?Jollibee Foods Corporation: Case Background I have always believed that I can make my business a big business. — Tony Tancaktiong In May 1975, Tony Tan and his girlfriend/future wife Grace decided to be the bosses of themselves and went into a franchise agreement with then popular Magnolia Ice Cream. The idea came when the bachelors from University of Santo Tomas found themselves unwilling to work for anybody after graduation. Though both were Chemical Engineering graduates, the two had a bulk of their lives being thought by their parents, also entrepreneurs, the basics of being a business person.
Ice Cream is a fad in the Philippines during the time. However, to be a $650 million business as Jollibee is right now, ice cream is just not the thing that can carry you into the ladder of success. As time develops and competitors keep on coming, Tony Tan had to think like the ‘big guns’, his empire’s development was a series of new Product development, Advertising, Acquisition and Expansion campaigns. Today, the Jollibee Foods Corporation is a brand tagged to the Philippines, much like Roman Catholic is to Pope Benedict XVI. And it does not stop there.Order now
Tony admitted that having dominated the local market, it is time for the little bee to step out of its hive. His long-term dream of being world renown is about to be reality… not quite. Tony admits that they are far from his dream, and it would take his third generation for this to happen. Still with his optimism, that has brought his to where he is today, Tony and Jollibee are not slowing down. An excerpt from the company website show just how dedicated the company is in further strengthening its hold of the food industry and the fulfillment of Tony and his family’s dreams.
Jollibee remains firm in its resolve to maintain its dominance in the fastfood industry. It will continue to push forward with its strategic programs and aggressively pursue further network expansion to ensure superior market coverage nationwide. Most importantly, it will continually apply itself to the paramount task of consistently delivering superior tasting products at the most affordable prices and services of the highest standards in a bright and clean store environment (www. jollibee. com. ph). Tony Tancaktiong Tony was born to a Chinese immigrant to the Philippines.
His father was his mentor in everything food. His father was a cook in a Buddhist temple and also a chef in outside restaurants. Maybe that was the reason why I (Tony) have such a firm grasp of my taste buds. He finished Bachelor of Science in Chemical Engineering in a reputable school, as he always had a dream of going outside the country as a professional. Based from the Discovery channel feature on the rise of Jollibee, it is evident that the success cannot solely be attributed to Tony. Even then, his characteristics have pioneered the empire that he has today.
Besides, it is a family business centered on uncle Tony. Since the start of his own business career, he has been optimistic… until today. Tony has always admitted that his father thought him the best way to succeed in the food business is to have good food, good service, and a reasonable price. Though he keeps this in mind, he also developed additions to his father’s teachings. Tony has learned to take risks, be creative and listen to his customers. This was evident when the ice cream business started to fail. Then Jollibee was born.
This was followed by numerous awards for Tony as he steered a business to the top of local fast-food chain industry. Exhibit: Management and Corporate Awards from years 2001-2003 2003 awards The Most Admired Corporation in the Philippines by the Far Eastern Economic Review for 6 consecutive years (1998-2003) The Asia Money Magazine adjudged JFC as the country’s “Best Small Company” based on market capitalization for 2 consecutive years (2002-2003) 2002 awards The Asia Money Magazine adjudged JFC as “Best in Operational Efficiency” based on the financial rations “Management Man of the Year” – Tony Tan Caktiong by MAP 001 awards Recognized as one of the “Top 20 Best Employers in Asia” and the Number 1 in the Philippines by Hewitt Associated and the Asian Wall Street Journal Cited as Best Employer in the Phils. Ranked # 16- Best Employers in Asia Listed as Asia’s Most Admired Companies: No. 1 Philippine Company No. 1 Consumer Company in Asia No. 1 in Contribution to Society No. 1 Growth Potential Listed among Asia’s Top Ten (Quality of Products and services, Quality of Management and Honesty and Ethics) Top Philippine Company – REVIEW 2000 (3rd straight year) Ranked #1 – Innovative in Responding to Customer Needs
Ranked #1 – Company that Others try to Emulate Ranked #2 – High Quality services / Products Ranked #3 – Management has long Term Vision Ranked #5 – Financial Soundness 2000 awards No. 3 Overall Ranking in Asia (surpassed only by General Electric and Microsoft) – Asia Business Magazine 1999 Grand Anvil Award for “Sabi ng Jollibee, ‘Kaya Mo, Kid! ‘” – Public Relations Society of the Phils. Award Excellence, Public Affairs Programs for Arts and Culture for “Sabi ng Jollibee… ‘Kaya Mo, Kid! ‘” Values Advertising Award for “Buhay Linggo” TV campaign – Phil.
Association of National Advertisers Outstanding Fast-Food Chain – Consumer’s Union of the Philippines (11th ANCA) Best TV Commercial “Buhay Linggo” TVC 45s/30s – Catholic Mass Media Awards Best Print Ad “Patawad Po” Print Ad – Araw Values Awards Licensee of the Year – First FILSCAP Awards Outstanding Filipino Franchise of the Year (Hall of Fame Awardee) – Philippine Franchise Association, Dept. of Trade & industry & The Philippine Chamber of Commerce & Industry Jollibee Foods Corporation As the ice cream business starts to wane, Tony and then his partners, his family (this is a family business… tried to listen to their customers. From then on they learned that there was a need by the customers, a need for something to eat. Not just a local ice cream parlor. Besides, ice cream is a dessert. At that time, Tony went back to his ‘I wanna go to the US’ attitude. He learned that aside from ice cream, burgers were also a favorite in the US. Even though it is a junk food! And as the ice cream sales go down, and the oil crisis of 1977 continues, Tony decided to scrap the franchise and start his family’s own business. In 1978 Jollibee Foods Corporation was born.
How did it succeed? They sold burgers… the ‘Yumburger’. Aside from the food, the store located in Cubao featured a family atmosphere. Centered on joy and the family spirit, just as Tony always envisions. On its first year of operations, the company earned 2 million pesos. Jollibee’s share of sales Of Jollibee’s P24. 1 billion in system wide sales in 2001, Jollibee accounted for P16. 88 billion or 70%; Chowking P3. 631 billion or 15%, Greenwich P2. 474 billion or 10. 3%, Delifrance P183 million or 0. 75%, and international P935 million or 3. 9%.
Jollibee and Chowking are the fastest-growing segments of the business. Jollibee sales rose 42% between 1998 and 2001, from P11. 82 billion to P16. 88 billion, while Chowking’s by 69%, from P2. 15 billion to P3. 631 billion in 2001. On the other hand, sales of Greenwich expanded 23. 8% during the same period, from P1. 999 billion to P2. 474 billion. Clearly, Jollibee remains the “bread and butter of the whole business in terms of profits and revenues. Jollibee’s system wide sales expanded by a hefty 18. 8% in 2001 over 2000 which in turn showed a growth of 12. % over 1999. In 1999 over 1998, system wide revenues nudged up just 8. 3%, the slowest during the decade. Net income margin, which is peso profit divided by gross revenues, slid to 3% in 2001, a quarter of the hefty 11% margin during the boom years 1993 through 1995. It was 5% during the first nine months of 2002. In 1998, the first full year after the Asian Crisis struck system wide revenue growth was a frenetic 49%, a record. Sales growth was a strong 30% in 1997, 25% in 1996, 31% in 1995, 29% in 1994, 20% in 1993, and 28% in 1992. It was a difficult year and challenging year for the Philippine fast-food industry and for your company,” said JF Chairman, President and CEO Tony Tan of 1999. That year, the economy, as measured by the Gross Domestic Product (GDP) grew by just 4%, same as 2002’s rate. “We didn’t see a broad-based turnaround and improvement in consumer spending,” he related in 1999. Amid the slowing revenue growth, Jollibee must constantly tap new sources of revenue here and abroad, keep opening stores, cut cost, sharpen its focus, and improve efficiency and technology.
Last year, on top of cost-cutting, the company even resorted to increasing prices (by about 4%) to keep its profit margins, an indication of brand strength; in other words, the Jollibee group must keep reinventing itself to stay ahead of competition and remain profitable. Today, the company is valued at $650M and has operations even outside the country. In places like China, United States, Saudi Arabia and even having 513 stores among the 7,107 islands of the country. Company Vision, Mission and Values Values – Always customer first – Excellence through teamwork Spirit of family and fun – Frugality, Honesty and Integrity – Humility to listen and learn Vision Become the most dominant and best-tasting QSR… The most endearing brand… that has ever been We will be within reach of every Filipino… We will lead in product taste at all times… We will provide FSC excellence in every encounter… Happiness in every moment Mission We bring great taste and happiness to everyone Production Commissary: the supply Chain Process The company uses a commissary system that ensures the quality of the products being sold in the local stores.
It does not only guarantee quality of product, but also the speed of delivery. Jollibee commissaries are located in Pasig, Cebu and Laguna. These offices are liable for all value adding processes for the products of the company. Starting from raw materials to distribution and logistics, a well organization and communication of process should always be in focus for easier operations. A professionally staffed Technical Services Team supports the maintenance of an internationally accepted quality management system that further ensures the quality and safety of the commissary manufactured food products.
High caliber teams from Engineering, Human Resources, Information Management, Finance and Accounting likewise provide support to the Manufacturing and Logistics operations of the Commissary. The key to handling the complex commissary operations is state-of-the-art automation, computerization and continuous improvement in manufacturing equipment and processes. Jollibee’s automated operations not only cut production time and ensure consistent quality from batch to batch but also ensures food safety by minimizing handling and maintaining the highest standards of cleanliness.
Proof of Jollibee’s adherence to high quality standards is the various awards it garnered for the commissaries. With modern machineries and quality awards, the commissaries are fully geared to ensure that Jollibee will achieve its goal in making the company a truly global brand! Quality control: JFC standards (excerpt from the company website) What explains Jollibee’s phenomenal growth? Surely, it is Jollibee’ s strict adherence to high standards as symbolized by the acronym “F. S. C”, a byword in all of Jollibee.
Every Food (F) item served to the public must meet the company’s excellent standards or it will not be served at all; the Service (S) must be fast and courteous; and Cleanliness (C), from sidewalk to kitchen, from uniforms to utensils, must be maintained at all times. These high standards, of course, depend on the employees who are considered as the cream of the crop. Jollibee knows this and is proud of its employees’ commitment to FSC in everything that they do. Jollibee recognizes them by providing the highest compensation and benefits package in the fastfood industry.
Apart from this, Jollibee’s people undergo modern and comprehensive training programs based on the company’s high standards. Managers continuously learn the latest systems in store operations as well as other results and people-oriented management skills. Service crew get regular training on the various store stations and on other food-service innovations as well. Career pathing is also provided, allowing opportunities for qualified and exceptional crew members to pursue their food-service careers as managers. Store operations are ably supported by professionals who are experts in Marketing, Computer Management and Engineering.
As a whole, Jollibee’s working environment is anchored on the highest standards of corporate professionalism and excellence. Honest, Hardworking, Jolly. The Jollibee people do their best… and get the best in return. Franchising and Marketing strategy By 1980 with the entry of big competitors such as A&W and KFC, Jollibee already had 21 franchises around the country. Adding to the Filipino taste, the company developed products that could compete with the new comers. Therefore launching the Chickenjoy and Jolly Spaghetti.
That’s not all, with news of McDonald’s coming to the country the following year; Jollibee had its first step to advertising and the mascot strategy. And as predicted, the biggest fast-food chain in the world is here, McDonald’s. It would also follow that the ‘little bee’ will soon loose its sting. True enough, the color, ambiance, service and food of McDo ate up a fair share of Jollibee sales. Tony Tan leaned on a friend to counter this problem, though it meaning that it is not a pure family controlled business anymore. Smith Lanning was a management consultant that Tony met in a convention.
The two became close friends and later on helped each other. The business know-how of Smith Lanning taught Tony a basic strategy. Go into advertising, PINOY ADVERTISING. After spending a whole year’s profits on advertising, launching new products together with the Langhap-Sarap theme in commercials, Jollibee got back at McDo posting 500 million sales in 1984. By 1985, the company was the prime fast-food chain in the country getting the most of the market share. In 1987, after a series of hardships and controversies, Jollibee opened in Brunei and Taiwan, and the rest followed. Sales ballooned to 1. billion in 1989 just to show the amount of patronage the company experiences. And as usual, advertising is not solely for the original Yumburger, but there are already a wide product offering from Jollibee at the time. Going Public The 1987 advertising and expansion campaigns showed that the company needed money if sooner than later. Jollibee financial consultant Paul Rosenberg saw this and recommended to Tony that the company should go public to gain needed financing. After a long family debate, on the risks of diluting ownership, the company debuted in the local stocks exchange in 1993.
Initially priced at 9 pesos per share, in a day’s time, the offering rose to 16 pesos and everybody was happy. With money on their hands, Jollibee was able to fortify its name in the food industry with a series of acquisitions of Greenwich, Delifrance, Chowking and the newest one, Red Ribbon. Human Resource Management The organizational structure is shown below. DIRECTORS ANG NGO CHIONG Chairman Emeritus TONY TAN CAKTIONG Chairman of the Board WILLIAM TAN UNTIONG Director/Corporate Secretary ERNESTO TANMANTIONG Director ANG CHO SIT Director ANTONIO CHUA POE ENG
Director FELIPE ALFONSO Director MONICO JACOB Director EXECUTIVE COMMITTEE MEMBERS Tony Tan Caktiong President and Chief Executive Officer Ernesto Tanmantiong Executive Vice President and Chief Operating Officer William Tan Untiong VP – Real Estate and Head, Delifrance Philippines Rufino L. dela Rosa President and CEO, Chowking Food Corporation Ma. Regina B. Navarrete General Manager, Greenwich Pizza Corporation Jeffrey Chao Chief Executive Officer, Yonghe King Ysmael V. Baysa VP – Corporate Finance and Chief Finance Officer John Victor R. Tence
VP – Corporate Human Resource Development Paul A. Zaldarriaga VP – Shared Services OFFICERS – STRATEGIC BUSINESS UNIT Robert T. Poblete VP – Human Resource Development Anastacia S. Masancay VP – Controllership and Tax Management Carolina Inez S. Reyes VP – Marketing Susana K. Tanmantiong VP – Purchasing Joseph Tan Buntiong VP – Restaurant Systems and Quality Management Noel F. Guerrero VP – Information Management Benigno M. Dizon VP – Engineering Ma. Lourdes S. Villamayor VP and Regional Business Unit Head – Mega Manila Tommy Y. King VP and Regional Business
Unit Head – South Luzon and VP Jollibee US Operations Jose Ma. A. Miñana VP and Regional Business Unit Head – North Luzon Jose Filemon F. Allid VP and Regional Business Unit Head – Visayas and Mindanao Dennis M. Flores VP – International Operations Lizette G. Olandres General Manager, Baker Fresh Foods Philippines Inc. Financial Position Exhibit: Financial data 2002-2004 (www. jollibee. com. ph) Jollibee Foods Corporation and Subsidiaries (in P’000, except Number of Stores, Personnel, Ratios, Per Share Data and Outstanding Shares) FOR THE YEAR 2002 2003 2004
Consolidated System Wide Sales 26,754,726 28,881,630 35,543,006 Gross Revenues 20,259,816 21,660,344 26,227,662 Income from Operations 1,385,431 1,284,371 1,966,802 Net Income 970,811 1,182,208 1,580,673 Payroll and Benefits 2,751,806 3,108,494 3,461,941 Personnel 21,992 21,479 26,495 Number of Stores Jollibee 436 467 499 Greenwich 191213 232 Chowking 216 245 303
Delifrance 28 30 31 AT YEAR-END Total Assets 11,456,284 12,924,859 15,387,948 Property & Equipment 4,887,341 5,782,211 6,307,689 Stockholders’ Equity 6,309,481 7,201,913 8,366,413 Current Ratio 1. 34 1. 22 1. 07 Debt-to-Equity Ratio 0. 82 0. 79 0. 84 PER SHARE DATA Basic Earnings Per Share 0. 9966 1. 2015 1. 6021 Diluted Earnings Per Share 0. 9927 1. 1998 1. 6004 Cash Dividend 0. 28000. 3500 0. 4500
Book Value 6. 4244 7. 3140 8. 4710 SHARE INFORMATION Outstanding and Subscribed Shares (net of Treasury Shares) 982,119,098 984,668,488 987,647,817 Social Responsibility Advertising a product will not work at all times in catching customers because though they get interested, they get tired of seeing the commercial as well. Dominating as they are, Jollibee launched several publicity tactics that is geared to strengthen awareness from the public, but also get into the hearts of customers, and staying there, because the customer brought Jollibee to where it is today.
Tony Tan believes that with sharing one’s blessings, something good in turn will happen to the business. The social responsibility campaign launched a bundle of projects as seen on the exhibit that follows: Exhibit: Social Responsibility Projects 1. Habitat for Humanity- a poverty housing project initiated by the JFC group for habitat 2. Sabi ng Jollibee ‘kaya mo kid’ program- an inspiration program targeted at inspiring young ones to exhibit the talent they possess within. 3. MaAga ang Pasko sa Jollibee- tapping a celebrity in aharing blessings for the welfare and development of underprivileged children. 4.
Nurture the Future- a nationwide supplemental feeding program. 5. (Jollibee supports Give-A-Live Foundation to benefit sick children)- This foundation aims to provide assistance to indigent pediatric patients confined at various hospitals. The project aims to raise funds for the purchase of desperately needed life-saving medicines and hospital equipment. par Jollibee Foods Corporation: Case Analysis I. Company Vision, Mission and Values Values Always customer first Excellence through teamwork Spirit of family and fun Frugality, Honesty and Integrity Humility to listen and learn Vision Become the most dominant and best-tasting QSR…
The most endearing brand… that has ever been We will be within reach of every Filipino… We will lead in product taste at all times… We will provide FSC excellence in every encounter… Happiness in every moment Mission We bring great taste and happiness to everyone II. Objectives The company through its values and guided by its mission and vision is aimed at achieving these strategic objectives: 1. To continue to strengthen the company’s competencies and capabilities. 2. To constantly introduce new products and keep in touch with our customers through various programs and promotions. 3.
To maintain a strong revenue growth rate in the food industry 4. To develop marketing campaigns that will touch our consumer’s sentiments. 5. To be the dominant fast food service leader in all the territories we operate in. III. Case Issues Are we saturated? (CI-1)- This is a question whether the company has dominated the local market. Is there still room for growth in the local market? Or is it time for the company to tap other markets. The move to locate in China, Taiwan and the US is a proof of this. How do we maintain our sales growth? (CI-2)- the company experienced a decrease in the revenue growth after the boom years of199-1995.
Though sales continue to increase, gross revenues decline. With 11% gross revenue increase in the boom years, it slid to 3% in 2001. An issue that should not be taken for granted. What is a potential international market? (CI-3)- Going global is always a company objective. As a general rule, one must know his local talents before going in other countries. There is a question therefore for Jollibee to identify what we are looking for in a potential international market. And will their strengths here in the country still be applicable in the international market? Do we acquire a new company or do we build from scratch? CI-4)- The current move of acquiring new businesses both international and domestic is a contribution to the vision of being a world brand for Jollibee by the year 2020. Therefore, meticulous assessment before such actions should be taken. Just as what happened to the failure with the LA venture. IV. External Environment Dominant Economic Features A. Market Share Jollibee owns 52% of the local QSR/fast food market. With their closest competitors, McDonald’s (28%) and Wendy’s (9% far behind). Jollibee’s vision of being a global brand forces it to go outside the country and do what competitors are doing.
This has propelled the company to go shopping for businesses in the food industry to help their cause and even increasing their advantage over their competitors. B. Scope of competitive Rivalry Rivalry started as a local happening. Competitors in the Philippine fast-food industry are both international (KFC and McDonald’s) and local (Wendy’s and Shakey’s) companies. For the international market of Jollibee, it has the same rivals such as McDonald’s and KFC especially in the US market. C. Buyers and their lifestyle The country is a Catholic country with over 80% being Roman Catholics.
This has allowed businesses such as Jollibee and McDonald’s to introduce their burger products. With close to half of the 85 million people residing in urban areas where fast-food chains are dominant, the opportunity is great. People rarely have time for themselves being engrossed in work activities and mid-afternoon meals. This lifestyle has affected every fast-food business. People want to buy because of the need to work more to earn money. Moreover, the custom of eating after mass is always a factor for any food business to locate near a church.
Therefore innovation, EOS and wide product offerings are what a seller would expect to take advantage of. D. Distribution Channels Companies in the fast-food industry could gain an advantage if it has a centralized distribution system. It should be noted that the quality and speed of delivery are success factors in the food industry. A company in the fast-food industry should be able to secure effective, reliable and efficient channels to have an advantage over rivals. E. Differentiation of products Rival firms rely on their wide product offerings to stay competitive.
Constant development of new products are done to anticipate changes in consumer preferences and tastes. The high differentiation is a window that companies in the fast-food industry are already tapping. F. Technological change in product introductions and production innovations. The company that has invested on technology to enhance operations has an advantage over the rivals. Company operations always try to maximize the output from resources. The technology development in the fast-food industry therefore is a necessity especially in achieving economies of scale.
Strategies should take advantage of the new technologies being developed for their operations. V. TOWS analysis The company opportunities and strengths show that the company should prioritize the following opportunities and watch over the threats. Opportunities 1. The potential for international markets and the migration of Filipinos in certain countries. Cultural diversity especially in countries penetrated by Filipinos and Filipino cooking offers a potential market. Examples are India and Indonesia. 2. The Philippines is still an agricultural nation.
Full integration in sourcing raw materials especially for the imported beef patties cold be a solution is world transportation and sanitary issues continue to develop. 3. For international markets, locating commissaries in the same country through joint ventures could be a potential source of success for the company. Jollibee could provide the technology while the partner deals with appropriate techniques to sell in the foreign market. 4. For the local market, an increase in the number of commissaries could potentially decrease the transportation costs and the duration of shipments.
Allowing the company to focus on the quality of products. Threats 1. Competition both international companies and local small-hold SMEs in the food industry. 2. Sanitary standards such as the ‘worm’ issue can affect customer loyalty and sales. 3. Increase in crude prices increases transportation costs and the prices of transported materials and products. 4. Political instability in the country threatens JFC as it hinder the opportunities to convince international investors and country leaders to allow a JFC entry in their country.
For the company, it is essential that they maximize the following strengths and turn the weaknesses into strengths as well. Strengths 1. Jollibee is a local industry leader that has competent leaders at the helm of the organization. 2. Proven track-record makes dealings with partners easier 3. Speed and timeliness of deliveries because of the locations of the commissaries. 4. Effectiveness of the company ad campaigns in communicating the company’s culture on being a family. 5. Wide variety of products offered in wide markets. 6.
Portfolio can serve various segments of the market and pass the winning culture of Jollibee on the other business units. 7. Highly motivated and well-trained personnel Weaknesses 1. Lacked more effective marketing skills as growth revenues decreased to 3% in 2001 2. Lack on in-depth planning and research in the expansion to foreign markets. VI. Competitive analysis (Porter 5 forces) Rivalry among competing firms- high, the QSR industry is highly profitable. The source of rivalry stems from price wars and marketing innovations. The fast food industry can be described by the strong competition between firms.
The rivalry is also centered on the KSFs 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. Moreover, the standardization of service also contributes to the intensity of rivalry. The said factors are points wherein the competition stems from, and rival firms use this to achieve the objectives they consider. Threat of substitute products- low to moderate, products from the local street food industry is a major substitute, but the service and cleanliness offered by Jollibee is an advantage.
Restaurants are not as quick as a Jollibee QSR which is an advantage for Jollibee having a superior service, and finally, Jollibee prices are reasonably priced that is has been a pinoy favorite. Threat of new entrants to the industry- low, the industry is highly profitable with a population lifestyle that wants to eat with a good service. However, the bar is already set for potential entrants. This was seen when Jollibee first experienced a strict competition from then new-comer McDonalds’s that it resulted to the company increasing its standards.
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, capacity to Economies of Scale, and strategically situated distribution channels. Bargaining power of suppliers- low, though some raw materials are imported, the country’s stock of technically skilled people can do the job for Jollibee in case it tries to integrate. The level of technology of the commissaries contributes to the standardization and maintenance of quality of food products.
Also, trade barriers that limit the amount imported to the country is an appealing reason to integrate. This lessens the bargaining power of suppliers. Bargaining power of consumers- high, the customer first policy shows it all. The summary of the competitive forces show that the industry is highly profitable. Competition within the industry is high and is centered on marketing and product innovations. The customer is the key sector for any QSR and their say should always be considered. Jollibee has appealed to the market with its product and service offerings, together with the reasonable ricing strategy. This has helped in Jollibee being a country-known brand that the threat of substitutes is low. Finally, the supplier’s control over Jollibee is low; there is always a room for integration with the amount of cash of the company and the pool of technical people in the country to work for them. VII. Driving Forces Increasing globalization Sourcing beef materials from Brazil and locating in foreign markets both introduce the company to global developments such as crude prices and tariff and non-tariff barriers that could potentially change how operations continue in the future.
The forging of tastes of the global market as mentioned is an opportunity. This was possible because of the increasing trend of migration and the trend for global trade and investments. Therefore, a strategy that should be formulated should be aware of the globalization trend and at the same time, be active for future developments. Industry profitability Minimizing the company’s operating cost by creating an efficient production is one way to increase its profitability. This can be done by adopting new technologies that can speed up the company’s operation. These can greatly help the company to capitalize on economies of scale.
The same concept forces other players to innovate and cause changes in the industry. Interest of the buyers for differentiated products Across the seas, there is only one use for Jollibee products, that is, to be eaten. Everybody needs to eat and some time or another, a need has to develop for new products that can appeal to different interests. The development of the ‘need’ is a major driver of change in the industry. Right now, in the local market, as Jollibee does, they continue to add new products to their menu, still maintaining the pinoy taste that they have patented.
VIII. Key Success Factors For a company like Jollibee in the food industry the identified key success factors are as follows: First, the company must offer its customers good food. The taste is essential in building up a good customer. It has also need to be reasonably priced and served at the best service that the company could offer. A company’s success centers on these characteristics. Aside from the abovementioned factors, there is also a need for new marketing and product innovations, as it also drives competition. IX. Value Chain Analysis Procurement
Some of the raw materials processed and manufactured in the Jollibee commissaries are import products or are grown by suppliers. For the French fry product, the Jollibee supplier also serves the company’s prime competitor, McDonald’s. The beef on the other hand comes from Brazil. Jollibee has developed long-term deals with these partners. So the supply chain works in a reliable working environment between the supplier and Jollibee. However, due to global trade barriers, coupled by the increase in crude prices, it is not long before Jollibee scraps international sourcing activities.
There is always a room for integration within the country. This could lead to Jollibee reinventing their procurement process, and start from the ground with the level of skill and technology available in the country. Logistics For outbound logistics, Jollibee distributes to franchises and fully-owned stores. Because of the centralized distribution system brought by Jollibee commissaries, it is an advantage to have a centralized processing and manufacturing quarters that delivers to stores in proximity. This has allowed Jollibee to have a timely delivery for perishables and maintain its quality till it reaches the consumer.
Manufacturing The commissary system is responsible for the value adding processes done to produce genuine Jollibee products. Being part of the value chain, the manufacturing process is highly technology dependent to ensure that the food is consistent to Jollibee standards and is produced safely and cheaply without sacrificing the quality. The key to handling the complex commissary operations is state-of-the-art automation, computerization and continuous improvement in manufacturing equipment and processes.
Jollibee’s automated operations not only cut production time and ensure consistent quality from batch to batch but also ensures food safety by minimizing handling and maintaining the highest standards of cleanliness. (excerpt from the JFC website) Marketing Another key component of the Jollibee value chain is marketing and effective ad campaigns. Jollibee ads reach the customers through media. Using celebrities to promote the company’s products and citizenship. The company’s culture of family values is well communicated through publicity moves such as MaAga ang Pasko and Habitat for Humanity.
Thcompany has used media masterfully in showing its ethical stance on issues of poverty and humanity. Human Resource Management Finally, the JFC value chain, as stated by Mr. Saldriega, works through its people. The culture of sharing and family values is well communicated to employees. However, this that mean that poor performance is tolerated. To abide by the consistent quality of products and service, employee actions are evaluated on the achievement of objectives. Good performers are rewarded, and a higher value for the customer experience is provided. Summary
The value chain analysis of Jollibee shows that the internal competencies of Jollibee are through its social responsibility, production capacities, and marketing know-how through advertisements. Finance Percentage changes Consolidated System Wide sales trend changes 2002-2003 = 7. 9 % increase 2003-2004 = 23. 0 % increase Gross Revenue changes 2002-2003 = 6. 91 % increase 2003-2004 = 21. 1 % increase Income from operation trend changes 2002-2003 = 0. 08 % decrease 2003-2004 = 53. 11 % increase Net income percentage changes 2002-2003 = 22 % increase 2003-2004 = 11 % increase
As can be seen from the snapshot of the company financial position and operation history, it can be seen that JFC is pursuing a growth strategy. This has increased sales and revenues; however, the issue for the company is to maintain this growth trend. The move though, has increased the company’s cash tie-up to increases in fixed assets and payroll benefits. As the net income percentage changes suggests that the company should consider the 50% drop in the net income increase, strategies to increase and maintain this rate of income increase should be considered along with the growth strategies.
Profitability Ratios Return on Investments Debt-to-equity ratio 2002 = 12. 1 %2002 = 0. 82 2003 = 10. 0 %2003 = 0. 79 2004 = 12. 8 %2004 = 0. 84 Current Ratio 2002 = 1. 34 2003 = 1. 22 2004 = 1. 07 The productivity of the utilization of the company assets show that the company is doing well. Because of expansion strategies, the company liquidity experiences a decreasing trend. However, this decrease should not only result from increase in number of stores. The company should also balance the investments on advertising campaigns and R&D for new product development.
In these cases, the company shows its commitment to continuous improvement and attaining and maintaining growth. X. Time line Analysis This section features the developments and strategic moves that the company undertook from the start of its operations. The developments are categorized as actions that add value to the existing management functions. (please see the following page) Time line of Jollibee Food Corporation YEARPRODUCT DEVELOPMENT 1979Spaghetti is introduced 1980Chicken joy and French fries 1982Palabok Fiesta 1984Champ Burger 1985Breakfast Joys 1986Chunky Chicken Sandwich 988Jolly Twirls soft serve 1990Coleslaw, Jolly Hotdog, Chicken joy take-me-out, Peach mango pie 1991Pancakes and Jolly meals 1992Frozen patties for its hamburgers Improved soft served ice cream line by offering fruit flavored ice cream 1995-2000Amazing aloha 1999Cheezy Bacon Mushroom Burger FINANCE (SALES) 1978JFC posts 1st year sales of 2 M. 1987Sales of 570 M (pushes Jollibee into the elite top 100 corporation) 1988Jollibee syatem wide sales hit 921 M, Further leading market share of 31% in Fast food industry and a dominant 57% share in the hamburger segment 1989-1990Jollibee sales hit 1. B (marks 1st fast food chain to surpass billion peso sales mark) 1990post sales of 1. 8 B 1991sales hit a whopping 2. 65B 1992sales hit the 3. 365B 1993JFC was lusted in the Phil. Stocks Exchange with an initial offering of 9. 00 per share JFC share are being sold for 20. 00. a windfall or more than 135% 1996Sales increased to 8. 29B which translates to a market share of more than 50% among all hamburger fast food chains 1997Sales increased to 11. 17B 2000System wide sales reach 20B. Jollibee sales are summarized in the following table. Year1978198719881989199019911992199619972000 Sales Pesos)2 Million570 Million921 Million1. 3 Billion1. 8 Billion2. 65 Billion3. 365 Billion8. 29 Billion11. 17 Billion20 Billion MARKETING STORE OPENING, ACQUISITION 1975Magnolia Ice cream parlor at Cubao 1st Jollibee outlet 1978JFC is born Bakery is established in Cubao 19791st Franchise owned store opens at Ronquille Sta. Cruz 1981ended with 10 stores 1986opens its 1st international store in Taiwan 19872nd Taiwan store opens 1987opens 1st fast food chain outlet in Brunei 1989-19902nd Brunei stores opens 1991Jollibee 100th store opens in Davao city 1992acquired 73% of the hamburger segment 992opened another sore in Jakarta, totaling to 2 stores in Indonesia 1992have 112 stores nationwide acquiring more than 50% share of the fast food industry 1994148 stores nationwide by the year end expands into pizza segment with the acquisition of Greenwhich pizza Corp. 199520 more stores opened in the Phil bringing the total to 168 opens store abroad: Guam, Dubai, UAE, Kuwait & Jeddah and USA acquires franchise of Delifrance 1996had 208 stores nationwide Mary’s chicken was born, a semi self service restaurant and another Jollibee subsidiary 19961st Jollibee store in HongKong 997Jollibee international opened Jollibee Xiamen located in the Peoples Republic of China 19985 stores opens in Daly City opened 62 stores nationwide opens its 300th store in Balagtas, Bulacan 1999opened 50 stores nationwide, total of 350 stores ADVERTISEMENT, PROMOTIONS,etc. 1980launches its 1st Tv commercialJollibee mascots debuts 1982pioneers of the use of in-store promotions, novelty items and Kiddie bday packages for kids 1983the Langhap Sarap TV ad campaign is launched Chickee and Lady Moo join the Jollibee mascots 1984Mascots Champ and Hetty join the Jolibee family 1993introduced the Kiddie pack promo
XI. Evaluation of Current Strategies To accomplish the mission and attaining the vision, in the local food/QSR industry, Jollibee should build around what it does best. Growth strategy moves should be undertaken to improve the firm’s competitive position and long-term profitability as well. Evaluation of the current strategy shows that: A. Expansion in international markets through Acquisition/Joint venture and full ownership (CI-3)(CI-1) B. Acquisition of other local businesses w/ a different PL in the food industry (CI-2) C. New product-same market (CI-2) D. Franchising as a growth strategy (CI-4)
The current strategy for JFC is comprised of the following strategies combined. 1. Expansion in International markets through Acquisition, Joint Ventures and full ownership. Jollibee is the county’s leading fast food chain. He size, geographical expanse and breadth of the company’s operations have grown exponentially local and global. Through expansion in international markets, Jollibee has been able to spread its risks. It is one of minimizing their risk if one of their branches would not be able to successfully penetrate a market in a county. It is also parallel to their vision to be known I the United States and other countries abroad. . Acquisition of other local businesses with a different product line in the food industry. In line with its long term goal to be the dominant food service leader in the court, the company acquired several numbers of companies, which is to enable to penetrate other market segment. Such as pizza-pasta segment through the acquisition of Greenwich, French café bakery segment which is the acquisition of Delifrance, cakes and pastries segment through Red Ribbon and the Oriental QSR segment which is through Chowking. Through the acquisition of these companies, it has provided Jollibee Group an increased in the enterprise value.
They have captured the market of those companies; therefore it would increase their market share in the industry. Moreover, the shares are continuously rising for the company as it implements a franchising growth strategy. 3. New Product. – Same market Jollibee has devoted a considerable amount of resources with t identification of consumers taste and preferences, development, testing, manufacturing and marketing of new products. With continuous research and development, Jolilbee has come up with new product lines to cover all market segments.
With Jollibee’s superior product lines, it has become a foundation of a continuous consumer excitement with every introduction of products. Existing products are improved and re-launched. New products are test-marketed in keeping with the strategy of having continuing fresh line up of products. All this to respond to consumer’s changing needs and preferences which has been a major factor in Jollibee’s success. The abovementioned strategies are feasible for Jollibee because they have the cash to support it, the culture, and the depth of skill that they have. The strategies also are in line with the company visions and management aspirations.
XII. Strategy Formulation A. Maintain current strategies B. Add some aspects to the current strategy 1. new product new market 2. expansion through subsidiaries (in foreign markets) (CI-2) 1. Maintain current Strategy The last few years of Jollibee have been a triumph for the company. Profits have steadily increased and the focus has been on giving 5the beast QSR to their consumers. Jollibee’s leadership was not only reflected by market share (the company enjoys more than half of the entire fast food industry); numerous local and global wards attest to this as well. . Add some aspects to the current strategy 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. Specifically, the Filipinos working abroad. Jollibee products like bistek, aroscaldo and longsilog meals are consumed mostly by Filipino. b. Increase commissaries in the domestic and other countries abroad. JFC could establish additional commissary near Jollibee stores specifically in Mindanao.
Through this, they could be able to lessen transportation costs of delivering the Jollibee from the far commissary to the other parts of the country, thus leading to cost efficiency. Also, they could have a commissary abroad to 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. However, high risk is involved. They may also engage into joint venture agreement with other country in establishing new commissary abroad.
That is for JFC to be able to have ready knowledge about the external factors governing the country. Recommendation We recommend that the company should take our second alternative. They should introduce local products to the international market. Successfully launched products in the Philippines, the opportunities and the company’s mission of bringing good taste to its customers. This also supplements the growth objectives the company is pursuing. Having commissaries abroad could potentially be beneficial as global developments continue to be unfavorable for an importing company.
To follow the rule of maintaining market dominance, Jollibee should focus on the recommended strategy as they continuing on international markets. The international market will only need a ‘more communication strategy’ 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. The financial position of the company shows that they can do whatever they want. There is a lot of money and they have the track record to prove that.
As a supplementary strategy, the company should improve on its research and development from new markets, potential acquisitions, ad campaigns 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. Advertising campaigns though do not always have to be Jollibee sponsored. As a suggestion, the other business units should focus on environment publicity, compared to Jollibee’s ads for humanity and youth.