Strategic Management Paper

STRATEGIC MANAGEMENT PAPER:

JOLLIBEE FOODS CORPORATION

Mr. David Achacoso

Submitted by: Patricia Alcantara Cara Galima Jae Hwan Lee

CHAPTER I INTRODUCTION

CHAPTER II

CHAPTER III MISSION – VISION STATEMENT ANALYSIS Mission To serve great tasting food, bringing the joy of eating to everyone. Vision We excel in providing great tasting food that meets local preferences better than anyone. We provide superior dining experience, through FSC (Food, Service, Cleanliness) excellence in every encounter. We are the most cost efficient restaurant company in our business segments, allowing us to price at the most popular levels. Our people are passionate about their work and thrive in a high performance culture. We strive to become a model corporate citizen by being relevant to the communities we serve. Our brands are either #1 or #2 in each of our market segments. It is the vision of JFC to become one of the three largest and most profitable restaurant companies in the world by 2020. Review of the Current Mission and Vision JFC's vision is currently designed to summarize the aspirations of the company to develop an international presence, as evidenced by the statement that "It is the vision of JFC to become one of the three largest and most profitable restaurant companies in the world by 2020." The vision also emphasizes the key aspects of the fast food business that is important to Jollibee, namely product quality "We excel in providing great tasting food that meets local preferences better than anyone.", customer satisfaction "We provide superior dining experience, through FSC (Food, Service, Cleanliness) excellence in every encounter.", and service excellence "We strive to become a model corporate citizen by being relevant to the communities we serve.”. The major weakness of the vision is that its ideas are presented in a disconnected manner, lacking clarity in the way it is stated although there is no need to for it to be revised as such major aspirations of the company is clearly stated and unified as presented.

plausible chance of success

JFC has a probable chance of achieving its vision : “It is the vision of JFC to become one of the three largest and most profitable restaurant companies in the world by 2020”

focused concept

the vision appears to be a combination of varied aspirations of the company with lack of unity in presentation

noble purpose

the purpose of JFC's vision is noble as evidenced by: "excellence in every encounter" and "we strive to become a model corporate citizen by being relevant to the communities we serve"

The mission manifest JFC's purpose that distinguishes better product quality "serve great tasting food" and customer satisfaction "bringing the joy of eating to everyone". However, it doesn't quite capture what the business is about as a whole. If evaluated using the criteria of designing a mission statement, it would not be able to satisfy the components needed in establishing a good mission statement. products and services

the products and services of jollibee are not clearly stated since "great tasting food" is too broad

concern for public image

the mission statement did not mention whether the company is responsive to social, community and environmental concerns

markets

the mission statements does not indicate JFC's commitment to growth and financial soundness

technology

the mission does not indicate whether JFC is technologically current

philosophy

the mission only partially reveals the values upheld by JFC "bringing the joy of eating". It does not summarise the basic beliefs, values, aspirations and ethical priorities of the company

customers

the customers of JFC is not clearly specified, as "community" is too broad

self-concept

the mission statement does not clearly state the competitive advantage of the company

nation building

the mission statement did not indicate the company's contribution to nation-building

concern for employees

the mission did not state whether the employees are valuable assets of the company

Revised Vision By year 2020, Jollibee will establish itself as a global brand leader that represents Filipino excellence in product taste, customer satisfaction and service quality in the quick service restaurant industry. Revised Mission Jollibee provides its customers with superior fast food products and services that satisfies the taste of customers worldwide Jollibee is committed to continued growth, as it expands its operations in the Philippines and international markets Employing the latest advances in technology and social networking, Jollibee provides new ways for customers to gain information about the company's products and services. Jollibee provides a family oriented atmosphere, where concern for the individual happiness of customers are given with utmost importance Jollibee distinguishes itself from the competition by being a distinctly Filipino fast food chain, the one that truly understands the tastes and preferences of Filipinos As a corporate citizen, Jollibee is committed to give back to its host communities through meaningful and lasting socio-civic works Jollibee recognizes the value of its employees by providing a just and fair compensation and benefits packages in the fast food industry, while providing modern and comprehensive training programs Review of Revised Mission and Vision Vision

plausible chance of success

By year 2020, Jollibee will establish itself as a global brand leader that represents Filipino excellence in product taste, customer satisfaction and service quality in the quick service restaurant industry.

focused concept

leader that represents Filipino excellence in product taste, customer satisfaction and service quality in the quick service restaurant industry.

noble purpose

represents Filipino excellence

Mission

products and services

Jollibee provides its customers with superior fast food products and services that satisfies the taste of customers worldwide.

concern for public image

As a corporate citizen, Jollibee is also committed to give back to its host communities through meaningful and lasting socio-civic works.

markets

Jollibee provides its customers with superior fast food products and services that satisfy the taste of customers worldwide.

technology

Employing the latest advances in technology and social networking, Jollibee provides new ways for customers to gain information about the company's products and services.

philosophy

Jollibee provides a family oriented atmosphere, where concern for the individual happiness of customers are given with utmost importance.

customers

Jollibee provides its customers with superior fast food products and services that satisfy the taste of customers worldwide.

self-concept

Jollibee distinguishes itself from the competition by being a distinctly Filipino fast food chain, the one that truly understands the tastes and preferences of Filipinos.

nation building

As a corporate citizen, Jollibee is also committed to give back to its host communities through meaningful and lasting socio-civic works.

concern for employees

Jollibee recognizes the value of its employees by providing a just and fair compensation and benefits packages in the fast food industry, while providing modern and comprehensive training programs.

CHAPTER IV EXTERNAL ANALYSIS

EXTERNAL ANALYSIS A. ECONOMIC FORCES The Philippines is among the fastest-growing economies in Southeast Asia. The Philippine Government focuses on economic growth, accelerating employment on a massive scale, and reducing poverty. According to Asian Development Bank (ADB), strong domestic demand and increased government spending helped sustain high levels of economic expansion in the Philippines throughout 2015. Threat: Inflation gained pace late in the year 2014 Inflation gained pace late in the year, rising to 1.1% due to an increase in LPG prices, upward electricity rate adjustment, transitory increase in food prices due to Typhoon Nona and the weaker peso. In a research note issued in early December, Barclays predicted inflation would rise to 2.4% in 2016, due in part to a modest anticipated increase in fuel costs and the potential impact of the El Niño weather pattern on agricultural prices. Opportunity: Growth of OFWs Number of Deployed Overseas Filipino Workers 2012

2013

2014

2,083, 223

2,241,854

2,391,152

This helps local fast-food chains to establish internationally for Filipino workers. Opportunity: Unemployment rate lessened Unemployment rate fell to 6.5 percent in 2015, according to the Philippine Statistics Authority Opportunity:  Positive ratings outlook and investors are more comfortable in investing in proven fast-food chains. The stability of the Philippine economy urged ratings agency Fitch to revise its outlook for the country from stable to positive in late September. The agency also affirmed the Philippines' long-term foreign- and local-currency issuer default ratings at “BBB-” and “BBB”, respectively, maintaining the country’s investment-grade standing. The expectations that the positive economic and fiscal trends will continue for the next one to two years. Opportunity: Investors are more comfortable in investing in proven fast-food chains.

Threat: Weakening of the value of peso Peso weakens by 5.2% in 2015 due to global uncertainties brought about by the slowdown in the Chinese economy, the devaluation of the Chinese yuan, and the prospect of rising US interest rates. Opportunity: Strong domestic consumption The country has strong fundamentals and derives a larger percentage of growth from domestic consumption. Additionally, according to Philippine Statistics Authority, almost 45% of Household Final Consumption Expenditures in 2015 is attributable to consumption of Food and Non-alchoholic Beverages. Opportunity: Local chains are steering in a new competitive era While many international chains are struggling to retain their footing on key markets, local chains have become serious strategic competitors. Asian foodservice categories are anticipated to see significantly more growth than other categories over the next five years, and local chains are well positioned to take advantage of this demand. Threat: Stock market trends Trading started to go down in the second half, after US Federal Reserve Janet Yellen signaled the starting of monetary tightening. Concerns about the weakening Chinese economy also contributed to the market’s decline. BPI Securities chief executive officer Michaelangelo Oyson said the PSEi could hit between 7,600 and 8,200 in 2016 on election-related spending and increased government expenditures Opportunity: Growth of the GDP trend The Philippines is expecting growth of 6.1% next year as robust domestic demand and election spending are seen to offset weaker trading and slow public spending. The economy’s high dependence on domestic demand will likely insulate it from the ongoing global trade recession. The country’s strong services sector gives it “steady footing” as external trade in goods and overseas workers’ remittances grow weak, the economist said, while household consumption and pre-election trends are seen to make up for weak public spending. B. SOCIAL, CULTURAL, DEMOGRAPHIC, AND ENVIRONMENTAL FORCES Opportunity: Population growth/ Growing middle class Euromonitor says that in 2030, the population of the Philippines will reach nearly 128 million. Population growth will be driven by increases in all age clusters with predominantly fast growth in the 60+ age groups. However, the Philippines will remain a massively young country in 2030 with 71.4% of the population aged 40 years or under.

The urban population will overtake the rural population for the first time in 2016 and by 2030 it will make up 56.3% of the population. Another factor is the Philippines’ growing middle class, many of whom are likely to trade affordable full-service restaurants at the expense of fast food. Opportunity: Growth on home delivery sales The fast-food industry has seen an improvement in the share of delivery sales as compared to eat-in sales in the past year. In 2010, delivery sales contributed 28% of total Philippines consumer foodservice value sales, which denote a rise of 8% in comparison to 2009 actual revenues. Opportunity: Filipino consumer preference towards value­for­money goods and services In a study conducted by Euromonitor International, Filipino consumers identified value for money as an important goal when buying food and restaurant products. 91% percent of their respondents noted that quality of products comes first and the price ranked second with 86% in food purchase decisions. Filipinos are into purchasing value-formoney goods and services. Information obtained as Mang Inasal for example, offers unlimited servings of rice. Mang Inasal continues to meet the customer’s satisfaction by providing high quality and value in relation to cost goods and services. Opportunity: Increased development of shopping malls in provincial areas The country’s top three retailers, Ayala Land Inc., SM Prime and Robinsons Land, are  expected to launch more shopping malls and account for the bulk of the new retail space  this year through 2018 on the back of rising incomes.  Aside from expansion in Metro  Manila, developers are also exploring more opportunities in the provinces and  neighboring cities. “One example is the SM City Seaside in Cebu with a gross floor area  of 472,400 sqm. SM City Seaside is also slated to be among the world’s largest shopping  malls once it opens in 2015,” the report said. Opportunity: Convenience and experience are primary growth drivers Filipinos of different social classes are leading hectic lifestyles. This pushes them to go for products which provide convenience. As such, ready meals and foodservice are prevalent meal preferences among busy individuals. Also, most impressive growth opportunities globally are being driven by demand for convenience, like of retail foodservice or home delivery. In the recent years, the food service sector has posted strong growth and is expected to continue doing so over the next years. It is so because time­pressed consumers utilize restaurants as a convenient and time­saving alternative to cooking food at home.

According to Kantar World Panel, 78% of Filipinos preferred food that was convenient to eat or prepare, while 80% of respondents indicated that they prefer food establishments that have short cooking times. Threat: More foreign brands are expected to enter full-service restaurants in the Philippines. According to Euromonitor, the number of foreign brands continues to grow in consumer foodservice in the Philippines as local companies tend to favor the launch an international brand over the creation of a home-grown one. In addition, an established foreign brand is offering better prospects for success as less effort is required to build the brand in the Philippines nowadays. American brand Applebee’s is already among those that should be marked as major competitor as Global Restaurant Concepts Inc. confirmed its launch in the country during the first quarter of 2015. The company is also reported to be in discussions with four other international companies, including one which owns a burger restaurant. The enthusiasm that foreign brands make among consumers who are looking for variety is likely to encourage more companies to bring in more international foodservice brands rather than create a home-grown one. International brands are also perceived as providing a more authentic version of a particular cuisine, which makes them an alternative places for consumers craving a particular food. Threat: Growing numbers Street Stalls/Kiosks in the Philippines Food truck markets are expected to continue operating in the Philippines over the forecast period. More capitalists are expected to be attracted to investing in food trucks due to the relatively small investment that it entails. Also, consumers are expected to be consistently drawn to food truck markets due to the unique experience they provide. These are expected to be popular destinations, especially among food bloggers and young adults who like to go on food adventures with their friends and take pictures with unique food and distinctive places. Threat: Increased health consciousness in the Philippines Prosperity from the growing economy across Asia has seen a shift in local appetite from staple grains toward more meat, fish and other foods. The research report on the “Philippines Food and Drinks Market: Emerging Opportunities” attributed the rise in the demand for health food and drinks to the growing young affluent population, rising disposable income and increasing consumer awareness of health and safety concerns. Filipino population regarded themselves as conscious in their health and well-being as they started to pay more attention regarding to their food intake. Threat: Increased in natural and human­induced disasters, calamities or disturbances The Philippines was fourth in the world among countries hit by the highest number of disasters over the past 20 years, according to the United Nations Office for Disaster Risk Reduction (UNISDR). A total of 274 disasters were recorded in the Philippines from 1995 to 2015. The information comes from The Human Cost of Weather Related Disasters report covering weather-related disasters from 1995 to 2015. The Philippines is also among the top 10 countries with the highest absolute number of affected people, with 130 million.

The report found that 90 percent of major disasters were caused by weather-related events. A collaboration by the UNISDR and the Centre for Research on the Epidemiology of Disasters (CRED), the study reports that 606,000 people died and 4.1 billion people were injured or left homeless because of the aforementioned disasters. Economic losses are a major development challenge for many least developed countries battling climate change and poverty.

C. POLITICAL, GOVERNMENTAL AND LEGAL FORCES Opportunity: Improved Food Safety Standard according to Republic Act No. 10611 or the “Food Safety Act of 2013” An act to strengthen the food safety regulatory system in the country to protect consumer health and facilitate market access of local foods and food products, and for other purposes. Threat:  3% decrease in the corruption perception index of 2015 In the study conducted by Transparency International in which a country or territory’s score indicates the perceived level of public sector corruption on a scale of 0 (highly corrupt) to 100 (very clean). A country's rank indicates its position relative to the other countries   in   the   index.   Year   2015's   index   includes   168   countries   and   territories. Philippines ranked 95 with the score of 35 out of 100 which is 3% lower than 2014’s 38 out of 100. Despite of President Aquino’s anti­corruption drive, investor services might disapprove even if there is an improvement in the investor confidence of the country. D. TECHNOLOGICAL FORCES Opportunity: Rampant use of social networking in the Philippines Both and beyond the Jollibee food industry, some of the technological advances will serve to improve the experience both for the industry and for the patron. Yet with every new advance comes a new challenge, and with technology moving faster these challenges can seem insurmountable. It allows the patrons to find restaurants, rate them, and decide where they want to spend their money when they go out to eat. It allows restaurant owners to be more efficient and effective in the areas they feel can be streamlined.

In 2011, the Philippines has shown a rapid rise in the number of users of social networking sites such as Facebook. As of March 2015, the Philippines ranks 7th in the world with highest Facebook penetration.

Distribution of Facebook users according to age bracket. Opportunity: Significant growth of internet retailing Internet retailing will remain to experience strong growth over the projected period as more Filipinos are expected to be drawn to the method due to the convenience, wide selection of products and attractive promotions that retailers will continue to provide. More payment options will also be made available to encourage more consumers to shop via the internet. Innovations such as cash/credit card payments of food delivery & delivery to another address system.

E. COMPETITIVE FORCES I.

ADVERTISING Jollibee – Needs improvement in advertising strategy as compared to McDonald’s although it focuses on family values and delicious but affordable products. Recent use of highly popular loveteam. Aside from promoting a family oriented work environment, the brand’s values also reflect on their advertising and marketing. Jollibee knows their target audience very well: the traditional family. All communication materials focus on the importance of family values, making Jollibee the number one family fast food chain in the Philippines and a growing international QSR player. In addition, Jollibee stresses the affordability of their products. Recently, JaDine, a popular loveteam in the country appeared in their tv commercial. The company has their own official website where it can help them in offline marketing for them to reach a multitude of potential customers. In addition, The Jollitown is a show whose objective is to attract kids and promote their products through them. McDonald’s- Excellent marketing and advertising strategies through the years. The company has gained firm brand identification in the country through it excellent marketing and advertising efforts. In 2009, the advertising agency of McDonald’s, DDB Philippines, garnered numerous awards for their McDonald’s campaigns. DDB won 6 Bronze trophies for Film with entries that include Grab and Go Breakfast “Cook,” “Hold This Please,” and “McDonald’s First Love.” They also won in the category of best use of mixed media for “Burger Burger” and Best Outdoor campaign for McDonald’s clock. The “Burger Burger” campaign garnered 3 silver trophies as well for its outstanding integrated multimedia campaign. The strong advertising and marketing strategies of McDonald’s has pushed it to the second spot in terms of fast food brand identification in the Philippines. According to Euromonitor, Filipinos continue to identify more with Jollibee but McDonald’s Philippines has started to make inroads in getting the Filipino customers’ attention through Filipino-themed marketing campaigns such as “Love ko ‘to.” (Tan, N.A) In 2015, McDonald’s Philippines won the inaugural Digital Marketer of the Year and Digital Advertiser of the Year. The company won 4 bronze awards under the Campaign category, 3 awards under Effective Campaign category and “Business Results Excellence” award under Special awards. In addition, the company is known for using highly popular artists, sports figures and loveteams such as AlDub, Enrique Gil, Nino Muhlach, Luis Manzano, Toni and Alex Gonzaga, Jessy Mendiola and Jeric and Jeron Teng. The McDonalds objectives in advertising are to make people aware of an item, feel positive about it and be sentimental about it. The McDonalds first love commercial was aired 2009 where it gave the consumers to remember their nostalgic childhood memories by using the backdrop of memorable Eraserheads song Ang Huling El Bimbo which was also became Top Ten Philippine Advertising Campaign in 2009.

KFC – Focuses on introducing and promoting their products. Weak advertising campaigns. KFC continues to struggle to connect with general masses which comprise a large portion of fast food consumers. KFC ranks 3 rd in brand identification tests of fast food chains in the Philippines. According to Euromonitor, the company lags behind Jollibee and McDonald’s in terms of brand equity. One of the reasons as to why the company fails to connect to Filipino consumers is because the focus more on the introduction and strengths of its product rather producing a heartwarming commercials which attracts mostly the Filipino people. II.

PRODUCT QUALITY AND TASTE The researchers conducted survey covering 200 participants. The following questions were asked: TABLE E Category

SURVEY RESULTS Jollibee McDonald’s

KFC

1. Fried Chicken

50%

10%

39%

2. Burger

47%

38%

17%

3. French Fries

21%

50%

29%

4. Spaghetti

84%

16%

-

5. Ice-cream/Desserts

14%

80%

6%

6. Serving size

58%

15%

27%

7. Product variety & mix

58%

19%

23%

8. Overall taste

50%

25%

24%

Additional studies related to the topic: JOLLIBEE Jollibee ranked first in the overall food quality and taste among Filipino consumers according to an independent consumer food panel testing conducted by Datamonitor in 2011. Chickenjoy also reaped the highest percentage among chickens offered by competitors. Spaghetti and burgers also garnered a favorable rating. MCDONALDS AND KFC McDonalds and KFC followed Jollibee in the ranking as they tied second in the survey. McDonald’s product such as Big Mac and Chicken McDo had positive satisfaction rating of 74% and 70% respectively. KFC’s Zinger, Hotshots and KFC chicken also garnered a favorable satisfaction rating of 75%, 70% and 70%, respectively.

III.

PRICE COMPETITIVENESS

TABLE F PRICE COMPARISON BETWEEN JOLLIBEE, MCDONALD’S AND KFC Category

Jollibee

McDonald’ s

KFC

1. Chicken

Php 75

Php 79

Php 85

2. Spaghetti

Php 50

Php 52

Php 50

3. Plain burger

Php 29

Php 31

Php 35

4. Regular fries

Php 29

Php 33

Php 36

IV.

NUMBER OF STORE LOCATIONS JOLLIBEE JFC has a total store network of 2,951 stores worldwide as of March 31, 2015. In the Philippines, JFC’s store network totals to 2,335: Jollibee brand 869, Greenwich 216, Chowking 419, Red Ribbon 334, Mang Inasal 452, and Burger King 45. Abroad, it operates 616 stores: Yonghe King 313, Hong Zhuang Yuan 43, and San Pin Wang, 53, all in China, Jollibee 123 (USA 32, Vietnam 60, Brunei 12, Saudi Arabia 10, Qatar 3, Kuwait 3, Singapore 2 and Hong Kong 1), Chowking 47 (US 19, UAE 20, Qatar 5, Oman 2 and Kuwait 1), Red Ribbon US 34 and Jinja Bar US 3. MCDONALDS McDonald’s has grown to have more than 33,000 restaurants all over the world. Today, McDonald’s has grown to become one of the country’s leading fast food chains with more than 460 restaurants nationwide.

KFC -No data providedV.

SPEED AND QUALITY OF SERVICE JOLLIBEE Jollibee highlights the need for quick and good quality of service. The crew are trained to be professional and approachable at the same time. Through this they developed a welcoming and family-oriented approach in serving their customers. They conduct comprehensive training programs that seek to improve their ability to serve consumers at the shortest possible time. Though they have shown great emphasis in the need for quick and good quality of service, there have been reports and experiences that shows Jollibee’s slow service due to inexperience & inadequate number of crew members as well as the process time of orders especially in peak hours. MCDONALD’S McDonald's emphasizes to its customers that it is committed in providing optimal service quality and speed. It has also an advantage in improving customer service through advance technology. According to customer services at McDonald's, every customer receives an accurate, personal and timely response from their feedbacks. Employees trains to deal with complaints effectively through tools and resources. Nonetheless, there are still ordinary problems and feedback from the customers. They pointed out the members of the crew for not being courteous and such. KFC KFC introduced an ordering and claiming system so that service and quality would be improved. But consumer reports show that due to inefficient crew members, KFC suffers from slow service. Though KFC introduced a new system to improve their quality of service, there is a need for the company to improve their crew members.

VI.

PRODUCT VARIETY AND MIX JOLLIBEE Jollibee has expanded its menu with the introduction of new rice meals such as the Garlic Pepper Beef meal, Reese’s and Hershey’s Mix-In, Amazing Aloha Champ, Ultimate Burger Steak, Garlic Bangus, and the reintroduction of Peach Mango Pie. Jollibee also provide a large set of food choices from breakfast meals to desserts. Their breakfast meals offer classic Filipino foods such as hotdog, beef tapa and longganisa. MCDONALD’S McDonald’s Philippines has introduced a innovative line of deserts that aim to please customer’s needs. The new products include: the Oreo Overload McFlurry, the Double Hot Fudge Sundae, the Double Hot Caramel Sundae, Green Apple Sprite

Float, Waffle cone w/ caramel Toppings and large Strawberry/Ube McDips. They also offer a wide variety of cafes such as McCafe Iced Mocha, McCafe Double Choco Frappe, and McCafe Strawberry Smoothie. However, as McDonald’s focuses on launching new deserts and drinks, it continues to lag behind other competitors in terms of rice meals. KFC KFC has recently diversified their product line-up with the introduction of the Cheezy Bacon Fest that includes a Pasta Bowl, Zinger, Twister, Chik’n Fillet, Cheezified Baconized rice meal, and a bucket of fries which is topped by cheese and bacon. They also introduced Korean Bibimbap and Texas Barbeque. They also introduced new flavours of KFC Krushers, its line of drinks, which include Rockin‟ Road, Kookies n‟ Kream and Mixed Berries. VII.

FINANCIAL POSITION JOLLIBEE The total assets of Jollibee Corporation as of 2014 is Php 54.11 billion with a recorded liabilities of Php 26.04 billion. Revenues coming from sales is Php 86.20B while cost of sales reached Php 73.72B. Net income is recorded at Php 5.48B. Based from the financial statements presented by Jollibee, it can be seen that their financial position is very strong as their sales, and assets are continuously increasing. This conclusion can also be derived at good financial ratios of the company. MCDONALD’S McDonald’s restaurants are franchised in the Philippines through Golden Arches Development Corporation. GADC has recorded revenues of Php 18.74 billion, Php 15.97B and 13.92B in the years 2014, 2013 and 2012, respectively. Costs and expenses are recorded at 17.64B which resulted in a net income of Php798M in 2014 while a Php 788M net income in 2013 and 694M in 2014. KFC -No financial statements provided-

VIII. EFFECTIVE SOCIAL MEDIA MANAGEMENT/STRONG ONLINE PRESENCE PORTER’S FIVE-FORCES MODEL Entry of new entrants - LOW

1. Difficulty in brand switching in relation to new entrants 2. High proprietary knowledge 3. Control over access to distribution channels 4. Large capital requirements 5. Large economies of scale 6. Well-established brands

Bargaining power of buyer MODERATE

1. Low switching costs 2. Availability of information 3. High availability of close substitutes 4. Small volume of purchases per customer 5.Strong brand identification 6. Large number of customers

Bargaining power of supplier - LOW

1. Large number of suppliers/providers 2. Suppliers’ lack product differentiation 3. Suppliers’ are in favor of powerful customers.

Threat of substitution - HIGH

1. Low switching costs 2. Availability of healthier options 3. Growing numbers Street Stalls/Kiosks

Rivalry among competing seller HIGH

1. Industry is concentrated but many competing firms 2. Low product differentiation 3. Mergers and acquisition are common in the industry 4. High exit barrier

A. ENTRY OF NEW ENTRANTS – LOW Fast-food industry in the country has set barriers to entry that help well-established companies preserve a favorable position in the industry and take good advantage of it. The following barriers to entry are included in the analysis: 1) Difficulty in brand switching relative to new entrants as well-established brands are in place Brand identification is prevalent in many different industries in the Philippines nowadays. Powerful fast-food restaurants such as Jollibee, McDonald’s and KFC are already operative in the country and these QSRs are very aggressive and have established name and customer loyalty over the years. Unless the entrants are renowned competitors outside the country, it will be difficult for new players to enter the market. 2) High proprietary knowledge Established fast food chains have recognized trademarks that constrain other companies from making use of specific food preparation techniques. For example, the gravy of KFC which is one of their well-known recipes is a secret that cannot

be copied by other fast food companies. Other proprietary knowledge includes processes and operations techniques, marketing plans, salary structure and details of its computer systems. Time-honored QSRs are already familiar with the flow of processes and methods used in running operations that a possible new entrant may lack. 3) Control over access to distribution channels Ms. Margot Aissa Tan, marketing development manager of Jollibee Foods Corporation, revealed in an interview that the control over distribution channels in the fast-food market is high. This made it difficult for new players to enter the industry. According to her, fast food distribution in the Philippines is hindered by poor transportation facilities, poor infrastructure and the high cost of power and the lack of infrastructure support. Small fast-food chains are more susceptible to the inefficiencies in the distribution system since they have not yet established a firm channels of distribution. In contrast, giant fast-food chains have already established distribution channels in various ways such as partnerships with individual investors and entrepreneurs who are encouraged to build new franchise outlets. 4) Large capital requirements 5) Large Economies of Scale Also, according to Ms. Tan, the fast-food industry is marked by large economies of scale, which is defined as the cost advantage that arises with increased output of a product because of the inverse relationship between the quantity produced and per-unit fixed costs as these costs are proportioned over a larger number of goods. As such, a large fast-food chain, which buys inputs in bulk can take advantage of transportation costs and maximize the fixed costs associated with processing raw materials to produce a salable goods. B. BARGAINING POWER OF BUYER – MODERATE Bargaining power of buyers in the fast-food industry employs a moderate threat as consumers are able to affect the pricing and quality of goods and services but the effect is neither high nor low. The following poses risks to players in the fast-food industry: 1) Low switching costs Various fast-food chains’ customers find it easy and inexpensive to switch to alternative brands due to the proximity of fast-food restaurants in terms of location, price and product ranges. 2) Availability of information The flourishing utilization of internet and social media made it easier for consumers to access and gain information regarding the goods and services they want to acquire. These information helped them form effective and convenient course of actions. They can access and make information about food quality ranking, service/performance evaluation, location and ambiance analysis that will

either help or destroy a company’s reputation. These information readily available over the internet increases the bargaining power of customers. 3) High availability of close substitutes According to Euromonitor, food trucks/kiosks are expected to continue operating in the country. The report also showed that capitalists are expected to incline on investing in food trucks due to the relatively small investment it requires. Consumers, especially, food bloggers and young adults are also expected to be enticed to food truck markets due to the inexpensiveness and uniqueness of product and services they provide as taking pictures and sharing it online has become customary. Also, canteens, cafeterias, and other budget-friendly eateries, as well as cooking at home located at various places are booming. Cooking at home is also another choice for customers as Filipinos are accustomed at eating inside their homes. This also increases the customers’ discretion on whether and when to buy their products. Although there are factors that increases the bargaining power of consumers, there are some other factors that lower the bargaining power of the buyers. The following factors are included in the category: 4) Small volume of purchases per order Customers of the fast-food giants in the Philippines often purchase small volume of goods in each transactions. On average, a typical Filipino consumer only spends approximately P100 per transaction in a fast-food chain. Although customer purchases poses a significant proportion of output of the industry, the large number of consumer scope makes it difficult for a single consumer to affect the services of fast-food chains. 5) Strong brand identification Filipino consumers are known for patronizing well-known brands whether it is a food chain or an apparel brand. Consumers prefer buying goods and services at brands in which they have grown up with. With this, continuous strong performance of established brands such as Jollibee and McDonald’s is evident. Strong brand identification among Filipinos decreases their bargaining power. 6) Large number and diversified types of customers The number of customers of the fast-food industry as well as the diversified and large scope in social classes of consumers lower their bargaining power. Due to the unbiased customer focus of these fast-food chains, the industry is able to increase their customer scope. Filipinos in all upper, middle and lower classes are considered buyers of this type if industry. C. BARGAINING POWER OF SUPPLIER – LOW

Players in the fast food industry have thousands of suppliers to choose from given that the Philippines is an agricultural country. 1)

Large number of suppliers/providers According to Ms. Tan, fast food chains can easily shift to another supplier whenever they feel dissatisfied with the quality of inputs provided by the current supplier. Since the materials needed by fast food chains, which include chicken, buns, meat, vegetables, ketchup are easily available from various suppliers, fast food companies can quickly switch suppliers in instances where the current supplier is not at par with the quality standards set by the fast food company or whenever conflicts arise. Due to large availability of suppliers and inputs in the market, the bargaining power of suppliers is reduced.

2)

Suppliers lack product differentiation Fast-food industry have low product differentiation that the raw materials they need are the same throughout the operations and the same among the fast-food chains. Similarly, suppliers of this industry have little variation in their products. Close substitutes are available nationwide as the country if full of agricultural lands and farms. In fact, according to Philippine Statistics Authority, agricultural production grew by 0.11% on an annual basis while livestock production increased by 3.83% in 2015. The poultry sector’s output expanded by 5.74 percent. Due to the lack of differentiation among raw materials the suppliers provide, their bargaining power is low.

3)

Suppliers are in favor of powerful customers

82,697

81,804

80,796

2012

2013

2014

According to Ed F. Limtingco on his article on PhilStar in 2012, “the sustained positive growth of the industry during the last decade can be attributed to the robust performance of the restaurant sector, particularly the fast food subsector given that approximately 80 percent of the restaurants in the country are classified as fast food.” Among fast-food chain players, local operator Jollibee Foods Corporation leads among the fast-food brands through its wide portfolio with a value share of 31% according to Euromonitor. Other important players include Golden Arches Dev Corp (with the McDonald’s brand), Ramcar Inc. (Mister Donut and KFC) and Philippine Seven Corp (7-Eleven). With the large percentage share of giant fast-food chains in the composition of fast-food industry, the suppliers’ bargaining power decreased because most of its supplies are bought by these renowned fast-food chains. D. THREAT OF SUBSTITUTION – HIGH 1) Low switching costs Various fast-food chains’ customers find it easy and inexpensive to switch to alternative brands due to the proximity of fast-food restaurants in terms of location, price and product ranges. 2) Availability of healthier food options Nowadays, customers have fancy living a healthy lifestyles such as proper food diet and routinely exercises. Some customers in this industry converted from eating at fast-food restaurants due to the health hazards associated with eating processed foods as well as the dietary influences it promote such as obesity. With these, availability of healthier food options exposes a great threat to the industry. 3) Growing number of street kiosks/stalls Food alternatives such as streets stalls/kiosk such as Mercato in Bonifacio Global City, Eastwood Malls and Farmers Market are prevalent these days. Small restaurants in Lilac and Maginhawa are also dominant nowadays. These street stalls poses a threat as large variety of food options are now available in the market. These alternatives are especially attractive to working adults and college students. E. RIVALRY AMONG COMPETING SELLER – MODERATE 1) Many competitors but Industry is concentrated Since 80% of the restaurant industry is comprised of fast-food chains and 31% of this is comprised of Jollibee Food Corporation and the remaining 69% are comprised of McDonald’s, Mister Donut, KFC and 7-Eleven, industry is said to be concentrated as majority of market share is held by these food chains firms. With only a few organizations holding a large market share, the competitive landscape is moderate.

2) Product differentiation Fast-food industries sells commodities (food) which are not differentiated in nature. Thus, customers can easily switch from one brand to another making the competition higher. 3) Mergers and acquisition are common in the industry In the Philippines, Jollibee Foods Corporation is the most aggressive fast-food corporation as it eyes for investments and acquisition of subsidiaries. They already own Chowking, Greenwich, Red Ribbon Bakeshop, Mang Inasal and Burger King. This makes competition higher. Max’s Group on the other hand owns, Pancake House, Krispy Kreme, Yellow Cab, Teriyaki Boy and Sizzling Steak. 4) High exit barrier Fast food operators capitalize greatly in non-transferable fixed assets in their operations/production resulting in higher exit barriers. An example of a nontransferable fixed asset used by fast food operators includes the special convection oven used by Jollibee to cook their recently introduced chicken barbecue. The convection oven costs approximately P5 million and is specifically used to cook the chicken barbecue. Due to large investment in non-transferable fixed assets among fast-food operators, there is a high exit barrier.

CHAPTER IV

INTERNAL ANALYSIS A. MANAGEMENT

I.

PLANNING Strength: Store network expansion and boosting information technology capabilities. The company will continue accelerating their investments in building their organization capability primarily in store network expansion and in information technology. Mr. Tanmantiong said JFC looks forward to another historical milestone with the planned opening of 300 new stores worldwide -- of which 100 will be overseas, the bulk to be situated in China.

II.

ORGANIZING Strength: Family-friendly and supportive work culture. A family-oriented approach to personnel management, making Jollibee one of the most admired employers in the region with an Employer of the Year Award from the Personnel Management Association of the Philippines, Best Employer in the Philippines Award from Hewitt Associated and a Top 20 Employer in Asia citation from the Asian Wall Street Journal.

III.

MOTIVATING Strength: Establishment of strong core values in business practices. Through the years, JFC has formed its foundation from good business practices and strong core values of a. Respect for individuals - recognize diversity and show consideration towards different cultures and beliefs. b. Teamwork - We work together to achieve our objectives, knowing that we are stronger as a team than in our solo efforts. c. Spirit of family and fun - JFC is a place where every employee feels part of the family and experiences a sense of community and fun that makes work enjoyable. d. Humility to listen and learn - Regardless of how big we grow, we hold dear to us the openness and humility to improve ourselves. Strength: Holding events to nurture teamwork and employees’ work performance. Promoting Jollibee’s Eight Values through launching a series of culture-building events such as staff activities, staff forums, and the Dawang Award where it recognized employees promoting the company’s core values and best practices at work.

Mang Inasal formally gave recognition to outstanding employees as well as topperforming agents through the Mang Inasal Service Excellence Awards. These efforts resulted in an impressive employee engagement score which showed a marked improvement from 2012. IV.

STAFFING Strength: Helping farmer become entrepreneurs and directly supply fresh produced to the company through the FEP. FEP continued to enable smallholder farmers to become entrepreneurs and directly supply fresh produce to institutional markets. In 2014, FEP assisted more than 900 farmers from 27 farmer groups nationwide. Farmer clusters were accredited as JFC suppliers for onions, tomatoes, bell peppers, chili peppers, and calamansi leading to increased incomes. Records show that farmers delivering to JFC can earn up to five times more compared to markets.

V.

CONTROLLING Strength: Implementation of Golden Standard Training. YHK comprehensively implemented Golden Standard Training across all stores and conducted frequent audits in order to guarantee food safety procedures and quality processes. Strength: Strong franchise system. The company reinforced its organizational strength through values integration and enhancement workshops and business partners’ assemblies for increased franchise engagement. At present, there are more than 900 Jollibee stores worldwide and more than half of these are operated by franchisees. However, demand does not wane and opportunities still abound in various markets both domestic and international. Jollibee proves to have a strong leadership in the market. Such leadership is proven by being the #1 Employer in the Philippines. In addition, awards such as, being the only Philippine Company that made it to the top 20 of Asia’s Best Employers list, ranking #16 in the survey made by Hewitt Associates, as cited in the Far Eastern Economic Review and The Asia Wall Street Journal. They also ranked 3rd among Asia’s Most Admired Companies in 2000 and were cited as #1 in Overall Leadership among Top Ten Philippine Companies. They were also named the “Global Growth Company” by the World Economic Forum. Moreover, they are recognized as The Most admired corporation in the Philippines by Asian Wall Street Journal Review 200 for 7 consecutive years (1998-2004) Strength: Observance and focus on Food, Service, Cleanliness and Conditions.

The company focused on FSC (Food, Service, Cleanliness and Conditions) improvement in the stores, which resulted to growth of FSC-certified stores from 50 percent (2013) to 78 percent (2014) and Gold-Certified Stores, from 8 percent to 25 percent. This commitment to quality has kept Mang Inasal a well-loved brand, a commitment it continues to live up to year after year. Strength: Proper implementation of strategies to achieve goals. Overall plans on achieving the goal of the company are also effective as JFC was among the Asia’s Fab 50 in Forbes List. According to PhilStar, the company is on the list for the second time on the back of strong sales of about $2.04 billion in 2014

B. PRODUCTIONS/ OPERATIONS I.

PROCESS Strength: Efficient manufacturing and distribution facilities. Efficient manufacturing and distribution facilities located at Pasig City, Cebu city and the central site in Laguna which is the biggest and most advanced in the country and among Asia’s bests. These factories are operating 24/7 to support the supply-chain. Strength: Modernization of equipment. Installation three-tier picking tower equipped with pallet and carton live storage, where non-perishable supplies, such as utensils and condiments, are stored for dispatch. Strength: Development of new systems. New system that enables faster picking and deployment for the company that is more responsive to the needs of its stores. The system also aided JFC’s plans to consolidate multiple supply chains into one facility in a cost-effective way, laying the groundwork for the company’s expansion plans. Strength: Expansion and acquisition of commissary facilities. The expansion and modernization of commissary facilities to address the need for increased capacity and improvement in operating efficiency and production costs in the manufacturing, warehousing and distribution infrastructure. Jollibee operates a total of 20 commissaries worldwide: 13 in the Philippines, three in China, three in the United States and one in Vietnam. It builds these

commissaries to supply food products to its restaurants, making its supply chain more efficient while assuring food quality and safety. Strength: Sufficient raw materials and production of supply. No supply issue because it has sufficient raw materials, finished products and product capacity to meet the consumer demand.

II.

CAPACITY Strength: Sufficient commissary facilities to support its supply chain system. Jollibee operates a total of 20 commissaries worldwide: 13 in the Philippines, three in China, three in the United States and one in Vietnam. It builds these commissaries to supply food products to its restaurants, making its supply chain more efficient while assuring food quality and safety. The 3 major commissaries in the Philippines are operating 24/7 that manages Jollibee’s total supply chain process. Strength: Equipments can match the demand for supply. The chicken marination line can produce as many as 150,000 pieces a day while about 480,000 hamburger patties a day is turned out by the frozen patty line. The breadline is designed to match the volume output of patties that is also about 480,000 pieces a day.

III.

INVENTORY Strength: Jollibee Foods Corporation's annual raw materials increased from Dec. 2012 $59M to Dec. 2013 $79M and increased from Dec. 2013 $79M to Dec. 2014 $134M. Strength: The central kitchen improved and standardized HZY’s raw materials and cooking sauces. This was followed through with an effort to equip all restaurants with standardized operating processes for each individual dish. Weakness: Pressure of higher raw material prices. Continued to bear the pressure of higher raw material prices with their impact on operating margins.

IV.

WORKFORCE Strength: Giving recognition to outstanding employees as well as top-performing agents resulted in an impressive improvement.

Strength: The Dawang Award where employees are recognized in promoting the company’s core values and best practices at work. Strength: Competent and professional staffing system. A professionally staffed Technical Services Team supports the maintenance of an internationally accepted quality management system that further ensures the quality and safety of the commissary manufactured food products. High caliber teams from Engineering, Human Resources, Information Management, Finance and Accounting likewise provide support to the Manufacturing and Logistics operations of the Commissary. V.

QUALITY Strength: Yonghe King comprehensively implemented Gold Standard Training across all stores and conducted frequent audits in order to guarantee food safety procedures and quality processes. Strength: Yonghe King winning the Top Brand in Chinese Quick Service Restaurant Industry of China Brand Power Index award for four consecutive years; the Seven Star Awards for Outstanding Contribution in Food Safety & Public Health for three consecutive years and the Sincerity Service and Satisfactory Brand Award on March 15, 2014 for three consecutive years. Strength: In 1997, the commissary in Pasig earned the Outstanding Industrial Plant in the National Capital Region from the Laguna Lake Development Authority and the Most Improved Industry awarded by the Sagip Pasig Movement while Commissary Plant Engineer Romy P. Fernandez was awarded as one of the Top Ten Most Outstanding Pollution Control Officers of the Philippines. 2004 is a banner year for Vismin Foods Corporation (VFC) who has been assessed and certified by the National Meat Inspection Commission of the Department of Agriculture, to have fully met the requirements and standards of Good Manufacturing Practice, reinforcing the commissary’s “AAA” accreditation granted by the same agency. Weakness: Chinese quick service restaurant (QSR) industry as sales from highend and western QSR restaurants declined due to food safety issues.

TABLE A Various Strategies

Implications of Various Strategies on Production/Operations

Strengths

Weaknesses

1. Low-cost provider

Products are standardized or readily Becoming too fixated on reducing available from many suppliers. It costs and ignoring buyer interest in provides lower overall costs than additional product features. rivals and appealing to a broad spectrum of customers, usually by under pricing rivals. Adopt labor-saving operating methods

2. A highquality provider

Use online systems and sophisticated More expensive and efficient software to achieve operating equipment with highly skilled worker efficiencies. Make greater use of which requires higher wages. online technology applications.

3. Provide great Technological change and Slow response to customer demands customer product innovation are fast-paced. and services that the customer needs. service Well-trained teams that work in a culture of integrity and humility, fun and family-like. Every Jollibee outlet welcomes customers with a clean and warm in-store environment and friendly and efficient service. 4. Be the first to Being the first to introduce new Has higher research and development introduce new products can serve as a barrier to cost products entry. It may be more difficult for new entrants to enter the market with a similar food item. The most familiar brand may capture the market for that particular type of food product. 5. Minimize layoffs

Family oriented approach to human resource management. Company’s Code of Ethics and Business Conduct itself serves as a guideline towards their goals. No employee shall be suspended, dismissed, laid-off or discharged except for a just or authorized cause provided by law and after due process serves security.

C. MANAGEMENT INFORMATION SYSTEM Managers use an MIS to create reports that provide them with a comprehensive overview of all the information they need to make decisions. MIS can provide managers with everything they need to make highly informed decisions and perform in-depth analysis of operational issues. An MIS can collect nearly any type of information managers require such as financial datas. It can also facilitate communication and performance within the company. Improve business performance since they have detailed information on their business environment and their decisions reflect the company position in the marketplace. Jollibee Food Corporation’s information system is continually being improved. On August 1, 2014, JFC’S migration to a new system for an accelerated business growth has resulted in temporary slowdown in sales order taking, product loading and dispatch of transportation. All users undergone training to maintain the system. MIS is the only major that focuses on both business processes and information technology. Food industries like JFC hires MIS professionals as a web developer, business analyst or systems developer. Requirements as a candidate must possess at least a Bachelor’s/College Degree in Engineering (Computer/Telecommunication), Engineering (Industrial), Computer Science/Information Technology or equivalent.

D. MARKETING I. CUSTOMER ANALYSIS Strength: Brand name reputation. Strong brand identification as it received numerous awards like 2012’s Readers Digest Most Trusted Brand in the family restaurant category, the President’s Award. It was also awarded as Most Admired Company in the Philippines by Wall Street Journal Asia in 2009. It was also cited by the travel magazine Travel + Leisure as one of the world’s best fast food chains, the only Philippine company to be included in the list. Strength: Primary targets are the Filipino kids and families that is attractive to all social classes. Strength: Food is a necessity. Basic needs refers to those fundamental requirements that serve as the foundation for survival. Access to the basic needs of life, including shelter, food, and clothing is necessary to the development of a strong community and a necessary precursor to individual self-sufficiency.

Strength: Time consciousness of consumers due to work/ school demands. Consumers, especially students & employees, have limited time allotted for breaks during school/work. The quick service and budget friendly approach of Jollibee Foods Corporation addresses such problem. Strength: Jollibee topped Strat Polls’ poll as the preferred fast-food chain. According to Strat Polls, 72.8% of those surveyed chose Jollibee as their preferred fast-food chain as against to its rival McDonald’s who obtained only the 2nd spot. Weakness: Health consciousness of consumers. Consumers are becoming aware of a healthy diet and the consequences of eating processed foods. Weakness: Market distribution is too concentrated in Luzon. Market distribution is too concentrated in Luzon comprising 70% and only 14% and 11% in Visayas and Mindanao, respectively. *approximate Weakness: Local competitors open stores in the same places where Jollibee networks are located. II.

SELLING PRODUCTS Strength: Primarily targeting Filipino families & values Strength: Offers variety choices of foods. Strength: The location of outlets are constructed at places where a large number of customers gather such as schools, malls and workplaces. Also, in other countries, branches are constructed at central places to promote accessibility to a greater customers. Weakness: Food coupons are rarely produced compared to rival McDonald’s. In fact, some brands of the company does not even offer discounts/ coupons.

III.

PRODUCTS AND SERVICE PLANNING Strength: Recipes truly capture local tastes that is unlikely to be found in competitors. Strength: Menus across the world accustomed to local preferences to differentiate it from other standardized players like McDonald’s and KFC who maintain the same menus worldwide with minimal changes.

Strength: Store layout, menus and mascots are very appealing to kids and familiar to Filipino families. IV.

PRICING DISTRIBUTION Strength: Affordable and value-oriented pricing

E. FINANCE/ ACCOUNTING TABLE C:

FINANCIAL RATIOS

2014

2012

2013

EPS

3.58

4.45

4.96

ROE

18.33%

21.38%

21.56%

ROA

9.22%

10.62%

10.71%

Current Ratio

0.94

10.62

10.71

48.9%

50.1%

Debt Ratio

Receivables Turnover

27.66

27.56

16.94

Inventory Turnover

21.29

21.09

15.47

Company

Industry

44.92

35.67

Valuation Ratio

P/E Ratio (TTM) Growth Rates

Sales – 5yr growth rate

13.59

9.58

Capital Spending- 5yr growth rate

15.81

14.62

Current Ration (MRQ)

1.36

1.24

LT Debt to Equity (MRQ)

12.31

51.85

Total Debt to Equity (MRQ)

18.94

67.87

Interest Coverage (TTM)

387.15

77.05

5.70

4.22

Receivable Turnover

21.19

90.96

Asset Turnover

18.46

36.41

Inventory Turnover

1.80

1.38

Return on Assets- 5 yr average

10.08

5.75

Return on Investment- 5 yr average

16.09

8.23

Return on Equity – 5 yr average

19.81

11.81

Financial Strength

Profitability Ratios

Net Profit Margin- 5 yr. average Efficiency Ratios

Management Effectiveness

TABLE D

Receivables

FINANCIAL STATEMENTS

2012

2013

3,082,872,678

7,621,193,252

Working Capital

1.18

1.26

Total Assets

54,118,679,600

46,026,634,113

Total Liabilities

26,040,658,079

22,665,694,036

2012

2013

2014

Net Sales

67,493,953,521

76,313,489,585

86,209,777,710

Net Income

3,711,995,652

4,722,806,527

5,488,941,506

Weakness: Accounts receivables balance doubled. The dramatic increase of 147.21% in receivables account is due to slower collection period of receivables as reflected from the 10.59% decrease in receivables turnover. The ability of the company to meet its current obligation is also positive as working capital ratio was able to yield a +1 result. Strength: Net sales and net income continuously increasing. Net sales increased by 13.07% in 2013 and by 12.97% in 2014. This is practically due from higher volume of customers and purchases per store. Their brands’ healthy sales growth translated to strong profit growth for the company which increased by 14.78% in 2014. Strength: Jollibee Foods ranked 1st in the Asia’s top fast-food companies in terms of Asia Pacific sales in 2013

Strength: Positive investment consensus forecast. According to Financial Times Ltd., average annual growth rate is +14.20%. As of Jan 09, 2016, the consensus forecast amongst 12 polled investment analysts covering Jollibee Foods

Corporation advises that the company will outperform the market. This has been the consensus forecast since the sentiment of investment analysts improved on Oct 16, 2015. The previous consensus forecast advised investors to hold their position in Jollibee Foods Corporation. 2012

2013

2014

Operating

8,237,963,925

9,219,500,197

2,862,428,217

Financing

(2,168,992,899)

(3,880,163,473)

644,653,684

Investing

(3,883,708,435)

(4,288,943,532)

(5,798,023,969)

Cash & Cash Equivalents at the end of the year

8,848,591,584

9,903,877,068

7,618,473,267

Cash inflows from operating activities are mainly coming from income. However, receivables and inventories greatly affects the cash outflows. Outflows from receivables are recorded at (214,752,618), (324,828,093) and (4,543,770,222) in 2012, 2013 and 2014 respectively. While outflows from inventories are (940,056,121) in 2013, (2,413,958,938) in 2014. Cash outflows from investing activities are due to the continuous expansion of the company such as acquisition of assets to which the company spent P5,045,474,419 in 2014 and P3,907,875,891 in 2013. The company also spent P277,484,623 in 2014 in investment properties while nil in the years 2012 and 2013. Proceeds from disposal of property, plant and equipment and investment properties resulted in a higher cash inflow of P291,195,603 in 2014 compared to P50,662,989 and P41,766,889 in 2013 and 2012 respectively.

CHAPTER IV

STRATEGY FORMULATION A. SWOT MATRIX

STRENGTHS

SWOT

WEAKNESSES

S1

Store network expansion and W1 Pressure of higher raw material boosting information technology prices. capabilities

S2

Family-friendly and supportive W2 Chinese quick service restaurant work culture. (QSR) industry as sales from highend and western QSR restaurants declined due to food safety issues.

S3

Establishment of strong core W3 Health consciousness of consumers. values in business practices. Consumers are becoming aware of a healthy diet and the consequences of eating processed foods.

S4

Holding events to nurture W4 Market distribution is too concentrated in Luzon comprising teamwork and employees’ work 70% and only 14% and 11% in performance. Visayas and Mindanao, respectively. *approximate

S5

Helping farmer become W5 Local competitors open stores in the entrepreneurs and directly supply same places where Jollibee networks fresh produced to the company are located through the FEP.

S6

Implementation of Standard Training.

S7

Reinforcement of organizational W7 Accounts strength through values doubled. integration and enhancement

Golden W6 Food coupons are rarely produced compared to rival McDonald’s. In fact, some brands of the company does not even offer discounts/ coupons. receivables

balance

workshops/ assemblies.

SWOT

S8

Observance and focus on Food, Service, Cleanliness and Conditions.

S9

Affordable pricing

and

value-oriented

S10 Efficient

manufacturing distribution facilities.

and

S11 Modernization of equipment.

S12 Development of new systems.

S13 Expansion

and acquisition of commissary facilities.

S14 Sufficient

raw materials production of supply.

and

S15 The

location of outlets are constructed at places where a large number of customers gather such as schools, malls and workplaces. Also, in other countries, branches are constructed at central places to promote accessibility to a greater customers.

S16 Equipments

can demand for supply.

match

the

SWOT

S17 Jollibee

Foods Corporation's annual raw materials increased from Dec. 2012 $59M to Dec. 2013 $79M and increased from Dec. 2013 $79M to Dec. 2014 $134M.

S18 The central kitchen improved and

standardized HZY’s raw materials and cooking sauces. This was followed through with an effort to equip all restaurants with standardized operating processes for each individual dish. S19 Giving recognition to outstanding

employees as well as topperforming agents resulted in an impressive improvement.

S20 The

Dawang Award where employees are recognized in promoting the company’s core values and best practices at work.

S21 Competent

and staffing system.

professional

OPPORTUNITIES

THREATS

O1

Growth of OFWs

T1

Inflation gained pace late in the year 2014

O2

Unemployment rate lessened

T2

Weakening of the value of peso

O3

Positive ratings outlook

T3

Stock market trends

O4

Entrepreneurs/ Investors are more comfortable in investing in proven fast-food chains.

T4

More foreign brands are expected to enter full-service restaurants in the Philippines.

O5

Strong domestic consumption

O6

SWOT T5

Growing numbers Street Stalls/Kiosks in the Philippines

Local chains are steering in a new competitive era

T6

Increased health consciousness in the Philippines

O7

Growth of the GDP trend

T7

Increased   in   natural   and   human­ induced   disasters,   calamities   or disturbances

O8

Population growth/ middle class

T8

Improved Food Safety Standard according to Republic Act No. 10611 or the “Food Safety Act of 2013”

O9

Growth on home delivery sales

O10

Filipino   consumer   preference towards   value­for­money   goods and services

O11

Increased   development   of shopping malls in provincial areas

O12

Convenience   and   experience   are primary growth drivers

O13

Improved Food Safety Standard according to Republic Act No. 10611 or the “Food Safety Act of

Growing

2013” O14

Rampant use of social networking in the Philippines STRENGTH - THREAT STRATEGIES

WEAKNESS - THREAT STRATEGIES

SWOT

S8T4,T 6,T8

Focus on food service, cleanliness W1- Jollibee should not be focused on and safety of the consumers T7 only one supplier of raw materials

S9T4

Food products must be at people W2- Increase awareness of food safety reach/budget and taste T8 issues in every branch

S15T5

Jollibee must add more branches

STRENGTH - OPPORTUNITY STRATEGIES

W3T6

Expect a good quality of raw materials that is part of their menu

W4, W5T5

Produce coupons and public attention through advertisements WEAKNESS - OPPORTUNITY STRATEGIES

S12 O14

Develop system

S8O13

Focus on food safety issues by W2, Improve quality tasting food products doing monthly rounds W3- and promote the quality through O13 advertisements

S15 O12

Build Jollibee outlets near in W4- Increase development of Jollibee places with a great number of O4, outlets on developing cities and consumers O11 provinces

S5, S14 O2, O4

Increase the number of suppliers on local markets

S9O9, O10 ,O1 2

Add delivery crews for a faster delivery time

S19, S20 -O2

Improve training programs and promote impressive employee recognition

a better

and faster W1- Choose local market suppliers with O10 good quality raw materials and produce quality of food products

B. THE STRATEGIC POSITION AND ACTION EVALUATION MATRIX (SPACE) FACTORS THAT MAKE UP THE SPACE MATRIX AXES

FINANCIAL POSITION (FP)

RATINGS

Net Sales increased by 13% and 14% in the year 2013 and 2014, respectively and 4.01 greater than the average industry growth sales.

6.0

Larger company capital spending rate of 15.81 as against to the industry’s 14.62 which reflects.

4.0

Current ratio is greater than the average industry by 0.12.

5.0

Debt to Equity Ratio is relatively lower than the industry average by 39.54

2.0

Due to the low D/E Ratio of the company, Interest Coverage Ratio is 500% greater than the industry average.

4.0

Net Profit Margin is 5.70 compared to the industry average of 4.22

7.0

Efficiency Ratios such as RTO and ATO is considerably lower than the industry average by 430% and 197%.

2.0

Inventory Turnover is greater than the industry by 30%.

5.0

Management Efficiencies Ratios are generally higher than the industry by 200%.

7.0

COMPETETIVE POSITION (CP)

RATINGS

Jollibee is the number 1 most preferred fast-food chain in the Philippines.

-1.0

Weak advertising strategy as compared to McDonald’s.

-4.0

The company ranked 1st in the food quality and taste surveys.

-1.0

Edges other competitor as they provide the largest serving size and cheapest food provider.

-1.0

Jollibee tied with other competitors when it comes to speed and quality of service in store branches.

-5.0

Jollibee offers a wide variety of food selections and frequently updates their menu as compared to other fast-food chain players.

-2.0

In the Philippines, Jollibee Foods Corporation occupies 31% of fast-food chain market shares.

-1.0

Threat of substitution in the industry is high due to low switching costs.

-6.0

STABILITY POSITION (SP)

RATINGS

The growth of Overseas Filipino Workers.

-2.0

Strong domestic consumption in the country that is attributable to expenditure on food and non-alcoholic beverages.

-1.0

Consumer convenience, experience and preference towards value-for-money goods and services are primary growth drivers.

-1.0

Growing number of full-service restaurants and street food stalls.

-6.0

Rampant use of internet and the growth in internet retailing.

-1.0

High availability of close substitutes.

-6.0

Increase in natural and human induced disasters/calamities

-3.0

High technological changes

-2.0

INDUSTRY POSITION (IP)

RATINGS

Difficulty in entering the fast-food market as large capital requirement is needed and compete with these large players

6.0

The opening of new shopping centers in the country provides additional opportunities for consumer foodservice brands to expand their consumer scope.

5.0

Local food chains are steering into a competitive era.

6.0

Profit potential is high as 78.9% of total revenue produced in the restaurant and hotel industry came from the food sector.

6.0

High proprietary knowledge

6.0

CONCLUSION

FP Average is……… 4.67 CP Average is……... -2.63 SP Average is……... -2.75 IP Average is……… 5.80 Directional Vector Coordinates: x-axis…. -2.63 + 5.80 = 3.17 y-axis…. -2.75 + 4.67 = 1.92 The bank should pursue an Aggressive Strategy

Jollibee’s directional vector is towards the aggressive quadrant of the SPACE Matrix. This means that the organization is in an excellent position in utilizing its internal strengths. As depicted below and in the computation shown above, the x and y-axes are in close proximity with one another. This suggests that the company has strong financial position and has achieved major competitive advantages in a stable and growing industry. Aggressive strategies are appropriate in the quadrant that Jollibee belongs to. Backward integration, related diversification and market development are some examples applicable in this quadrant. STRATEGY PROFILE (3.17,1.92)

D. BOSTON CONSULTING GROUP MATRIX (BCG)

RELATIVE MARKET SHARE POSITION High 1.0 High

Medium 0.50

Low 0

+20

(.59, 12.96)

Medium 0

Low

INDUSTRY GROWTH RATE

-20

Relative market share position…….. 63.618% Industry growth rate……………….. 12.96%

Jollibee Food Corporation had a total sales of Php 86,209,777,710 as compared to the total industry sales of 135,509,985,635. A total of Php 76,313,489,585 sales was recorded in 2013. This resulted in a value of 63.618% RMS and an industry growth rate of 12.96%. Divisions with a high relative market share and a high industry growth rate should obtain substantial investment to sustain or strengthen their dominant positions. Forward, backward, and horizontal integration; market development; and product development are appropriate strategies for these divisions to consider. Jollibee’s high related market share of 63.618% is a sign that the company is not falling behind their competitors in the industry. This kind of information clearly shows that the company have a best long‐run opportunities for growth & profitability.

C. INTERNAL-EXTERNAL MATRIX

I

II

III

IV

V

VI

VII

VIII

IX

High 3.00- 4.00

Medium 2.00- 2.99

Low 1.00- 1.99 Strong 3.00-4.00

Average 2.00-2.99

Weak 1.00-1.99

TOTAL WEIGHTED SCORES: IFE 3.63 EFE 3.60 The total weighted scores for both IFE and EFE are 3.63 and 3.60, respectively. As indicated by the positioning of the circle, internal key factors are strong while external strengths are high. Grow and Build strategies such as backward integration, diversification, product and market development are appropriate. It is suggestive for Jollibee Foods Corporation to acquire or invest on other international brands or enter new markets worldwide. Another strategy Jollibee may apply is Related Diversification because switching costs in the fast-food industry is very minimal. Adding other segments such as cafes, international section & healthy section will greatly influence the company’s sales. Seeking ownership or increased control of a firm’s supplier will also be helpful as cost savings.

D. GRAND STRATEGY MATRIX

RAPID MARKET GROWTH

WEAK COMPETITIVE POSITION

STRONG COMPETITIVE POSITION

SLOW MARKET GROWTH

Jollibee Food Corporation has strong competitive position and is operating in a rapid growing market thus putting it in an excellent strategic position. The company may focus on the following appropriate strategies: •

Market Development

• • • • •

Market Penetration Backward Integration Forward Integration Horizontal Integration Unrelated/ Related Diversification

Out of the suggested strategies, the following strategies are extracted as these are deemed most appropriate strategies: • • • •

Market Development Backward Integration Product Development Related Diversification

6.EFFICIENT MANUFACTURING AND DISTRIBUTION FACILITIES AND EQUIPMENT/ MANUFACTURING COMPETENCE

7. STRONG BRAND

Due to the increasing number of Filipinos working abroad, and the rise of Jollibee brands globally, JFC should introduce products abroad. Concentrated areas such as China, Middle East and United States may be the focus. In addition, the company has excessive suppliers as the country produces masses of agricultural products. Costs related to purchases of raw materials and hiring of services may decrease because of this strategy. As the food industry grows, the competition gets stiffer. Many competitors, big or small, may become a threat to the company’s INTERNAL WEAKNESSES

1. SLOWDOWN IN SALES ORDER TAKING, PRODUCT LOADING AND

sales. As such, Jollibee should develop or improve present products and services to eliminate such risks and maintain their competitiveness position. Related diversification, as consumers nowadays are fond of peculiarity, Jollibee may opt to add new but related products. They may EXTERNAL OPPORTUNITIES

1. LOCAL FOOD CHAIN ARE STERRING IN A NEW COMPETITIVE ERA

2. GROWTH OF DELIVERY SALES

add café rooms to compete with the growing numbers of coffee shops around the globe and the McCafe of McDonald’s. They may also add healthy sections & salad bars as health becomes a priority to consumers today.

QSPM MARKET DEVELOPMENT

PRODUCT DEVELOPMENT

RELATED DIVERSIFICATION

EXTERNAL THREATS

1. INFLATION GAINED PACE LATE IN THE YEAR 2014 AND IS EXPECTED TO INCREASE BY 2% IN 2016

E. QUANTITATIVE STRATEGIC PLANNING MATRIX (QSPM)

REFERENCES information written in the basis section are all extracted from the company ’s financial statements and annual manual on corporate governance. bworldonline.com/content.php?section=Corporate&title=Jollibee-posts-&lsquobasically-flatgrowth&rsquo-in-Q2&id=113086

http://www.businesswire.com/news/home/20151012006191/en/Smashburger-Enters-StrategicPartnership-Jollibee-Foods-Corporation http://markets.ft.com/research/Markets/Tearsheets/Forecasts?s=JFC:PHS http://quotes.wsj.com/PH/JFC/financials http://financials.morningstar.com/ratios/r.html?t=JBFCF®ion=usa&culture=en-US http://business.inquirer.net/207576/jollibee-gains-full-control-of-china-manufacturing-unit http://smallbusiness.chron.com/management-information-system-useful-companies-63415.html http://www.philstar.com/business/2014/08/09/1355368/it-system-upgrade-causes-disruptions-jollibeeoperations http://www.jollibee.com.ph/careers/job-openings-main-office/ http://www.gurufocus.com/term/RawMaterials/JBFCF/Inventories%252C%2BRaw%2BMaterials%2B %2526%2BComponents/Jollibee%2BFoods%2BCorporation http://www.jollibee.com.ph/wp-content/uploads/2014_Annual_Report.pdf http://www.ssi-schaefer.ph/systems-automation/references/food-industry/jollibee.html http://canatx.org/basicneeds/backup/documents/1999Assessment/basicneeds99whatarebasicneeds.html http://www.scribd.com/doc/280281502/Boomerangs-2015-winners http://www.allianceglobalinc.com/portals/0/pdfs/AGI2014-AR-FINAL.pdf http://en.wikipilipinas.org/index.php/Top_Ten_Philippine_Advertising_Campaigns_in_2009 http://www.euromonitor.com/running-just-to-stay-in-place-consumer-foodservice-in-rapidly-evolvingasia-pacific/report http://www.euromonitor.com/fast-food-in-the-philippines/report http://www.euromonitor.com/full-service-restaurants-in-the-philippines/report http://www.euromonitor.com/consumer-foodservice-in-the-philippines/report http://www.euromonitor.com/street-stalls-kiosks-in-the-philippines/report http www.quickmba://.com/strategy/porter.shtml http://www.inc.com/encyclopedia/proprietary-information.html http://www.investopedia.com/terms/e/economiesofscale.asp http://agstat.psa.gov.ph/?id=907&ids=download_now&p=1&dami=10&srt=dateadd http://gain.fas.usda.gov/Recent%20GAIN%20Publications/Food%20Service%20-%20Hotel %20Restaurant%20Institutional_Manila_Philippines_12-29-2014.pdf http://www.slideshare.net/stephenjagger/philippines-food-and-beverage-industry-infographic-bywwwpayrollherocom http://www.philstar.com/cebu-business/764410/philippine-fast-food-industry http://www.economist.com/news/business/21685465-tenacious-filipino-burger-chain-tries-different-wayconquer-world-acquired-tastes http://www.businessinsider.com/jollibee-expands-beyond-the-philippines-2016-1 http://www.dailymail.co.uk/news/article-3338206/Fried-chicken-breakfasts-tuna-pies-pancakesandwiches-Welcome-Jollibee-bizarre-Filipino-fast-food-chain-set-Australia-storm.html http://www.pepper.ph/metro-manilas-growing-fast-food-scene/ http://www.maxsgroupinc.com/ http://www.poea.gov.ph/stats/2014%20POEA%20Stats.pdf http://www.reuters.com/finance/stocks/financialHighlights?symbol=JFC.PS http://www.reuters.com/finance/stocks/financialHighlights?symbol=JFC.PS http://www.nscb.gov.ph/sna/2014/4th2014/2014hfce4.asp