filipinos were potential customers) and the costs related to promotion and advertising (the franchises, first need to reach certain level of sales to afford them) at the end of 1996, he demonstrated with results that his strategy had success. Two years, 8 new national markets and 18 new stores. He designed a model to growth with efficiency. For instance, he enabled local partners customize the store (counter and dining areas) to the local preferences. The model also was

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    well-connected which promoted the use of store data not only for controlling but also to improve the local support. The second phrase which illustrates kitchners

    development is More important than the goal is the path”. He forgot that he was hired to build the global brand name with greater structure and resources. Structure means „to build not to destroy. Identifying changes is a crucial behavior in any

    management style. The problem arises when these changes are implemented incorrectly. For example, Customizing for local tastes, in our opinion, was a good approach. Think global, act local support this change. However, he failed to manage stress originated in Fillippines. Worse, His actions projected a bad example to their subordinates. For instance, when he stopped attending company meetings. With that behavior he did not realize that even though the international company is a division with self-autonomy, this division is still part of the company. It is not another company. Jollibee was not his enemy;the enemy was the lack of communication throughout the company. Where were the "friendliness and fun atmosphere", part of the 5 F's of the Jollibee's Philosophy? Again, the path is important; you cannot reach success with destroying the culture values developed for years.For example, he should first talk to the managers of the people he wanted to recruit. This action perhaps could enable the creation of a plan designated by both sides to avoid jealousy and the superiority complex. It could be seem as a promotion instead of sudden irruption. A good communication plan should be included in the plan for the implementation of changes in the international division. Kitchner failed to address internal factors of the company that at the end affected the initial divisions objective: Making Jolibee

    one of the worlds top ten fast food.

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    3. As NoliTingzon, how would you deal with the three options described at the end of the case? How would you implement your decision? The market of PNG seems attractive from the competitive perspective. Maybe Jollibee can monopolize the local fast-food industry, but they cant assure if they can get the enough critical consumer group. In fact, there is a lot of risks in exploiting this market. Although very little number of competitors in this market, exerting the first-mover advantage, it is worth learning from the previous failure experience. The failure comes from the bad management of operation and the change of relationship with the dealer. The Jollibee should seriously consider this issue because it may also encounter this problem, which may be related to the basic characteristic of the local dealer. In addition, if

    Jollibee wants to enter this market, they will have to improve the quality of the food and service, which means a huge cost for Jollibee. And if the market cant

    accommodate 20 stores, Jollibee is likely unable to obtain significant benefits. Dealers, negotiating with Jollibee, are difficult to open 3-4 stores immediately. Even if they are willing to provide the cooperation with the gas station, how many tourists there are near the gas station and whether the tourists can meet each branch store turnover requirements are unknown. Although the domestic partner is willing to share the risks, the profit offered by the local partner still uncertain. Due to the different condition in economic level and the lower national product, it may also affect the future development of Jollibee. The local dealer won a huge success with its first store in 1996 in Hong Kong. The location of the first store is located in the center of Filipino immigrants; however, it is difficult to attract the local consumer. In addition, taking into account the not understand of Filipino employees, Jollibee cannot hire theChinese people. And the fourth location will be built on

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    the market, which full of Chinese style, so it depends on the Chinese customer mostly. It is of importance to employ Chinese staff. Moreover, McDonald occupies a dominant position in the local market, the awareness of Jollibee doesnt as popular as their

    own country. Local dealers also blame that the menu provided by the company is too rigid to attract Chinese consumers. If Jollibee changes the menu, they will sacrifice original brand characteristics. Moreover it is not conducive to the management of the company. To enter the U.S. market means a completely different investment. Daly City represents a market with huge amount of potential profit. Our group considered that investment in the United States is a viable plan. Although McDonald's has become a local fast-food industry giant, but like in the Philippines battle with McDonald's, you can make the differentiation in this market, there will also be considerable gains. There is a lot of Filipino American consumers supporting Jollibee. Fast-food is from the United States; the local market can be described as indicators of the global fast-food enterprises. As long as Jollibee can be successful in the United States, it also has the opportunity to take the experience of the United States to copy to other global markets. Although Jollibee is impossible to pursue any first-mover advantage in this highly developed complex market, entering the U.S. market will help establish the international reputation and prestige. In our opinion, Specific strategy should be based on the California wealthy Filipinos, take advantage of this consumer group to break into the wider market. Due to the various geographic divisions, Jollibee should create two kinds of management policies between international and domestic area. Additionally, Jollibee should spend more money on IT system, which will allow Jollibee to have day-to-day operation from their headquarters in the

Philippines to overcome the problem induced by distance.

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CONCLUSIONS It is important to mention that Jollibees competitive advantage was a

    an essential factor that contributed to their success in Philippines, especially competing against one of the most powerful companies in the fast food industry. The fact that the company had an excellent performance in a couple of other countries, means that it has the potential to surpass many other competitors worldwide. Thus, the cultural adaptation that needs to be taken into account is a fundamental process that the company still needs to improve. When a company is in its growing stage, planting so many flags creates a feeling of invincibility on its owners, blinding them from their arrogance, which in turn affects their relationships with the host countrys top managers and executives. And one of the most important reasons why successful MNEs have achieved ultimate performance is because of the good relationships between home and host countrys employers. Another factor that helps

    these multinationals become successful is the process of hiring. It is crucial to assure that whoever they hire in their top management team is someone who shows commitment and motivation, two factors that are key for the success of a company, needless to mention the connections and good relationships the director of international division has to have with other countries, as in the case of Tony Kitchner, a well-connected individual. The United States is a country characterized by its cultural diversity; however, it does not keep it from being an individualistic society where cultural climate differs greatly from societies that tend to be collective. For this reason, it is believed that Jollibee needs to come up with a plan that helps establish a foothold in North America and become successful. Also, the company needs to understand that unlike previous countries conquered, they are entering an industry of more than 100,000 stores nationwide (in the late 90s),

    therefore, the company needs to re-evaluate

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    its past experiences and figure out how to adapt to new cultures, tastes, environment, working climate, and many other factors that shape foreign continents.

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