Reference no: EM132214286

McDonald’s opened its first restaurant in the Philippines in 1981, when George T. Yang, an entrepreneur of Chinese descent and a Wharton graduate, launched the fast-food phenomenon in a joint venture with the US-based McDonald’s Corporation.

The Philippines, with its four-decade history as an American-occupied territory, is a huge fan of American culture. Several American restaurant franchises have been well-received here, and Yang was confident that McDonald’s would do well too. Introducing the Big Mac experience to the Philippines was seen as something of a revolution in the local dining industry. It offered consumers a taste of McDonald’s Quarter Pounder, the World Famous Fries and Coke McFloat. Apart from the fast-food fiesta, McDonald’s also provided quick service, a clean environment, and a young-and-upbeat staff. In 2005, the business became a fully owned Filipino enterprise.

However, the McDonald’s journey hasn’t been all smooth sailing. A local company called Jollibee, which turned its ice cream parlor into burger joint has been stinging McDonald’s in the Philippines ever since it was opened. Jollibee, which was founded by Filipino entrepreneur Tony Tan Caktiong in 1978, is often referred to as Asia’s response to McDonald’s.

With more than 31,000 outlets in over 100 countries, of which 3,000 are in Asia, and their vast experience, one would think McDonald’s would easily surpass its regional brands; however, Jollibee has surfaced as its biggest competitor. Having heard that McDonald’s was coming to the Philippines, Tan traveled to the US to get a better understanding of Jollibee’s competitors.

Just before McDonald’s was launched, Jollibee offered consumers a menu similar to McDonald’s but adapted it to suit the Filipino palate and priced the items lower. Unlike the Americans, Filipinos don’t like pure-beef patties as they consider them to be bland. Catering to the local tastes and preference, Jollibee ensures that their patties have a stronger flavor, usually with more garlic, onion, and celery. One of its popular dishes is Chickenjoy, which is a serving of fried chicken and rice with a generous helping of chili powder. Its fries are dry on the inside and taste like they have been fried several times over, just the way the primary consumers like it. Other items on their menu include Jolly Spaghetti, which is spaghetti served with sweet meat sauce and hotdog slices, and its signature deep-fried mango pie, which is in a better position to take on McDonald’s apple pie. Even its mascot, Jolly Bee, epitomizes the Filipino spirit of lighthearted, everyday happiness and is more endearing to the Filipinos than Ronald McDonald.

Unlike Jollibee, McDonald’s remained largely faithful to its core menu. According to Yang, initial sale were astounding. However, it became apparent that localization was necessary to win the Filipinos over and beat the competition. Yang lobbied to integrate local flavors into the menu. As a result, in 1986 McDonald’s Philippines introduced McSpaghetti, which was a take on the Filipinos’ distinct version of spaghetti. The following years saw new items on the menu, including the Chicken McDon and the Burger McDo in 1993.

Such localization has seen some success. In the Philippines, McDonald’s has been affectionately given a nickname, McDo. Several of the catchphrases in its commercials have found their way into local lexicon – “Kita-kits” from “Kita-kits sa McDo,” a phrase in one of its early commercials, was adopted by locals as a short way for saying “See you there.”

Marketing to the smartphone-savvy Filipinos, McDonald’s has launched several apps. The McDo PH app, with its “Never Miss a Craving” tagline, was built to make McDelivery more accessible. In 2014, McDonald’s collaborated with Coca-Cola to launch the BFF Timeout App, a gaming app that challenges players to go on a “digital timeout” with their best friends. The longer they can go through life without digital interruption, such as checking their mobile phones, the more points and badges the players get. Best friends can even win free trips through the app. Innovation has also helped McDonald’s promote its sales. The Fry Holder, launched in 2014, can be placed in cars to hold fries, allowing drivers to have a hassle-free, eat-on-the-go experience.

Despite these adaptations, innovations, investments, and the brand’s heritage, McDonald’s still lags behind Jollibee. The latter has over 750 stores nationwide compared to McDonald’s 400, around twice in terms of store-count market share. Other fast-food chains, such as Wendy’s and Burger King, have about 250 collectively. According to Forbes Asia, Jollibee controls some 18 percent of the market in Metro Manila, beating McDonald’s 10 percent. Jollibee is reportedly also ranked higher than McDonald’s when it comes to courtesy and service.

In light of the sting, Kenneth S. Yang, President and CEO, ponders on how he can remedy the situation.

Questions:

1. How does remaining faithful to its core menu jeopardize McDonald’s success in the Philippines? (use marketing management concept in answering this question)

2. Is adaptation to local culture always important? Why do you think it is so in the case of the fast food industry?

3. What can McDonald’s do to win customers over?

4. What can Jollibee do to thwart McDonald’s challenges?