Noli should support the California investment option. I evaluated each investment option considering the four dimensions of distance, Noli’s strategic objectives and organization politics. Many times firms enter foreign markets not understanding the context of them. The four dimension of distance; geographic, cultural, political/administrative and economic, all help to create context when deciding to enter a foreign market. However, they must be evaluated keeping long term business strategy in mind.
Evaluating this decision culturally; the US, especially California, has one of the most diverse cultures as far as food and population. This is partially evident by the menu appealing to Americans in Guam. Moreover, Jollibee’s analysis of California indicates a high Filipino expatriate concentration and low level of competitors; two things relatively easy to quantify. The Hong Kong location is expected to have far less Filipinos than the Central location which struggled to attract locals, but did an excellent job with expatriates. This company understands expatriates. Moreover, the ongoing issues in China, for example, mangers quitting, reflects some cultural differences that Jollibee is still struggling with in this region of the world. The lack of solid and positive information of New Guinea is indicative that this market, as this point, is not yet ready to have “flag-planted.”
Moving to geographic distance; certainly the California is the furthest from the parent country in comparison to the other two options. Success in Guam demonstrates that geographic obstacles (distance and size) can be overcome assuming the correct business infrastructure is in place. For comparison sake, Brunei and Taiwan are both relatively close in terms of physical distance, and their ventures started around the same time, yet both performed quite differently.
Economically, the US has a wide range of personal economic situations, but in general is considered a developed and wealthy country. Per the case, many of the Filipino expatriates living in US are wealthy, thus they would like be financial capable of purchasing native food a price that still allowed Jollibee to be profitable. New Guinea is not as developed as Hong Kong or the US. The lack of wealth and infrastructure there would exacerbate the impacts of economic distance obstacles. A potential franchisee, from New Guinea, advised that he would attempt to bring more infrastructures (gas stations). This alone would likely not be enough to drive business and besides, this does not appear to be a very developed lead.
There is no better US test market for Jollibee than the US territory of Guam. The ability to enter Guam, successfully, reflects that there were no political/administrative hurdles that could not be overcome. The poor state of institutional infrastructure in New Guinea would likely create additional challenges in conducting cross country commerce. The current presence in China shows ability to manage the political distance of the Hong Kong, but this ability is significantly overshadowed by the significant management and cultural challenges that exist here.
Purely thinking about his position, as the head of the international division, Noli undeniably would want to grow the division. The proposed option of a new chain in California appears to be the most viable option to support his acceptable ROI goal of 60 restaurants abroad and $800k in sales per store. The division currently has 24 restaurants abroad; 1 store in HK would only be a drop in the bucket and multiple stores in New Guinea would likely be too much to be supported by their existing infrastructure and financially risky. Also, Tony Tan Caktiong (TTC) believed that Jollibee could be successful in the birth place of fast food. This would likely ensure significant support for the California effort.
The favorable demographics of California (and US), ongoing cultural failures of China, and lack of sufficient business environment in New Guinea, all lead me to advise Noli to pursue the expansion venture in California.