Managerial Accounting Balanced Scorecard Swot Analysis Jollibee Caffe Ti Amo [PDF]

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Mary Jane Javier-Mollenido Masters in Government Management Managerial Accounting Dr. Roberto Gonzales, PhD Graduate School of Business San Pedro College of Business Administration POSITION PAPER ON JOLLIBEE’S ACQUISITION OF CAFFE TI AMO USING THE BALANCE SCORECARD I.

Introduction

With Jollibee’s diversification into the coffee and gelato business, as evidenced by its franchise of Caffe Ti Amo, a Korean owned coffee business that opened in 2006, the fast food giant is right on its track towards achieving over 4,000 stores in year 2020. Caffe Ti Amo has 269 stores after four years of operation. Currently, expansion objective for the said coffee business is set at 100 stores within the country and an additional 100 stores outside of the Philippine territory. In addition, this 50-50 joint venture of JFC with businesswoman Pamela Tan and siblings is expected to augment the current 1,569 stores owned by JFC to 2,082 by end of the year. 1. Coffee Culture The Philippines produces four varieties of commercially-viable coffee: Arabica, Liberica (Barako), Excelsa and Robusta. Coffee was first introduced in Lipa City, Batangas by a Spanish Franciscan monk in 1740. From the province of Batangas, it has found its way towards the lands of Amadeo, Cavite in 1876. In 1880, the Philippines was the fourth largest exporter of coffee beans, and when the coffee rust hit Brazil, Africa, and Java, it became the only source of coffee beans worldwide. However, similar catastrophe hit the Philippine coffee industry when coffee rust and infestation destroyed trees in Batangas reducing production to one-sixth of its original quantity. In 2008, production is pegged at 97,430 Metric Tons (Philippine Coffee Annual). Coffee, apart from water, has become a medium of hospitality often served during early morning or late afternoon breaks. For how could coffee break have a meaning without coffee itself? Accordingly, a person reveals his social class by his way with coffee. If he goes for the instant kind and takes it with canned milk and sugar he’s middle class. If he uses real cream or those powdered substitute instead of canned milk, he’s upper-middle class or really upper class. If he prefers brewed coffee and takes it black, that is without cream he’s individualistic and sophisticated, and savors his coffee like it’s his cup of tea so to speak. If he prefers it black but instant, he’s Americanized and perhaps licks cake icing off his fingers. 2. Demand for Coffee Increasing number of “yuppies” or young urban professionals working in late night shifts coupled with the emergence of Business Process Outsourcing (BPO) such as call centers have

contributed to the increase in the demand for specialty coffee found in coffee shops. Generally, there is a 3.1% annual increase in domestic demand for coffee (www.dost.gov.ph), however, a 20% increase in demand for specialty coffee has been observed in 2009. Aside from the business development perspective, another contributory factor that led to the increased demand for coffee is the awareness that made coffee a health value adding beverage through its advertised health benefits – decreasing cancer risks etc. Coffee drinking has become a very popular social activity among “yuppies” and mostly if not all flock coffee shops for late afternoon, small meetings discussions while enjoying good company and a hot cup of coffee. Generally, Filipinos are avid coffee drinkers. Some, go to coffee shops for chatting, meeting new people and enjoying a “wifi” free access service coffee shop offers for internet surfers. Coffee shops are not just stores, but symbols of a good coffee experience to share with family, relatives, loved ones, and friends. Recognizing the increasing demand and growing market share for coffee, the government thru the Department of Science and Technology (DOST) have extended rehabilitation efforts to cover the increasing annual output for coffee thru expansion of areas for planting of coffee, building capabilities, provision of post harvest facilities and equipment, introduction and promotion of sustainable coffee production such as organic growing, conduct information dissemination on diversified coffee production, Train people on coffee production technologies and strengthen institutions and conducting aggressive market research and marketing among others. II. Background 1. Jollibee Foods Corporation Vision We are the best tasting QSR.. (Quick Service Restaurant) The most endearing brand... that has ever been... We will lead in product taste at all times... We will provide FSC excellence - (Food, Service, Cleanliness) in every encounter... Happiness in every moment... By year 2020, with over 4,000 stores worldwide, Jollibee is truly a GLOBAL BRAND. (and the Filipino will be admired worldwide) Mission To serve great tasting food, bringing the joy of eating to everyone. Values

       

Customer Focus Excellence Respect for the Individual Teamwork Spirit of Family and Fun Humility to Listen and Learn Honesty and Integrity Frugality

I have identified the mission, vision and values of Jollibee as a restaurant, seeing their success throughout years of operation in the country, top management would best implement their strategy upon initially applying their goals to best integrate Caffe Ti Amo into the market. Keeping the core values of Jollibee and aligning the vision and mission of the restaurant with Caffe Ti Amo, the following has been determined: Vision To be the best tasting coffee and gelato shop that offers a unique experience of fun and healthy dining, leading in product taste and innovation which provides service excellence at all times. Mission To serve great tasting coffee and gelato, bringing a healthy and joyous experience of eating to everyone. III. Conceptualized “In store operation” The table below shows the proposed TOWS analysis for Caffe Ti Amo, followed by the working Balance Scorecard for CY2010:

Proposed TOWS Analysis for Caffe Ti Amo    



Threats Inconsistency of market demand for coffee as observed during historical trends Susceptibility of coffee shops to increasing costs of coffee and dairy products Increasing number of competitors (new entrants) Stiff competition among existing coffee shops

Weaknesses Relatively new business as compared to other coffee shops with renowned marketing and excellent product offerings and service

   

 

Opportunities Introduction of new products and services in the form of coffee and gelato mixes Healthy combination of products offered Possibility for global expansion especially that a surge in demand for specialty coffee has been evident Co-Identification of product/service with a renowned fast service quality restaurant like Jollibee. Strengths Fast rising coffee brand with 269 stores after just 4 year of operation Extensive product offerings ranging from



Target market is limited as compared to the known business which made Jollibee popular



coffee to healthy gelatos for the health conscious market First store opened at SM Annex, a known hub for yuppies working during late night shifts

Caffe Ti Amo’s Balance Scorecard Champion:

Key Result Area

CEO/Vice President for Coffee Ti Amo Operations

Weight 0.1

Objective Increase number of stores & franchises Employee commitment & turnover

Number of existing and newly opened stores Contract period & personnel absences

0.03

Training on technological aspect for operations

0.03

Provide Training to all members that upholds "Jolli"-values and applies it to Coffee Ti Amo services Conduct monitoring & validation of service provided

Conduct initial training on in store computer operations for managers & key personnel Complaints and grievances against staff/ employees

0.03

Learning and Growth

0.1

Customer 0.1

Internal Business Process

Output Measure

0.05

Number of customers (new & retained) speed, pricing, quality & service Product innovation – coffee and gelato mixes

Employment of a mystery shopper thru instore purchases of products and services Sales growth, patronage cards, implementation of survey questionnaires Customer acceptability

Time :

Target Open 10 stores by end of CY2010

May – December 2010 Commitments Champion

Time

Sales & Marketing Department Human Resource Department

Before end of 2010 Before end of 2010

IT Department

Before end of 2010

Zero complaints

Human Resource Department

Before end of 2010

Zero complaints & Customer satisfaction survey

Audit Department

Before end of 2010

Increased patronage and sales growth

Sales & Marketing Department, staff employed Sales & Marketing Department, staff

Before end of 2010

Maximize 5 month contracting period of personnel and reduce employee absences by 10% Increased Knowledge and skill competency level

Increased sales for specific product and good feedback

Before end of 2010

Rem arks

employed

0.08

Cut off ordering/waiting times Increase market share

Decrease average ordering & service time Inclusion of caffe ti amo in the top ten coffee shops identified

Decrease average ordering & waiting time by 5% Increase sales by 20%

0.05

Speeding production & delivery times – Profit

Decrease waiting time

Minimum delivery time

0.1

For sales – cost leadership, efficiency and consistency Profitability

Reduce operational costs

5% reduction in electric bills

Do suggestive selling

Increased sales of 5 % for featured item

Increased franchise stores & royalty fees Global expansion of store operations

20% increase in franchises

Decrease cost of unnecessary toiletries, dining aides such as table napkin

Decrease in-store operational expenses by 5%

0.1

0.03

0.08 Financial 0.08 Sales 0.04

Total

10% increase in franchises

Dine in staff, chef and manager Sales & Marketing Department, staff employed Sales & Marketing Department, staff employed staff employed

Before end of 2010 Before end of 2010

Sales & Marketing Department, staff employed Sales & Marketing Department Sales & Marketing Department Manager, staff employed

Before end of 2010

Before end of 2010

Before end of 2010

Before end of 2010 Before end of 2010 Before end of 2010

100%

The above Balanced Scorecard or “BSC” focuses on “Growth” as an initial strategy for Caffe Ti Amo as evidenced by the focus on increasing the number of franchise stores and royalty fees by 20% for in country operations and 10% increase in franchises outside the country before end of 2010. (see KRA for Finance) and placing a 10% weight on increasing the number of outlets to 10 stores by the end of the year (refer to learning and growth KRA). However, if strategy changes from growth to extract profits, the Balance scorecard will focus on, net sales increases, improved efficiency and production outcomes like minimum waiting time, faster delivery and ordering service for store operations and reduction in operational costs that are not value

adding. It will place a higher percentage on sales and profitability from 0.04 and 0.03 to 10% each and reducing percentage weight for areas pertaining to store expansion within and outside the country. Refer to the table below for possible changes in areas in the scorecard that will be affected if strategy is diverted from growth to extract profits. Key Result Area Learning and Growth

Weight 0.03

0.1

Objective

Output Measure

Target

Champion

Increase number of stores & franchises Profitability

Number of existing and newly opened stores

Open 10 stores by end of CY2010

Sales & Marketing Department

Before end of 2010

Do suggestive selling

Increased sales of 5 % for featured item

Before end of 2010

Increased franchise stores & royalty fees Global expansion of store operations

20% increase in franchises

Decrease cost of unnecessary toiletries, dining aides such as table napkin

Decrease in-store operational expenses by 5%

Sales & Marketing Department, staff employed Sales & Marketing Department Sales & Marketing Department Manager, staff employed

0.04 Financial

0.06

0.1

Sales

10% increase in franchises

Time

Remarks

Before end of 2010 Before end of 2010 Before end of 2010

IV. Internal Operations and Management With the opening and extensive introduction and expansion of the coffee shop’s brand name into the market, its executives and/or managers play a significant role towards the achievement of its target objectives especially during the crucial stage wherein preparation for expansion activities and business sustenance is in full operation. New measures that would be implemented by the coffee shop that negates the norm as dictated by the usual “Quick Service Restaurant (QSR)” applied in Jollibee restaurants should be integrated in seminar/trainings and orientations. This new measures shall differentiate Caffe Ti Amo from Jollibee giving the Coffee shop individuality. Resistance of managers to new measures must be handled with extra care. First, the need to identify the new measure being implemented that has caused the resistance. Second, is to extend the reason behind the implementation of the new measure e.g. Extended late hour shift. At first, this may entail resistance on the part of managers especially with the late night shift extension despite additional pay they may get from overtime. On the part of Cafe operations, this is necessary because the market they cater extends to “yuppies” who enjoy afternoon until late night breaks or for people working in call centers. Sales increase may be observed during the latter part of the day than during the morning because of the type of product they offer. It is important that the managers as well as the staff, understand new measures that are planned to be implemented prior to actual implementation so they

can take part in achieving the desired goal rather than be contributory to the problem just because of miscommunication and misunderstanding on their part. Lastly, to solicit other measures that may ease up operations and ultimately help achieve the coffee shops’ goals.

V. Sub-optimization In any business operation, it is best to employ the method that yields great or best results, however, in reality that does not always happen which results to – suboptimization. Defined as a “situation where a process, procedure, or system yields less than the best possible outcome or output, caused by a lack of best possible coordination between different components, elements, parts, etc.” (http://www.businessdictionary.com/definition/suboptimization.html). For Caffe Ti Amo, possible events that may lead to sub-optimization would be in terms of outlet expansion as a growth opportunity for operations department which may come in conflict with sales and marketing department- as projected sales may not align with expected expansion budgetary requirements. In a situation where managers sub-optimize and focus only on the reward matrix with the largest payoff like Economic Value Added (EVA) and Customer Satisfaction, only one aspect of performance is measured and that is in terms of revenue, other moderators that affects outcome like manufacturing unit costs, employee retention rate and product innovations is not given additional value and importance which are equally significant as customer satisfaction. It is best for a starting business like Caffe Ti Amo, to design a scorecard that best reflects their vision into a quantifiable strategy, so as to effectively operate the business taking into considerations both financial and non-financial measures. Both measures could be employed by the manager to effectively control business and promote both growth and sustainability in the long run. VI. Summary It is another wise business decision by Jollibee to acquire Caffe Ti Amo’s franchise, as the demand for coffee is on the rise. Market demand for specialty coffee is increasing along with the boom in late night employment shifts such as call centers. It is beneficial for Caffe Ti Amo to be identified initially with Jollibee because of the numerous and strategic locations of their outlets. However, Caffe Ti Amo, should offer their products and services less the “QSR” motto employed in Jollibee because the store offers coffee and gelato drinking and eating experience with the savouring identity. Management should employ the use of the balance scorecard in the coffee business to best measure and analyze performance indicators that affect the growth, revenue and profitability of their business.