Managing Global Markets: Yoshinoya

International Brand Recognition: Yoshinoya is one of Japans largest restaurant chain companies and a global brand with over 1400 locations throughout the world including 99 in USA. It is known for its quick service and the menu is based on fresh ingredients served in a variety of rice bowls including its original recipe Beef Bowl that started it all in 1899 opening its first store in Tokyo Japan.

Scope of Expansion: In 2006, Yoshinoya made franchising opportunities available to U.S. entrepreneurs.

Service: Known for its quick service. It is one of its key strengths and tries to maintain it in all of its outlets and franchises.

Quality: Yoshinoya’s commitment to quality has never wavered since opening in Tokyo’s Nihonbashi District in 1899, even stopping sales of its popular beef bowls in 2003 when a ban on American beef went into effect in Japan. Beef bowls were off the Yoshinoya menu for two and half years, until the import ban on American beef was lifted, and company officials say the Yoshinoya decision reflects the commitment to maintain the best quality in both service and product. Its beef bowl recipe calls for American beef, and that’s all Yoshinoya has served for nearly eleven decades.

Professional Advertising Campaigns: Yoshinoya is known for its advertising campaigns and helps to advertise for the franchisees also.

Skilled Traning: Yoshinoya has developed a stringent training regimen for all Yoshinoya employees, hence franchisee’s can enjoy having a courteous, well-trained staff from the very first day, and maintain the same level of high quality and service across the chain.

Competency:

Yoshinoya’s major expansion plans are for Chinaand to open as many as 500 restaurants there by 2010, as part of its joint venture with Hong Kong’s Hop Hing Food Group. There are already 99 restaurants operating in the USA and many more to come.

Diversification Strategy:

The company began expanding its range of restaurant formats, starting with the 1996 acquisition of Commoco Food Company, later renamed as Peter Pan Comoco, operator of the Hitokuchi Chaya baked good chain. In 1999, the company acquired struggling Kyotara Corp. and its chains of takeout sushi and seafood restaurants. The company acquired the Chinese food chain Shanghai Express in 2002, then added the Hanamaru noodle restaurant group in 2004.

The company’s other restaurant formats include the Kyotaru takeout sushi chain; Shanghai Express, a Chinese-foods concept; Hitokuchi Chaya, which sells fresh-baked taiyaki cakes and takoyaki dumplings; and the curry shop Pot & Pot. Listed on the Tokyo Stock Exchange’s First Section, Yoshinoya D&C is led by chairman Shuji Abe.

Yet gyudon remained the company’s core recipe. Into the middle of the first decade of the 2000s, Yoshinoya stepped up international expansion of its flagship chain. The company entered Singapore in 1997, followed by the Philippines in 2001. By 2002, the company had launched a second mainland China partnership, targeting specifically the Shanghai market. In that year Yoshinoya also opened its first restaurant outside of the U.S. West Coast, targeting the New York City market, and boosting its number of restaurants in that market past 100. This was followed by the creation of a new subsidiary, Yoshinoya America, to oversee growth of its U.S. operations. Similarly, the company launched a subsidiary in Australia, which opened its first restaurant in 2004, followed by the launch of operations in Malaysia later the same year. Meantime, the company’s Beijing-based joint venture announced its own plans to expand its restaurant chain to as many as 500 restaurants by 2010.

These efforts enabled Yoshinoya to continue to post strong revenue gains through 2005. Nonetheless, the company’s profitability suffered as the U.S. beef ban entered its third year. At last, however, the Japanese government announced its decision to lift much of the ban. This allowed the company to launch its first limited sales of its beef bowl by September. While supply shortages continued to hamper the company, it nonetheless was able to resume wider gyudon sales by December 2006. The effect on the company’s revenues were dramatic; by the beginning of 2007, the company posted revenue gains of more than 119 percent. Yoshinoya D&C had become one of Japan’s largest and most diversified and restaurant groups, building its empire on a recipe that had been a Japanese favorite for more than 100 years.

Agility:

Yoshinoya was hit hard, however, by the developing crisis in the global beef industry. The appearance of the first case of so-called mad cow disease in the United States, which was becoming notorious for the suspect nature of its sanitary conditions, prompted the Japanese government to enact a ban on all U.S. beef imports in 2003. Remembering its last ill-fated attempt to alter the ingredients of its famous beef bowl, Yoshinoya adopted an extreme response, announcing that it would simply end sales of its flagship dish until imports resumed. In place of the beef bowl, Yoshinoya rushed to develop new recipes, including chicken- and pork-based bowls.

Weaknesses:

Global competition with other fast-food chain of restaurants:

Other competitive fast food chains such as KFC , Mc Donalds, Subway, Burger King have many restaurants world-wide. Mc Donalds has the largest Market share in the fast food industry.

International Marketing Strategy

The international marketing of Yoshinoya* and its services needs to improve for its survival.. With the growing numbers competitors’ branches worldwide, Yoshinoya needs to further expand its international market operations. In terms of competition, one great and possible strategy to do is a possible merger, joint ventures or strategic alliances because by doing this kind of strategy, it will lessen the competition in the market. It should look at localizing its menu and offer discounts and sales. IT should advertise to bring in more franchises to expand further.

Keeping pace with changing consumer preferences

As a natural process of reaction in the product marketing, the dynamic and diverse consumer preferences and behaviour is the most predicted trend that will affect the marketing strategy. Due to different geographical location, cultural beliefs and practices, lifestyle, health status, and personal indifferences, various segments of the current marketing strategy are subject to possible changes. Yoshinoya, should look at expanding or altering its menu based on the locations and the consumer’s prefermnces. Also, it should concentrate on low calorie foods as more and more fast food restaurants causes concerns of obesity and health issues. Eating places were forced to stake out a strong identity for themselves and to pay closer attention to consumers, who were becoming increasingly demanding

Dependence on American beef for its signature Beef Bowl

In late 2001, a domestic mad cow incident critically damaged beef bowl sales. In late 2003, Japan suspended imports of American beef due to a BSE incident in Washington, cutting off Yoshinoya’s main source of short plate (fatty beef) that is the main component of its beef bowl. This forced Yoshinoya to terminate gyudon sales in Japan (the first time in its history) on February 11, 2004. News of the removal of this item from Yoshinoya’s menu caused its fans and non-fans alike to queue in massive lines at Yoshinoya restaurants all around Japan to taste what might be their last beef bowl for a long time. Yoshinoya then switched to selling butadon (pork don) instead of beef. However, Yoshinoya restaurants in America continue to sell the beef bowl using American short plate, and restaurants in Japan sold a “gyÅ« yakiniku don” (Yakiniku-style beef bowl).

In December 2005, Japan agreed to remove the restriction on importing US beef. A letter to customers was then put up in restaurants promising that the beef bowl would return in a couple months or so. However, in January imports stopped again because inspectors found banned cattle parts in a veal shipment from the U.S. In June 2006, however, Japan lifted the ban on imports, and on July 31, 2006, Yoshinoya reposted the letter promising to bring back the beef bowl in about two months.

External Factors for Yoshinoyas planned entry

Ethnic food is seen as the basis for innovation in the food industry. Different cuisines and products are emerging on a continual basis, as consumers become more knowledgeable about eating habits in other parts of the world as well as becoming acquainted with foreign cuisines through foreign travel.Apart from formerly being consumed mostly in the evening, ethnic food is now being consumed throughout the day, for example as a lunchtime snack. The repertoire of ethnic food is forecast to widen even further, resulting in continuous increases in sales

Chinese food is expected to remain the largest segment within the market for East Asian cuisine, since it has a significant customer base and is quite popular with large sections of population. However apart from Japanese cuisine, growth is expected to be strongest for the Thai and Indian segments, which are becoming increasingly popular.

Japanese became a trend cuisine in the mid 1990s with several sushi outlets opening up in major cities. German retail quickly picked up on this trend and started offering Japanese sushi in its chilled cabinets at first in large cities only and then successfully in more rural areas. Today, in rural areas, sushi tends to be accepted very positively.Japanese food has only recently, within the last five to ten years become popular but the range available is still relatively restricted. Yoshinoya provides healthier food when compared to other fast food joints like Mc donalds and KFC.Wagamama is not Japanese cuisine. In fact, there are no Wagamamas in Japan or China so Yoshinoya providing authentic Japanese food is an advantage.

Changes within the population have directly affected the development of the food sector. As the number of single households and working women has increased, coupled with an aging population, German society’s values have shifted towards focusing more on the “quality of life”.

Today’s consumer is more widely travelled and open-minded towards new, exotic cuisines.

Risk factors

Ineffective risk management within partnership working may lead to poor working relationships and lack of engagement,not realising benefits,community outcomes not achieved against agreed priorities,reputational damage,poor value for money and missed opportunities to secure cashable efficiencies gains and contribute towards sustainability targets.

PESTEL analysis:

Political Factors

The government in Europe is supposed to be politically stable. In recent years, the Government has pursued policies aimed at making Europe more attractive to investors, creating a welcoming environment for foreign investment. It has low labour and transport costs and the introduction of the single market has eliminated exchange rate fluctuations and reduced overall transaction costs. European government is planning to lower corporate tax which will be extremely beneficial. . Denmark badly needs skilled foreign workers, and will change laws to make them welcome. The rise of the newly formed centrist party New Alliance, offers the minority centre-right coalition government a stable partner.encourage entrepreneur and energy reforms, while rejigging the administrative structure of the municipalities. The addition of the conservatives to the coalition suggests a more active foreign policy, including stronger ties with America, but also a mediating role in the EU’s strained relations with Russia.Less belt-tightening will boost the economy, as will increasing integration into west European production and supply chains. The government controls the marketing and licensing of fast food restaurants which makes it important for every company to maintain good relations with the government and benefit from tax reductions.

Ireland With the Green Party now in the coalition government, policy will shift slightly towards environmental issues, though the government’s overall focus-keeping businesses competitive-won’t change. Economic management will be more complicated than during the boom years; spending cuts, for example, may now be required,creating stresses within the government.

Economic factors

In last few years there has been a financial crisis in the market. Cost of everything has increased due to fall in major investment banks. There have been inflationary pressures due to high energy prices and lack of credit. All this would amount to increase in price of supply chain and goods. The cost of food items has increased as there has been a food crisis. France and Germany have interrelated economies,so selling in both the markets would not yield great results. Yoshinoya import most of its raw material such as beef and potatoes due to local market cannot supply in abundant to meet the demand of its product they need to be aware of global supply and currency exchange. Since the pricing is above normal food pricing Yoshinoya consumers may find it hard to make the buyer agree to the price on offer. Moreover if the economy is bad and income percapita is affected, the demand of Yoshinoya product will certainly going down. Good economy generally means disposable income is more and people can spend more on more expensive food .

SOCIAL/Cultural

Not many people can afford eating out all the time but with the fast food option providing affordable meals people have caught up with increased spending habits.But consumers always also look for value for money and demand quality in services and more conveniences that can differentiate one restaurant from another. There is not much difference between cultural and the purchase of products in a single country but for different countries cultural sensitivity should be upheld. For example in India people (Hindu) do not take beef, Muslim countries do not take pork, German like beers, Finnish like fish type of food menu, Chinese like to associate food with something good (for example prosperity), Asian like rice and Americans eat in big-sized menu. So far Yoshinoya has shown good efforts in localization of its menu to suit local taste but it should constantly survey and learn about local culture to better understand and design the best product for them

Technological

European online meal solutions prospects by country

For a fast food restaurant, technology does not give a very high impact on the company and it is not a significant macro environment variables. Computer ordering (till system) and using technology for production,supply and research reasons is a requirement.Technology implementation can make the management more effective and cost saving in the long term.

Environmental factors

Yoshinoya should invest more on the environment related issues. They should reduce their dependency on beef dishes as production of beef involves methane gasses coming from the cow’s ranch causing green house effect. Large scale plantation affects the environment and loss of green forest opening for plantation activities. Vegetarian environmentalist criticizes the fast-food giant for cruelty to animals and slaughtering. Use of plastic is also an issue as millions of people are known to throw away packaging which is hard to recycle. Our world is getting concern on environment issue and business operating here should not just care for profit, but careful usage of world resources for sustainable development and care for environment safety and health for our future generation.

Legal factors

Legal requirements of a business owner should be to follow stipulated laws such as operating hours, business registration, tax requirement, labor and employment laws and quality & environment certification (such as ISO) in which the outlet has been certified. The legal requirement is important because the offenders will be fined or have their business prohibited.

b) Country Shortlisting

This part addresses why the country Uk was chosen from amongst the 27 other countries belonging to the EU.

A 2008 study was conducted worldwide counting the number of fast food restaurants per person.The UK has claimed this title with Australia second and the United States third. England alone accounted for 25% of all fast food. The majority of multinational corporations that are based outside of Europe but have a presence on the continent, establish their European operations in the UK.

Decision making global integration vs global responsiveness…multi domestic strategy,the food industry has a weak need to integrate operations across countries because scale economies are highly offset by transportational costs.

In Russia,eating out is also becoming increasingly common. A burgeoning middle class is creating a solid customer base and is increasing demand for international foods, with the result that numerous restaurants and cafés are opening or expanding.

In France With regard

to business and investment, the climate cannot be considered to be very conducive due to lack of fiscal and investment

freedom, and freedom from government intervention. Business taxes are also higher compared to other developed

countries which acts as a deterrent for investment.

In 2004, Germany’s share of the ethnic food retail market (by value) within Europe was relatively small (9.2% compared to the UK’s 68.8%). Nevertheless, it was the third largest market, following the UK and France (who had 9.7%)

In 2006, the Ethnic Food retail market in Europe was worth EUR 4.12 billion. The UK has the largest and most developed market, with sales worth over EUR 2.34 billion. In fact, the UK, France and Germany together account for over 80% of total sales. It notes that countries like Spain and Ireland have much smaller markets, but that sales are on an upward spiral

So first establish about 5 stores in uk and 5 in germany check the performance over a year hope to gain from spillover effects where Media helps it to get noticed in nearby countries and the following year expand in markets like Denmark and Netherlands which are in the same region.

So the plan suggests that the country selection is also region specific.Northern European countries like england and Denmark andWestern European countrie like Germany and Netherlands

Economic stability based on GDP

Spain has per capita GDP of UK is $ 34,619 (International Monetary Fund,2009).It is the third largest economy in Europe after Germany and France and the second largest after germany in terms of Purchasing Power Parity.

Japanese in Uk

Colindale in north London has Oriental City a shopping centre which has the highest footfall of Asian consumers.

North West England, Manchester is town with largest population and Aberystwyth largest student town are locations for opening a store.

When eating outside the home, Japanese expatriates in the Netherlands most commonly patronise Chinese restaurants (29% of meals eaten out); Japanese restaurants run a close second at 25%, Italian restaurants at 19%, and French restaurants at 10% (Cwiertka 2000, p. 17)

Start with 10 stores with centralization,check performance and then shift to decentralization. The strategy for the first three years in Europe should be of Centralization and concentration in big country markets .

Part 2

a) Market Entry Strategies

Why would Yoshinoya choose franchising?

Yoshinoya wants to aggressively expand in the European market.The franchising model will help it expand its operations on a faster scale.

Speed of entry

Speed of entry can be classified as Aggressive-broad front and aggressive-focused. Yoshinoya must have systematic and dynamic game plan using all of its resources.

How will the franchise work?

Joint venture will be 50-50. Yoshinoya has had nation wide franchising in the United States offering single franchise and territory arrangements. Having identified a franchisee, NewLook must determine aspects such as franchisee fee and initial investment required to get the venture on road. NewLook can follow the standard industry practice of charging between $30,000 – $40,000 per location per year – a standard followed by 70% of the franchisors. Additionally, the terms of franchising also need to lay down the amount of royalty that franchisee needs to pay (International Franchise Association, 2010). This figure is a percentage of franchisee’s gross monthly income and could be set at 4%.

Risks of franchising

Without having a local presence in Europe, this method results in a great loss of control and supervision over the franchise as the franchisor has no legal entity in Europe. However Wholly owned facilities, at the start would serve as anchors while they build relationships in the host country to support further entry through non-equity modes such as franchising and management service contracts (Bartlett & Ghoshal, 2000). So it might prove difficult to build familiarity and relationships in the market, non-equity contractual forms are readily adopted to support the increasing degree of presence. Due to Yoshinoya’s present financial condition franchising would be the best option but finding the right franchising partner would be the most important.

Exit Strategies

Franchisors that they needed to understand that their business would fail, and in fact all businesses are bound for failure. Daniel Hudson Burnham said “Make no little plans; they have no magic to stir men’s blood.” So plan. Plan to profit. Plan to nurture and build. And plan to exit.If Yoshinoya does not get its estimated profit or is in loss, it can exit the market. It is not easy to exit the market as closing franchised stores due to non performing would affect brand image and create stutor among other franchising partners.If a joint venture is established exiting market becomes an easy option as the share can be sold to the partner. Relocation of non profitable stores can be an option. Additionally, once the initial period of uncertainty is over and the payoff (for NewLook) from the venture is more or less stabilized, NewLook may find it advantageous to dissolve the partnership by either acquiring the franchisee’s interest in the venture or selling its own stake. The price for the transfer of ownership interests between two parties should be set in the original contract. To determine the share price, both parties could accept the appraisal of an independent evaluator (Chi, Tailan; McGuire, Donald J, 1996).

b)Functional strategies, including product, marketing, and operations decisions.

The marketing strategy inviloves 4ps product,price,place and promotion.As yoshinoya is not yet established in the European market they could use Penetrative pricing policy to expand the menu by adding chicken based side orders,sushi,soups and salads.To cut costs,decreasing price should not be an option instead they should reduce the quantity of products.Table service is a good idea.On the other hand having a limited menu, rapid table turnover and employing temporary staff on minimum wage so that pension and health benefits dont have dolled out is a way of cutting costs too.

A marketing strategy involves using brand names and other marketing elements.Yoshinoya must look at protecting brand name and patent.In a Franchise system the franchisor does the R&D and Marketing while Franchisee does the Production and sales and service.

c) Yoshinoya’s Organizational Structure

Organizational structure shows how management decisions would be taken and the flow. VP (HR) will be reporting to CEO and will be accountable to all HR related operations. Senior VP (marketing and sales) will be reporting to CEO and will be accountable for marketing and sales. CFO will be reporting to the CEO and will be accountable for all financial operations. VP (Operation & development) will be reporting to COO and will be in charge for operations and development. Then VP (Investor relation) will be reporting to COO and will be responsible for relations with the investors. VP (public relations) will be responsible for public relations. Special task force would be formed to work in teams to take care for any new stores to be opened or major structural changes to be made in functioning of any stores.

Although the organisational structure outlines who reports to whom within the MNE, it does not indicate where decsisions are made within the framework.companies must determine where decisions will be made.The higher the level within the organisation at which decisions are made, the more they are considered to be centralised;the lower the level,the more they are decentralized.whether decision making should be centralized or decentralized can be addressed from the stand point of either the company as a whole or some part of it,such as particular subsidary operation.

d)Strategic control system

Conclusion

It is observed from various analysis made above like PESTLE and SWOT, that Yoshinoya is a brand which needs to expand internationally in order to increase its revenue and to compete with other big brands.

References:

http://www.swot-pest-porter.co.uk

Hollensen, S (2003) Global Marketing: A Decision-Oriented Approach. 3rd ed. Pearson Education

Wall, S & Rees, B (2004) International Business. FT Prentice Hall.

LEE, K & CARTER, S (2005) Global Marketing Management. Oxford: OUP

Mellenius, H 2007′ Market Orientation as a Branding Strategy’. Working Paper, department of Business Studies, Uppsala University.

Johnston.S, Beaton.H (1998) Foundations of International Marketing, Cengage Learning EMEA

http://www.answers.com/topic/yoshinoya-d-c-company-ltd

http://www.swot-pest-porter.co.uk/index.php?action=vthread&forum=1&topic=5

http://www.absoluteastronomy.com/topics/Yoshinoya

http://kinnikuman.wikia.com/wiki/Yoshinoya

http://www.bignerds.com/papers/8120/Pestle-Mcdonalds/

http://en.wikipedia.org/wiki/Yoshinoya

http://www.scribd.com/doc/2535092/THE-WORLD-IN-FIGURES-2008-COUNTRIES-AZ

http://www.scribd.com/doc/510675/COUNTRY-PAGES-2008

http://www.doingbusiness.org/EconomyRankings/Default.aspx?direction=asc&sort=9&page=2

http://www.scribd.com/doc/510775/COUNTRY-PAGES-2008

http://www.51lunwen.com/format/lw200907311530516796-2.html

http://en.wikipedia.org/wiki/Japanese_expatriates_in_the_Netherlands

http://staterepos.com/

http://www.stuckonstuckeys.com/Fast-food.html

http://www.businesswire.com/portal/site/home/permalink/?ndmViewId=news_view&newsId=20100122005188&newsLang=en

http://en.wikipedia.org/wiki/Fast_Food

http://www.51lunwen.com/agent_upload/lw200907311530516796/Unit%5FGuide%2Edoc

http://www.absoluteastronomy.com/topics/Fast_food

http://www.newswiretoday.com/news/24168/

http://www.answers.com/topic/fast-food

Yoshinoya Expands U.S. Restaurant Chain, Opening 99th Location in Escondido

http://www.reinholdkeller.com/wissen.html

http://portugues.doingbusiness.org/EconomyRankings/?direction=Desc&sort=9

http://thesissamples.blogspot.com/

http://www.japanupdate.com/?id=9041

http://espanol.doingbusiness.org/EconomyRankings/?direction=Desc&sort=9

http://www.dfat.gov.au/publications/business_spain/section_1.html

http://www.franchising.com/pressreleases/14262/

http://www.businessdictionary.com/definition/organizational-structure.html

http://www.luleaquestionnaire.com/eng/

http://www.encyclopedia.com/doc/1O39-chaya.html

http://www.worldlingo.com/ma/enwiki/en/Fast_food

http://sde.state.nm.us/div/psb/dl10/CLASS/Glossarycomplete8-3-09.doc

http://en.wikipedia.org/wiki/US_beef_imports_in_Japan

http://www.allbusiness.com/business-planning/220919-1.html

http://maquette.saonor.fr/kvrdma/yrqw.php?gdnr=size-growth-of-fast-food-restaurants

http://www.entrepreneur.com/tradejournals/article/89491195_2.html

http://en.wikilib.com/wiki/Fast_Food

http://www.encyclopedia.com/doc/1O41-Chaya.html

http://results.mindspark.com/redirect.jhtml?qid=0eefbc8aa4c78e5dd3ea934b32150178&action=click&si=&p=AJmain&ss=sub&ptnrS=ZRxdm429TIUS&st=hp&cb=ZR&pg=AJmain&ord=52&searchfor=Popular+Food+in+Colombia&tpr=jrel3&redirect=AJmain.jhtml&ct=RR

http://stmichaelbyz.com/qgsrxp/jxmg.php?ysgq=causes-of-fast-food-restaurant-popularity

http://www.soc.surrey.ac.uk/petras/reports/denmark.html