Managers' Forum ~ Business Case Reviews
Kentucky Fried Chicken (Japan)
Business Case Review by: Rodolfo Martinengo
In analyzing the Kentucky Fried Chicken’s (KFC) general situation, one
can find
many problems that made the trajectory of this company complex from
its foundation.
The main factors that did not let the company take advantages of the
opportunity
that they had, were primarily: 1) an undefined strategy planning 2)
a non-standardized
products and services and 3) an unorganized and unclear style of management.
Kentucky Fried Chicken in Japan (KFC-J) was not able to escape the situation
described above. In addition the two changes in ownership, with the
differences
in management style and corporate culture that this implies, and the
cultural
differences between U.S. and Japan, made the company face many tough
financial
situations.
With regard to the cultural differences is obvious that the growth of
the company
in Japan was really hard, primarily, because of the differences in
tastes and
food’s custom existence there. However, the application of some specific
strategies
center in the marketing’s focus and menu’s change, gave the company
the opportunity
to open 14 new stores in 1972, most of them in Tokyo, which was the
main focus
since it was the center of fashion and the source of new trends in
Japan. In
1993, 50 more were added.
In 1974, year in which Loy Weston -manager of KFC-J- was sure the company
would
turns its first profit, then the oil crisis hit the Japanese economy
and continuing
losses forced a refinancing and a slowdown in store expansion. It was
not until
1976 when the company reported its first profit thanks the strategies
applied
for Weston based in his own experience in Japan.
In spite of the above, in 1980 in accordance with Mike Miles -new president
of KFC-international- a lot of changes were done because of the general
situation
of the company. New administration plans and a different managerial
style were
applied. Henceforth the headquarters would control the international
operations.
This new management directions and systems did not sit well Loy Weston,
who
promptly argued:
We are slowly being reduced to the role of order takers. In the first
year after
Miles come back, we had 22 man-weeks of visitors from the corporate
headquarters.
Quality control audits, computer people, planners, operation guys,
and so on.
They questioned everything from our store designs to the smoked chicken,
yogurt,
and fish on our menu. They gave hurdled rates for real estate, and
operating
instructions straight from the American manuals.
They acted as if they had all the answer and we knew nothing. Just
because they
had introduces crispy chicken in the United State, they thought we
should too.
I knew it wouldn’t work. But I agree to a test market. It bombed. They
didn’t
like our TV commercials so they made one for us that was so inappropriate
we
never aired it.
The arguments above allow us to know some of the changes applied in
KFC-J to
make it work. Definitively, Weston’s strategies had been design in
accordance
with a different culture and a different place where general strategies
would
not work.
Finally, this analysis is a good example of the fact that can be involved
in
the beginning and trajectory of a new business overseas. A lot
of factors should
be considered and a deep analysis made to identify the opportunities
and threats
related with cultural and political aspect of the host country.
Kentucky Fried Chicken (Japan).
Christopher A. Bartlett and Srinivasa Rangan.
Harvard Business School.
9-387-043.
http://www.hbsp.harvard.edu/hbsp/prod_detail.asp?387043
