Mind map for Jollibee

1.0  Introduction

Noli Tingzon General Manager of the International Division in July 1997 was faced with three options –Papua New Guinea: Raising the Standard, Hong Kong: Expanding the Base, and California: Supporting the Settlers. The decision he makes to take up any of the options will affect Jollibee’s future international strategy and growth.

2.0  Papua New Guinea: Raising the Standard

Penetrating into Guinea gives Jollibee the first-mover advantage and thus no competitors in the starting stage of the franchise. This allows Jollibee to lock preferences such as size, taste, and lifestyle and be ahead of other potential competitors in getting to know the market. For example, when KFC decides to penetrate into Guinea, locals may still prefer Jollibee’s core menu Chicken Joy.  Moreover with prior knowledge on Jollibee’s international endeavors, Tingzon knew that location is one of the keys to a successful franchise, therefore setting up Jollibee in Guinea’s major petrol service stations all around the country was a good prospect as it would create a constant flow of customers and attain reputation much faster than the original plan. As Guinea is a third world country, cost of operating in it will be low and job vacancies will be filled easily with no minimum wage rate. As a result, Jollibee can enjoy maximization of profits.

Governmental issues are one of the downsides of penetrating into Guinea. Guinea is a country filled with natural resources like timber and fisheries and economic growth was prominent for over a decade but it still remained poor due to corruption (Pngblogs, 2013). This creates unstable environment for Jollibee to strategize for long-term sustainability and growth like creating 20 chains as decisions may unpredictably be influenced by frequent changing governmental and political environments. Jollibee may be subjected to unnecessary costs and for a market of 5 million people which is 6.7% of Philippine’s total population, it may not be a feasible idea for strong expansion as Tingzon was aiming for. Moreover, Tingzon could not rely on Philippine expatriates in Guinea as there were hardly any to ensure sales in the early stage of franchise for survival. To only pick one of the three opportunities, Tingzon would be entering blindly into Guinea without considering cultural differences, and products appeal to locals unless thorough market research was done before contracting the franchise. By then, it might be more costly than the other two options.

3.0  Hong Kong: Expanding the Base

First of all, Jollibee will be able to capture more locals in the fourth store and will be able to learn more about the locals and therefore restructure the first three stores accordingly. Moreover, opening up in the busiest district of Hong Kong will enhance Jollibee’s visibility and brand recognition among the locals; substantially taking away some of the fast-food market shares as compared to the first three stores. To add on, Tingzon already have knowledge on how to operate in Hong Kong in the context of supply chain, government policies and more, therefore he can focus mainly on the expansion and resolving current issues.

However, expanding in Hong Kong will require drastic change in the staffing methods and decentralizing the control of Philippine managers so that Jollibee will fit into the culture of Hong Kong. This would also mean losing control and be more locally responsive to the demands which all cost time and money to strategize. Furthermore, it is expensive to operate in Hong Kong as the state is small but the demand for areas is high. Coupling with the fact that Jollibee should hire locals, the minimum wage rate will add into the costs of operation as well.

All in all, expanding into Hong Kong may seem like a bad idea at first; however, if Jollibee was able to capture the market in Hong Kong, it may curb the loss making issue and possibly give opportunities to enter new markets like neighboring state Macau and other parts of China. Tingzon should encourage a polycentric staffing approach to the existing Jollibee stores so that a majority of the locals would not be alienated. Because the stores have been established for a few years now, Tingzon should focus less on the Filipino expatriates who knew the menu by heart and start collecting loyalty from the locals. For example, Jollibee can come up with a menu with both Cantonese and English languages and train Filipino personnel to understand the Cantonese in the menu.

4.0  California: Supporting the Settlers

As the case study stated, California is the birth place of fast food therefore Jollibee would be entering into a highly competitive market where customers’ loyalty are vague and sales depended highly on low price set meals, promotions, convenience and appeal. Jollibee further stated that to offset its high wage cost, it will outsource raw materials from Philippines. However, it is faulty to think that it will be cheaper as transportation costs are hiking due to a few factors like petrol price and trade barriers. Moreover, to transport raw materials for only two Jollibee stores reflected that the container may be half-empty or Jollibee would have to incur in warehousing costs to keep degradable raw materials fresh. This also proved that transportation of goods will occur frequently as food supply cannot be kept for too long unless Jollibee is working towards a low quality meal. Cost of operating can be predicted as high therefore it might be a challenge for Jollibee to maintain low price meals. Tingzon need to thoroughly assess market potential such as possible store locations, cultural distance issues, and sales forecast before making a decision.

5.0  Conclusion

In my opinion, Jollibee should take up the Hong Kong expansion and work towards capturing the Asian market before venturing abroad to the western markets. Hong Kong will give access to many other Asian markets where economy is steadily growing, standard of living is increasing and governments are welcoming investments. With low cost of production prospects like India, Thailand and Vietnam, Jollibee can maximize its profits. If better, restructure all franchise to integrate and coordinate in the Asian continent so that economies of scale and scope can be enjoyed. For example, TTC’s brother-in-law and Tingzon can work towards in lowering the cost of production in Hong Kong by outsourcing raw materials from Thailand as the cost of operating is high.