THE NATURE OF THE EXTERNAL ENVIRONMENT SURROUNDING THE COMPANY

Porter’s Five Forces Model

Threats of New Entrants

Factors that reduce the threat of new entrants for Jollibee Foods Corporation:

1) The industry where Jollibee Foods Corporation is in, requires substantial capital and resource
investment.
2) If existing regulatory framework imposes certain challenges to the new firms interested to enter
in the market, the Corporation will have a low threat of new entrants. In this case, new players
may be discourage due to the compliance of time consuming regulatory requirements.
3) If consumers have a high psychological switching cost and existing brands have established a
loyal customer base, the threat will be low.

Factors that increase the threat of new entrants for Jollibee Foods Corporation:

1) Existing regulations support the entry of new players.

2) Consumers can easily switch the brands due to weak/no brand loyalty.
3) Initial capital investment is high.

Threat of Substitute Products or services

The Threat of Substitute Products or services increases when;

1) A cheaper substitute product/service is available from another industry

2) The psychological switching costs of moving from industry to substitute products are low.
3) Substitute product offers the equal or even overqualified the quality and performance as offered
by Jollibee Foods Corporation’s product.

The threat is substantially low for Jollibee Foods Corporation when;

1) The switching cost of using the substitute product is high (due to high psychological costs or
higher economic costs)
2) Customers cannot derive the same utility (in terms of quality and performance) from substitute
product as they derive from the Jollibee Foods Corporation’s product.

Rivalry among existing firms

The Rivalry among existing firms will be low for Jollibee Foods Corporation if;

1) There are only a limited number of players in the market

2) The industry is growing at a fast rate
3) There is a clear market leader

The Rivalry among existing firms will be high for Jollibee Foods Corporation if;

1) Market players are strategically diverse and target the same market.
2) Inconsistency of customer loyalty.
3) The economic/psychological switching costs for consumers are low.
 Bargaining Power of Suppliers
Bargaining power of suppliers will be high for Jollibee Foods Corporation if:
1) The supplier’s position will be strengthen against Jollibee Foods Corporation if the suppliers are
only limited and the demand of their offered products are high.
2) The cost of switching from one supplier to the other is high.
3) High product differentiation offered by suppliers

The bargaining power of suppliers will be low for Jollibee Foods Corporation if:

1) Switching costs are low

2) Substitute products are available
3) The Corporation is highly price sensitive and has adequate market knowledge

Bargaining Power of Buyers

Some factors that increase the bargaining power of buyers:

1) Consumers’ price sensitivity, high market knowledge and purchasing standardized products in
large volumes increases buyers’ bargaining power.
2) Buyers’ strong sense of backward integration strengthens their position in the market as it
shows the buyers’ ability to produce the products themselves instead of purchasing them.
3) A more concentrated customer base increases their bargaining power against Jollibee Foods
Corporation.

Some factors that increase the bargaining power of buyers:

1) Lower customer concentration

2) Customers’ inability to integrate backwards
3) Low price sensitivity, lower market knowledge, high switching costs and purchasing customised
products in small volumes.

PESTLE ANALYSIS

Political Factors

Government policies regarding taxes can greatly affect businesses including the Jollibee Foods
Corporation. Full compliance of these policies is highly required by the government. Moreover, the
company has to comply the requirements resulting from establishment of any political alliances for this
is prohibited.

Economic Factors

The decrease in consumer demand, revenues, and sales were brought by the economic crisis in
the Philippines. Due to this, the inflation rate surged which disabled numerous families to afford Jollibee
products. As inflation rate rises, costs of business production also increases which compels the company
to raise its prices. Also, other factors which may have impact the products and services of Jollibee is due
to the change in exchange rates and currency fluctuations.
Social Factors

Philippines is known to be a diverse country. Its people differ in culture, religion, and social
values. Jollibee carefully analyses this situation as it offers products that could cater to a wider scope of
audience in relation to its cultural, social, religious preferences. On the other hand, Jollibee is also
known for launching programs with a collaborative effort from its consumers in providing financial
assistance to various welfare organizations (e.g. Bantay Bata 163) in helping the needy children in the
country.

Technological Factors

Jollibee centralized its express delivery service through the launching of the “Jollibee Delivery”
which made its service more convenient and accessible online. The Hashtag project is another step to
provide maximum customer benefit through the technology innovation. With the advancement of
technology, the company hast to keep up the pace in order to satisfy its customers for its services.

Legal Factors

The legal operations regarding the franchising and copyrights must be legally carry out for a
successful business operation. The corporate law and tax regulations drives the way in conducting the
business. On the other hand, employment regulations and labor laws has put pressure on Jollibee as it
surfaced various controversies regarding this matter. Statements from the company have been released
in response to these issues.

Environmental Factors

Fast food restaurants such as Jollibee is a great contributor of huge carbon emissions as it
involves the entire process of fast food manufacturing which lead them far from the green
environmental approach. Although use of plastic spoons and forks are still evident, the gradual
promotion of environmental approach such as the usage of paper containers to their products is highly
commendable.