Jollibee

BUS 488 STRATEGY

Individual Assignment 1

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

High

are high when: Concentration of buyers relative

 

suppliers Threat of backward integration by

quality of buyer's final product

Low



to suppliers Switching cost Product differentiation of 

 buyers Extent of buyer's profile Importance of supplier's input to

Medium

  

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 – 

High

Medium

Low

 

 performance relationship of 

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BUS 488 STRATEGY

Individual Assignment 1

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:  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

Individual Assignment 1

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 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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BUS 488 STRATEGY

Individual Assignment 1

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.

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BUS 488 STRATEGY

Individual Assignment 1

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 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 SIM University

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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 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. 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

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BUS 488 STRATEGY

Support Activities

Firm Infrastructure HRM Technology Development Procurement

Individual Assignment 1 Value Created Yes Yes

Jollibee engages a RBU concept for higher efficiency. Superior personnel training, good compensation and

Yes

 benefits package. Insufficient Evidence in Case Economies of Scale enabled them to purchase highest-

Analysis

quality raw materials. Primary Activities Inbound Logistics Operations Outbound Logistics Marketing and Sales

Service

Yes Yes

Insufficient Evidence in Case Insufficient Evidence in Case Decentralization for greater efficiency Extensive personal relationship with buyers by

Yes

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

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.

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BUS 488 STRATEGY

Individual Assignment 1

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 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

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BUS 488 STRATEGY

Individual Assignment 1

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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