KFC Japan Ltd Case Analysis

Thomas Xavier
Vinod D
Vishnuprasad R Pai
Mridul Vijay
Arun Narayan Thekkethil

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 RJ Reynolds acquired KFC 1982

Sales per store increased at 10% per annum 1979

Back-to-basics program implemented in 1977

Domestic
KFC-J First time profit 14M Yen. Emphasis: 1976
Control
M Miles appointed VP. KFC-J yet to hit breakeven. 1975

14 new stores opened in Japan. (50 New:1973) 1972

1971
Brown and Massey sold KFC to Heublein Inc @ $275M

1970 Added 1000 stores a year. Joint Venture with Mitsubishi in Japan

1964 700 outlets. Brown and Massey acquired KFC @ $2M

1956 Harland Sanders starts franchising KFC.

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 EVALUATION OF THE WAY KFC IS MANAGING ITS INTERNATIONAL OPERATIONS

Harland Sanders Each country manager was left Need for change in strategy. Overseas
developed chicken alone to make success of his subsidiaries needed control from HQ. Despite
recipe based on venture, most had little resistance subsidiaries started adopting strategic
pressure cooking expertise or staff support. planning approach. KFC-J showed resistance for
method. Sanders Colonel Sanderss personal the increased control from HQ. KFC-J adapted it
decided to franchise efforts were utilized to maintain to Japanese practice.
his recipe. quality.

Late Late Early Late Late

1973
1950s 1960s 1970s 1975 1970s

Standard size of stores reduced. Fried fish KFCs international staff was merged with
JV with Mitsubishi
and smoked chicken added to menu. Price Heubleins international group. Integration
(Japan). Little change in
was adjusted to compete in local market. between KFC-I and subsidiaries. Each
KFC products. Stores
Mini-barrel with 12 pieces was introduced. country manager was using their funds
were exact replica of US
Basic menu varied in South Africa, generated from their existing operations for
take-out stores
Australia, Japan and Brazil too expansion

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 EVALUATION OF THE WAY KFC IS MANAGING ITS INTERNATIONAL OPERATIONS

Up to
1981

Local Responsiveness is high

Business Units are

independent
Entrepreneurial executives
are made in-charge.

Planning in International was

perfunctory.

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 EVALUATION OF THE WAY KFC IS MANAGING ITS INTERNATIONAL OPERATIONS

From
1981

Consistency in Products and

Facilities
Emphasis on Standardization

Focus on Economies of Scale

and Cost Savings.

Increase Efficiency. Bring an

underlying similar Database
Mgmt.

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COST REDUCTION-LOCAL RESPONSIVENESS GRID: IS KFC-I SHIFTING STRATEGIES

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 SUBSIDIARY ROLE IN THE INTERNATIONAL PORTFOLIO

Strategic Leaders : They hold

valuable resources. Located in
countries which have competitive
success.
Contributors : Located in
countries of lesser strategic
significance. Holds valuable
internal capabilities.
Implementer : Not contributing
substantially to competitive
Advantage . Helps generate
money (CashCow).
Blackholes : Located in
countries that are crucial for
competitive success but lack
Japan accounts to about 25%
resources.
of KFC-I stores.
Japan was the largest, fastest
growing and highest potential
units as recognized by KFCs
leadership team.
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 WHAT SHOUD MEYER DO AT HQ AND AT SUBSIDIARY FOR SUCCESSFUL CHANGE?

Food habits are a sensitive area. A Far West menu will not suite the palate of Oriental customers.
One size fits all will not work for Japan.
Customization needs to be considered both in taste and quantity of the offering.
Transnational Strategy needs to be looked into from an IR framework standpoint.

Think global and act local, goes the saying, but Gurucharan
thats only half a truth. International managers must Das
also think local and then apply their local insights on Author
a global scale. Ex-CEO P&G
India
Control over subsidiaries should have flexibilities with emphasis on incentivizing standard procedures.
Firms should encourage Local leanings to flow back to the HQ. Subsidiaries should be recognized for
adoptions in both sides.
All subsidiaries should have similar underlying rules. However there should be a cell for each subsidiary
in the International Office to translate reporting standards back and forth to/from Corporate Leadership.
At subsidiary level, there needs to be one layer of Corporate staff to assist (not control) in interaction
with the HQ International Cell and International Marketing and Planning department.
Subsidiaries should be encouraged to conduct market research under assistance of corporate teams.

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 WHAT SHOUD MEYER DO FOR EXPANSION IN JAPAN, KOREA, TAIWAN, THAILAND, HK?

JAPAN
No mention of raw material cost savings from Mitsubishi proposal for JV arose from their need to increase
demand of one of their business. Look forward to avenues to cut cost of chicken procured.
Do additional round of market research not just on taste but on mode of delivery (Location/ Home Delivery
etc)

KOREA, TAIWAN, THAILAND,

HONGKONG
Spin a vertical for Emerging Markets. Have Loy Weston lead that reporting directly to Meyer.
Emerging Markets which mature, will move to the Portfolio of International Markets.
Let Korea, Taiwan, Thailand and HK be the pilot for the Emerging Market vertical. Give Loy the freedom as he
received in the initial stages of Japan.
Loy can pick from a platter of reporting standards and gets a planning cycle of his choice created but to be
committed to the same for the markets under the Emerging Markets vertical.
Invest time in initial Market Research. Enter JV to get initial inputs. Direct Franchising may result in failing to
read the market.

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THANKYOU

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