List the top-3, biggest, political & economic risks. How would you mitigate the same? (yanxing)

CH-13

  1. List the top-3, biggest, political & economic risks.  How would you mitigate the same?  (yanxing)

According to the textbook, there are many kinds of political and economic risks, political risks refer to the political instability that can immensely impact our business. And economic risks include instability in the economy such as interest rates fluctuation and exchange rate fluctuation, these can also impact our business enormously(Pg80 & Pg359). As Jollibee is expanding the business from the Philippines to Australia, we will face many political risks. One of the risks that Jollibee should consider is the political instability risks. This foreign investment may be completely affected significantly by the Australian political climate. Political stability and economic performance of companies are directly related. Major political events such as elections in Australia, diplomatic agreements, and policy changes, and labor strikes do have overwhelming impacts on the markets. For Jollibee to mitigate the risk is to have a political risk analyst to analyze the situation for us and not allow ourselves to be politically involved in Australia (Fei, Fei, Rui, Yan, 2019). Secondly, The legal system of Australia consists of three major parts which include the commonwealth government, and the local government.(https://www.parliament.nsw.gov.au/about/Pages/The-Roles-and-Responsibilities-of-Federal-State-a.aspx) The company should be ready to comply with all the legal regulation that comes with all three sets of government. From this perspective and to mitigate the risk, we can seek experienced legal counsel for overseas business practices in the identification of hazards that may cause barriers for the business. Another risk that is associated with Jollibee entry into Australia is the unexpected Swing in the exchange rate. When the market moves considerably it in one way of the other affects international trade, and since Jollibee is an international company, it might also be affected. To mitigate this risk we should ensure it has a huge amount of hard cash in a uniform exchange currency like to US dollar.

            (Excellent use of textual and external references and citations—professor)

Mergers and acquisitions can enable companies to enter the markets of other countries and expand their market shares at the fastest speed, reduce competition costs, and obtain scale returns. As Jollibee, the company that we have decided to form a merger with is the Australian Fast Foods Pty Limited. There are very many reasons why we have chosen to merge with this company. This company is based in Balcatta, in western Australia, and has employed 6,956 people. It was among the top five fast-food operators in Australia.( https://enacademic.com/dic.nsf/enwiki/10517013)

The main reason why Jollibee would consider entering a merger with Australian Fast Foods Pty Limited is the diversification that these two companies will be brought to the table. Since Jollibee is entering a new market, it is very important to get an experienced partner to ensure a new range of products and services are offered to suit the average Australian consumer.

Acquisition of assets is one of the most important things that Jollibee would consider when it decided to enter into a merger with Australian Fast Foods Pty Limited (Hoberg and Phillips, 2016). This is because Jollibee is a pretty new company in the country. It does not have to go through all the hell available for it to acquire space for its operation but instead use the locally acquired and already existing stores by Australian Fast Foods Pty Limited.

(Good analysis. Has Jollibee use mergers before as a market entry strategy anywhere? Will this be the first time? Will Jollibee have controlling interest in the merger? How will the new company be called? Textual references were omitted.—-professor)

  • Finalize your entry mode into the market and describe the reasons why:

We decided we would pursue a partnership/strategic relationship with one of the local farms preferably with a strong reputation in Australia. We chose this for mainly 2 reasons. One is for the initial breakthrough phase, we need their reputation for the people to trust us enough to try our food. This leads to our second reason. We chose to partner with local farms to provide the freshest ingredients to prepare the freshest and most delicious food so we can build trust of our own and soon become a major player in the Australian fast food market.

(A strategic partnership is a great idea but it is not the complete picture? Will you still pursue the merger with the company that you mentioned in the previous question?—-professor)

  • Are you a first-mover or a late-mover into this market? What are the pro’s & con’s of your decision(oanh)

Jollibee is a first-mover of Fillipino fast food; however, it is a late-mover for expanding their markets internationally. Their competitors, such as but not limited, McDonalds, KFC (Kentucky Fried Chicken), and Subway, are well-known convenient food in the city of Sydney, Australia. The cons for our company being late-movers into this market is our competitor that provides dishes similar to our menu, KFC and their fried chicken. Considering that KFC has been in Australia since 1968, they have not only created a name for their company being the first-mover for a fast food chicken restaurant but has expanded to fifty restaurants all over the country. According to the textbook, first-mover advantages of moving into a new market are having less competitors to fight through a crowd which has a con for Jollibee when moving to Australia.(pg. 360) Also, being the first-mover will enhance creating a new branding and name easier in a new market, such as fast food. On the brightside, a pro of being a late-mover into the Australian fast food market is learning from mistakes our competitors have made and analyze what has worked while adapting to a slightly different culture. Another pro to being a late-mover is entering a market place that has an increasing number for take away meals, this will help our company not only create a name for Jollibee but bring more techniques for takeout services to provide for consumers.

(Excellent use of textual references and citations—professor)

  • Consider your market entry-scale. Think SMALL! What product/service? Why? (Shun Kit)

According to the textbook, I see that there are two types of market entry- scale including small and large scale. Entering a market on a large scale involves the commitment of significant resources and implies rapid entry. However, not all firms have the resources necessary to enter on a large scale. Therefore, some large firms prefer to enter foreign markets on a small scale and then build slowly as they become more familiar with the market. For Jollibee, we decided to enter Australia’s marketing on a small scale. We decide to open a fast food restaurant as a beginning. The reason why we open a fast food restaurant is because we are first-movers for Filipino fast food in Australia. We believe that we can start a successful business since we are the first fast food restaurant of Filipino food.

(Good textual reference and analysis, lacking only citations and external sources—professor)

  • Timing of entry. How soon can you start generating revenue? (Patrick)

Australia has a diverse selection of restaurants, therefore we would be Due to Jollibee being a fast food chain, it will require at least a year before our first restaurant generates revenue. Start-up costs include setting up a local distribution chain for chicken and other raw food goods, establishing capital, and marketing campaigns. The first step in our entry into Australia is to find a physical location for the restaurant. The second step is to partner with the local chicken industry so we can have a reliable stream of chicken instead of importing food. As soon as the food distribution is established, we can focus on marketing campaigns that will require funds before we gain a foothold in the local area. Until the restaurant is physically established and we have a steady stream of customers, our first restaurant will likely not generate revenue until at least 1.5 years into our venture.

(Excellent analysis that you will need to keep in mind for the financial projections—professor)

  • Conclusion/Recommendations: Based on your research findings, what changes would you recommend to your current strategy?

Jollibee has the advantage in that it is a first-mover for Fillipino fast food, and that it is a late-mover for international fast food chains in Australia. Being a new face for Filipino fast food in Australia will make it easier to market our speciality, and allow us to diversify the fast food industry. Due to other international fast food companies having a presence in Australia, Jollibee can pursue and navigate this venture based on their competitor’s strategies and mishaps along the way. In terms of political and economic risk, Australia has much less risk compared to the home country of the Philippines. Australia supports Phillipino businesses and encourages free trade and western capitalistic ideals. This will benefit and smoothen out Jollibee’s expansion into Australia. Our current strategy is to properly market Jollibee to the Australian consumer as a special kind of fast food restaurant, one that can differentiate from the other large food chains such as McDonalds or KFC. We also plan to work with local chicken farms that can provide high quality chicken meat and a steady supply to maintain the business. By working with local chicken farmers, our company will gain demographic preferences for natural and the freshest chicken. On the other hand to understand the local consumer market we will merge with  Australian Fast Foods Pty Limited as mentioned previously. As we use both methods to merge and team up with these ventures it will make the ease of being a late-mover to Australia less challenging. 

(Excellent summary of all your discoveries above—professor)

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