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Global Expansion of Jollibee
Jollibee was founded in 1975 in Cubao, Philippines and the company was incorporated in 1978 (Layug, 2009). Jollibee grew rapidly, offering a menu consisting of mainly Western foods and following a business model that was inspired by McDonald's. One of the main reasons that Jollibee has become such a success both in the Philippines and abroad is that the company has been able to execute this foreign business model to a high degree of excellence. This essay will analyze the success of Jollibee and make direct comparisons to the business models of Jollibee and McDonald's to show that much of the success Jollibee has enjoyed relates to following this foreign business model. The essay will break down Jollibee's strategy into a number of key components to better understand how it has earned its international and domestic success.
History and Mission
Jollibee began expanding shortly after becoming incorporated under that name, and by the 1980s was expanding into nearby international markets such as Taiwan and Brunei. The company has always held an international orientation, has focused on a Western menu, and has undertaken a number of other strategies that mirror those of Western fast food chains. The company has simply adopted the mission of providing Western fast food to Asian audiences. Another mission is to expand the company around the Asia-Pacific region and further into the United States.
From the beginning, Jollibee adopted the McDonald's tactic of appealing to children, so that it could win customers at an age when they are vulnerable and keep them as they progress through life. To this end, the company settled on a name "Jolly Bee" that was later altered to "Jollibee." The company based its bee mascot on a cartoon character. Its menu is also based around foods that children enjoy eating, such as fried chicken, hamburgers and hot dogs (Layug, 2009). The company has leveraged this strategy in order to build its appeal, especially in the domestic market. Its success today can be in part attributed to the foundations in laid with the current generation of young adults. They grew up on Jollibee in the late 1970s and 1980s, and now they are bringing their children to Jollibee as well, fueling good potential success for the future.
Jollibee's early international expansion was focused on markets that ultimately have low growth potential. They used their core strategy to enter these markets and enjoyed some success. This, combined with the perceived saturation of the domestic market, bolstered the company's desire to expand into larger overseas markets with greater growth potential. The two most important of these are the United States and China. The company's strategy for market entry and its operating strategy in these two countries are different from its strategy in the Philippines.
Jollibee has been successful in part because it emulated the strategies and many of the tactics of Western fast food companies, especially McDonalds. Similarities can be found not only on the menu but in the marketing approach, the systems used within the company and within the individual restaurants, and the company's human resources tactics. Where Jollibee has diverged from the McDonalds approach is with respect to its international expansion strategy. Jollibee has avoided direct competition with McDonalds in the U.S. And China both, but this deviation is perhaps not the best strategy for Jollibee to follow.
Operating, Marketing and International Expansion Strategies
There are three key strategies that Jollibee employs that have a direct impact on the company's success -- operating, marketing and international expansion. The operating strategy is based around the standard model of Western fast food chains. When Jollibee began, there were few if any such operations in Asia, let alone the Philippines. That allowed Jollibee to enjoy first-mover advantage in setting up the logistics systems to facilitate not only the fast food business model but the expansion of that model as well. Similar to McDonald's, Jollibee was able to build strong relationships with its suppliers.
The company has continued to use its strong relationships with local suppliers to deliver competitive advantage. It is important for Jollibee to use its buying power to drive volume discounts in order to keep costs to the customers down. In addition, the company has the advantage of being not only a local firm but the first-mover when it comes to developing relationships with suppliers. Maintaining a supply chain advantage over Western rivals that have now entered Jollibee's key markets is important. To that end, Jollibee has worked to build relationships with farmers, for example (Lamentillo, 2011). The company has a sophisticated program to give it advantage with local suppliers in the Philippines, known as the JFC Supply Chain Project (Jollibee, 2011).
At the individual locations, Jollibee has been able to successful imitate the operations management of Western fast food companies. Jollibee locations have a similar layout to Western fast food chains, and function in much the same way. Orders are taken at the front, and the food is prepared quickly by a team in the back. The turnaround time from order to delivery is very short, and the prices are kept low as well. One of the most important benefits of franchises is that the company can gain advantage when it has a system that not only works but can easily be transferred from one location to another (Goldberg, 2011). The key to Jollibee's international expansion, just as it has been the key to international expansion from Western fast food chains, is that it has been able to develop an operating model that can be used anywhere, by anybody.
Marketing strategies imitate those of Western fast food outlets. Marketing to children is a primary tactic of Jollibee. The name of the company, along with its cartoon mascot, appeal directly to children. The menu also appeals to children. In addition, Jollibee restaurants are designed to cater to families. They are plastic and easy to clean, with open formats that allow for families to interact with one another, and that discourage adults-only dining. The use of mascots to attract young children has been a staple of McDonald's promotions for decades. Jollibee also seeks to attract children by means of hosting children's parties, founding the Jollibee Kids Club and the Jollibee Kid's Meal and other promotions (Inquirer.net, 2011). These programs mirror those of McDonalds, which hosts children's birthday parties, supports children's charities and has enjoyed tremendous success marketing to children with the Happy Meal.
The underlying strategy is that when children want to go to a certain restaurant that is child-friendly, their parents will go so the whole family will eat. Additionally, those children will grow up as customers, so the tactic in essence builds customers for life, starting at a very young age. While this tactic has come under fire in the West for its cynicism (Melnick, 2010), such controversy has yet to translate to the Asian market, and has failed to harm fast food business in North America either.
Another element to the marketing strategy is that the company wants a strong distribution presence. In fast food, distribution is essentially the location of the restaurants. Fast food chains typically operate with saturation distribution -- there are many locations and they are relatively close to together. For Jollibee the base strategy with respect to distribution is to focus both on domestic and international expansion. The company has consistently opened new restaurants, growing its distribution area as the Philippine economy has grown. The company has ensured that it has a presence in major shopping areas and malls, to reach the greatest number of people.
The international expansion strategy is an outgrowth of the distribution strategy. The company first expanded internationally in the 1980s to relatively nearby locations such as Taiwan and Brunei, but has since built its profile in other Asian countries and expanded to the United States. The Philippine economy remains highly tied to overseas remittances (Flores, 2009) so for the company to succeed in the long-run it must focus on international expansion as a means of growing its business. For the franchisor, such expansion not only builds the global strength of the Jollibee brand, but it also brings valuable foreign exchange to the company from the new franchise owners.
The company currently uses franchisees to help it expand rapidly overseas. As of 2010, overseas growth projections are for around 100 new stores overseas, bringing the international component of the business to 25% of revenues by 2013 and 50% by 2017 (GMA, 2010). The company is focused on the U.S., China, Vietnam and the Middle East. The push to enter the U.S. market came when there were fewer new countries in Asia deemed worth entering. Jollibee knew that it would eventually build out its operations in Asia, but was facing more intense competition. There was an interested franchise owner in California. Jollibee knew the California market was essentially saturated with fast food chains, but that it also had a strong Filipino population that would support one of their own companies coming…[continue]
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