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MR.

KWOK FRANCHISING

A STRATEGIC MANAGEMENT PAPER

Submitted by GASCON, Marc R.

Submitted to Mrs. Mabel Liza Cagadoc

May 27, 2011 INTRODUCTION


ABOUT THE CASE STUDY This paper covers the analysis of existing business-level and corporate-level strategies as well as the formulation of suggested strategies for Mr. Kwok Franchising, a medium-sized family business. The underlying intention of the proponent of this case study is to show that strategic planning is not only for key players and big corporations, but is also of great help for the growth of even small and medium-sized businesses. Mr. Kwok has a lot to gain from strategic planning and could be better prepared to compete or at least keep up with the heavyweights in the industry. The results of this case study will show the potential areas of business and corporate growth, as well as what the company could do to achieve sustainable competitive edge in the local fastfood restaurant segment. Although the Food Service Industry covers hotels, bars, refreshment stands and kiosks, I will limit my discussion to fastfood restaurants. I will identify and interpret various situations such as industry opportunities and threats as well as environmental scanning using principles plus statistics derived from Porter (1980), Osborne (2009), the Department of Trade and Industry (2010), and the UA&P Center for Food & Agri Business (2010), and Mr. Kwok Franchisings marketing representative. This case study also comprises a brief examination of the internal environment of Mr. Kwok, by assessing some of the activities of the business enterprise that provide basis for identifying the strengths and weakness of the organization.

ABOUT THE COMPANY MR. KWOK is a franchising institution operating in selected urban sites in the metropolitan region of the Philippines, serving mainly Chinese food because of its Chinese inclinations. The particular branch visited by the proponent of this case study for research purposes is the La Salle Taft branch. It is the outlet located along Taft Avenue corner Estrada street, adjacent to the old building of De La Salle College of St. Benilde (CSB). Accessible mainly to people residing and/or working within the vicinity of the Vito Cruz to Singalong neighborhoods of Taft, Mr. Kwoks potential market consists of the residents and visitors of this area. But the target market of Mr. Kwok are students and teachers of schools in that neighborhood. That is because given its physical location, Mr. Kwok found itself catering primarily to the students and professors from three wellknown schools namely [a] CSB, [b] DLSU-Main (De La Salle University-Manila), and [c] St. Scholasticas College. Historically speaking, it is with the great influence of early Chinese civilization in the Philippines that Filipinos have come to learn and love to patronize Chinese food. It has become a much-loved cuisine, complementary to the actual Filipino diet. This very constructive taste for Chinese food of the Filipino tongue was what prompted a Hong Kong native peddler named Pun Kwok to put up the earliest Mr. Kwok branch in 1979. Having only an inadequate capital combined with his gutsy personality, the streetsmart man named Mr. Pun Kwok tried his luck in establishing a small home-style restaurant with vague to no business plan at all. This first branch was a sit-down type tea house located in Sta. Cruz, Manila. It originally targeted the purebred

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and hybrid Chinese community who loved to cook plus eat good traditional Chinese food. The pioneer branch offered traditional Hong Kong tea, mooncake, siopao, and other authentic Chinese dishes. In 1981, a second branch of Mr. Kwoks was opened in San Juan. Made famous by its authentic Hong Kong-style Chinese food with affordable prices, Mr. Kwoks tea house was able to develop its own loyal customers. At this point in Philippine History, Mr. Kwoks target market expanded to include the middle-class to the lower economic classes of Filipinos. The increasing number of highly competitive foreign and local food joints in the early-80s led Mr. Pun Kwok to put up new outlets in areas where human traffic is dense. One of these outlets was opened in Luneta in 1982. The start of the establishment of supermalls by fellow Chinese businessman Henry Sy gave Mr. Pun Kwok an opportunity to tap yet another market. So, SM City EDSA became the home of the third branch of Mr. Kwoks tea house. This branch, according to the Philippine Department of Trade and Industry (2010), is the first legitimate Chinoy fastfood endeavor in the year 1984. From a sit-down restaurant mimicking the Hong Kong-style household, Mr. Kwoks started transitioning into a fastfood restaurant. This was because the first major problem encountered by Mr. Kwoks had to do with customer dissatisfaction: The mallgoers who patronized Mr. Kwoks tea house demanded faster service and complained of the slow delivery of food. Thus, Mr. Kwoks tea house underwent a major streamlining whereby the owner Mr. Pun Kwok changed the physical and operational layout of the restaurant. Mr. Pun Kwok acquired an exclusive manufacturer of the raw materials needed by the tea house in addition to acquiring an exclusive in-house culinary training center to improve the quality of Mr. Kwoks services plus to meet the demand of faster food preparation and delivery. With the increasing number of outlets, the owner then decided to establish in 1994 a main commissary that standardized the taste and the products sold in each branch of Mr. Kwoks as well as to handle the vast raw material requirements of all branches. With the emergence of Mr. Kwoks main commissary, the restaurant also started to diversify its business; that is because putting up the main commissary meant that the owner and managers of each branch would have to implement new guidelines and procedures for the exclusive food processing plant of the Mr. Kwok company. Along with commissary came an in-house accounting department and purchasing department. In the business sense, the company itself now handled the supply and daily delivery of raw materials plus finished goods to the different outlets. The most noticeable strategic development from having this commissary is the bargaining power it yielded for the different branches: this means that Mr. Kwoks also became a credible supplier to other restaurants with a Chinese-themed operation. Mr. Kwoks had an integrated structure capable of producing both finished products and raw materials that are standardized and ready for selling to their own customers and other potential investors. Thus, Mr. Kwoks became a franchising company, with Mr. Pun Kwok as the head franchisor, in the summer of 1996. The company also legally changed its name from Mr. Kwoks to Mr. Kwok Franchising. Although Mr. Pun Kwok acknowledged that growth opportunity exists in the fastfood market, the expansion of Mr. Kwoks tea house was not as fast or as aggressive as the owner originally intended. It started to franchise in the mid-to-late 1990s, but the somewhat perfectionist Mr. Pun Kwok did not like the franchisees who operated their own Mr. Kwoks tea house outlet without the formal training and actual professional know-how of franchising. And so, Mr. Pun Kwok made the franchising limited only to a number of the owners relatives and trusted friends. As of the year 2011, there is a total of fourteen (14) Mr. Kwoks branches within the National Capital Region (NCR) plus two (2) branches outside of Metro Manila. Twelve (12) of these branches are owned by Mr. Pun Kwok while the remaining four (4) are franchised by the owners friends and acquaintances.

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At present, there are no efforts being done to further develop the branching out of the company to interested party, especially for franchisees living outside of Metro Manila. This is one aspect that I, as the proponent of this case study, see as a suggested move (to be discussed later in the Alternative Courses Of Action part of this paper). Nevertheless, here is a chart showing the different outlets of the Mr. Kwok Franchising firm, arranged in chronological order (according to which branch was opened first): BRANCH WITHIN NCR
1. Mr. Kwok Sta. Cruz (near Chinatown) 2. Mr. Kwok San Juan (near Greenhills) 3. Mr. Kwok SM City North Edsa 4. Mr. Kwok SM City Centerpoint 5. Mr. Kwok SM City Fairview 6. Mr. Kwok SM Megamall Bldg. A basement 7. Mr. Kwok Robinsons Galleria, Quezon City 8. Mr. Kwok SM Megamall Bldg. A 3rd Floor 9. Mr. Kwok SM City Southmall, Pasay City 10. Mr. Kwok Sucat 11. Mr. Kwok La Salle Taft 12. Mr. Kwok M.H. del Pilar 13. Mr. Kwok Makati (near Glorietta II) 14. Mr. Kwok Metropolis

BRANCH OUTSIDE NCR


15. Mr. Kwok SM City Bacoor, Cavite City 16. Mr. Kwok SM City Baguio

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SUMMARY
I. TITLE: Environmental and Strategic Analysis of Mr. Kwok Franchising Mr. Kwok Franchising is a local business organization belonging to the food services industry. It envisions itself to be the preferable quality fastfood joint to customers thriving in the busy Collegiate district of the Vito Cruz area especially students and teachers, by offering freshly cooked healthy meals that are affordable as well as by providing excellent service that would make the unique dining experience at Mr. Kwok worth revisiting. II. VIEWPOINT: Outsider Potential and Target Client As both an aspiring restaurateur and a PWU student enrolled in this Strategic Management class, the case study is written from my perspective. As someone who is not directly part of the organization itself, I determined the several threats and opportunities as well as other strategic elements surrounding the Mr. Kwok enterprise as an outsider. And as mentioned above, students and teachers are the main clientele of Mr. Kwok; therefore, given my status as a student AND a resident of the Vito Cruz neighborhood, it could be interpreted that I as the proponent of this paper can be considered as a part of the potential market and target market of this fastfood restaurant. III. TIME CONTEXT: April 29th, 2011 to May 26th, 2011 A total of 28 days was devoted by the proponent of this paper to accomplish this case study, from basic conceptualizations to conclusive synthesis. IV. STATEMENT OF THE PROBLEM: A. GENERAL How can Mr. Kwok continue to operate in a highly challenging environment with strong competition, while striving for an edge in the local fastfood restaurant segment? What suggestions could be made in order for Mr. Kwok to improve its strategic Vision and Mission so that it could keep up with (if not surpass) the rival fastfood joints within its highly competitive immediate environment?

B. SPECIFIC

V. OBJECTIVES:

In this paper, the proponent analyzed a particular local fastfood restaurants internal and external environment. The objective is to evaluate the threats and opportunities both in the macro-level and micro-level, as well as to review the firms existing strategies in order to build on the restaurants strong points then find out the weak points that could be improved upon.

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VI. SWOT ANALYSIS PART ONE: USING THE FRAMEWORK OF PORTER (1980) Based on the competitive strategy teachings of Porter (1980), the essence of formulating strategies has a lot to do with the relationship of a company to its environment. Because of this, I have decided to take a look at the environmental factors related to Mr. Kwok. Namely, I will first study its internal environment, then its external environment. My analysis of the internal environment of Mr. Kwok, namely the behaviors and strategic planning that occur within the company itself, brought to light the following strengths and weaknesses: STRENGTHS
Variety of the foods Mr. Kwok has diversified from its original food products into more and more new products. It now serves breakfast and snack to add to its lunch and dinner items to meet the whole day demand of its consumers. Mr. Kwok even offers food combinations (rice toppings and combo meals) to capture the tastes of the Filipinos and Filipino-Chinese community. Chinese chefs from Hong Kong and other parts of China come to the Philippines and stay with the company to introduce new products on a quarterly basis, with the bestsellers permanently added to the special menu section. Total quality control for products Due to the fact that cooking is done upon order, there is always an expert cook or chef checking the quality once it is ready to be served to the customer. The food must reach the customer at the quickest time possible, but still the perfectionist Chinese chefs check all the food that their assistants make. Since Chinese chefs do things unconventionally, they do not scientifically measure the ingredients that they put in the food, but everything is done by gut feel and own taste with extreme attention to healthy details.

WEAKNESSES
No actual advertising and/or marketing department Marketing and promotions efforts of Mr. Kwok are informally done by the different store managers of the company. These are done in a shotgun manner, meaning there is no apparent strategic direction to make the tactical efforts cohesive and distinct. Limited number of Distribution Channels & Geographic Scope Compared to other companies within the strategic group, Mr. Kwok is the only one that does not have enough branches to reach more of its consumers outside the Philippine metropolitan center. Furthermore, Mr. Kwok is, for the most part, a closed-circled family-and-friends business and all of its family members live in Metro Manila, this poses a problem in expanding to other areas outside of Metro Manila, no one will manage outlets outside of Metro Manila. Franchising venture of the company was slow and efforts to look for franchisees are limited and uninspired. No one is responsible in promoting and selling the idea to franchisees. Adding to this, Mr. Kwok has no alliance with any website designer or other online presence to make its product available to a broader segment of the market by even reaching out to overseas Pinoy/Chinoy workers with Chinoy food cravings. Mr. Kwok does not even offer catering and home delivery to increase the geographic reach of the company.

The key aspect of a companys external environment is the industry/industries in which it competes. And in my analysis of the external environment of Mr. Kwok, namely the Philippine Food Service Industry as well as the Philippine Fastfood Restaurant Segment, these opportunities and threats initially came up: OPPORTUNITIES THREATS
The state of affairs in the Philippines are leaning towards The share of food spending decreases in proportion to the food-service proprietors advantage: total expenditure of a Filipino household, especially with [a] the Filipino lifestyle of either occasionally or frequently global recessions in addition to the fluctuating Philippine eating outside the house, as well as of ordering food from economy: outside sources to be eaten at home because of lack of time Families spent more on transportation and communications. to prepare their own food by themselves; Increases in expenditure were also noted in fuel [b] increase in Philippine population, including both the native consumption, light and water, personal care and effects, citizens and tourists; clothing, footwear, accessories, medical care, durable [c] increase in number of shopping malls plus other hang-out furniture plus related equipment, and miscellaneous centers; and expenditures such as gifts & contributions for special [d] advancing online communications network as well as family/social occasions. improved transportation infrastructure.

VI. SWOT ANALYSIS PART TWO: USING THE FRAMEWORK OF OSBORNE (2009)

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According to Osborne (2009), the external environment consists of [1] the general environment, [2] the industry environment, and [3] the competitor environment. The first two are classified under the MACROlevel; whereas the third one is classified under the MICRO-level. Therefore, below are more comprehensive SWOT Analyses that I performed on the macro-level and micro-level external environments of Mr. Kwok.
Chart 1: SWOT Analysis based on the Macro-level External Environment of Mr. Kwok Franchising:

The state of Legislation and Economy in the Philippines encourage ventures into the fastfood industry:

The Department of Trade and Industry [DTI] allows both natural-born Filipino citizens and foreigners to set up fastfood STRENGTHS THREATS OPPORTUNITIES WEAKNESSES
chains in the Philippines, as long as they comply with the valid legal registry and taxation-related criteria. There is a significant buying force for sellers of affordable fastfood meals: Families with disposable income to spend on food outside the home. Children, who influence the decision of their parents, especially when it comes to buying meals with corresponding free toys or other giveaways. School and Office crowd who need to eat breakfast, lunch, or dinner during studying/working hour breaks. Mallgoers, since most of the fastfood companies have outlets within the malls. There are limitless ways of attaining brand identification in this industry; but the problem is, due to the fragmentation of the industry, customer loyalty is hard to attain, especially since there is high preference for well-established and trendier brands like McDonald's and Jollibee. Competition in the fastfood industry focuses on ensuring superior quality products and a high level of consumer satisfaction. However, the intense competition prevailing in the industry may make it difficult for fastfood firms to differentiate themselves from other players, thereby reducing their chance to develop product loyalty among customers. Filipino consumers are price-conscious, in the sense that they demand high quality while still expecting very low costs. The sheer magnitude of options available to the buyer due to many other fastfood companies allows the buyers to already have an idea of what price range they want and what quality is acceptable. This is especially true of Filipino mothers and other breadwinners who have been accustomed to canvassing and haggling (or what is known in local culture as tawad or pakikipag-tawaran). There are consumer behavior patterns that are favorable to food establishments in general, thanks to the influence of improved transportation and communication networks in the modern era: Increase in the number of shopping malls and food centers as well as condominiums would mean more areas for setting up a branch, as well as more potential customers from the mall-going population. Promotional costs can be reduced if restaurants capitalize on the free online medium such as Facebook for spreading awareness about certain products and social causes. Nowadays, even if start-up companies do not advertise big-time on TV or on mainstream billboards, Pinoy consumers and even tourists of other nationalities have the tendency to end up trying a restaurant at least once; and then if they get a pleasant or even an unpleasant experience, they will spread it by word-of-mouth or through social networking to friends and family, and so more customers will eventually try the new restaurant. Online blogging as well as lifestyle-magazine/television features influence this kind of behavior. New entrants do not necessarily have to invest large financial resources in order to compete, because in theory, anybody owning a kitchen can start a canteen or small-time restaurant. Next to starting up a sari-sari store, setting up canteens or catering services is the easiest way to earning additional income for the average Filipino family. With the advent of microwavable food items and instant meals, Supermarkets and Convenience Stores give consumers many alternatives to fastfood service. Product substitutes like these are threats to fastfood firms. With every increase in prices of commodities, there are changes in the spending pattern of Filipino families. To save up, the spending pattern of the average Filipinos would be towards less expenses. Lesser fastfood consumption would lead to less money spent. There is also a mentality that frequent fastfood consumption can be somewhat a luxury. Buyers also have a persistent misconception that fastfood is generally unhealthy, causing obesity and heart illnesses due to high cholesterol and saturated fat levels. New and existing medium-sized players will have to clash with established firms that are presently implementing aggressive advertising and public relations campaigns. The continuing presence and emergence of big foreign fastfood chains poses significant threat to the industry given their financial capability, their wide variety of products and new food service concepts.

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Chart 2: SWOT Analysis based on the Micro-level External Environment of Mr. Kwok Franchising:

Knowledge of its segment of the market:

On the corporate-level side of things (that is, based on Mr. Kwoks statement of Vision and Mission, as well as its

THREATS

OPPORTUNITIES

WEAKNESSES

STRENGTHS

company profile and history), this institution knows its specific target clientele. From the business-level side of things, Mr. Kwok is strategically located to best reach out to its target market: in two out of the three main schools in the immediate area of Mr. Kwok, there is a huge sub-population of Filipino-Chinese (that is, the Chinoy students and teachers as well as alumni from the LaSallian community). Responsiveness to demand for variety: Based on what one can interpret from the menu as well as the business-level and corporate-level strategies of Mr. Kwok, it appears that the restaurant has been responsive to market demand concerning diversification. A tradition of prioritizing quality food creation and quality food serving: Mr. Kwok has always prioritized the quality and taste of the food they serve, by creating an operations manual on how to handle food and how to process the ingredients required in each of the dishes offered by Mr. Kwok. This manual is given to each and every employee, even those who are not directly cooking the food (like the janitors).

Its exact location is familiar to students and teachers from the three big schools in the neighborhood (DLSU, CSB, and

St. Scho); but other people who can be potential customers may not be able to spot Mr. Kwok because there are no promotional tactics like the placement of Mr. Kwok ads on streetposts. In connection, Mr. Kwok has no actual system for the formal marketing of operations apart from its sponsorships of school-related activities at the three big academic institutions in the area. Unlike the other eating establishments in the area, Mr. Kwok has no provision for other profitable services, like the catering, bulk-ordering, and delivery side of the food business or the social gathering side of the food business.

It could be seen in the Appendix 2 part of this paper that compared to the Average Price Brackets of the key players

present in the neighborhood where Mr. Kwok Taft Branch is located, Mr. Kwok has a lower price range. This can be an opportunity for Mr. Kwok to attract more customers especially students and workers with limited daily allowances. The WiMax system of DLSU extends until the physical location of Mr. Kwok; this means that there is an informal source of wireless Internet connection that is accessible to whoever is staying within the premises of the Taft Branch of Mr. Kwok. During the off-peak hours (in which the other giant fastfood chains have very little to zero customers), this can be an opportunity for the company to serve as a tambayan or hang-out for students who can pay for the affordable snacks at Mr. Kwok while enjoying wireless connectivity. The presence of at least half-a-dozen competitors in the area:

As can be seen in the Appendix 2 part of this paper, there are many other restaurants present in the locality of Vito Cruz,
Manila. Theres Jollibee, McDo, KFC, Mang Inasal, ChowKing, and even Kennys. This list has not yet included the small-time players, like the eateries inside and outside the colleges along Taft Avenue. The majority of these big-time competitors in the vicinity already offer profitable services, like free WiFi and toy bundles and party packages.

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VII. ALTERNATIVE COURSE/S OF ACTION The following are the proposed corporate strategies I outlined for Mr. Kwok Franchising:
COURSE OF ACTION ADVANTAGES EXPANSION: According to the DTI (2010), legally sanctioned Venturing into the Food food carts/stalls are at least two meters by two Carts/Stalls Business. meters (2x2) in size, portable, and are electrically powered. With these, Mr. Pun Kwoks goals to Mr. Kwok Franchising increase its company and be able to compete in the could have recognized the industry with as little capital put in would have been feasibility of food cart or possible. These food carts are portable, and can be stall trends and could have conveniently stationed anywhere. invested on this venture If implemented, Mr. Kwok was able to generate early on. additional income from these food carts by joining bazaars, fairs and trade shows. DIVERSIFICATION: Most fastfood and other food service companies Encompassing other food have diversified to other products aside from their services such as bulk main product line in order to maintain or expand orders, delivery, party their market shares. Some have expanded to functions, or catering lucrative in-between meals and desserts segments options. while others have even offered rice and viand food combinations. New products guaranteed to have Since profitability is one of high customer acceptance are continuously being the issues to be addressed developed to delight existing and future customers by the company, the and increase their current market base. company could diversify Expanding into catering and bulk orders is the most its operations by venturing efficient way of increasing revenues without into bulk order, delivery, investing large amount of capital. The company party, and catering services. should also be able to exploit the trend of ordering food in big quantities for public social get-togethers, especially since there are only a few Fil-Chinesestyle fastfood caterers. DIVERSIFICATION: Wireless connectivity appeals to clients engaged in Offering free Wireless business, education, and even leisure. Eating places Internet Connectivity. like cafs, donut shops, and restaurants have included this feature in their operations either as a Wireless network hotspots, free service or a charged basis. This is to attract already common, are more potential customers with celfones, computers, spreading so rapidly it has and other gadgets to help them in their routines, become a high selling point especially students and office employees busy with in most establishments in their preoccupations. the Philippines and abroad, Although WiFi still dominates as the most common whether the establishment way to wirelessly connect computing devices to the is food-related or not. Internet, WiMAX has emerged. WiMAX is also a wireless technology that provides faster broadband connections over long distances. It is similar to WiFi in concept, but has certain improvements that are aimed at improving performance and permits usage over much greater distances. WiMAX can carry Internet signals across miles, rather than hundreds of DISADVANTAGES Any substandard or unsatisfactory performance in the remotely located food carts/stalls will still make an impact on the reputation of the entire company, so additional quality control and service ratings should be perpetually performed. This takes a lot of time, effort, and even sideexpenses. The number one concern for bulk orders and delivery options as well as party and catering features would be the additional costs for the packaging, transportation, plus the personnel involved. This also takes a lot of time, effort, and budget.

The owner has an option to hire a person with moderate to high expertise in I.T. to setup the wireless connection; this requires compensation. But nowadays, this can be done on a D.I.Y. method (doit-yourself, like the owner can set up the network himself or ordering the restaurant staff to do it themselves). Either way, setting up any kind of internet connection really entails added costs for the hardware and the software, as well as the maintenance and repair.

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EXPANSION: Opening outlets in other urban districts not just within the NCR (National Capital Region) but also in the rising economic centers like the Calabarzon (Cavite, Laguna, Batanagas, Rizal, Quezon) and the Socsargen (Sorsogon, Camarines, Sarangani, General Santos) Zones. Fastfood companies must be able to broaden their branch network to increase revenue. By making their products available to a larger market, these firms generate demand as they solicit patronage among customers. More so, they develop familiarity among customers which is very important in fostering loyalty.

feet as with WiFi. The Metro Manila market, being the center of the countrys economic growth, has almost always been the focus of attention among fastfood and other businesses. Based on the Annual Survey of Establishments by the DTI (2010), there are 3,426 registered eating and drinking businesses situated in the NCR; this doesnt include the undocumented ones. Furthermore, figures from the UA&P Center for Food & Agri Business (2010) indicate that families in the urban areas spent 5.6% of their total income to food consumed outside the home while those in the rural areas allocated only 3.5%. A wide gap still exists between the number of restaurants, cafes, and other eating and drinking businesses located in the National Capital Region (NCR) and those found in other Philippine Regions. But with the regional government programs of development aiding the accelerated urbanization of the countryside facilitated the emergence of tourism and business growth centers like the Calabarzon and Socsargen regions in the provinces. The fast growth areas in these provinces would provide expansion opportunities for newcomers and medium-sized players as the industry leaders have already fortified their presence in Metro Manila. In the case of Jollibee, its ability to branch out in the provinces and in OFW-dominated communities abroad earlier than its competitors gave them a great advantage in gaining the goodwill of consumers.

Other fastfood firms are also expected to explore the provinces to compete for market dominance.

VIII. ADDITIONAL RECOMMENDATIONS There is no actual need to totally change the store concept of Mr. Kwok Franchising, because for the past 32 years of its operation, this company has stood the test of time and change. However, it would be helpful for the company to keep on revitalizing the interest of its customers (both the past, present, and the future clientele) by annually changing the physical configuration of the outlets. This recommendation comes from the discovery of the proponent of this paper about the Taft Branch of Mr. Kwok, which apparently last underwent redesign or renovation four (4) years ago. Indeed, renovations entail a large sum of money which could be used for other aspects of the business operation; but even minor changes in the store, like chair rearranging and chinaware redecoration or repainting jobs that can be handled by the existing members of the staff, would not hurt the budget. Finally, I recommend that Mr. Kwok continue its unique service system and its training of service crew on the importance of good and efficient service management. Quality is already at the topmost list of the companys agenda, and I recommend that this be maintained.

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IX. REFERENCES Department of Trade and Industry (2010). An update on the Philippine fastfood industry. Retrieved on May 01, 2011, from http://dti.gov.ph. Osborne, D. (2009). Effective visioning. Retrieved on May 05, 2011, from http://psg.us. Porter, M. (1980). Competitive strategy. USA: New York Free Press. UA&P Center for Food & Agri Business (2010). Seminar papers on winning management styles and success factors of food service giants. Quezon City, Philippines: UA&P Press.

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APPENDIX 1: ANALYSIS OF INTERNAL ENVIRONMENT


EVALUATION OF PRESENT COMPANY STRATEGIES Below are the different dimensions of the current strategies of Mr. Kwok Franchising, embodied mainly by the companys Vision-Mission Statement: Specialization:
The company focuses its efforts in coming up with modern Filipino twists in its Hong Kong-style Chinese cuisine. Since most Mr. Kwok dishes are targeted towards young professionals and mature market in schools with many Chinoy students and teachers, the company therefore seeks to maintain its presence by continuing to appeal to both the traditional and modern city dwellers with a passion for quality and savory Filipino-Chinese foodstuff. The company, being the only Chinese-themed fastfood restaurant in its area of operation, seeks brand identification to compete against competitors. Moreover, Chinese raw materials are more expensive than local raw materials and so it would be hard for other restaurants in the location of Mr. Kwok to compete with price. Industry players must differentiate themselves through innovative measures to remain competitive. Mr. Kwok differentiates itself with its cook-upon-order policy while other fastfood chains promote serve-upon-order policy. Differentiation also comes in the form of the companys corporate image and product lines supported by brand awareness and identity campaigns to build customer acceptance. Some companies have chosen to identify with the Filipino masses by stressing on their ability to suit local tastes, but Mr. Kwok has a broader potential market despite its very specific target market. Key players continuously embark on intense market research and product testing to improve the quality, taste and presentation of their products.

Brand Identification:

Differentiation:

These are strong selling points of the company, since these show how Mr. Kwok sticks to what it does best and what it knows best: that is, the preparing and serving of Chinese-style foodstuff that appeal to both the Chinese and the Filipinos. The company doesnt try offering products or services it has no knowledge about, and Mr. Kwok doesnt try imitating the other restaurants nearby.

Product quality:

The menu of the restaurant includes raw products, like tuna. So to maintain the freshness of the raw tuna, the company makes sure that the tuna itself is acquired only from the General Santos fishermen working in direct partnership with the Mr. Kwok Franchising company. GenSan is the Tuna Capital of the Philippines.

This is also a strong point, since it shows how Mr. Kwok prioritizes the excellence of its products.

Push vs. Pull:

The company makes use of the pull advertising where it advertises directly to the customers. The common mode of advertising is sponsorship of the different activities of the surrounding schools (such as the aforementioned College of St. Benilde, De La Salle University, and St. Scholasticas College).

This is another strong point of the company, since it shows how Mr. Kwok attempts to form a relationship with its clientele, building a level of trust in order to develop customer loyalty. It also shows how Mr. Kwok takes advantage of an inexpensive but effective means of promotion.

Channel selection:

In the medium-size Mr. Kwok Franchising network, the majority of the business units are company-owned channels. Meaning, the company didnt try to make a presence in the foodcourts of malls and other establishments; but rather, the company focused on being stand-alone franchise outlets.

This is a weak point of the company, since it shows how Mr. Kwok does not or did not ever attempt to diversify its business venture. Food-courts provide opportunities, and Mr. Kwok just let such potential success go away.

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At its Business-Level of strategizing, Mr. Kwok is currently engaged in focused cost leadership. Osborne (2009) defines focused cost leadership as an integrated set of actions taken to produce goods or services that serve the needs of a particular competitive segment (Osborne, 2009, 351). This happens when a firm, such as a restaurant, offers meal items with good presentation and acceptable quality at low costs. By engaging in the strategy of focused cost leadership, Mr. Kwok is showing that it is fully aware that one of the chief characteristics of its potential and target markets is price-sensitivity. This means that the restaurants clientele is dominated by the budget-conscious student and faculty population heavily dependent on allowances; to these customers, meals served by Mr. Kwok may not necessarily be as important to them as compared to other miscellaneous expenses. The prices of Mr. Kwoks offerings is a prime concern for the majority of students especially to those who are also into online gaming and hanging-out with peer groups, because computer shops and other tambayans surround the actual location of Mr. Kwok. THE EDGE OF MR. KWOK Porter (1980) and Osborne (2009) state that the two prominent perspectives on competitive advantage are the following: [a] competitive advantage results from the firms position in the industry, also known as the structural forces approach; [b] competitive advantage results from the firms inherent resources and capabilities, also known as the resource-based view. Based on the structural forces approach, advantages result from securing a defensible cost or differentiation position in the most attractive segments of the total market. On the other hand, the resource-based view relates superior performance to the distinctive, hard to duplicate resources of the firm. However, the UA&P Center for Food & Agri Business (2010) provides a modifiable Competitive Advantage Cycle based on the Wharton Business Model. This model teaches that neither of the two abovementioned views by Porter (1980) and Osborne (2009) provides the full picture of competitive advantage, because the creation and maintenance of advantages is a continuous cycle. Based on the Wharton Business Models modifiable Competitive Advantage Cycle, a position of superiority and the resulting market share and profit rewards are continually subject to erosion by competitive moves and changes in the market. The significance of this is the idea that it is important for a firm to put obstructions in the way of the competitors to protect the firms current advantages. However, because these barriers are continually being eroded, the business has to keep investing in new assets and capabilities. According to UA&P (2010), strategic competitiveness is achieved when a firm successfully formulates a value-creating strategy. When a firm implements such a strategy and other companies are unable to duplicate it or find it too costly to imitate, this firm has achieved a sustainable competitive advantage. However, when a firm achieves a competitive advantage, it normally can maintain it only for a certain period. In line with these information, I have created Figure 1. It is a diagram which I have adapted from the Wharton Business Model as found in the UA&P (2010) reference material. It represents a summary of all the strong points and weak points of Mr. Kwok given its internal environment. [NOTE: Refer to page 14 to see Figure 1].
Figure 1: Competitive Advantage Cycle of Mr. Kwok Franchising

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Now, allow me to explain the contents of Figure 1. I have highlighted the words used in the Competitive Advantage Cycle of Mr. Kwok for easier understanding. Mr. Kwoks main source of advantages over the other players lies in its product line, which is specialty food that is primarily Chinese, although it evolved into a mixed Filipino-Chinese cuisine. As a result, Mr. Kwok can boast of not only the relative freshness plus uniqueness of its ingredients, but also its menu that consists of beyond-ordinary healthy foodstuff. The positional advantage enjoyed by Mr. Kwok franchising is its healthy status based on the standards set by both the Department of Health (DOH) and the Department of Trade and Industry (DTI). Also, the positional advantage of the firm can be derived from Mr. Kwoks serving of high quality meals at reasonable prices, in addition to its status of being an originally authentic Chinese restaurant that promotes healthy lifestyle through its menu. However, these advantages are currently being eroded as competitors are also offering their own competitive advantages. For instance, the target market is price-sensitive, in the sense that instead of dining three (3) times a week at Mr. Kwok, the representative of the company shared the informed observation that these clients would rather eat at street eateries to save on food expenses and only eat at Mr. Kwok only once a week. Thus, investments in renewal are necessary in order to attain competitive advantage again, among which is the investment of Mr. Kwok in training programs intended for revising food preparation, as well as the investment of Mr. Kwok in training programs intended to formulate additional healthy menu such as creative tofu-based items with low-fat and low cholesterol. With such focus on ensuring the freshness of raw materials and overall food quality, the performance rewards attained by Mr. Kwok Franchising are reflected in the companys weekly profit plus the loyal groups of students and teachers that comprise the companys patronage.

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APPENDIX 2: ANALYSIS OF EXTERNAL ENVIRONMENT (MICRO)


COMPETITOR ENVIRONMENT ANALYSIS The following are the other fastfood establishment within the immediate environment of Mr. Kwok's operations, competitors such as:
Competitor Type of Food Served and Other Outputs Combo meals from breakfast to lunch to dinner, comprised by Rice, Fried Chicken with Gravy, Burgers, French Fries, Spaghetti, Softdrinks, as well as some Pinoy trademarks like the Pandesal and Palabok and Bistek (localized Beef Steak and Pork Chop) Sundaes and other specialty desserts Jolly Kiddie Meal (food combined with either Filipino toys or American toys) Combo meals from breakfast to lunch to dinner, comprised by Burgers, French Fries, Fried Chicken with Gravy, Rice, Spaghetti, Softdrinks, as well as some American trademarks like the Pancake and Hash Brown Apple pies, Sundaes, and Softdrink-Floats plus other specialty desserts McDonalds Happy Meal (food combined with American toys) Kentucky-style Fried Chicken with Gravy Bucket Meals for holidays and other special occasions Combo meals from lunch to dinner, comprised by Burgers, French Fries, Fried Chicken with Gravy, Rice, Spaghetti, Softdrinks, as well as other American trademark side-dishes like the Coleslaw and KFC Mashed Potato and corn & carrots Shakes and Cakes plus other specialty desserts Average Price Bracket (in PhP) 25-180 Highlights

Jollibee La Salle Taft branch

Largest Filipino-concept fastfood chain with the most number of franchisees in the country including international presence (e.g. Canada & West Coast American branches) Highly active in mass-media promotions, including celebrity endorsement deals In their meal varieties, there is a rice-over-patties proportion, since Rice is the staple Pinoy food Known for its giant fat Bee mascot named Jollibee

McDonalds La Salle Taft branch

25-190

KFC (Kentucky Fried Chicken) La Salle Taft branch

35-200

Worlds largest fastfood chain; but in the Philippines it is only the second-largest fastfood chain with huge number of franchisees in the nation American-concept adapted for the Filipino taste Extremely active in mass-media promotions, including celebrity endorsement deals In their meal varieties, there is a patties-over-rice proportion, since Bread is the staple American food The first to introduce the concept of Super-Sizing (upgrading Beverage and/or Fries to a larger serving portion) Known for its huge letter M symbol plus a ragtag band of mascots headed by Ronald McDonald Well-known for its trademark Original recipe Chicken plus unlimited Gravy, as well as its trademark Original recipe Fries Active in mass-media promotions, including celebrity endorsement deals Known for its Colonel Sanders figurehead

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Mang Inasal La Salle Taft branch

Bacolod-style Chicken a.k.a.

25-180

Chicken Inasal Combo meals from lunch to dinner, comprised by Rice, Chicken, Pork Barbecue, Softdrinks, as well as other Pinoy trademarks on Sizzling Plates

ChowKing FB Harrison branch

Kenny Rogers Roasters La Salle Taft branch

Filipino-Chinese-style combo meals from lunch to dinner, comprised by Noodles, Rice, Chicken, Pork, Beef, Vegetables, Softdrinks, Tea, and other fanfavorite offerings like the Lumpia and Chop Suey and Siomai and Siopao Filipino-style and Chinese-style desserts like the Halo-Halo and Leche Flan and Buchi and Machang Combo meals from lunch to dinner, comprised by American Roast-style Chicken and Steaks, Chicken with Gravy, Rice, Spaghetti, Softdrinks, Iced Tea, etc. American-style side-dishes that could be partnered with meals and/or consumed in isolation, such as the trademark Kennys muffins, Kennys fries, Kennys mashed potato, potato salad, buttered vegetables, mac & cheese, corn & carrots, etc.

50-200

Well-known for its trademark unique recipe Chicken plus unlimited Rice Also well-known for its cozy tambayan atmosphere reminiscent of lutong-bahay ihaw-ihaw In their meal varieties, there is a dominance of rice, available in varieties such as Sinangag, Java, and Regular, since Rice is the staple food of Pinoys A little bit active in mass-media promotions, including celebrity endorsement deals Known for its unnamed mascot that wears a salakot (Philippine folk hat) Well-known for its trademark Chinoy-style menu dominated by dimsum and dumplings In their meal varieties, there is a dominance of noodles over rice, since noodle is the staple food of the Chinese In their meal offerings, there are more varieties of noodles, rice, meat, veggies, as well as for the tea and desserts Known for its advertising and ambience characterized by Chinese-themed elements (from the outfits of the servers and chefs, to the plates and utensils and menus) Known for its special higher-end meal offerings like Ribs and Muffins and Salads, as well as for meals that could be ordered by bulk or on single-order basis One of the first fastfood chains to offer Healthy meals such as Veggie-based and Bread-based items with Lowcholesterol Low-calorie ingredients

125-500

As can be interpreted from the table above, there are at six (6) other fastfood establishment within the vicinity of Mr. Kwoks Taft Avenue outlet. More specifically, the majority of these competitors are among the so-called big names or heavyweights of the Philippine food industry. The advantage of this is that Mr. Kwok has an Average Price Bracket (in Philippine Peso) of 10-150, a range that is obviously lower than the average price bracket found in the table above. Therefore, students and teachers as well as other potential customers can avail of the more affordable food servings of Mr. Kwok if they are on a budget that does not fit in with the higher price ranges of the big names described above. The disadvantage of this would be the popularity already enjoyed by Jollibee and others, as well as the additional services that these big names have been offering to potential eaters. The regular clients of these heavyweight fast food chains might think-twice about trying a relatively lesser-known name like Mr. Kwok, even if Mr. Kwok has been in the Philippine food trade since 1979, as mentioned in the Introduction.

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APPENDIX 3: ANALYSIS OF EXTERNAL ENVIRONMENT (MACRO)


OVERVIEW OF THE FOOD INDUSTRY As mentioned in the summary portion of this paper, Mr. Kwok belongs to the general umbrella of the food service industry. This is the industry that includes those places, institutions, and companies responsible for the production and distribution of meals eaten away from home. Under the food service industry category are school canteens, hospital cafeterias, caterers, and of course, restaurants, as well as many other similar formats. According to statistical figures provided by the Department of Trade and Industry or DTI for the year 2010, the food service business is the third largest industry in the Philippines. The independent restaurant segment accounts for 15% of that total. In fact, for the past five years, the restaurant industry has outperformed the other sources of national productivity, such as OFW earnings and import/export trades. According to research published by the University of Asia and the Pacific or UA&P for the year 2010, the general reasons for such an impact by restaurants are 1) lifestyle changes and 2) economic climate. First, although the restaurant industry is highly competitive, human lifestyle changes created by modern living have continued to fuel its steady growth. All over the world, more and more individuals have diminished available time, resources, and capacity to cook and serve food for themselves or other members of their household. Because of that, there has been a steady market interest in easy access to foodstuff priced at moderate to low levels. In the local context, we Filipinos are known for our love of eating and get-togethers in conjunction with the hospitality and gregarious nature attributed to our race. Folk traditions and legitimate history show that feasts and celebrations have long been an integral part of the Filipino social life, even prior to the Spanish colonial era. In the modern setting, statistics from the DTI (2010) and UA&P (2010) reveal that the average Filipino citizen spends at least 20% of his/her income on meals acquired away from home, and this number has been increasing for the past decade. Second, the economic climate of the Philippines is characterized by high levels of unemployment as well as a comparatively lower price of living: that is, compared to prices of commodities in foreign countries, the price levels in the Philippines are still lower, according to the scholarly research by the DTI (2010) and the UA&P Center for Food & Agri Business (2010). This kind of economic climate is favorable to the assembly of restaurants ranging from the smallest to the biggest scales. In fact, the DTI (2010) records show that there is an average of 600 new food establishments opening every month and over 200 more needed to keep pace with the increasing demand for food service providers. Business experts say that the continuing upturns and downturns in the state of Philippine economic affairs will keep the Food Service Industry highly attractive to existing and incoming players. The growth potential of both native and tourist markets will encourage diversification and expansion among food-related enterprises such as the fastfood chains all over the country. Quality and service innovations will still determine the sales performance of players; but nevertheless, the large market plus the increasing population in the Philippine setting are positively forecasted to be helpful to the fastfood industrys growth. Furthermore, the economys upsurge has resulted in higher disposable incomes for Filipinos, especially in urban and other growth areas where business and employment opportunities have emerged. With more income to spend and faster pace of life, preference for ready to consume and reasonably priced food increased. And so, changing lifestyles and consumption patterns both in the world and in the Philippines are generally advantageous for the Food Service Industry.

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Therefore, given the intense competition in the fastfood business, the small and medium-sized players should have a good vision on what and where they want their companies to be in the future. Strategic planning recognizes potential changes in the environment to sustain and expand their businesses. Knowing the success and risk factors, through planning, would make it easier for the company to think of ways to ensure its viability as well as maximize business revenue and growth. THE RESTAURANT BUSINESS IN GENERAL Opening a restaurant can be a distinct experience. It could be both a thrill and a challenge, providing an entrepreneur with the opportunity for tremendous creative expression on one hand while testing his/her management knowledge and skills on the other hand. Thinking of the restaurant's name, creating a new dish which could become a future bestseller, finalizing the menu, planning the interior and exterior dcors, establishing an ambience, buying kitchenware and other equipment, finding suppliers of raw materials, hiring then training personnel, accomplishing government-related responsibilities, shouldering promotion-related costs, meeting with potential investors, welcoming and attending to the gueststhese are just a few of the many factors that contribute to the general business aim of matching and even possibly exceeding the expectations of the different stakeholders in the restaurant business. The recent half-decade, which was characterized by global economic phenomena such as the American and European recessions, has shown that food-related ventures enjoy record sales high but also face the downsides of rising labor and other costs. The conditions for a restaurant's success quickly change, leaving financial scars on even the most business-savvy owners or managers. With the constant shifting of technology and customer mindsets came several new styles of restaurants; the delivery of their products and services have changed as well. Foodstuff formerly considered unusual or outrageous have slowly turned into interesting and profitable products. The restaurant-going endeavor is no longer just confined to what the customers can taste through the ingestion of food, it has also grown to involve other sensory experiences such as viewing live-viasatellite telecasts with fellow sportsfans or seeing the waiters dressed up as popculture characters on a theme basis. Customer satisfaction and enthusiasm come through a restaurant's offering of stimulating food combinations and service gimmicks that keep both the owners and the clientele interested. Hoping to meet the continuing food-related business challenges is the oncoming wave of young aspirants who have studied the art and trade of hotel and restaurants managementFilipino students like myself who view the restaurant business as a careerpath of choice. With such choice in mind, I hereby present my analysis of the opportunities and threats facing Mr. Kwok Franchising. BARRIERS TO ENTRY IN THE PHILIPPINE FOOD INDUSTRY Restaurateurs like myself who wish to enter the local food services industry would have to contend with many factors. First up, in the food enterprise sector of the Philippine society, fastfood outlets dominate the market. With a population dominated by low-income to middle-income citizens, the very basic trait of this segment of the Pinoy food services industry is the ability to respond to the majority's desire for convenience. That is, the convenience of buying promptly prepared yet palatable meals at affordable prices. In this regard, it could be said that it is relatively easier to set up a business within this particular industry, since there has almost-always been a steady demand for fastfood services; BUT the challenge is how to maintain strength in all the others aspects of operations.

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For instance, given the diverse but identifiably home-loving nature of the Filipino culture, any street-level vendors (such as the hole-in-the-wall kitchenettes more popularly referred to using the terms 'carinderia', 'pares' 'turo-turo', and 'oyat-oyat') can be able to provide that kind of in-demand food service. Speaking of 'convenience', the country is also teeming with stores like 7-Eleven and Mini-Stop that provide not only stocks of groceries and combo meals but also other necessities on a round-the-clock round-the-corner basis. Not to forget, the fastfood segment of the Philippine food services industry is dominated by the major players such as McDonald's, Jollibee, KFC, and more recently, Mang Inasal, just to name a few. There was a time when Wendy's and Burger King used to be part of this list of dominating fastfood corporations in the Philippines, until the two foreign chains closed down a number of its branches all over the metropolis, eventually losing stronghold in the industry. Anyhow, McDo and Jollibee are the main household names in terms of the Philippine context. The thing is, entering the Philippine fastfood business arena is not an entirely impossible feat. At present, statistical data from the DTI (2010) show that new local franchisees with the capital and the determination can start a company in the food delivery service industry. However, what potential entrants into the restaurant industry would have to deal with is the challenge of gaining share in the market given the dominance of popular fastfood chains. With the passage of the Retail Trade Liberalization Law in the mid-2000s, foreign franchises have enjoyed considerable levels of success in the Philippines. International fastfood giants can easily establish their business in the country and are free to to engage in joint venture agreements with local companies. And so across the years, these big fastfood companies have had numerous branches all over the Republic. Naturally, these key players would enjoy economies of scale through lower purchase price of raw materials. Suppliers would prefer to transact with these more well-known firms for the volume of business they would generate despite lower purchase prices. These key players also enjoy advantages in terms of identity establishment, since these fastfood giants have been in business for a long time already. Also, under the premise of trending and product differentiation, there comes a point when there are almost no actual tangible differences in the products and services being provided by the existing fastfood chains. First, on the topic of trending, fastfood companies have all put large emphasis on their corporate image to influence product differentiation and attract customer loyalty. The most recognizeable corporate imagebuilding strategy that fastfoods here in the Philippines and abroad resort to is the launching of massive ad campaigns using popular public figures names and testimonials to endorse their products in print, radio, television, and online media. Rivaling fastfood firms compete tightly to be the most well-recognized and best-loved consumer brand in the country. Second, the homogenous nature of the industry has limited the fastfood firms ability to totally differentiate themselves from each other. Product diversification has led food service companies to offer similar food items such as spaghetti, french fries, fried chicken, pizza, and even in the Oriental food type like the siomai and noodle foodstuff. Even the original Pinoy-concept food companies like Greenwich and Papa Johns have extended their product lines by offering smorgasbord-style pasta and salad bars. Happy Meals from McDo are analogous to the Jolly Kiddie Meals from Jollibee; even other restaurants offer freebies and giveaways to their patrons. Party packages for special occasions such as birthdays and baptisms or graduations are offered not just by the all-time fastfood giants but also by the other small-time fastfood players. Kiddie Parties and Cosplay Conventions similar type of special crowd functions have been used by Jollibee and McDonalds to more effectively attract primary customers. Since there is little to no differentiation on the benefits being given

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to the customers, the threat of entry is increased. How would a new organization like Mr. Kwok be comparable but different from the existing fastfood companies in the Philippines? But above all, in an age wherein clients have a figuratively short attention span (that is, in Filipino jargons, madaling magsawa or mabilis magbago ng gusto), enterprising individuals who want to put up a fast food restaurant would need to invest a substantial amount of money to account for innovation-related costs. Aside from the typical renovation costs, costs of kitchen equipment/fixtures, personnel training costs, etcetera, the amount of money to be shelled out in putting up a business generally depends on the preference and awareness of the owner. Given the conditions stated above, it could be concluded that it is possible for an aspiring restaurateur to shell out a large amount of money through loans (such as the well-touted microfinancing program of the Philippine government); however, it is equally possible to shell out only a minimum amount of money. For example, putting up a carinderia will not cost as much compared to putting up a larger standalone restaurant, but carienderias are stereotyped as unhealthier alternatives to other fastfood joints like Tapa King and Tropical Hut. All in all, the threat of entry in this market ranges from the moderately high level to the extremely high level.

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