This case pertains to the issues faced by Kikkoman’s Corporation which is market leader of the soy sauce industry. The case narrates the challenges which the Kikkoman Corporation encountered during the developments associated with globalization of soy sauce market. Kikkoman’s Corporation started its operations in Japan and the company expanded its business successfully to several global locations. Per capita income had grown very rapidly in all the countries where the use of Kikkoman’s products is high. Also soya sauce went through a rapid adoption process in foreign cultures due to trans-cultural movements.
The ownership believed that the company should be contributing towards the exchange of cultures by bringing together tastes and flavors of different countries together. Even though, the market share of Kikkoman is consolidated in the soy sauce industry, yet the industry demand for soy sauce is slowing down. The top management of the company has realized that the business is in need of adapting its business strategy to maintain its leadership in a rapidly evolving world market.
The analysis of the case employed PESTLE analysis and SWOT analysis to systematically comprehend internal and external environment of the business. Through the above mentioned analytical tools and marketing analysis, secondary and primary issues of the business are identified. The case offers recommendations for the business to sustain its growth in the perspective of emerging threats to the business.
Kikkoman Corporation is a Japanese company which is a manufacturer of soy sauce. After starting its operations in Japan, the company expanded its business successfully to several global locations. The share of soy sauce mainstay is high in its global marketing, and even within Japan the share of the company is 30% at the global market share. United States is especially a very strong market for the company since the share of the company is 55% share in the United States. Kikkoman also owns a manufacturing plant in Walworth within United States of America.
The challenges presented in this case relates to stagnant sales growth of Kokoman Corporation and a highly underperforming stock price of the company. The head of the company in this case is Yuzaburo Mogi and the case is set during the end of 1990s. The company is characterized by the heritage of being headed by seventeen generations of the Mogi family and which is undergoing a shrinking market share in the mature market of its country of origin Japan. Another growing challenge for the company is finding is difficult to manage a highly diversified product line in other countries in which operate. The task has become especially difficult to manage diversification of product line outside Japan because the scale of operations outside Japan comprises of ninety-four foreign countries.
The tools used for situation analysis of this case are PESTLE and SWOT analysis because they related most closely to the facts given in the case.
Pestle analysis is a tool for analysis of external environment of a company to evaluate favorableness of the external environment to the business of the organization
– the political factors are neutral for Kikkoman because no regulations are being set by government related to operations of Japanese companies in US or other parts of the world.
– variables are highly favorable because the per capita income is growing very rapidly in all the countries where the use of Kikkoman’s products is high. For example, Japan, US, China and Asia are undergoing a rapid increase in prosperity at the time the case is authored.
– factors are also highly favorable for the business of Kikkoman because rapid globalization is leading to adoption go foreign foods and food additives in all regions of the world. The highest contributing product of Kikkoman, soya sauce, is going through a rapid adoption process in foreign cultures due to trans-cultural movements of eating habits and preferences.
– changes are challenging for Kikkoman because better methods of preparation of soya sauce are being created through technological improvements, while the competitive edge of Kikkoman’s was based on traditional and natural methods. The net outcome of this development is that technological improvements are helping Kikkoman’s competitors by eroding’s Kikkoman’s competitive edge.
– the legal environment is neutral for Kikkoman’s business because no new regulations have been imposed related to import or export of Kikkoman’s products (either raw materials or manufactured product)
– product of soya sauce does not have any impact on natural environment because the production methods does not release any harmful toxins in the environment nor does it lead to degradation of surroundings in any way.
is a company specific analysis which correlates the key strengths and weaknesses of the company (which are internal variables) to opportunities and threats in the external environment.
– the foremost strength of Kikkoman Corporation is that within Japan the company commands high brand equity for being known as the oldest and most renowned producers of soy sauce. Kikkoman’s visionary family ownership is an added strength. The ownership shares the belief that the company should be contributing towards the exchange of cultures by bringing together tastes and flavors of different countries together. The core competencies of the company are also high. Kikkoman’s management and ownership possesses rich experience of the food industry for meeting the needs of their consumer and these competencies have assisted them in sustaining their competitive position as the largest producer and distributor of soy sauce round the globe.
The financial resources of the company represent a significant strength because they can be leveraged along with the brand name of the company to launch innovative food products in the market. The culture of the company is based on Japanese values of integrity and hard work which makes the human resource of the company a valuable asset. Research and development investment of the company and good relations with community are supportive strengths of the business.
– the longer production cycle of this company in comparison to its competitors is a major weakness of the business. The direct outcome of the longer production process is more expensive products of the company reducing the margins. Another key weakness of Kikkoman is the inability of the organization to sustain its market share in their home country, Japan. The higher cost associated with shipping the product in several countries of the world is yet another weakness. These added costs are mainly due to tariffs and taxes paid on transportation and freight of manufactured goods. These weaknesses are very important because in this industry barrier to entry is very low because it is a commodity market where use of technology or expertise for production is minimal.
– globalization represents a major opportunity for the organization. Due to globalization of cultures, there are growing markets in USA and EU for this category of food products. In addition to globalization, economic growth within USA and other parts of the world are leading to an increasing demand for oriental cuisine. There are emerging markets for the product in Asian continent which needs to be capitalized promptly before other competitors take advantage of it.
– technological improvements are the biggest threat for Kikkoman because it will facilitate low-priced synthetic producers of soya sauce to capture consumer markets through low cost products. Owing to growing competition in this food sector, the consumer market is becoming increasingly price sensitive. Also, a major threat associated with this industry is the frequently changing demands of consumer. The dietary preferences of consumers may change radically eliminating the competitive advantage of the company. Competitors’ intense rivalry at the retail markets of Japan is likely to spill over to US and European markets as other brands will follow the lead of Kikkoman’s growth by marketing their products outside Japan. There are country-specific risks associated with making sizeable investments in foreign markets where business environment may not be as favorable as US.
The marketing strategies adopted by Kikkoman’s corporation are to position itself as a natural producer of soya sauce rather than a mass-produced synthetic brand. Also, country branding of Kikkoman is centered around Scandinavian countries rather than as a Japanese brand. It was part of the marketing strategy to engage in marketing of imported brands and products for Japanese market.
The primary problems of Kikkoman’s Corporation presented in the case are stagnant sales of the company with slow growth since early periods of the year 1996. The stocks of Kikkoman are underperforming in the stock exchange especially in comparison to other players in the market. The management of the company is also foreseeing gradual changes in tastes and preferences of the consumers which will erode competitive advantage of the company.
The secondary problems which are encountered by Kikkoman Corporation relates to the growing pressure on the business to innovate and diversify its product lines to match evolving consumer demand. The company needs to grow its sales despite growing competition in order to sustain its share price. The most important problem faced by the company is to augment US market while maintaining share of Japanese market.
In the perspective of the above mentioned analysis, the suggested strategy for Kikkoman is to be adaptive of technological developments rather than being critical of them. The company can increase its market share by launching a slightly lower cost sub-brand of its existing soya sauce product. This strategic decision will enable the organization to cater to the target market which are price sensitive and, hence, increase its sales. The sub-brand can be produced through mass-production technology to transfer cost advantages to the consumers. The growth in the top line of the company will contribute towards strengthening of the stock performance of the company.