Jollibee-Foods-Corp.-(A)-International-Expansion-(

9-399-007REV:DECEMBER17,2001________________________________________________________________________________________________________________ProfessorChristopherA.BartlettandResearchAssociateJamieO’Connellpreparedthiscase.HBScasesaredevelopedsolelyasthebasisforclassdiscussion.Casesarenotintendedtoserveasendorsements,sourcesofprimarydata,orillustrationsofeffectiveorineffectivemanagement.Copyright©1998PresidentandFellowsofHarvardCollege.Toordercopiesorrequestpermissiontoreproducematerials,call1-800-545-7685,writeHarvardBusinessSchoolPublishing,Boston,MA02163,orgoto—electronic,mechanical,photocopying,recording,orotherwise—withoutthepermissionofHarvardBusinessSchool.CHRISTOPHERA.BARTLETTJollibeeFoodsCorporation(A):InternationalExpansionProtectedbyhisofficeairconditionerfromManila’shumidAugustair,inmid-1997,ManoloP.(“Noli”)TingzonponderedananalysisofdemographictrendsinCalifornia.AsthenewheadofJollibee’sInternationalDivision,hewonderedifaPhilippinehamburgerchaincouldappealtomainstreamAmericanconsumersorwhetherthechain’sproposedUSoperationscouldsucceedbyfocusingonrecentimmigrantsandPhilippineexpatriates.OntheothersideofthePacific,apossiblestoreopeningintheKowloondistrictofHongKongraisedotherissuesforTingzon.WhileJollibeewasestablishedintheregion,localmanagerswereurgingthecompanytoadjustitsmenu,changeitsoperations,andrefocusitsmarketingonethnicChinesecustomers.Finally,hewonderedwhetherenteringthenearlyvirginfastfoodterritoryofPapuaNewGuineawouldpositionJollibeetodominateanemergingmarket—orsimplystretchhisrecently-slimmeddivision’sresourcestoofar.Withonlyafewweeksofexperienceinhisnewcompany,NoliTingzonknewthathewouldhavetoweighthesedecisionscarefully.NotonlywouldtheyshapethedirectionofJollibee’sfutureinternalizationstrategy,theywouldalsohelphimestablishhisownauthorityandcredibilitywithintheorganization.CompanyHistoryStartedin1975asanicecreamparlorownedandrunbytheChinese-FilipinoTanfamily,JollibeehaddiversifiedintosandwichesaftercompanyPresidentTonyTanCaktiong(betterknownasTTC)realizedthateventstriggeredbythe1977oilcrisiswoulddoublethepriceoficecream.TheTans’hamburger,madetoahome-stylePhilippinerecipedevelopedbyTony’scheffather,quicklybecameacustomerfavorite.Ayearlater,withfivestoresinmetropolitanManila,thefamilyincorporatedasJollibeeFoodsCorporation.Thecompany’snamecamefromTTC'svisionofemployeesworkinghappilyandefficiently,likebeesinahive.Reflectingapervasivecourtesyinthecompany,everyoneaddressedeachotherbyfirstnamesprefacedbythehonorific“Sir”or“Ma’am,”whetheraddressingasuperiororsubordinate.Friendlinesspervadedtheorganizationandbecomeoneofthe“FiveFs”thatsummedupJollibee’sphilosophy.Theotherswereflavorfulfood,afunatmosphere,flexibilityincateringto399-007JollibeeFoodsCorporation(A):InternationalExpansion2customerneeds,andafocusonfamilies(childrenflockedtothecompany’sbeemascotwheneveritappearedinpublic).KeytoJollibee’sabilitytoofferallofthesetocustomersatanaffordablepricewasawelldevelopedoperationsmanagementcapability.Aseniormanagerexplained:Itisnoteasytodeliverqualityfoodandserviceconsistentlyandefficiently.Behindallthatfunandfriendlyenvironmentthatthecustomerexperiencesisawelloiledmachinethatkeepsclosetabsonourday-to-dayoperations.It’soneofourkeysuccessfactors.JollibeeexpandedquicklythroughoutthePhilippines,financingallgrowthinternallyuntil1993.(Exhibit1showsgrowthinsalesandoutlets.)Tanfamilymembersoccupiedseveralkeypositionsparticularlyinthevitaloperationsfunctions,butbroughtinprofessionalmanagerstosupplementtheirexpertise.“Theheadsofmarketingandfinancehavealwaysbeenoutsiders,”TTCnoted.(Exhibit2showsa1997organizationchart.)ManyfranchiseeswerealsomembersorfriendsoftheTanfamily.In1993,Jollibeewentpublicandinaninitialpublicofferingraised216millionpesos(approximatelyUS$8million).TheTanfamily,however,retainedthemajorityownershipandclearlycontrolledJollibee.AlthoughtheacquisitionofGreenwichPizzaCorporationin1994andtheformationofajointventurewithDeliFrancein1995diversifiedthecompany’sfastfoodofferings,in1996thechainofJollibeestoresstillgeneratedabout85%oftheparentcompany’srevenues.(Exhibits3and4presentJollibee’sconsolidatedfinancialstatementsfrom1992through1996.)McDonald’s:GoingBurgertoBurgerThecompany’sfirstseriouschallengearosein1981,whenMcDonald’senteredthePhilippines.AlthoughJollibeealreadyhad11stores,manysawMcDonald’sasajuggernautandurgedTTCtoconcentrateonbuildingastrongsecond-placepositioninthemarket.AspecialmeetingofseniormanagementconcludedthatalthoughMcDonald’shadmoremoneyandhighlydevelopedoperatingsystems,Jollibeehadonemajorasset:PhilippineconsumerspreferredthetasteofJollibee’shamburgerbyawidemargin.ThegroupdecidedtogoheadtoheadwithMcDonald’s.“Maybewewereveryyoung,butwefeltwecoulddoanything,”TTCrecalled.“Wefeltnofear.”McDonald’smovedbrisklyatfirst,openingsixrestaurantswithintwoyearsandspendinglargesumsonadvertising.PerstoresalesquicklysurpassedJollibee’sand,by1983,McDona