Jollibee Foods Corporation, Essay Example

This deals with the case study of Jollibee Foods Corporation, Philippine based fast food company. Part A deals with analysis of the global hamburger chain industry structure. Part B will deal with analysis of the structure within the global hamburger chain industry relevant to Jollibee. Part C analyses the external Jollibee business environment in California.

Part A: Analysis of the structure of the global hamburger chain industry

The fast food industry has renowned industry competitors including McDonalds, Sonic, Jack-In-The-Box and Burger King amongst others (Hotels, Restaurants & Leisure Industry Profile, 2012). McDonald’s first store came into existence in 1940 and had its headquarters at the Oak Brook, IL. The first store for Sonic followed in 1945 while the Jack-In-The-Box started in 1951 with its headquarters at San Diego CA and Burger King began operating in 1954 with headquarters at Miami, Florida.

The fast food industry has about 200,000 restaurants worldwide accruing combined annual revenue of about $120 billion. The industry has an extremely high fragmentation with the leading companies holding over 25% of the total sales made.

According to Hotels, Restaurants & Leisure Industry Profile (2012), fast-food industry is highly labor-intensive, and the average yearly revenue per worker is below $40,000. It is a common phenomenon for fast-food restaurants to specialize in a few main dishes. Such restaurants consist of regional and national chains, independent operators and franchises. Quite a number of fast-food restaurants utilize a POS (point of sale) system to make orders from the register and drive-thrust.

The fast-food industry’s breakdown constitutes the restaurant industry divided into full-service and limited-service (NAICS 722211). The limited service includes foods in the burger segment such as sandwiches, chicken, Mexican and pizza/pasta amongst others.

The economic factors that affect the fast-food industry include economic recession. Fast food restaurants fare better than their casual and high-end cousins do when disposable personal income is tight. This happens because people will tend to shift their buying downward. For a restaurant to survive well through recession times, there must be tight cost controls in place as well as a well-advertized dollar menu.

Political factors in place to help restaurants in recession entail Economic Stabilization Act of 2008. In this case, restaurants acquire loans from banks for updates and many needed expansions. The Act also contains accelerated 15-year depreciation schedule in case of new construction, which save money.

There are social factors so crucial in the fast food industry. The goods and services must add value through consistent quality and being affordable. The menus should have products with a vast variety. The restaurants should strive to provide brand image needs and healthy options. The foods served must be fast to accommodate the lifestyle of the surrounding and be convenient.

The five forces models that apply to any businesses also apply to the fast food industry. These forces include bargaining power of customers, threats of new entrants, bargaining power of suppliers, threats of substitutes and rivalry among existing firms. In general, the fast food industry has a high threat of new entrants, low bargaining power of customers and that of suppliers. It also has high threat of substitutes and high rivalry among firms.

The key factors for success in the fast food industry include differentiation and operation on low cost (Khanna & Krishna, 2006). It is difficult to differentiate a fast-food burger on a single product. One can focus towards the surrounding atmosphere and unique menu items in this industry. Product and brand advertisement can be crucial players in attracting customers and making a household name in the industry. Consumers can find a suitable burger at a comparable price from just about any of the competitors in a synonymous industry.

Part B: analysis of the structure within the global hamburger chain industry relevant to Jollibee

Jollibee has its formidable competitor in McDonald’s which leads in the world. McDonald’s takes over 40% of the fast food industry in US burger market while Jollibee dominates in the Philippines. In more than 100 countries, McDonald’s has more than 31000 outlets where 3000 are in Asia. Jollibee has 600 outlets only where over 50 of them are international outlets. In contrast to these numbers, Jollibee has captured over 65% of the Philippine hamburger market. Jollibee has a secret of Smart Niching where they focus on serving Filipino consumer unique tastes, as McDonald’s concentrates on exporting standardized fare. Another well-established Jollibee’s competitor is KFC.

Jollibee faced new challenges as it made entry into the international market. There is a high competition in the fast food industry and marketing innovations and price wars are a common phenomenon. The rivalry also centers on crucial success factors including reasonable pricing nourishing food, services and goods. The competition is extremely stiff because the rivals are nearly equal in opportunities and capabilities. The success of Jollibee in the niche market will allow generation of momentum for the company’s expansion although there is a risk of targeting a narrow segment. The company’s concentrated marketing campaign enables it to generate stable income that can enable Jollibee to enter into other segments.

Jollibee managed a competitive advantage over McDonald’s in the Philippines through a fast mover advantage strategy (Khanna & Krishna, 2006). Tony Kitchner headed the International Division of the Corporation in 1994. He became successful in the wealth creation and increase of the Corporation’s presence in countries that had no or less competition. During his tenure, the Corporation’s stores increased from 65 to 205. Furthermore, there was an increase of total sales to over 94.5%. The increases were marvelous since few companies do experience fast growth such as this. Tony was of the idea that although one can incur losses while moving into untapped markets, a company could enjoy the rest of time by restricting entry into the market by other companies. Although he managed some success for the company, there were downfalls, as well. Mounting at times resulted to shutdown of stores. The company experienced failures in chaotic investments strategy unsupported by careful research. Tony’s strategy targeting expats faced the narrow segment targeting risk. There was no consideration of expats’ lifestyle, preferences and tastes considered for the international expansion.

Part C: external business environment of Jollibee in California

There are a significant number of Asian communities living in California and Jollibee’s international expansion strategy has taken the move to the region. The US fast food market with intense, competitive atmosphere provides tremendous global learning opportunity for Jollibee. Jollibee also found out that many of its restaurant elements appealed to the Americans. The Filipino-Americans provided a strong support to the company (Rarick et al., 2011). Before it moved east, Jollibee was going to expand throughout California. America has diversification, which is another aspect that helped in Jollibee’s success, in California. In any American city, one can find Italian, Chinese, Greek, Japanese, Spanish, polish, American, Indian, polish and other ethnic restaurants. Jollibee knew from research that Americans liked to try food from a different culture and thus it had all reasons to take Filipino food to the market. Therefore, the Filipino food entered the American fast food market. However, Jollibee faces stiff competition from companies that offer the same services. Jollibee moved late into the region and thus it did not obtain success to suppliers, distribution channels and store locations, which made the company a cost Philippine leader. Jollibee does not have any tangible experience operating in a Western business environment aside from its experience in Guam. However, careful research and sound implementation plan can boost Jollibee markedly in the Californian market environment.

Question 2: as a consultant for United Airlines (UA)

This question deals with analysis of the Chinese market, the trends of the Chinese market and the impacts of the trends on business operations in the airline industry.

Analysis of the Chinese market from various perspectives

The Chinese market can offer the UA lucrative business opportunities, as it has a vast market and rapid economic growth. China’s economy is at $2.26 trillion and is the fourth largest world economy. It is also the fastest growing world economy and approximately a seventh of US economy. China has a large population of about 1.3 billion, which makes a gigantic market.

China is one of the world’s emerging markets and any company investing in an emerging market will always risk more than in a domestic market (Airlines Industry Profile, 2011). We note that there is a political risk where we find the Chinese insisting that Taiwan belongs to them. Taiwan, on the other hand, wants to be independent. There is also currency risk: the people’s money (Chinese renminbi) has problems with the dollar and the value has been a puzzle to many investment analysts. Corruption is another problem facing china. In the region, there is a lack of transparency- China airline companies provide less information than those in the Western.

We should have in mind that china is a high-risk environment, and a ‘work in progress’ and as investors we must be careful as we enter its business environment. The task of identifying the best companies in which to invest can be a daunting one given the sheer size and complexity of China.

Zheng and John (n.d.) assert that the General Administration of Civil Aviation of China (CAAC) imposes checks and regulations, which will be difficult for United Airlines to implement its business strategies. The regulations imposed include those on international and domestic routes, jet fuel prices, airfares, air traffic control and air craft maintenance amongst others. These regulations are crucial in ensuring safety in the air industry, but they will provide hindrance when it comes to UA’s flexibility to lower prices, respond to competition, and adapting to market conditions.

All Chinese airline companies buy the jet fuel from the China Aviation Oil Supplies (CAOSC) and companies under CAAC. United Airlines will not be an exception in this case. The jet fuel prices in China have remained higher than that of the world market prices. This might disrupt future operations, and thus we should enter the Chinese market with exceptional care. We will also face competition from other companies such as Air Macau Group, Dragon Air, and Thai Airways International amongst others.

However, I would like to conclude that taking into consideration the opportunity in the Chinese population coupled with the growing tourism industry, it is a noble venture for the company to enter the market.

International Store Sales by Country: 1996 (in U.S. dollars at contemporary exchange rates)

Porter’s competitive strategies Model, a strategy adopted by JFC

References

Airlines Industry Profile: China. (2011). Airlines Industry Profile: China, 1-42.

Hotels, Restaurants & Leisure Industry Profile: Global. (2012). Hotels, Restaurants & Leisure Industry Profile: Global, 1-36.

Khanna, T. & Krishna G. P. (2006).Emerging Giants: Building World-Class Companies in Developing Countries. Harvard Business Review: 2-11.

Rarick, C. A., Falk, G., & Barczyk, C. (2011). JOLLIBEE FOODS CORPORATION AND THE GLOBAL MARKET. Allied Academies International Conference: Proceedings Of The International Academy For Case Studies (IACS), 18(1), 57-61.

Zheng, L., & John F., O. (n.d). The evolving landscape of Chinese aviation policies and impact of a deregulating environment on Chinese carriers. Journal Of Transport Geography, 19829-839. doi:10.1016/j.jtrangeo.2010.10.010