One year later, with five stores in the metro area, the Tan family incorporated the company as Jollibee Foods Corporation. Question 1: How was Jollibee able to build its dominant position in fast food in the Philippines? What sources of competitive advantage was it able to develop against McDonald’s in its home market? Jollibee’s philosophy consisted of the “Five F’s” – Friendliness, Flavorful food, Fun atmosphere, Flexibility in catering to customer needs, and Focus on families.
Their main goal was to deliver quality products and ensure that their customers and staff were happy. To do so, the Tan family held many of the key positions of operations and supplemented their expertise with professional managers. They understood the importance of having knowledgeable experts in the right places. The company was already doing business in the food industry, so the entry barrier was low for them to shift from ice cream to fast food. Being an early mover allowed Jollibee to select good locations and franchisees.
Their decision to finance growth internally for the first 16 years was also a key factor to their quick expansion. When McDonald’s entered the Philippine market in 1981, this became the first serious competitive challenge that Jollibee faced. Thanks to Jollibee’s menu of culturally desirable food which was highly preferred by Philippine customers over McDonald’s, they felt they had a chance to compete with the big-name brand. Utilizing one of the “Five F’s” – Flexibility – Jollibee introduced the “Champ” burger which was intended to compete with the Big Mac.
In advertising this new product, Jollibee focused not only on the large size of the burger, but also on its local, cultural taste. This initiative, along with the company’s tight control over operations which kept costs low, were surely key success factors in winning brand appeal over McDonald’s in the Philippines and ultimately allowing them to attain competitive advantage in its home market. Question 2: How would you evaluate Tony Kitchner’s effectiveness as the first head of Jollibee’s international division?
Does his broad strategic thrust make sense? How effectively did he develop the organization to implement his priorities? As head of Jollibee’s international division, Tony Kitchner felt that his new division should have a different identity and capabilities from its domestic side in the Philippines. He felt that Jollibee’s existing image and management approach would not help his strategies of projecting a world-class company. Very quickly, Kitchner formulated expansion initiatives called “targeting expats” and “planting the flag.
” To “plant the flag”, Kitchner built stores in countries that had little or no fast-food presence based on his idea of setting the pace and standards in new markets. He felt that as an early mover, Jollibee could create brand recognition, customer loyalty and high sales before competitors could enter the market, giving them an advantage to remain on top. Kitchner’s idea of “targeting expats” was aimed at allowing the company to ease its transition into an unfamiliar market.
Although there was the risk of targeting too narrow of a segment, Jollibee’s success in the niche market would allow it to later appeal to a broader audience. In my opinion, Kitchner’s strategy makes sense as a concept– unfortunately I’m not convinced that his broad strategic thrust was executed well. During Kitchner’s time at Jollibee, there was great expansion and increased sales – but this may not be indicative of Kitchner’s strategy. In many cases, stores were forced to shut down due to losses.
This is a sign of Kitchner’s unplanned strategy that was unsupported by proper analysis and research. In order for Kitchner’s strategy to work, there needed to be a deeper understanding of customer preference in the new markets and expats. The company also needed to appeal to a broader audience. Kitchner also failed to push forward the international division’s initiatives due to internal company conflicts. To create his “world-class” company, Kitchner stole employees from domestic operations causing a poor first impression that lasted the duration of his careers at Jollibee.
Pulling away from the domestic side to create a separate and independent international division also caused failure of R&D and other financial activities which were controlled by the domestic division. Kitchner’s continued tension within the organization caused the international division to fail in making potentially beneficial changes such as improved store layout, redesigned logo and menu modifications. If Kitchner had formed an alliance with the domestic division, he could have had their support in his endeavors and effectively executed his expansion strategies.