The case gives an idea about how the competition influenced Jollibee’s strategy, both domestic and international. Jollibee ,which was a Filipino chain of restaurants, was forced to change their strategy with the entry of McDonalds in Philippines, which later transformed the company into a global company . The company faced serious challenges with their international exposure. The challenges included the conflicts with franchisees/Joint venture and conflicts between divisions. Another issue that the company faced was the entry into Papa New Guinea, United States of America and expansion plans in Hong Kong.
The company has to consider the financial instability it faces while considering their plans. In the analysis we have tried to cover the effectiveness of strategies adopted by Mr. Tony Kitchner (Former International Division head). This case analysis report deals with, firstly the key management challenges faced by the company, followed by some supporting arguments. In the management issues, the report focuses into the conflicting areas or the need to establish a greater cooperation and coordination between the Domestic and International divisions.
II. STATEMENT OF THE PROBLEM Being an agricultural country, full integration in sourcing raw materials could be done. For international markets, locating commissaries in the same country through joint ventures could be a potential source of success for the company. Jollibee could facilities had the idea to be the first -mover into untapped markets as he believed that although you may incur losses in the initial years, which can be cross subsidized from Philippines operation, the company will be able to restrict the entry of its competitors.
But these do not show the whole picture of his strategy implementation. There were instances of shutdown of stores due to mounting losses . The chaotic strategy of investments unsupported by proper research failed costly for the company. His strategy of targeting expats had the risk of targeting a narrow segment. The lifestyle, tastes and preferences of the expats was also not considered during international expansion. III. OBJECTIVES Jollibee was able to attain a competitive advantage in Philippines over McDonald’s by doing following things:
• Jollibee was the first to enter the market. Retaining tight control over operations management, which • Allowing 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 10 fast food brands in the world; Kitchner implemented a two-part international strategy which comprised of targeting expats and planting the flag. IV. ALTERNATIVE COURSES OF ACTION 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. V. RECOMMENDATION . International operations should be completely separated from domestic ones. 2. Strategy of varying the menu to local taste should be implemented. 3. Smooth supply chain management system should be put in place to increase efficiency and productivity. 4. In case of expanding the menu, economies of scale and operational efficiency should be kept in mind. 5. Some items which increase inefficiency should be removed from the menu. VI. CONCLUSION a. New product-new market JFC could introduce new product develop targeting the foreign market.
The new products that they had introduced in the Philippines could also be applicable to the international market. These stores should be particularly targeted towards the Filipinos working overseas. b. Increase depots in the domestic and other countries JFC could establish additional depot near Jollibee stores. Through this, they could be able to reduce logistics costs thus leading to cost efficiency. Such a measure will ensure the freshness and high quality of the products that they will deliver to the international stores. In addition, they could avoid high shifting cost from the Philippines to other countries.
They can also enter into joint venture agreement with other country in establishing new depot abroad. That is for JFC to be able to have ready knowledge about the external factors governing the country. c. Maintaining market dominance To attain market dominance, Jollibee should concentrate on increasing the presence in international markets. The international market will only need a good communication plan like tailor made ads, PR articles, good promotional plans in getting the newly introduced products known, and focusing on pushing products, getting it known, and creating loyal customers.
Besides, the transfer of the local taste buds would not be that quick going to international markets. Also, the company should improve on its research and development from new markets, potential acquisitions and new products to be developed. For each of the other business units, JFC should communicate the company culture through company conventions to ensure that the company interests are achieved. Textbook:Introduction to International Business and Globalization Mondejar, et al, 2010 Cases: 1. Kleinwort Minkins p. 27 2. Jollibee Foods Corporation p. 126 3. Enron p. 165 4. Adidas: Why we listen to stakeholders p. 203
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