Ateneo De Davao University

School Of Business And Governance

Strategic Management
External Assessment

Submitted by:
Canonoy, Dian
Jereza, Kenneth
Parenas, Charlene
Modina, Reiji
Yap, Esther

Submitted to:
Eding Godofredo

October 5, 2019

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Industry: Fast Food Industry

Background and Nature (Done)

The food service industry in the Philippines is growing at a phenomenal rate and
everyone wants a part of it. Through recent years, the rapid modernization and expansion
of the Philippine fast food retail industry have led to the increase of national and upscale
supermarket chains throughout the country. The use of improved distribution systems in
these modern supermarket industry chains also allow better storage options for imported
food that offers superior quality, variety, and reliability to the generally more high-end and
demanding supermarket customers.

Fast food refers to a kind of eatery that offers quick services and affordable food.
This flourishing industry has changed the scene of Filipinos' eating routine and culture.
Buying of fast food has now turned into a regular daily practice for a great many people,
particularly for middle class earners occupied with profitable exercises. Most fast food
establishments are located in Metro Manila and in a few significant urban communities in
Central Luzon and Southern Tagalog. Starting at 2009, there are around thirty-2,000 fast
food outlets in Metro Manila area alone. Rising urban regions outside Luzon—including
Metro Cebu and Metro Davao are likewise considered as key areas for outlet
development.

According to the 1994 Philippine Standard Industrial Classification report, fast food
services are classified under class restaurants, cafes and fast-food centers. This
classification comprises all activities concerned with the sale of prepared foods and drinks
for immediate consumption in the premises such as restaurants, cafes, lunch counters
and fast food outlets. It is also concerned with take-out operation activities which includes
drive-thru. No stopping fast-food growth in the Philippines. For those unaware, the food
service industry is composed of all forms of food retail. This includes fast-food chains,
food kiosks, cafes, bars, take-out and delivery stores, and full-service restaurants.
Interestingly, fast-food sales inside convenience stores will grow at a more phenomenal
rate of 32%, thanks to their improving quality and democratic price. Fast-food chains are
seen to expand their product offerings to sustain demand even if it encroaches on other
food concepts.

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Economic (Done)

Economic and social conditions in the Philippines were very favorable to the
fast food industry as at the end of the review period. Improved purchasing power
pushed an even higher frequency of spending on food and the increasingly busy
lifestyles of Filipinos, especially for the emerging middle class, heightened the
demand for more convenience, which fast food players can take advantage of. Fast
food continued to be the largest category within consumer foodservice in the
Philippines in 2017.

The growing demand for convenience has led to the expansion of the
Philippine food service industry in the form of fast-food restaurants and casual
dining restaurants. Full-service restaurants are also growing, especially in
fashionable shopping or dining areas in Metro Manila. Competition in this segment
is keen, with restaurant operators always interested in new and exciting menu ideas
to attract customers.

Based on the 2012 nationwide Census of Philippine Business and Industry (CPBI),
the Philippines food service industry amounts to roughly US$7.2 Billion with an
estimated 15% to 20% annual growth over past decades.

Social, Cultural, Demographic, & Environment

Social (Done)

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 Fast food trends shift based on what consumers want. As mentioned throughout
this analysis, healthiness is the focus in many countries. This is not only pushed by
governmental authorities, but by consumers, as well.

What we’re seeing is a rise in organic and whole foods as diets and lifestyle
changes come into play. Vegetarian, vegan and pescetarian eating are becoming less of
a fad and more of a lifestyle choice particularly with the younger generation. How these
foods appeal to people is based on their branding look. As a result, fast food chains are
implementing their own branding makeovers.

To input professionals and young adults into their consumer base, McDonald’s is
changing their company appearance. The restaurant interior was initially “grab and go”.
Now they have a much cleaner and modern look with wood, softer lighting, menu screens,
and wifi. To market to the younger generation, they had to change their branding and
look. They even changed their slogan to “Lovin’ Beats Hatin’” but that hasn’t gone over
too well. And they’re adding healthier options to their menu still.

Cultural (done)

A fast food refers to a type of restaurant that offers quick services and affordable
food. This thriving industry has transformed the landscape of Filipinos’ diet and culture.
Buying of fast food has now become an everyday routine for most people, especially for
middle class earners engaged in productive activities. Most fast food establishments are
located in Metro Manila and in several major cities in Central Luzon and Southern
Tagalog. As of 2009, there are around thirty-two thousand fast food outlets in Metro
Manila area alone. Emerging urban areas outside Luzon including Metro Cebu and Metro
Davao are also considered as strategic locations for outlet expansion.

Per same published report, it was revealed that according to the 1994 Philippine
Standard Industrial Classification (PSIC) handbook, fast food services are classified
under class 55210—restaurants, cafes and fast-food centers. This classification
comprises all activities concerned with the sale of prepared foods and drinks for
immediate consumption in the premises such as restaurants, cafes, lunch counters and

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fast food outlets. It is also concerned with take-out operation activities which includes
drive-thru option.

Demographic (Done)

The country’s food service industry has continued to improve over the past years
due to the stronger consumers’ purchasing power, influenced by today’s fast-paced
lifestyle. Food service players are increasing their network to cater to more Filipinos who
demand for more convenience.

Different types of food establishments are being set-up across the country to provide
Filipino consumers with their needs. Based on the final results of the 2015 Annual Survey
of Philippine Business and Industry (ASPBI) released by the Philippine Statistics Authority
(PSA) last October, a total of 27,028 establishments in the formal sector of the economy
were engaged in accommodation and food service activities. Restaurants led the sector
with 6,652 establishments, which accounted for 24.6% of the total number of
establishments. Fast food chains ranked second with 4,477 establishments (16.6%),
followed by refreshment stands, kiosks and counters with 3,772 establishments (14%).

In addition to food service industry’s contributions to the Philippine economy in

terms of value sales, outlets and transactions, it also generates employment to many
Filipinos. As data in 2015 ASPBI showed, the total employment generated by the sector
engaged in accommodation and food service activities reached 433,260 workers. Among
the industries, fast food chains employed the most number of workers with 130,304, or
30.1% of the total number, followed by restaurants, and hotels and motels with 116,556
(26.9%) and 62,392 workers (14.4%), respectively.

With the growing urbanization across the country, Filipinos are having more busy
lifestyles that pushed them to buy cooked foods or simply dine out. Also, those who are
residing or working in key cities are also facing a worsening traffic and transportation
issues which resulted to the growth of home delivery or takeaway outlets. At present, food
service players focus on attracting millennials who comprised one third of the country’s

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population and are recognized as the biggest spenders. Given this, this consumer group
continues to inspire innovations within the food service industry. More digital initiatives
will be seen from the industry players to extend their reach, especially on social media.

Political, Government, Legal (need to revise)

Most of the companies determine the impact of political environment factor of its long term
profitability in a specific market or country that can provide with both opportunities and threats to
its prosperity. Government policies towards issues, such as, the trade or general wellbeing can
expand expenses or effect on the operations of the organizations. Trade agreements can make it
simpler and harder for company to attempt business activities in specific areas, such as, when there
are differences in sustenance gauges between business sectors which the organization is working.
However, health problems such as, concerns with respect to heftiness, also make the business
activities expensive and costly. Particularly if charges fast food are increase or certain ingredients
are restricted. In the legal context and institutions are not vigorous enough to secure the protected
innovation privileges of an organizations. More elevated amount of regulation can stifle business
development, while lower levels may empower organizations to make more benefit. Employment
law issues, such as, the lowest pay permitted by law, occasion and wiped out compensation may
expand the costs of the business, but it can may decrease enlistment costs if the staff feel that they
are receiving the right pace of compensation and other benefits. However, according to Ruddick
2016, in the UK, there has been an increased used of zero hour contracts which organizations have
used to gain a more flexible working force, which is particularly useful for the food industry, which
often operates the 24 hours per day. Whilst these are legal, there have been some criticisms of their
use as the prevent workers from receiving holiday and sick pay (Ruddick 2016).

Technological (need to revise)

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 Technology is fast disrupting different ventures in all cases. A firm should not exclusively
do the innovative analysis of the business but also the speed at which technology disrupt that
industry. Slow speed will give additional time while fast speed of mechanical interruption.
Changing technology not allows some organization to improve business process, such as, re-
requesting and reducing waste, yet in addition enables it to create noteworthy organizations with
its customers. Technology can help organizations in reinforcing its image by giving various
channels for requesting of clients, such as, in store self-service and gathering or ordering online.
Technology can also enable a brand to reach a far greater market and to undertake appropriate
social media strategies to engage with their customers.

Competition (need to revise)

Jaradat (2013) exclaimed that a competitive strategy with powerful competitors will
give the organization a competitive edge over other organizations. In the food and
beverage industry, the competition is high. Firms in the food and beverage industry
prioritize on increasing a competitive advantage by using ways that could help adjust
costs, thus lowering product cost. They focus on differentiating their products among their
competitors and bring improvements, to make use of creative channels of distribution and
also to exploit the relationship with suppliers. When firms are competing with the same
customers, same location, and with the same industry the rivalry is automatically
increased. In order for the firms to gain market share and revenues they expand or open
their firm for franchise.

Sources:

 https://www.marketresearch.com/Euromonitor-International-v746/Fast-Food-
Philippines-11652063/
 http://www.ifexphilippines.com/en/General-Info/Philippine-Food-Industry
 https://pestleanalysis.com/pest-analysis-example-for-the-food-industry/

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 http://www.bworldonline.com/a-taste-of-the-countrys-food-service-industry/
 https://www.philstar.com/cebu-business/2012/01/04/764410/philippine-fast-food-
industry
 https://www.bworldonline.com/trends-in-the-food-industry/
