Market Strategy Vs Organizational Structure

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You say you want help with the research for this assignment. Have you given any thought to the three companies that you might consider for this project? They are supposed to be very different, so let’s try KFC (e.g., franchise), Hyundai and Oil and Energy company. I will provide you with some essential information related to the questions, which you can use for your 5-7-paragraph discussion.
In general, a company will choose a marketing strategy and structure that accelerate the growth of the company. For example, KFC is a fast food franchise, so they marketing strategies reflect this structure internationally, with local people working in the KFC and supplying the chicken for the company (marketing strategy is to meet the needs of the people in Jamaica – where chicken is staple food). See more on this below.
ORGANIZATIONAL STRUCTURES
• TRADITIONAL
• BUREAUCRATIC
• HUMAN
• SYSTEM
• NETWORKED (?)
• MARKETPLACE (?) (See characteristics of each at http://eies.njit.edu/~turoff/coursenotes/CIS679/vg1679/tsld061.htm).

http://www.marketingforsuccess.com/marketing-questions.html

Task Name: Phase 3 Discussion Board

Details:
You realize there's a link between market strategy and organizational structure...so it's time to do more research! Look at three very different global companies. Determine their organizational structure and what market entry strategies each of these companies are currently using. Consider why each company designed its organizational structure to be what it is and why they have chosen to expand internationally in the manner that they have. Is each company’s organizational structure and international market expansion plans what you expected them to be? Share your thoughts with your international marketing special interest group by responding to the Discussion Board. Comment on at least two other postings.

Objective: Compare alternative organizational structures for international operations.
Discuss strategies organizations can pursue for international market expansion.
Use effective communication techniques.
Let’s look at several examples:
Example 1: KFC (excerpt)
Kentucky Fried Chicken (KFC)- one of the most known fast food chains in the world started in the early 1930's by Kernel Sanders in the Southern USA as a small franchise operation. Colonel Sanders has become a well-known personality throughout thousands of KFC restaurants Worldwide. Quality, service and cleanliness (QSC) represent the most critical success factors to KFC's global success.
What and why? Throughout its 35-year history, the company has gone through several stages and has answered to a legion of corporate parents from Heublein to R.J. Reynolds. The most significant stage was when the enterprise was sold to the American giant, Hubelin International in 1974. Rapid growth throughout the use of franchising together with increased competition from primarily MacDonald's reduced the consistency of the standard of both food and service on the individual franchise level leading to massive decreases in profitability. Together with low Research and Development funding from Hubelin, the division found it difficult to match the expansion plans of its main competitors. KFC responded to these problems by improving staff training; employ a new manager- Michael Miles capable of managing an effective turnaround strategy. The QSC motto was emphasized on a global level together with slogans such as "We do Chicken Right". In 1982, Hubelin International was acquired by R.J. Reynolds and Richard Mayer succeeded Miles. (Excerpt from http://www.geocities.com/TimesSquare/1848/kfc.html).
Why FRANCHISING? This reduced financial risk, but also increased problems of operational control, as local franchisees often were more interested in maximizing profits in the short term rather than to adhere to corporate standards and strategic plans. To find the balance between corporate control and cultural sensitivity has been the main point of concern at KFC.
INTERNATIONALIZATION OF KFC: (Excerpt from article present below)
Opposite to Hubelin International, R.J. Reynolds was willing to fund KFC's overseas expansion plans. In order to reduce risk, KFC encouraged franchising (e.g., organizational structure) in complicated markets. Why? This reduced financial risk, but also increased problems of operational control, as local franchisees often were more interested in maximizing profits in the short term rather than to adhere to corporate standards and strategic plans. To find the balance between corporate control and cultural sensitivity has been the main point of concern at KFC. (1)
THE CHINA OPTION
The China expansion plans first came-up in the early 1980's after several successful expansions in the South East Asian (SEA) region including Japan. Tony Wang who was born in China, educated in Taiwan and in the USA, and now living in Singapore was appointed manager for KFC's SEA region. He was given the autonomous responsibility to further investigate the feasibility to further expanding KFC's operations in Asia to the world's most populous nation and the largest market for consumer goods- China. On the other side of the scale, expanding into China would certainly be KFC's most risky international business strategy so far. Moreover, a "go-ahead" signal would make KFC the first western fast-food chain in China. (1)
MARKET ENTRY OPTIONS
There are three market entry strategies that can be employed:
Franchising/Licensing
Wholly owned subsidiary
Joint venture

First, KFC's traditional franchising strategy, which is emphasizing standardization and reducing financial risk, on the expense of cultural sensitivity and control. Due to China's strict foreign investment laws such a strategy is not feasible. In addition, KFC will be pioneering in the fast-food field and thus needs to be highly sensitive to cultural demands. In the past, KFC encountered problems with aligning corporate planning with franchisee's short-term focus on profitability.

A wholly owned subsidiary represents the second option. Such a strategy relies upon total control over competitive advantages and ensures complete operational and strategic control. It also involves high investment expenses with no financial risk sharing. With high levels of resource commitment and little country-level flexibility and responsiveness, this option is not recommended. (1)
RECOMMENDED MARKET ENTRY STRATEGY: JOINT VENTURE
When KFC first went into the Japanese market in the early 1970's, the company chose to form a joint venture with a large-scale poultry producer with excess capacity. This 50/50 joint venture served the two partners very well, as KFC was able to ensure a stable supply of quality supplies to its operations, and the local corporation was able increase efficiencies in production by selling its excess supply. Furthermore, KFC was able to utilize existing distribution networks serviced by the partner and at the same time, adhere to exiting rules and regulations imposed by the Japanese government on Foreign direct investment.
Despite of the many differences between the Chinese and the Japanese market, a similar joint venture agreement is highly recommended in China. The essence of a joint venture is the synergy effect of two different entities merging. Such an international business strategy will attempt to; solve many logistic problems such as access to good quality chicken and other supplies, solve many logistic problems such as access to good quality chicken and other supplies, ease the access to the Chinese market, share risk with a local entity, and finally serve as a sign of commitment to the host government increasing goodwill. In addition, due to the complexity of many barriers to entry into China, a potential partner with sufficient contacts/networks with government agency officials may smoothen the process of setting-up operations in the nation. (Excerpted from http://www.geocities.com/TimesSquare/1848/kfc.html).
Example: KFC: JAMAICA
a. KFC = Franchise
Cunningham1 (1986) identified five marketing strategies used by firms for entry into new foreign markets:
i) Technical innovation strategy - perceived and demonstrable superior products
ii) Product adaptation strategy - modifications to existing products
iii) Availability and security strategy - overcome transport risks by countering perceived risks
iv) Low price strategy - penetration price and,
v) Total adaptation and conformity strategy - foreign producer gives a straight copy.
In marketing products from less developed countries to developed countries point iii) poses major problems. Buyers in the interested foreign country are usually very careful as they perceive transport, currency, and quality and quantity problems. http://www.fao.org/docrep/W5973E/w5973e0b.htm

b. International Strategy

To offset the real and significant threat and high levels of competitive rivalry in the fast food industry and the growth of the sandwich market, an opportunity for leverage for KFC includes taking market share from major burger companies (i.e., Burger King, McDonald’s) as a result of the wider pressures of the global Fast Food Industry. Chicken is likewise. For example, to keep ahead of their competitors, KFC expanded into Jamaica. As chicken remains Jamaica's most popular protein, it's not surprising that competition in the chicken product segment of the quick-service restaurant sector is rife. KFC says ahead of the competition through regular surveys to determine exactly what their customers want and part of what the customers have told KFC is that they want to see KFC in more locations so that they have easier access to their product.
To target the customer in Jamaica, for example, the new stores will employ 230 workers, bringing to 2,207 the total number of Jamaicans employed throughout KFC Jamaica and Pizza Hut operations. But Charles Davidson, the company's manager for warehouse, commissary & purchasing, points to deeper economic benefits through the backward linkages to Jamaica's agricultural and agri-processing sector. For example, Davidson estimates that the new restaurants will increase the demand for chicken and other farm products like cabbage, tomatoes, lettuce and carrots by 10-15 per cent. "Discussions with several of our suppliers have revealed that, in the case of some agricultural products, additional acreage will have to be planted," says Davidson. "Opportunities are also being opened up for other farmers of some produce to gain access to the ready market the company's expansion is creating." Myers says that the expansion being undertaken would ensure the availability of the meals his company sells throughout Jamaica. It was also a way of meeting the growing competition in the fast-food market, he says. Thus, KFC product is demand, and this ...