The history of Jollibee dates back to 1975, when a Filipino entrepreneur Tony Tan Caktiong (Tony) set up a two-outlet ice cream parlor business in the city of Manila. His father used to operate a kitchen in Fujian (China), which was where Tony’s association with the food services business began. Though the ice cream parlor business was doing well, Tony wanted to do something bigger in the foods business – in the form of a fast-food outlet chain. His vision was inspired by the global popularity of companies like McDonald’s (which incidentally, was planning to enter the Philippines during that time), Wendy’s and Burger King (these two already had a presence in the Philippines). By establishing Jollibee in 1978, Tony pre-empted McDonald’s entry into the country. Tony was aware that Jollibee could not compete with McDonald’s which had financial muscle and decades of expertise in the business. Therefore, he decided to differentiate his company by making it a ‘symbol of Filipino pride.’ Thus, while Jollibee hired US consultants for assistance on the franchising and retailing fronts, it took decisions regarding the products on its own. All the food products were prepared keeping in mind the tastes and flavors prevalent in the country. Since Filipinos liked eating out in groups and ordered different dishes, the menu was quite exhaustive (as compared to the limited menu offered by US fast-food outlets). This strategy worked well and from the very beginning, Jollibee became a huge hit with the customers. The foreign fast-food outlets, meanwhile, did not localize their offerings to cater to Filipino tastes. Moreover, their prices were 5 to 10 percent higher than Jollibee’s. As a result, by 1985, Jollibee became the undisputed leader in the fast-food industry in the Philippines. Jollibee’s practice of greeting customers in the traditional Filipino way (Magandang Umaga Po,1 Welcome to Jollibee) soon became the industry norm. Even MNC fast-food companies had to decide in favor of greeting customers in this manner. According to an article in Advertising Age International, the failed military coup in the Philippines (1989-90) prompted McDonald’s and other foreign companies to leave the country temporarily. During this period, Jollibee firmly entrenched itself in the market and opened its 100th outlet in 1991. To fund the company’s expansion plans, Tony decided to take Jollibee public; the initial public offering took place in 1993. Around 70% of the stake in the company was retained by Tony and his family. In 1994, Jollibee acquired a leading pizza and pasta outlet chain, Greenwich Pizza Corporation, to fulfill its ambition of becoming a dominant player in the food service industry. Continuing its ‘growth through acquisitions’ model, Jollibee acquired the franchise of Delifrance, a worldwide leader in the French bakery products business, in 1995. In 1997, the President of the Philippines, Fidel Ramos, opened the company’s 200th outlet. Jollibee recorded $ 3.59 billion in revenues for 1997 and a net income of $ 312.9 million. The Asian financial crisis of 1997 led to a decline in the spending power of the average Filipino and hence a decline in the spending power of Jollibee’s customer base. The company dealt with the problem by reducing prices substantially. By renegotiating with suppliers for lower prices and baking its own bread, it achieved significant cost advantages. By promoting its ‘Value Meals,’ which enabled Filipinos to spend less than what they would have eating at a street side hawker’s stall, the company actually turned a crisis into an advantage. In 2000, the company bought Chowking, a successful Chinese fast-food chain. Chowking, established in 1985, had pioneered the concept of the Oriental quick- service restaurant. Prior to its takeover by Jollibee, it had established its franchise network all over the Philippines, US and Dubai. Tony, one of the main shareholders of Chowking, bought the stake of Chowking’s holding company, Antares. As a result, Chowking’s 162 stores came under Jollibee’s control. Along the lines of McDonald’s Quality, Service, Cleanliness and Value (QSCV) model, Jollibee made its own model to highlight its adherence to strict quality standards. Named FSC, the company’s website expanded it as “Every Food (F) item served to the public must meet the company’s excellent standards or it will not be served at all; the Service (S) must be fast and courteous; and Cleanliness (C), from sidewalk to kitchen, from uniforms to utensils, must be maintained at all times.” Jollibee’s decision to expand globally seemed to have been necessitated partly by the economic recession plaguing South East Asian countries in the late 1990s. While McDonald’s decided to ‘slow down’ within the Philippines, Jollibee seemed to have adopted a dual approach – continue expanding internally in a limited way while exploring the option of tapping new countries. Jollibee identified the countries it wanted to enter after a lot of careful strategic thinking. The company decided to expand into those countries first where Filipino nationals were working in large numbers. Thus, Jollibee initially expanded into Indonesia, Hong Kong and Brunei, where a lot of Filipinos were working, forming a ready customer base for the company’s products. Even the first outlet in the US was opened in Daly City, California, where 25% of the population was of Filipino descent. The first US outlet became an instant hit. While the US market offered benefits such as lower rent, it also posed challenges such as tighter labor rules and a complex regulatory setup. It took Jollibee a lot of time to adapt its systems for US market use. Because of all these reasons, Jollibee had to scale down its expansion plans for the US. Manolo Tingzon (Tingzon), GM (International Division), said that not partnering with any US company seemed to have been a major mistake. He said, “Definitely, there would have been a lot of advantages if we had partnered with an American company that was familiar with US operations, from the front to the back of the house. It would have helped to know how to deal with the external parties, like cities and counties.”

1. Analyze Jollibee’s growth since its inception and comment on the strategies followed by the company to establish itself firmly in the fast-food industry in the Philippines. 2. Critically comment on Jollibee’s globalization strategies. Why did the company opt for globalization? Did the company make a mistake by not tying up with an experienced US partner?