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Fast food case study: Jollibee Foods Corporation
Define the problem
The Philippine-based hamburger chain Jollibee Foods Corporation is currently contemplating international expansion. The first question it must answer is where: should it expand into America, Hong Kong, or the developing world market of Papua New Guinea? If it decides to expand into America it faces another choice: should it focus on mainstream America consumers or recent immigrants and Philippine expatriates? (Bartlett & O'Connell 2001: 34)
Outside concepts that can be applied: The challenges of globalization
Regionalization was vital in Jollibee's original success: it offered larger spicy hamburger patties more attuned to local diners' palates vs. McDonald's more generic offerings. Political instability in the region resulted in reluctance for foreign companies to make incursions into the fast food landscape and enabled Jollibee to establish a secure foothold in its home nation. However, poor initial selection of partners abroad, poor quality control, and high rents meant its early forays abroad into East Asia were failures in the company's international organization, making Tony Kitchner's effectiveness as the first head of Jollibee's international division mediocre at best (Bartlett & O'Connell 2001: 39). The primary medium used for expansion was franchising, including an agreement for "stores in their jurisdictions to fax them every day their figures for sales by product, customer traffic, and average ticket and then monthly" to ensure effective quality control (Bartlett & O'Connell 2001: 45).
There were a number of 'fail safe' measures with these international partnerships, such as a mandatory alert to headquarters if sales figures declined for more than two consecutive weeks. Despite the regionalization manifest in Jollibee's early operations, the menu, pricing, and even the logo had to be adjusted for local taste in many regions, to ensure customers' palates were being satisfied and that the brand was clearly recognizable as a restaurant. The need for menu diversification often created conflict between domestic and international operations, given that since menu items were seldom deleted, international menus were growing increasingly unwieldy in terms of their operating costs (Bartlett & O'Connell 2001: 47).
Jollibee's conflicts reflect the concept of globalization, or the need to create an internationally-appealing brand that capitalizes upon the opportunities and resources of a global economy. Globalized companies must tread a delicate balance between holding fast to the core brand identity and serving local needs. For example, when Starbucks first infiltrated Japan, it insisted on upholding certain iconic aspects of the Starbucks experience, such as prohibiting smoking within stores to ensure the aroma of the coffee permeated the entire dining area. However, the American coffee company did introduce green tea Frappucinos, less sweet foods, and other components to suit Japanese tastes (No country is an island, 2007, The Economist).
Relevant qualitative data: The Jollibee image
Jollibee currently brands itself as a fun, family-friendly company that offers unique Philippine comfort foods, but is also willing to expand its offerings based on local needs. According to its past experiences, it has learned that "McDonald's succeeded everywhere because they were very good at selecting the right partners. They can get 100 candidates and choose the best -- we don't have the name to generate that choice yet" (Bartlett & O'Connell 2001: 40). In seeking to diversify abroad, Jollibee has struggled with finding both partners and the right places in which to lay down roots. Although it has adopted its menu to local tastes, there are concerns about keeping operating costs low, given that the company also wishes to offer its signature spicy burgers at all locations. It was able to defeat McDonald's in its home market through serendipitous political circumstances and catering to the local market. The question remains if it can translate this local success into different arenas.
Relevant quantitative data: Return on investment
At present, the company's international expansion has not justified the cost. "An 'acceptable' return on investment in international operations would require 60 Jollibee restaurants abroad with annual sales of U.S.$800, 000," thus demanding a relatively large, growing receptive market which could guarantee steady sales (Bartlett & O'Connell 2001: 50).
Describe the results of your analysis: The core message of Joillibee
Jollibee offers a unique product that is particularly palatable to Philippine customers who are not necessarily entranced with the 'standard' burger and fries offered by American chains, despite the cache of 'Americana' that often attracts consumers to patronize American fast food restaurants. Jollibee sets high standards for product quality which it wants to maintain in international stores. However, it remains uncertain if it can transport its business model abroad, keep operating costs low, and innovate just enough to attract local consumers while still remaining recognizably true to its brand.
Describe alternative actions: Different international venues
One possible action is to concentrate Jollibee's focus on the markets which most closely resemble the Philippines: "to consolidate and build on existing Jollibee markets that had either high profit potential, such as Hong Kong, or relatively mild competition, such as Malaysia and Indonesia" (Bartlett & O'Connell 2001: 50). This would allow for the company to capitalize upon its learning lessons from its past forays into the region and enable the company to continue to emphasize its localized perspective. Unfortunately, its current Hong Kong operations are not running smoothly. There is cultural friction between the Filipino and Chinese staff; McDonald's has a high degree of name recognition vs. Jollibee's weaker brand position; and worst of all its menu requires substantial innovation (changing the way tea is brewed to a more time-consuming and popular method and changing the fried chicken recipe) to remain competitive (Bartlett & O'Connell 2001: 51)
Another possible action is to focus on the Filipino market in the U.S., although this raises fears that the company will be 'boxed in' in terms of its appeal (Bartlett & O'Connell 2001: 51). Still, by focusing on the California market, the company would have access to a strong concentration of Filipino customers and also be able to perhaps expand its outreach to Latino-American consumers. By establishing this base, it might be able to slowly grow a wider market appeal in the dominant American fast food market. The California market is perhaps the most competitive fast food market in the entire nation and there are already many local and regional chains offering a wide array of exotic cuisines. Yet this novelty-seeking component of public demand could work in Jollibee's favor. "They also found they could adapt the labor-intensive Philippine operating methods by developing different equipment and cooking processes more in keeping with a high labor cost environment" (Bartlett & O'Connell 2001: 52). Finally, California has many affluent customers who could be counted on to provide steady revenue, even during a recession.
The most unusual and intriguing prospect would be to enter into the developing world. Unlike Hong Kong or America, Papua New Guinea has virtually no competitors in the fast food market and is 'hungry' for viable alternatives: there is only "five million people served by only one poorly managed, 3-store fast-food chain, that had recently broken ties with its Australian chicken restaurant franchise" (Bartlett & O'Connell 2001: 51). In distinct contrast to the other available options, Jollibee would have almost no competition and its quality control and monitoring standards would clearly be superior to what the residents already were offered.
But entering into a purely untapped market does have some clear downsides. First and foremost, there would be a dearth of local partnerships to explore. Little existing market research would be available regarding what customers wanted from a fast food establishment. Also, this developing world nation is quite poor, and residents may not have the luxury of being able to eat out very much. The small size of the market means there is a serious question if it "could support the 20 stores that he saw as the target critical mass…[continue]
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