Jollibee Complete

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Table of Contents CASE STUDY OF JOLLIBEE CORPORATION .................................................................................. 2 BACKGROUND OF THE COMPANY ................................................................................................. 2 STATEMENT OF PROBLEMS ............................................................................................................. 3 SWOT ANALYSIS ................................................................................................................................. 4 STRENGTHS ...................................................................................................................................... 4 WEAKNESSES .................................................................................................................................. 6 OPPORTUNITIES .............................................................................................................................. 6 THREATS ........................................................................................................................................... 7 SOLUTIONS AND RECOMMENDATIONS........................................................................................ 7 CONCLUSSION ..................................................................................................................................... 8 REFERENCE .......................................................................................................................................... 9 BOOKS ............................................................................................................................................... 9 ARTICLES AND JOURNALS ........................................................................................................... 9 APPENDIX ........................................................................................................................................... 10

MOHAMMED YUSUF BULAMA A00919462 MUHAMMAD YOUSUF IBRAHIM DANLAMI ALHASSAN A00211405

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CASE STUDY OF JOLLIBEE CORPORATION BACKGROUND OF THE COMPANY Jollibee Foods Corporation was founded by Tony Tan Caktiong in 1975 in Manila, Philippines. However, the company was first started as an ice cream place that later become a fast-food store. Tan decided to come up with the idea of hamburger, and became incorporated in 1978 having seven stores in Philippines. (Jollibee (n.d.), The Jollibee Phenomenon viewed on 21 March 2010, http://www.jollibee.com.ph/index.php?/about_us/contents/1) Therefore, by 1987 that is about 10 years after the incorporation, Jollibee turn out to be in the top 100 Corporations in Philippines. Thus, in 1989 it was marked as the number one fast food to break the Php1 billion sales in the country. By 1993, the company grow to be at the top fast food company in the Philippines Stock Exchange and this persuaded Tan to increase outlets locally as well as outside Philippines. (Jollibee (n.d.), The Jollibee Phenomenon viewed on 21 March 2010, http://www.jollibee.com.ph/index.php?/about_us/contents/1) Jollibee brought Tony Kitchner 1994 as a strategist to help the company in making expansion. Hence, Tony come up with a strategy of „plant the flag‟ which means the company should establish its presence in overseas where there is less completion of Food service industries. Also, in places where giant competitors like KFC and McDonald are very few. This strategy will help to develop brand name for the company. Nevertheless, the strategy has made so much increase in the expansion as well as increase in sales. Instead, the strategy failed in the long run because the profits could not meet up after deducting the „franchise & royalties‟. Thus, it led to the end of Kitchner‟s contract with JFC. (Pandya (2009), Jollibee, viewed on 27 March 2009 http://www.docstoc.com/docs/14423409/Jollibee/ ) However, today Jollibee has about 1800 stores around the World while its website declares 600 stores. Hence, the company was said to have made acquisition of so many fast food stores, for instance, Greenwich Pizza, Délifrance, Chowking, Manong Pepe's, to mention few. Moreover, it has also merged with other companies like the Chow Fun Holdings LLC in US. (Kfc Hours (n.d.), Philippines' Only Jollibee Food Corporation viewed on 21 March 2010, http://www.kfchours.com/a509919-philippines-only-jollibee-food-corporation.cfm) (Jollibee

(n.d.)

The

Jollibee

Phenomenon

viewed

on

21

March

& 2010,

http://www.jollibee.com.ph/index.php?/about_us/contents/1) MOHAMMED YUSUF BULAMA A00919462 MUHAMMAD YOUSUF IBRAHIM DANLAMI ALHASSAN A00211405

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In 2006, JFC has generated a net income of Php 2,146 million which was as a result of increase in sales and expansion. The company experienced rise in sales of 13.5% in both Company‟s and acquired stores together with increase of net income of 0.6% from 20052006. Thus, the above net income of Php 2,146 million is the increase in the net income from Php 1,690 in 2005 i.e. 27.0% increase. Therefore, with the above figures, Jollibee has grown to 9.5% in Philippine and 30.2% outside Philippine that is other parts of the world. (Jollibee Group of Companies (2007) Jollibee 2006 net income up 27% on strong sales, margin expansion

viewed

on

24

March

2010,

http://www.jollibee.com.ph/downloads/reports/2006/4th_quarter_2006.pdf) Similarly, Jollibee also made a net income 14.6% increase, from P2.32 billion in 2008 to P2.66 billion in 2009. Hence, the drop in the cost of materials, better expenditure, “under spent overhead budgets”, “reduced working capital level” as well as shut down of some old stores that are not functioning well. In fact, Chun Shui Tang Tea House in Shanghai, one of the company‟s stores was not operating in a good way, was closed down and also because of the modification in expansion plans, the Company put an end to Taiwan joint venture of Lao Dong

in

China.

(Sarga

2010,

viewed

on

24

March,

2010

http://www.malaya.com.ph/02192010/busi9.html) Consequently, as a result of the above actions of the Company, it was able to get great profit out of the ordinary sales. Therefore, JFC lunch smaller outlets and “a lower capex” in 2009 to meet up with the economic downturn in previous year 2008. However, there was a rise in the sales of JFC in both company‟s and acquired stores to 9.6%. Hence, in 2010 the company plans to pay out P4.8 billion in capex for more stores, joint ventures and purchase of other business.

(Sarga

2010,

viewed

on

24

March,

2010

http://www.malaya.com.ph/02192010/busi9.html)

STATEMENT OF PROBLEMS As stated in the introduction Jollibee is quiet a successful food company in Philippine and in some few parts of the World. However, the company is faced with certain challenges. The following are the most pressing problems of JFC: 1. Jollibee Food Corporation is closing down its stores in certain places for example JFC has given up about 70% of its share in Lao Dong Pte that is running a restaurant in Taiwan. Also, the company stopped its agreement licence with Chun Shui Tang Tea MOHAMMED YUSUF BULAMA A00919462 MUHAMMAD YOUSUF IBRAHIM DANLAMI ALHASSAN A00211405

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House. However, the reason of the closure of these businesses was that they were performing below 1% in the global sales of JFC. (Xinhua 2009, Jollibee closes branches

in

Taiwan,

Shanghai viewed

on

24

March

2010,

http://www.philstar.com/Article.aspx?articleId=530890) 2. Moreover, the company is also experiencing poor marketing strategy through which it can capture customers and sales. For instance the failure of Kitchner‟s strategy in the global market expansion. (Pandya 2009, Jollibee, viewed on 27 March 2009 http://www.docstoc.com/docs/14423409/Jollibee/ ) 3. Also, JFC has a problem regarding their product. Thus, the taste of the food does not usually meet with the local taste of the respective places in the world. 4. People prefer and know the famous brands of KFC and Mc Donald. This can pose problem to Jollibee.

SWOT ANALYSIS STRENGTHS 1. The standard and quality of JFC‟s product is good. Jollibee has very tasty product which can compete with the KFC and Mc Donald. Also, JFC has different variety of products to offer to the market. However, it may give the company strong advantage to perform well in the world market 2. Secondly, Jollibee experienced rapid growth as a result of “its superior menu line-up, creative marketing programs, and efficient manufacturing and logistics facilities.” Hence, the achievement was due to integrity and the working together of the workers in the way of life of the people. (Jollibee (n.d.), The Jollibee Phenomenon viewed on 25 March 2010, http://www.jollibee.com.ph/index.php?/about_us/contents/1)

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3. Table1: the highlights of JFC‟s results of operations for the quarter ended December 31, 2006 based on unaudited financial statements. Quarter 4 Financial Summary

2006

System Wide Retail Sales

2005

Full Year %Change 2006

2005

%Change

12,430 11139

11.6%

45,206

39,829 13.5%

Revenues

9,523

8359

13.9%

33.521

29,162 14.9%

Gross Profits

5,207

4,479

16.3%

18,102

15,102 19.9%

652

505

29.0%

2,146

1,690

27.0%

651

507

28.4%

2,143

1,675

28.0%

0.6503 0.5109

27.3%

2.1477

1.6867 27.3%

0.6496 0.5100

27.4%

2.1387

1.6838 27.0%

Net Income after Tax before Minority Interest Net Income after Tax Attributable

to

Equity

Holders of the Parent Earnings per Common Share - Basic Earnings per Common Share – Diluted

*Amount in Ph P Millions, except %change and Per Share Data Jollibee Group of Companies (2007) Jollibee 2006 net income up 27% on strong sales, margin

expansion

viewed

on

24

March

2010,

http://www.jollibee.com.ph/downloads/reports/2006/4th_quarter_2006.pdf) Table1: the highlights of JFC‟s results of operations for the quarter ended December 31, 2006 based on unaudited financial statements. The table above shows the highlights of JFC‟s results of operations for the quarter ended December 31, 2006 based on unaudited financial statements. During Jollibee‟s 4th Quarter of 2006, the highest percentage increase was in Net Income after Tax before Minority Interest i.e. 29%. Whereas in the full year the highest percentage increase was 28% for Net Income after Tax Attributable to Equity Holders of the Parent in 2006. In addition, in the 4th Quarter of 2006, there was a remarkable increase in the earnings of Jollibee as compared to last year‟s 4th Quarter that is 2005. Thus, the increase also reflected the Full year earnings. For example, the table shows 13.5% change in the System wide retail sales of MOHAMMED YUSUF BULAMA A00919462 MUHAMMAD YOUSUF IBRAHIM DANLAMI ALHASSAN A00211405

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JFC as a result of its expansion that is Php 39,829 million increased to Php 45, 206 million from 2005 to 2006. Moreover, the Revenue of Jollibee also shows an increase of 13.9% in the 4th Quarter and 14.9% in the Full year i.e. from 2005 to 2006. In conclusion, Jollibee is making progress in the general business. For instance, its sales and revenue is showing some increase. this may be because of the expansion to other part of the world.

WEAKNESSES 1. The pricing of Jollibee‟s items is high which is not really good enough to capture customers and sales in the global market. In this case, they have almost equal pricing as the competitors which cannot attract customers. However, when the company wants to decide on their price, they should not make same or almost the same price with the competitors. Thus, the price should be a little bit less than the competitors so as to attract many buyers. 2.

In addition, the company has poor marketing strategy. Thus, it can stop the company from performing greatly in the global world. However, the strategy can serve as a strong competitive advantage around the world. The strategy of “Plant the flag” used by Kitchner was not successful in the global market though it has increased the sales of the company as well as expand their stores around the world.

3. Finally, there is no conformity between the taste of Jollibee‟s food and the local taste. People mostly like the taste of their food at home and in food service stores. Therefore, it can hinder the company from getting large customers. OPPORTUNITIES 1. Jollibee is growing very fast as it has become one of the best food chains in the world. Therefore, it can achieve a better market share when it makes the expansion to other part of the world.(Jollibee (n.d.), The Jollibee Phenomenon viewed on 25 March 2010, http://www.jollibee.com.ph/index.php?/about_us/contents/1) 2. In addition, the company also has a chance of success as it can merges with local food chains and can even make acquisition of stores in many part of the world. Hence, this is possible as the company has set out P4.8 billion to acquire more stores. (Sarga 2010, viewed on 24 March, 2010 http://www.malaya.com.ph/02192010/busi9.html)

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3. Also, Jollibee has another opportunity in the sense that there is increase in demand of fast food around the world. Hence, this was as a result of the earnings of household is increasing. Therefore, there increase in the patronage of fast food stores. This may serve as a benefit on the company to accomplish well in the international market. Stewart et al (2004) states that “Consumer spending at full-service and fast food restaurants will continue to grow over the remainder of this decade and the next.” 4. There is also advantage for the company to increase the range of its product. Also, JFC can offer different type of dishes, both local and international plates. Hence, it will make different customers to patronise the store. THREATS 1. JFC have less strength to compete with giant food chain like Mc Donald. For example, Mc Donald has more 31,000 stores globally in about 119 countries whereas Jollibee has an estimate of 1600 in 24 countries. Therefore, the little company has no competing power over Mc Donald as the latter has more coverage than the former. (Steve

2006,

viewed

on

27

March

2010,

http://answers.yahoo.com/question/index?qid=20080914010401AAMH0oV ) 2. Also, the company has the disadvantage of not getting cheap supply. However, since the company is establishing in new places around the world, they will not achieve better supply cost which is very important for the success of the company. 3. The customers fancy the well-known brands of KFC and Mc Donald. This is true in the international market, which can cause problem to JFC.

SOLUTIONS AND RECOMMENDATIONS In order for Jollibee to succeed in the global market, the company needs to consider its problems. Hence, below are some recommendations the company should use that can help it to achieve its goals and objectives: 1. Jollibee should reduce the price of their foods so that people can have the opportunity to try the foods. The pricing of goods usually attracts customers to patronise and know the taste of JFC‟s foods. Hence, this can create more sales to the company which is going to bring profit. 2. Moreover, the company should make use of Market Penetration Pricing strategy. In this strategy Jollibee is expected to set a lower price compared to its competitors. MOHAMMED YUSUF BULAMA A00919462 MUHAMMAD YOUSUF IBRAHIM DANLAMI ALHASSAN A00211405

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Thus, it will help in getting a quick and large number of customers. In fact, Penetration pricing is very important because, for instance in US where Mc Donald and KFC have dominated, it will be difficult if not impossible for Jollibee to survive in case it set high price as that of the two giant competitors. (Kotler &Armstrong 2007 p. 371) The second strategy that JFC should employ is Promotional and Psychological pricing. Promotion pricing is the use of promotions for the purchase of certain foods. For example, if a person buys a certain combination of dish, he or she will be given free drink and also stand a chance of winning some items like mobile phones, LCD screens etc. However, Psychological is a pricing that plays with the mind of customers to think that the food is cheap. (Kotler &Armstrong 2007 p. 377). Consequently, people will rush to the JFC stores as a result of the offers and cheaper rates of their food. 3. In addition, the Company should make their foods in every part of the world to tally with the taste and likings of people in the environment. Therefore, it will make the customers to have confidence and sense of belonging i.e. to feel happy that their culture has been acknowledged. Hence, Jollibee will experience sales like never before which means it has accomplish its mission of expansion. 4. Jollibee should engage in commercial Advertisement. Thus, media advertisements like the Television and Radio, also through Newspaper and Magazines. Therefore, this will increase people‟s awareness and publicity of Jollibee. Finally, for Jollibee to develop its brand name, it should take part in public relations. Public relations involve creating good relationship with the public that is the people so as to develop a good image of the company with regard to the people. For instance, Jollibee can give donations to non profit organisations. Thus, this will develop the JFC brand in the eyes of the people. (Kotler &Armstrong 2007 p. 515)

CONCLUSSION In conclusion, Jollibee although it is doing well in some parts of the world especially Philippines but it has some problems that need to be tackled for the business to achieve better in the Expansion to other parts of the world. Thus, this could be possible through the use of the above recommendations.

MOHAMMED YUSUF BULAMA A00919462 MUHAMMAD YOUSUF IBRAHIM DANLAMI ALHASSAN A00211405

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REFERENCE

BOOKS P.Kotler, G.Armstrong, 2003. “Principles of Marketing” (pg 111,125) 10th ed. Prentice Hall, United Kingdom. ARTICLES AND JOURNALS Jollibee (n.d.), The Jollibee Phenomenon viewed on 21 March 2010, http://www.jollibee.com.ph/index.php?/about_us/contents/1 . Jollibee Group of Companies (2007) Jollibee 2006 net income up 27% on strong sales, margin expansion viewed on 24 March 2010, http://www.jollibee.com.ph/downloads/reports/2006/4th_quarter_2006.pdf . Kfc Hours (n.d.), Philippines' Only Jollibee Food Corporation viewed on 21 March 2010, http://www.kfchours.com/a509919-philippines-only-jollibee-food-corporation.cfm . Pandya, N. (2009) Jollibee viewed on 27 March 2009 http://www.docstoc.com/docs/14423409/Jollibee/ . Sarga, D.“Jollibee‟s 2009 income up 14.6%”, Business Insight 19 February 2010, viewed on 24 March 2010, http://www.malaya.com.ph/02192010/busi9.html Steve (2006) viewed on 27 March 2010, What is the SWOT analysis between Jollibee and McDonald? http://answers.yahoo.com/question/index?qid=20080914010401AAMH0oV . Stewart, H., Blisard, N., Bhuyan, S., & Nayga, R., M. (2004) the demand for food away from home full service or fast food, viewed on 24 March 2010 http://www.ers.usda.gov/publications/AER829/aer829.pdf

Xinhua 2009, Jollibee closes branches in Taiwan, Shanghai viewed on 24 March 2010, http://www.philstar.com/Article.aspx?articleId=530890 .

MOHAMMED YUSUF BULAMA A00919462 MUHAMMAD YOUSUF IBRAHIM DANLAMI ALHASSAN A00211405

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APPENDIX

Jollibee Shop, Philippines

Jollibbee Staff

MOHAMMED YUSUF BULAMA A00919462 MUHAMMAD YOUSUF IBRAHIM DANLAMI ALHASSAN A00211405

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