KFC Ltd. Analysis of Kentucky

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Analysis of Kentucky Fried Chicken (Japan) Limited Case Study

The case study on Kentucky Fried Chicken-Japan (KFC-J) demonstrates how an organization's decision to expand its operations overseas results to adverse results, such as conflict between managements located in Japan and U.S.. This is the scenario that the case study presents, especially in the company's attempt to create drastic changes in the operations and management functions of KFC, both domestically and internationally.

This paper analyzes the course of action that KFC should take, as it faces challenges and disagreement with KFC-Japan. The analysis includes a discussion of the history of KFC-Japan, identification of the competitive advantage and discussion of extant and potential problems that the company faces, and finally, recommendations on appropriate actions and decisions that must be adopted by the company in order to remedy the enumerated problems or difficulties in KFC's organizational structure and management, especially overseas.

The case study chronicles the development of KFC-Japan from its inception, which started in the 1960s, towards its development as an autonomous overseas branch of KFC-U.S. In the 1980s. In the first period, the 1960s, KFC-J emerged from the company's decision to expand overseas. Fresh from the turnover of the company from Harland Sanders to John Brown and Jack Massey, the decision to expand overseas resulted from the economic growth that is happening in the world market. Furthermore, the growth of the fast-food industry also inspired both Brown and Massey to extend the fast-food concept from the U.S. towards Eastern nations, such as Japan.

The KFC expansion in Japan began from a proposal by the Japan company, Mitsubishi. KFC's first venture overseas was headed by Loy Weston, with a partnership from the Japanese manager Shin Ohkawara. Thus, with a start-up capital of $200,000, both Weston and Ohkawara began establishing the new KFC-J. In the second period of KFC-J's development during the 1970s, the company encountered problems in attracting a stable consumer market in Japan. Evidently, the company's American standards in operating a fast-food business do not apply to the country. Problems such as the location of the fast-food store, food items in the menu, and advertising/marketing strategies did not appeal to the consumers. Thus, in the same period wherein KFC in the U.S. was experiencing a slowdown in its operation, KFC-J, too, had also failed to capture the Japanese fast-food market and experienced substantial loss.

The third period of KFC-J's development, meanwhile, demonstrates the eventual success of KFC in Japan. Upon analyzing the problems that Weston and Ohkawara had encountered in their initial venture to establish a KFC store in Osaka, they were able to clearly identify the company's target market -- that is, focusing on "upscale young couples and children." Moreover, they also changed the location and size of KFC in the country, reducing in half the store size to accommodate the small, rented spaces in urbanized Tokyo. New food items in the menu such as fried fish, smoked chicken products, and "mini barrels" containing 12 chicken pieces allowed enticed Japanese customers to buy and patronize KFC.

As KFC changed its management from Brown and Massey to Heublein, Inc. In the 1970s, it becomes apparent that KFC had operated almost exclusively from its mother company in the U.S. Thus, in a period where KFC-U.S. was experiencing problems in its operations, KFC-J was enjoying a "modest" profit from its operations, a condition that reflects the success of the company because of its exclusive operations. However, it is also important to note that the case study addresses this particular issue as the main problem of KFC. The seemingly exclusive nature of KFC-J's operations created a conflict between the U.S. And Japan management when the former had introduced changes in the operations and management of KFC stores located both domestically and overseas.

Looking at the performance of KFC-J as an autonomous business entity exclusive from KFC-U.S.'s operations, it is remarkable that despite little support from the mother company, KFC-J had managed to develop as a profitable company in a foreign market environment. This is because both Weston and Ohkawara were able to tap the business and food culture of the Japanese market. This is reflected in the changes that they had introduced when KFC has reopened and relocated in Tokyo. Changes from previous 'mistakes' that they committed include, as enumerated earlier, include modifications of the store location, store size, food items in the menu, and promotion of the KFC brand to the customers.

Weston's previous position as a salesman for IBM in Japan and Ohkawara's familiarity with the Japanese culture enabled them to devise strategies that helped overturn KFC's performance in the country. Realizing that the fast-food business is more profitable when located in urban areas in order to entice higher customer volume; thus, KFC-J relocated to Tokyo, which has a higher volume of people, therefore increasing the chances of the store to attract potential customers. Apart from changes in the store location, KFC-J also decided to change its store size into half the recommended store size in the U.S. Despite the expensive cost of space rental and limited space in Tokyo, KFC-J thrived because it is accessible to people who are most likely to patronize fast food items. Knowing the Japanese appetite also helped Weston and Ohkawara introduce changes in the menu, thereby making the KFC menu more suitable to the customers' taste and preferences.

Despite these advantages that Weston and Ohkawara had introduced in KFC-J, the company had experienced conflict with KFC-U.S. because of Weston's disregard for the changes implemented in managing KFC food stores all over the world. Weston reasoned that because of KFC-J was able to recover from its loss satisfactorily; it does not need any help from its mother company, who is also experiencing difficulties in managing its stores located domestically. But what makes Weston's argument disagreeable is that he failed to recognize that despite its exclusive operation from KFC-U.S., it is still part of the organization, therefore, he is entitled to cooperate and respond to the company's calls for implementing new managerial changes and plans for the succeeding years of KFC-J's operations. Disadvantages that emerge from KFC-J's autonomy from its mother company include: (1) the discontinuity of the "KFC heritage" in Japan; (2) internal conflict with the management because of differences in management strategies and techniques; and (3) tendency of Weston, as head of as vice-president for the North Pacific operations of KFC, to focus its attention on Japan only, and leave out management problems occurring from KFC's other branches in the North Pacific region.