VIETNAM GENERAL CONFEDERATION OF LABOUR

TON DUC THANG UNIVERSITY

FACULTY OF BUSINESS ADMINISTRATION

REPORT

STRATEGIC COOPERATION BETWEEN BRANDS

IN THE FOOD AND BEVERAGE INDUSTRY FOR
MUTUAL DEVELOPMENT
THE CASE STUDY APPLIED INTO JOLLIBEE AND HIGHLANDS COFFEE

Lecturer: MBA Tran Khanh

Group: 02
Subject: Negotiation in Business
Major: International Business
Academic Year Code: K22

HO CHI MINH CITY 11/2021

 GROUP MEMBERS

No. Full name ID Number

1 Đỗ Nguyên Bảo Ngọc 718H1957

2 Nguyễn Phạm Yến Nhi 718H1968

3 Nguyễn Thị Thu Hiền 718H1884

4 Nguyễn Nữ Trà My 718H1941

5 Trần Ưng Hồng Nhi 718H1972

6 Trương Nhật Vy 718H2080

 TABLE OF CONTENTS
GROUP MEMBERS......................................................................................
LIST OF ABBREVIATIONS AND ACRONYMS......................................
LIST OF TABLES & GRAPHS....................................................................
LIST OF CHARTS & FIGURES.................................................................

CHAPTER 1: INTRODUCTION ............................................................................

1
1.1 General overview ................................................................................................... 1
1.2 Issue ........................................................................................................................ 3
1.3 Objectives ............................................................................................................... 3
1.4 Timeline.................................................................................................................. 4
CHAPTER 2: LITERATURE REVIEW ................................................................
5
2.1 Theory review ........................................................................................................ 5
2.1.1 BATNA ................................................................................................................ 5
2.1.2 ZOPA .................................................................................................................. 5
2.1.3 Integrative Negotiation ....................................................................................... 6
2.2 Theory application in case ..................................................................................... 7
CHAPTER 3: ANALYSIS ........................................................................................
9
3.1 The summary of case study ................................................................................... 9
3.2 Analyze the case study ........................................................................................... 9
3.2.1 The development processes of VTI and Jollibee Corporation .......................... 9
3.2.2 Scenarios ........................................................................................................... 12
3.3 Evaluation ............................................................................................................ 15
CHAPTER 4: SOLUTION .....................................................................................
17
4.1 Solutions for the problems happening in the past .............................................. 17
 4.2 Solutions in the future for Jollibee and Viet Thai .............................................. 17
CHAPTER 5: CONCLUSION ...............................................................................
19
REFERENCES ........................................................................................................
20

LIST OF ABBREVIATIONS AND ACRONYMS

Words Stand for

BATNA Best Alternative To A Negotiated Agreement
CEO Chief Executive Officer
F&B Food and Beverage
IPO Initial Public Offering
JFC Jollibee Foods Corporation
JFS JSF Investment (a subsidiary of Jollibee)
M&A Mergers and Acquisitions
QS Quick Service
VTI Viet Thai International Group
ZOPA Zone Of Possible Agreement
 LIST OF TABLES & GRAPHS

Number Name

Table 3.1 The development of JFC and VTI after M&A

Table 3.2 Scenarios in negotiation between JFC and VTI

Graph
Timeline of JFC and VTI
1.1

LIST OF CHARTS & FIGURES

Number Name

Chart 1.1 Reason for choosing Western and Asian Outlets

Figure
Places which people choose to eat out
1.1

Figure
BATNA and ZOPA
2.1

Figure
Jollibee foods corporations
2.2

Figure
JFC-VTI collaboration
2.3
 CHAPTER 1: INTRODUCTION
1.1 General overview

Figure 1.1. Places which people choose to eat out

Source: Decision Lab, 2016

Eating out is becoming an essential part of modern life due to the increasing
demand for communication and meeting. According to a report from Decision Lab,
based on the online survey, the average amount that people in big cities can pay for
a meal, people can estimate the revenue of this industry. In 2016, the number of
guests (excluding children) coming to restaurants in three main cities (HCM, Hanoi,
and Da Nang) reached 340 million people, equivalent to revenue. $1.1
billion/quarter. Thus, it can be estimated that in 2016 the sales of the outside food
and beverage industry will be about $4.4 billion/year (counting only 3 big cities), a
significant number when compared to the $22 billion price tag. value of food and
non-alcoholic beverages in the country (2016). According to a survey conducted in
three major cities: HCMC, Ha Noi, and Da Nang, residents of these cities have a
modern eating and drinking lifestyle. Young people such as students who live far
away from home, office workers, and even security guards and janitors all enjoy
going out to eat. The first reason is that Vietnamese street cuisine is quite
diversified, offering a wide range of delectable foods at a variety of reasonable
rates. Another reason is that they are too busy to prepare a meal, and processed food
is considered fast food, which appeals to people due to its convenience and low
cost. Quick service (QS) restaurants are becoming increasingly popular among the
younger generation. Moreover, QS restaurants purchase a variety of products,
including coffee, chicken, ice cream, pizza, bread, and so on.
Chart 1.1. Reason for choosing Western and Asian Outlets

1
 Source: Internal Company Documentation
As can be seen from the chart, geographical location plays a very important
role in attracting customers, with 22% of votes. In addition, the issue of food
hygiene and safety (17%) as well as the taste of food (14%) is also very interesting
to customers. When describing these clients' choices in the F&B business, it is vital
to mention two major brands, Jollibee in fast food and Highlands in coffee, both of
which are available in crowded areas, convenient to move, and close to the city
center.
Jollibee of Jollibee Foods Corporation is a remarkable success story, having
grown from two tiny ice cream parlors focusing on hot food and sandwiches in 1975
to a corporation with seven locations specializing in burgers in 1978. Then it
evolved into a firm that launched in the Philippines' fast food revolution. Jollibee
currently operates over 1000 restaurants in the Philippines, as well as over 300
stores in the United States, Hong Kong, the United Arab Emirates, Qatar, Brunei,
China, and Vietnam.
Highlands Coffee was founded in 1999 by David Thai, the creator of VTI, as
a consequence of a Vietnamese love for and enthusiasm for Vietnamese coffee, with
the purpose of maintaining Vietnam's café culture and conveying the spirit of
Vietnamese pride by combining tradition and modernity. Since 2002, this brand has
grown from a packaged coffee business in Hanoi to a well-known coffee shop
network that has spread throughout Vietnam and beyond. This coffee brand is
currently the best-selling beverage in Vietnam.

2
 1.2 Issue

In the food and beverage industry, there are numerous reasons for companies
to decide to cooperate, such as diminishing sales, drastically diminished consumers,
highly competitive items that damage the business, the necessity to scale up, etc.
Therefore, these businesses with the same goals and directions work together to
overcome obstacles and build strength for each other's development.
However, there are a few instances where two companies merge because they
want to increase their market position, expand their company scope, and put
pressure on industry competitors, rather than because one of them is weak. The
combination of Highlands and Jollibee is an example of this case. To be more
specific, how Highlands Coffee and Jollibee collaborate and M&A in order to
develop the brand chain and business market to Asian countries and beyond.
Highlands also wishes to lessen competitive pressure from Starbucks; therefore,
accepting Jollibee's offer and realizing the potential of Highlands' expansion will
result in many accomplishments for them in the future.
More than that, M&A activities provide numerous benefits to the firm,
including personal liability protection, business security and continuity, reduced
human costs, improved technology-technical level, improved financial resources,
and simpler access to capital, allowing the company to diversify and achieve better
profits. It also allows businesses to expand into new areas of the industry, lowering
risks and allowing access to previously unavailable resources and markets.
Meanwhile, a corporation's downsides include being time-consuming and subject to
double taxation, as well as needing to adhere to stringent formalities and rules.

1.3 Objectives

Through this report, the authors would like to explore into the M&A between
two large companies in the food and beverage industry (Jollibee and Viet Thai),
including:
- Analyzing the core elements of this commercial discussion in further
depth.
- Providing the comments or counter-arguments about their development in
this field.
- Offering solutions to both parties from a third-party perspective.

3
 1.4 Timeline
Graph 1.1. Timeline of JFC and VTI

Jollibee
1978 Corporation was
established

Highlands Coffee
1999
was launched

Jollibee bought
2012 shares of Viet Thai
International

Jollibee Foods
Corp announced
the initial public 2016
offering

Highlands recorded
2017 a revenue of 1,237
billion VND

Highlands's revenue
reached more than
1,600 billion VND. 2018
This coffee chain had
reached 240 stores

Source: Internal Company Documentation

CHAPTER 2: LITERATURE REVIEW
2.1 Theory review
2.1.1 BATNA
“Best alternative to a negotiated agreement” or BATNA, a popular and useful
concept in negotiation, introduced in the book "Getting to Yes: Negotiating
Agreement Without Giving In" (Fisher, Roger and William Ury, 2011). This word
4
refers to determining what will happen and what options for discussion will be best
if no deal is achieved or if the agreement breaks. Specifically, this term will aim at
two objectives: first, it will protect one party from agreements that require difficult
decisions and must be rejected by determining the resistance point they can accept;
second, it will assist them in maximizing their strengths to achieve the greatest
benefit by utilizing their advantages and grasping the opponent's goals. The strength
of the BATNA is inversely related to the dependence on the competitor; if one side's
BATNA is weak, they will be at a disadvantage when negotiating and readily
persuaded by the other party, and vice versa (Sebenius, James K, 2016). BATNA
could be stated to be a necessary tool in any negotiation, whether at work or in life.
In some cases, when organizations want to associate with others, they may wonder
with whom they should collaborate; as a result, they should apply this theory in their
negotiations to make the decisions.
2.1.2 ZOPA
Figure 2.1. BATNA and ZOPA

Source: SlideModel
ZOPA stands for “Zone of possible agreement” and this is a theory that two parties
need to research to define the highest price a buyer can pay as well as the lowest
price a seller can accept to sell and the distance between 2 this prices is called
ZOPA. In all negotiations, ZOPA is compulsory and the success of negotiation
depends on it. ZOPA just exists when there is an overlap between what all parties
are willing to accept from an agreement. In ZOPA, the range of buyers is to pay the
minimum price that sellers propose and the range of sellers is to propose the price
that buyers are willing to pay in their possibility and if buyer and seller can do the
mission in their range ZOPA will create. In some cases, the sellers or buyers can not
do their range ZOPA will disappear and if do not have ZOPA in negotiation, the
probability of a negotiation failure is very high because there is no level to
determine the demand between the buyer and the seller. For instance, if some
corporations want to be more stable in a new market, they will offer to cooperate
with local partners; nevertheless, if each of them does not define their own
boundaries in the discussions, they won't be able to negotiate successfully and will

5
face major issues such as losing control or failing to recognize traps. “A ZOPA is the
range of potential deals that are better in terms of each party’s perceived interests
than the best alternative to a negotiated agreement (or “no-deal option”) of each
party” (Sebenius, James K., and Michael K. Singh, 2012).
2.1.3 Integrative Negotiation
Win – Win Bargaining or A Non – Zero – Sum Game are also the other
names of Integrative Negotiation, which is a negotiation strategy that all involved
parties engage in the discussion to find the “win – win” solutions together for both
sides. This strategy aims at mutually beneficial cooperation, so it requires
brainstorming and creative thinking sessions in order to identify common interests
and approaches for creating shared value for all negotiators (Indeed Editorial Team,
2020). Furthermore, in integrative negotiation, it is necessary to have a defined
strategy that focuses on win-win outcomes and acts as the foundation for
communication between the parties. However, trust, which is also the most crucial
aspect in every negotiation, plays an important role in integrative negotiation's
success. As a result, before engaging in any negotiation, it is crucial to build trust
with others in a variety of methods, including speaking their language, controlling
reputation, turning reliance into a factor, making unilateral concessions, and
explaining expectations, among others. Based on trust and integrative negotiation,
two companies can work well together and also achieve the benefits in their
business such as boosting their power in the fields or easily developing the scale of
their brands. As a result, integrative negotiation is effective when the following
conditions exist (GetSmarter Blog, 2020):

 The bargaining position is weak, but the negotiator still wants to get
something out of the deal.
 The bargaining resource is unlimited.
 Maintaining a healthy relationship with everyone involved in the
negotiation is essential.

2.2 Theory application in case

It is apparent that the negotiations between Highlands Coffee and Jollibee are
founded on three major theories: BATNA, ZOPA, and integrative negotiation theory.
In the following few paragraphs, these theories will be analyzed and clarified.
Jollibee had intended to invest and grow into the coffee market by holding the
Korean coffee brand Ti-Amo for a year, but the company was willing to sell it in
exchange for Viet Thai Group ownership. This demonstrates that, although being in
the same sector, Jollibee chose Highlands over other brands such as Ti-Amo to
6
collaborate with because JFC values the Vietnamese coffee brand, Highlands, and
strongly relies on VTI to access the Vietnamese market. In which, the purpose of the
VTI group is to bring Vietnamese goods to the global market and vice versa, while
also raising the brand value of Vietnamese goods. Despite the fact that VTI had
previously franchised Filipino companies such as Digital Paradise Incorporated and
IP Ventures Incorporated to expand Highlands into the Philippines market, before
the arrival of Starbucks, a heavyweight competitor, Highlands need a effective
assistant like Jollibee to assist them compete more effectively in the Vietnamese
market, and then introduce Vietnamese culture to the international market.
Highlands can not only improve its brand, expand its scale, and decrease the
pressure of competing with Starbucks by partnering with Jollibee, but it can also
obtain high capital when Jollibee lends at a low interest rate and returns over a long
period of time. As a result, it is critical in a negotiation to pick and consolidate
among the best alternatives (BATNA) before making a final decision, which leads to
F&B business collaboration between Highlands and Jollibee, which has given both
companies significant power and value. Figure 2.2. Jollibee foods corporations

Source: JFC Corporate

Without ZOPA - “Zone of possible agreement”, no matter how many
negotiations take place, an agreement will never be achieved. Therefore, the
negotiating parties must understand each other's requirements, values, and interests
in order to establish a successful agreement. As per information related to this
transaction, Jollibee proposed purchasing 49% of VTI's Vietnam business and 60%
of its Hong Kong business for $25 million, as well as agreeing to lend this group an
additional $35 million at 5% interest in exchange for VTI shares and debt settlement
by 2016 (Jollibee holds 49%, Highlands Coffee holds 51%). This money will be
used by VTI for future investments, according to a Jollibee representative. As a
result, the ZOPA of the Highlands and Jollibee have been effortlessly figured out
due to overlap in what both parties are willing to accept from an agreement.

7
 Figure 2.3. JFC-VTI collaboration

Source: cafebiz.vn
In integrative negotiation, two companies collaborate with each other in order
to expand their brands and strengthen each other's power. Before merging,
Highlands Coffee faced a threat from Starbucks' reputation as well as its success in
domestic and international markets, so Jollibee's approach and offer to join VTI
seems to have come at the right time. They will also bring Highlands Coffee's
products to other Jollibee restaurant networks throughout Asia, which will provide a
huge additional value for Jollibee, in addition to continuing to build this coffee
business in Vietnam. Furthermore, by 2018, the Highlands store network had grown
from 50 to 240 locations, and by the following year, it had reached 300 spots. The
Highlands coffee chain is considered particularly successful in the context of
foreign and domestic coffee chains fighting and rushing into the market, thanks to
the stunning "makeover" after getting Jollibee's management support. As a result, in
this transaction, a winwin deal has been achieved. Also, creating trust with one
another is critical to gain the success in integrative negotiation. Today, company
power comes from trusting one another and committing to work together. In specific
instances, due to their strong support for one another, two partners, Highlands and
Jollibee, will exert significant pressure on competitors in the same industry and
client group. Because Jollibee and VTI believe in their abilities and goals, they are
willing to adapt the Highlands Coffee strategy in order to strengthen their position
in the food and beverage business.
CHAPTER 3: ANALYSIS

3.1 The summary of case study

In 2011, Jollibee, through its subsidiary JSF, spent $25 million to acquire
49% of VTI's shares in Vietnam and 60% of VTI's business in Hong Kong, which is
owned by David Thai. In addition, Jollibee has agreed to lend VTI an additional $35

8
million with a super low interest rate of 5%. In 2016, this loan was repaid. This
money, according to a Jollibee spokesman, is used by VTI for future investments.
Also in 2016, Jollibee Foods Corp announced the initial public offering (IPO)
of Highlands Coffee store chain on the Vietnam stock exchange to raise capital to
turn Highlands Coffee into a more expanded brand. Not only in Vietnam but also in
Asia and major cities in the world. After the IPO, Jollibee will raise its ownership to
60% of Highlands' equity while VTI will reduce its ownership to 40%. With Jollibee
owning over 51% of the capital, the unit that owns Highlands officially becomes a
subsidiary of Jolllee. In return for this agreement, VTI received another 30 million
USD loan from JSF Investment (a subsidiary of Jollibee).
Jollibee brought Highlands Coffee's products to other restaurant chains
throughout Asia after the acquisition, besides continuing to grow in Vietnam, and
the majority of consumers were impressed. Jollibee will gain a considerable amount
of value from this. On the other hand, Highlands has grown the chain at breakneck
speed after receiving the help of a well-known name in the Philippine restaurant
industry.

3.2 Analyze the case study

3.2.1 The development processes of VTI and Jollibee Corporation

Before selling to Jollibee in 2012, Highlands Coffee had only 50 stores. 8

years later, with a positioning from high-end to mid-range and a series of changes
since Jollibee's handover, Highlands Coffee has reached 300 business points and has
the highest revenue and profit compared to other coffee chains. In this deal,
everyone has their own goals. Jollibee said that in addition to continuing to develop
this coffee chain in Vietnam, they will bring Highlands Coffee's products to other
Jollibee restaurant chains throughout Asia. This will be a significant added value for
Jollibee, because now Vietnamese coffee has been recognized worldwide for its top
quality. Meanwhile, Highlands Coffee did not face any difficulties like many
companies were forced to sell shares to partners, but still had to share power with
Jollibee because of competitive pressure with Starbucks. Despite having a long-
standing advantage and understanding Vietnamese consumer psychology, Highlands
Coffee does not necessarily have an advantage over Starbucks because consumers
tend to be "Xenophile". In this section, the study will show the M&A process of the
two large firms in three stages (before, during and after the M&A negotiation):

Table 3.1. The development of JFC and VTI after M&A

Stages Viet Thai International Jollibee Foods Corporation

9
Before M&A In 1999, David Thai founded
Viet Thai International Group
(VTI) and launched Highlands
Coffee. Before starting the chain
business, the first product of this
brand was coffee packages sold
in Hanoi.
On January 28, 1978, Jollibee
Corporation was established in
the Philippines. The first
Jollibee store opened in
Vietnam in 1996. Since then,
Jollibee has made every effort
to bring Vietnamese families
delicious meals at the most
reasonable prices.

In 2002, Highlands Coffee In June 2005, Jollibee Group

officially had the first 2 stores in officially invested to establish
the capital, then quickly Jollibee Vietnam Co., Ltd.,
expanded the chain of stores in marking a new development
Ho Chi Minh City. In 2012, step in the management and
Highlands Coffee only had 50 expansion of the Jollibee store
stores. At that time, Ho Chi system in Vietnam. Since then,
Minh City did not have many the Jollibee brand has received
coffee shops following the chain the support and appreciation of
and modern model, so Highlands customers in Vietnam.
Coffee was a suitable choice for
urban people, although it was
still no different from the
business style of traditional
shops such as ordering,
cumbersome layout, and taking
up space.

In M&A On December 1, 2011, Jollibee Group merged two more leading

F&B brands in Vietnam of VTI Group specializing in high-end
coffee and restaurant business, Highlands Coffee and Pho 24
through its subsidiary, JSF, which spent 25 million USD to buy
49% shares of VTI's Vietnam and 60% of the business division in
Hong Kong of Viet Thai International Group. In which, the
shareholder structure of Highlands Coffee is Jollibee holding
about 49%, Viet Thai holding 51%.

10
 David Thai might obtain a huge This is a deal that JFC
capital from Jollibee's appreciates, because they
lowinterest loan while insuring decided to sell the Korean
the expansion of Highlands' coffee chain Ti-Amo, which
inbound and outbound has only been owned for more
operations. Moreover, Highlands than a year, before signing
also reduced the pressure on with Viet Thai. In the
Starbucks as it prepared to enter acquisition of shares of VTI,
the Vietnamese market, making besides
it more difficult for others in the Highlands Coffee, Jollibee also
sector. holds the franchise of Hard
Rock Café chain in Vietnam,
Macau and Hong Kong
(belonging to VTI previously).
After M&A In early 2013 following a merger, Highlands has been repositioned
as a brand based on consumer group, store layout, and business,
among other factors, although it is said that Highlands has fully
altered and evolved since its foundation. Specifically, the menu
was reduced from over 50 to approximately 20 items, the decor
was changed from luxurious to more suited for a wider range of
customers, and the consumer segment was changed from high-end
(businessmen) to more suitable for a wider range of customers.
This was also why drinks and foods were less expensive than they
were previously. Furthermore, Highlands Coffee's operation and
management witnessed a dramatic transformation, from waiters
allowing clients to order water and charging it after they
completed drinking at the table to people ordering drinks and
paying, selfservice. As a result, this is the first coffee chain to
introduce customers to the concept of self-service, contributing to
the development of the food and beverage industry.

The joint venture between Jollibee and Viet Thai is the unit with
the highest growth rate in Jollibee's system with 36% growth in
revenue in the first 9 months of 2016. In particular, the growth
rate of Highlands Coffee increased by 78%. Compared with last
year.
Jollibee fast food brand alone also has 80 branches in Vietnam.
By the end of 2018, this coffee business had opened over 300
locations, including some in Vietnam and others in the

11
 Philippines, in just 6 years since the M&A. Highlands has the
most business outlets nationwide when compared to other coffee
brands. In
addition, Highlands also increases its operations internationally,
JFC and VTI, in particular, have ambitions to purchase several
coffee companies and aim to list Highlands on the Vietnamese
exchange as a future project in order to continue to extend their
commercial scope.
Source: Internal Company Documentation

In short, the reason for these two giant brands to implement the M&A
strategy: Firstly, VTI has a vision of "to become a world class Vietnamese Company
Championing South-East Asia with a global Footprint" and wants to reduce
competitive pressure Highlands Coffee's competition with rivals, especially
Starbucks, has not really been difficult because these two brands have the same
customer segment (premium) and the popularity of Starbucks. Secondly, Jollibee
can see the value and quality of Vietnamese coffee, seeing that Viet Thai
International holds many other big brands, especially seeing the development
potential of Highlands Coffee not only in Vietnam but also in the future throughout
Asia and around the world.

3.2.2 Scenarios
Table 3.2. Scenarios in negotiation between JFC and VTI
Scenario Jollibee Viet Thai
1 Collaboration to expand brands and boost each
↑↑ ↑↑
other's power
2 The ambition to spread the Highlands Coffee
chain to Asia and other parts of the world. ↑↑ ↑↑
Highlands is already controlled by Jollibee.
Source: Internal Company Documentation

Scenario 1. Collaboration to expand brands and boost each other's power

This agreement is made in 2012, when Jollibee Foods Corporation (JFC), the
Philippines' leading food service company, and Viet Thai International (VTI), a
large corporation founded by Vietnamese people, were both well-known in the
Vietnamese F&B industry through their two well-known brands, Jollibee and
Highlands Coffee. However, despite not being in any real trouble, Jollibee saw the
potential development of Highlands coffee chain and some other brands of VTI, so
JFC decided to sell Ti-Amo, a Korean coffee chain that they had only owned for a
12
year, and was willing to spend 25 million USD to own 49 percent of VTI's Vietnam
business and 60 percent of VTI's Hong Kong business. Not only that, but JSF also
gave VTI a 35 million USD loan with a 5% interest rate and a payback duration of
up to 2016. It is supposed that VTI not only decreases competitive pressure on
Starbucks while also increasing the reputation and scale of the Highlands Coffee
brand, but David Thai, the Viet Thai Group's founder, also obtained low-interest
loans as part of the purchase. As a result, it's clear that this M&A will enable VTI to
develop, and expand the Vietnamese coffee brand chain more readily (Highlands
already has 50 outlets at that time) while also providing David Thai with a large sum
of money to invest in future projects. Meanwhile, Jollibee saw this as an opportunity
to become more stable and penetrate the Vietnamese market more deeply.
Furthermore, following this transaction, JFC will almost completely own major
coffee shop chains in Asia, including Highlands Coffee and Hard Rock Cafe
(formerly owned by VTI) in Vietnam, Macao, and Hong Kong; thus, in addition to
continuing to develop this coffee chain in Vietnam, JFC will bring Highlands
Coffee's products to other Jollibee restaurant chains in Asia.
Furthermore, towards the end of 2011, David Thai purchased the Pho 24
store chain from Mr. Ly Qui Trung for around $20 million USD with the primary
intention of making a financial investment; particularly, he desired to resell at a
better price to Jollibee Corporation. This is also one of the reasons Highlands Coffee
now has more available places to open hundreds of outlets nationwide. As a side
effect of this alliance, VTI and JFC's mutual trust in the F&B chain (Jollibee,
Highlands Coffee, and Pho 24) has consolidated the strength and power to both
parties in the F&B industry in the Vietnamese and Asian markets, as well as created
many challenges for competitors in the industry and made Starbucks' development
strategy in Vietnam more difficult, particularly in terms of location in the early
stages.

Scenario 2. The ambition to spread the Highlands Coffee chain to Asia

and other parts of the world. Highlands is already controlled by Jollibee.
In 2016, Jollibee through JSF Investments (JSF), and Viet Thai planned to
launch the Highlands coffee brand on the Vietnamese stock exchange and the initial
public offering (IPO) was due in July 2019. Because the goal was to create funds to
develop Highlands Coffee and Pho 24 into a brand that will spread not only in
Vietnam, but also in Asia and major cities around the world, both parties put up their
best efforts and expected this successful strategy. Besides that, Highlands was the
largest-scale coffee chain (over 100 locations countrywide), which was the reason
why they could be confident in doing things that no other brand has done before,
such as raising capital on the stock exchange in the field of F&B chains. As an

13
outcome, this plan not only assists Highlands in establishing a strong brand, but it
also serves as a pioneer brand in supporting large F&B chains in making decisions
and considering a stock exchange listing in order to raise funds from the public and
promote its defined brand. If the JFC and VTI's plan succeeds, this will be one of
the most significant achievements in the food and beverage chain business.
However, in July 2019, Jollibee said that Highlands Coffee's IPO plan would not
happen as anticipated, and that the project would be temporarily postponed. In
addition, the Jollibee corporation stated that the IPO strategy will be thoroughly
reviewed within the unclear timeframe. Although, in addition to Highlands, the Mon
Hue restaurant chain had the same IPO ambitions as JFC and VTI, the results of
Mon Hue and Highlands Coffee were completely opposite after the plan failed. Mon
Hue, meantime, was losing money and was on the verge of bankruptcy as the
Highlands grew and expanded. As can be seen, launching an IPO in the food and
beverage chain industry is difficult, which is why no brand has succeeded thus far.
It's a great pity that this idea did not go as intended but Highlands had the
alternative strategy in expanding the scale of the Highlands store chain, and, of
course, no F&B chain brand has ever been listed on the Vietnamese stock exchange.
Nevertheless, Jollibee wanted to reform Highlands' equity after four years of
cooperation, notably Jollibee aimed to increase its ownership to 60% of Highlands'
equity while Viet Thai had to decrease its ownership to 40%. This means that
Highlands' owner had become officially a Jollibee subsidiary and in exchange for
this arrangement, VTI obtained another 30 million USD loan from JSF Investment.
As a result, David Thai has agreed to this request, and associated with a goal of
strengthening Highlands and extending to other nations around the world, it can be
seen that he is willing to give up ownership rights to the brand he created in order to
improve it. Despite the fact that the IPO plan has not been achieved, the desire to
develop Highlands in Asian countries has gradually been implemented and brought
a lot of reputation to this brand. In other words, when Highlands Coffee expanded to
the Philippines, it appeared to have a stable commercial direction, and even if it had
collaborated with Filipinos, the product image, store layout, and coffee taste in the
Highlands in this country still retained the original features of Vietnam. Therefore, it
is clear that Vietnamese coffee is highly appreciated and recognized globally for its
top quality. As an outcome, since June 2019, Highlands Coffee operated 340 coffee
shops worldwide, including 297 in Vietnam and 43 in the Philippines. However,
Highlands Coffee did not want to stop there; in the next three years, the company
hoped to expand its retail network in the Philippines to 100 locations, with the goal
of continuing to lead the Vietnamese coffee industry and expanding the Vietnamese
coffee brand globally.

14
 3.3 Evaluation
Up to now, Highlands has been towards the top of the list of leading coffee
brands in Vietnam for a long time, and it usually always comes out on top. And, in
order to accomplish that performance, Jollibee and Viet Thai have collaborated to
develop, innovate, and expand the Highlands beyond Vietnam's territory. But if
there is a chance to go back in time, will David Thai refuse JFC's offer to develop
Highlands by himself? Of course not, because it is evident that Viet Thai and
Jollibee have both enhanced their position and brought many benefits to both sides
following the Jollibee-Viet Thai alliance. Additionally, as proved by the Highlands
Coffee chain's brand awareness and scale of nationwide store expansion and
reaching out to the world, both VTI and JFC have effectively achieved the tasks set
out by the two sides. Further, after M&A, the revenue of this coffee brand virtually
ranks high top among competitors in the sector. As a result, it may be determined
that this is a prudent and timely transaction for both businesses.
However, in addition to the benefits that both parties gain, Viet Thai will face
numerous risks, the most serious of which is the potential of losing all Highlands'
authority and Jollibee repurchasing all shares. The danger of losing the national
brand: the "trap" of foreign acquisitions. Many Vietnamese trademarks have been
acquired by multinational firms, including X MEN, DIANA, PS, KINH DO, and
NGUYEN KIM. A contract between the coffee shop and the venture capital firm
Seedom is a good example. At the beginning, Founder Nguyen Hai Ninh announced
the opening of The Coffee House in 2014, but instead of franchising, he operated,
advertised, and managed the business himself. The Coffee House quickly established
itself on the market, with an ever-increasing number of locations. By the end of
2020, this chain will have 175 locations in 18 provinces and regions all around the
country. However, after collaborating with the Seedom investment fund, CEO
Nguyen Hai Ninh, The
Coffee House's founder, was replaced by another Seedom’s employee. Following
that, Nguyen Hai Ninh recently said his final goodbyes to the coffee brand he
founded. As can be seen, the creator of The Coffee House has entirely surrendered
his control to someone else in this situation. If the VTI enables Jollibee to continue
to grow its Highlands Coffee investment, such a terrible outcome is entirely
completely predictable in the future. Will the founders continue to devote their
hearts to dedication when their brainchild is no longer under their control and
operation?
Furthermore, because of the effect of COVID-19 pandemic, Highlands and
Jollibee faced a lot of issues. According to the reality in Viet Nam, Highlands and
Jollibee will have three major problems. The first issue that both parties need to
concern is that because of the policy of the government in Viet Nam to reduce the
15
amount of people crowded in the public, the government decided to close all stores
nationwide and limit the sale directly. This makes the case that the revenue and
profit of both JFC and VTI also declined. Following this, from July to October
2021, many provinces conduct a policy of lockdown so this causes the increase of
problems that Highlands and Jollibee need to face. Due to the policy of lockdown,
many stores that do not have the justifiable to be active will need to be closed so
Highlands and Jollibee are the objects that need to close the stores. However, the
amount of stores of both are very large so this causes a drawback for them.
Additionally, Highlands has a lot of stores located in different areas in Viet Nam so
the cost to pay for the premises is also a concern. In that time, the revenue from
business activities cannot afford enough for this cost. Last but not least, personnel
shortage is also an issue that Highlands and Jollibee catch. The situation of social
distancing occurred in a long time so various stores cannot remain in business as
many people decide to leave the city because they cannot afford the cost in the city.
The issue is that when the city becomes a new normal situation it cannot find the
employees because it has a lot of barriers to move from province to city. Besides
that, the transport materials also have several difficulties, the policy of closing the
broader gate and Zero - Covid make the F&B industry faced with a lot of barriers.
The difficulty in finding the raw materials lead to a situation that increases product
cost and directly affects the revenue of the F&B industry.

CHAPTER 4: SOLUTION
4.1 Solutions for the problems happening in the past
After the IPO plan, Jollibee held 60% equity of Highlands and VTI just 40%.
This caused Highlands to be under control of Jollibee and David Thai lose his
control and operate for the brand that he made Besides that, there are numerous
problems due to the context of COVID-19 pandemic. Therefore, from the third
party's perspective, the team will propose some solutions to tackle these problems if
there is any chance to go back to the time that these two enterprises made decisions.
First of all, because Jollibee held more than 51% of Highlands coffee chain,
this led this coffee brand to be under the control of Jollibee. The first suitable
solution for this situation is to offer some options that Highlands could be under
VTI's control for this brand, at least in Vietnam. If VTI wanted to hold all the
control for Highlands,
VTI could debate to hold the control about marketing strategy or brand image.
Because the Highlands were established and owned at the beginning by Viet Thai,
VTI's strategy will be more reasonable and realistic than Jollibee's. Besides that,
VTI could know exactly what Highlands needs to improve with maintaining the
16
original taste or Vietnamese culture as the Vietnamese coffee brand so Vietnamese
will have the most suitable ideas to develop this brand. From the third party's view,
if both parties still have conflict in this suggestion, VTI could share the higher profit
for Jollibee from their business activities to exchange Highland’s operation control
compared to the previous time. The concern that every business is aiming to profit,
so in this case if Highlands can exchange their profit to a little control of Highlands
from Jollibee. Another option in this case is that Viet Thai might reform the amount
of Highlands' equity to regain control of this brand if the IPO plan could not be
implemented on the estimated schedule. For this solution, VTI not only had an
opportunity in reconsidering the Highlands' ownership rate in order to regain control
power if Jollibee's operation might affect the original factors like brand image,
quality of drinks or others but also contribute to this coffee chain's development if
JFC could have several great projects to extend Vietnamese coffee brand to all
certain parts of world through listing Highlands on the Vietnamese exchange.
4.2 Solutions in the future for Jollibee and Viet Thai
If Viet Thai do not take any actions to solve the problem in the present, this
will lead to a terrible consequence that Highlands will be completely taken over by
Jollibee in the future. From the outsider, some solutions are suggested by the authors
to decrease the damage in future for both sides.
Firstly, trusting is one of the most key points leading to success in business
collaboration. However, both party should heighten cautions when having any
decisions during negotiation. During the merger period, Viet Thai and Jollibee gain
numerous benefits such as higher profits, a huge capital to future investment, high
achievements in F&B industry so this easily leads to lack vigilance and trust
partners too much, leading to face losses or disadvantages. Therefore, these two
enterprises and others should think about bad results being happened in all their
decisions before accepting any partners' offers and never put too much trust in
partners.
Secondly, Highlands becoming a subsidiary of Jollibee does not cause any
problems for Jollibee but vice versa VTI will face some drawbacks when Highlands
will gradually no longer be a trademark of Vietnamese people. Therefore, VTI needs
to ensure that becoming a subsidiary is just expanding the market and enhancing the
position, not selling the brand completely for foreign business. To approach that,
VTI needs to hold a certain equity to have a position in this collaboration such as
offering buyback the equity rate of Highlands as soon as possible. Furthermore,
David Thai should create an advisory board in the company to receive advice or
suggestions from them in order to gain more ideas and define the resistance point
and target point to have the successful negotiation.

17
 For another solution, VTI and Jollibee need to know each others' strengths to
assist and support others aiming to create and improve the plan that can bring
benefits for both. For example, VTI will become the main strategic consultants in
the Vietnamese market while Jollibee will take on this role in the Philippines market
because Jollibee is a large corporation in the Philippines. Additionally, having each
party come up with a plan based on an understanding of the market will help the
cooperation of both become successful results, know clearly cultures to reduce
related problems and avoid unsuitable business strategy in different countries.
Lastly, the solutions for Highlands and Jollibee to decrease the effect of
COVID-19 pandemic can be listed out as: Firstly, Highlands and Jollibee need to
increase the promotion in social platforms like Facebook, Instagram, Zalo or
TikTok. Both brands also need to create more promotions for customers when they
use the service at home in some applications of food like Grab and Baemin to
heightened the revenue. Secondly, solving the problem of premises has two ways:
Negotiate with the lessor to keep rental costs to a minimum to help businesses
survive the pandemic or Change business form from business in large and expensive
premises to business on Kiosk in convenience stores to maintain minimum profit as
well as cut rental costs. The final solution is raising wages to attract new employees.
Having a new policy in this pandemic to support employees like sending gifts or
supporting employees being infected with the Corona virus. Highlands and Jollibee
also can organize a shuttle bus to help the employees move to the city. Besides that,
finding some new suppliers can provide diversity materials to avoid the case of
depending on one supplier.
CHAPTER 5: CONCLUSION

Negotiation is viewed as a science of methodical solving issues with the

purpose of finding the best answer for all parties concerned in order to assist
negotiators in establishing a common ground. On this basis, it is possible to forecast
negotiation outcomes and determine the best strategy for the discussion. If
negotiation is compared to an art form, negotiators are compared to artists because
they must be skilled at combining a series of manipulations at a smooth level of
communication, presentation, persuasion, acceptance of persuasion, problem-
solving, and the ability to use negotiation techniques skillfully and at the right time,
in the right way, and with high efficiency.
Through this case, the team had the opportunity to dig deeper into negotiating
strategies and the stories of two large players in the F&B industry: Viet Thai and
Jollibee about Highlands. Additionally, in this negotiation, as in others in any
industry, the parties involved tend to discuss, resulting in win-win outcomes. It
appears that both sides' trust, vision, and attitude are the most important factors in
18
achieving integrative negotiation. Furthermore, negotiators define their barrier
points in order to prevent downsides and quickly reach a satisfactory agreement.
Many external elements contribute to the challenges to the results in international
business negotiations, including cultural differences on various levels, which is one
of the most critical aspects. Cultural differences, in particular, pose a significant
barrier for negotiators, requiring awareness and flexibility in order to expand the
organization.
In short, as a businessperson, the more accurately the factors affecting the
negotiation process are identified, and the better the principles of negotiation are
applied, the more successful the negotiation process will be.

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