BUS 488 STRATEGY

Individual Assignment 1

BUS 488 Strategy

Individual Assignment 01 July 2011 Presentation

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BUS 488 STRATEGY Question 1 Introduction

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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, Jollibees 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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BUS 488 STRATEGY Risk Management

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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 Jollibees 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 familys

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weekends are normally reserved for children, the previously mentioned activities add value to Jollibees 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 Jollibees 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 countrys 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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BUS 488 STRATEGY Capabilities

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Jollibees 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 Competencies Financial Strength Human Resources Strategic Management Large customer base Strong Filipino identification Valuable Yes Yes Rare No No Costly to imitate No No NonCompetitive Performance Implications Average Returns
Average Returns Average to above-average returns

substitutes Consequences Competitive No Parity Competitive Yes Parity Temporary No Competitive Advantage Competitive Parity Sustainable Competitive Advantage

Yes

Yes

Yes

Yes

No

No

Yes

Average Returns AboveAverage returns

Yes

Yes

Yes

Yes

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. Question 2

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BUS 488 STRATEGY Success Factors of Jollibee

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The key success factors that contribute to Jollibees success as the biggest fast-food chain in Philippines are highlighted in the competencies classification as mentioned earlier. Financial Strength Jollibees 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 Jollibees 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. Understanding Customer Needs

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BUS 488 STRATEGY

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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, Tomis 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 countrys market was not conducted, which ultimately resulted in losses for Jollibee.

Question 3

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BUS 488 STRATEGY

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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 Jollibees 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 Jollibees 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 Philippines market. The importance of the capital market stakeholders is also evident in the growing operations of Jollibee over the years.

Product Market Stakeholders

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BUS 488 STRATEGY

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Jollibees 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 Jollibees 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 Jollibees 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, Jollibees 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 Jollibees 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. Economic

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BUS 488 STRATEGY

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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 Jollibees 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, Wendys and KFC. Political/Legal No evidence in of technological segment in the case

Industrial Environment Analysis (Porter 5 forces)

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BUS 488 STRATEGY Threat of New Entrants Threat of New Entrants is high when: Economies of scale Product differentiation Capital requirements Switching costs Ease of access to distribution channels Cost disadvantages Government policies creating barriers High

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Medium

Low

The threat of new entrants to the industry is considered low to medium. New entrants to the fastfood 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: Concentration of suppliers relative to buyer industry Availability of substitute products Importance of customer to the suppliers Differentiation of the supplier's products and services Switching cost of buyer Threat of forward integration by the supplier

High

Medium

Low

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

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BUS 488 STRATEGY

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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: 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

High

Medium

Low

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

Threat of Substitute Products Threat of Substitute Products are high when: Differentiation of substitute product Rate of improvement in price performance relationship of High Medium Low

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BUS 488 STRATEGY substitute products

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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: Number of competitors Industry growth rate Fixed costs Storage costs Product differentiation Switching costs Exit barriers Strategic stakes High

Medium

Low

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.

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

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BUS 488 STRATEGY

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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 nancial 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 rst 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 diversication to hedge against competition and downturns in specic 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 uctuating crude oil prices might have an adverse effect on its prots. 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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BUS 488 STRATEGY

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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 Jollibees 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.

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BUS 488 STRATEGY Business Level Strategy

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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. Jollibees 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 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 Jollibees stores has enabled them to differentiate themselves from its competitors. This has also garnered popularity SIM University 16

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with the local Filipinos. As mentioned in the case study, 70 percent of the burger-based meals are being served at Jollibees 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, Tomis 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. 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 Jollibees activities in creating a differentiation strategy. Value Chain Analysis

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BUS 488 STRATEGY Value Created Yes Yes Yes

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Support Activities Firm Infrastructure HRM Technology Development Procurement Primary Activities Inbound Logistics Operations Outbound Logistics Marketing and Sales Service

Analysis Jollibee engages a RBU concept for higher efficiency. Superior personnel training, good compensation and benefits package. Insufficient Evidence in Case Economies of Scale enabled them to purchase highestquality raw materials.

Yes Yes Yes

Insufficient Evidence in Case Insufficient Evidence in Case Decentralization for greater efficiency Extensive personal relationship with buyers by adopting the Filipino style Tagalog speaking crew, exceptional service.

The above summarized value chain analysis represents the differentiation strategy Jollibee is currently heading towards.

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 Jollibees 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.

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BUS 488 STRATEGY

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Exploration of New Markets Jollibees 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. Jollibees 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 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. SIM University 19

BUS 488 STRATEGY

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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.

References Ireland / Hoskisson/ Hitt, (2011) Ninth Edition, The Management of Strategy Concepts. SouthWestern Cengage Learning. Singh / Pangarkar / Heracleous (2010) Third Edition, Business Strategy in Asia, a Casebook. Cengage Learning

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