Last updated: July 21, 2019
Topic: BusinessBusiness Operations
Sample donated:

Kikkoman Corporation is an international company based in Japan and founded in the year 1917. Its geographical location is at Noda, Chiba Prefecture, Japan. With a history stretching over 3 centuries the company has grown to constitute of 8 family owned businesses founded as early as 1630 by the Mogi family. Over the years Kikkoman has in its strategic planning diversity its products from mainly the production of soy sauce to include food seasoning and flavoring, milling, shoshu, sake, juice as well as other beverages, pharmaceuticals and restaurant management services. Following a successful business history, Kikkoman has attracted some of the best beverages in the world such as Coca Cola who have a working business relationship particularly in the area of bottling of Coca Cola products in Japan. Its main products and services have been dominated by soy sauce, which is legendary associated with Kikkoman Corporation and the Mogi family. So famous is Kikkoman Corporation in soy sauce production that it enjoys the sole rights to supply the imperial house in Japan with soy sauce.

Just what has contributed to the success of Kikkoman Corporation? The strategy a company adopts is very keen in determining the success such a company will achieve in the industry. No matter the strategy constant updating and realignment to market situation is always important. With the changing conditions of market and industry, it is important for an organization to keep its strategy intact with the changing business environment. At Kikkoman Corporation, the Mogi family drawing from years of experience has blended traditional managerial practices with modern management practices to respond to an ever-changing business environment. An outdated strategy cannot fulfill the needs of today’s global environment. In order to go through the updating process, Kikkoman Corporation often carries on an audit to analysis which aspects require improvement. Such an analysis is also meant to specify the particular strategy necessary to support the business operations. Equally important is the application of information systems to address areas requiring urgent attention as well as filling the gaps in the functional aspect of the business.

By accessing the knowledge possessed by an organization about its competitors and market environment, the managers can effectively take decisions in order to find the most feasible way for their businesses to maximize profits and improve market share. Equally important in the ability of the organization to calculate the extent to which change needs to be introduced to the organization. Although the identification of the problem is a big issue, the consequences of failing to analyze situations are a costly idea. At Kikkoman corporation analysis is constantly carried out as a way of finding solutions, which make sense in particular business situations.

In the volatile business environment of the 21st century, the most important climate of today’s business is constant changing and updating with the internal and external conditions. Change can be referred to as internal, external and business process re-engineering as well as transformation programs. The purpose of this report is to analyze the strategy that Kikkoman Corporation has utilized so as to remain a market leader.

Company Background

Kikkoman Corporation is a multi national company with presence in major food and beverage markets all over the world. Founded in 1917 in Noda, Japan, the company re-invented itself from a business founded in the 17th century by the Mogi family. In 17th century, the Mogi family businesses, which came to be re-known as Kikkoman Corporation in 1917, specialized in the production of food seasonings from herbs, which were cultivated locally, and mostly by peasant farmers. Soy sauce, which is a favorite food seasoning in Japan, was the main brand, which propelled the business into success that is associated with soy sauce branch even today. From a family run business, Kikkoman Corporation has grown to become one of the world’s largest and famous manufacturers of soy sauce with the overseas sales constituting of 20% of its revenue[1][2]. The company has diversified to include in its famous brands products such as Mann’s wine, vegetable juices as well as brown rice. Today, Kikkoman Corporation collaborates with other multinationals such as Delmonte and Coca Cola[3].

Mission

Kikkoman Corporation has the following mission: to strive for the whole hearted satisfaction and enrichment of its customers.

Vision

To achieve sustainable growth and goals to this endeavour has included maximizing return to shareholders by being mindful and responsible to its customers. To satisfy customers’ desires and needs as well as to collaborate with partners so as to build a beneficial relationship able to satisfy a global citizenry.

Values

To be mindful of the future generations, to show commitment to excellence, to fuse authentic and modern technologies, to satisfy customers, as well as to generate wealth to its shareholders.

 

Corporate Social Responsibility Policy

Kikkoman Corporation has come up with an Integrated Marketing Plan (IMP) masterpiece for guiding the company into becoming the company of choice for soy sauce consumers. Through brainstorming sessions amongst its staff, and as well as in consultation with several consultancy firms, the company has developed a goal to concentrate on branding aimed at augmenting the organization’s image in the eyes of prospective customers. This is achieved by designing messages aimed at communicating the market plan internally and externally. In order to dissect the needs of the target audience, a market analysis is carried out with a purpose of ensuring effectiveness of all marketing campaigns[4]. Such marketing efforts are designed in such a way as to take care of all geographical zones Kikkoman Corporation covers. The IMP also seeks to coordinate all the marketing campaigns as well as to ensure that the marketing plan works to the advantage of Kikkoman Corporation. The company also enforces evaluation and monitoring strategies aimed at ensuring that the IMP transforms the organization into a market leader.

Kikkoman Corporation has come up with policies outlined to guide the company in its social responsibility endeavors and to ensure good corporate governance. Corporate social responsibilities has been viewed narrowly as simply giving back to the society but at Kikkoman Corporation it is more than that. Giving such a narrow definition to corporate social responsibility carries the risk of treating corporate social responsibility as a constraint to the resources of an organization, which are usually scarce and hard to come by. Kikkoman Corporation appreciates the role of corporate social responsibility if utilized well and a company has greatly benefited from this approach especially in generating royalty from its customers.

Kikkoman Corporation has become a household name for the entire period it has been in operation. This success has been as a result of Kikkoman repackaging its products to reposition them as modern in line with global trends. The company continues to be a leading example in terms of community involvement considering the fact that the company has on several occasions sponsored several community initiatives such as environmental campaigns. Continually, Kikkoman Corporation depends on creativity and innovativeness especially considering their technologically favorable environment. The company constantly invests in research in order to come up with customer-focused products. With a customer royalty accounting for over 80% of the households in Japan alone and unrivalled customer base in Japan, Taiwan and the USA, Kikkoman continues to feature as a world leader in the industry. In terms of technological advancement, Kikkoman continues to lead considering the adoption of modern technology as well as adoption of efficient systems such as outsourcing of labour, market intelligence as well as the adoption of e-purchasing systems.

In terms of industry attractiveness, the prevailing situation for Kikkoman Corporation favors the company. Although the environment cannot be termed as monotheistic, Kikkoman Corporation enjoys near monopolization of the Japanese market and a great share of the USA market. This clearly indicates that Kikkoman Corporation has the potential to manipulate market forces to its advantage[5].

However, Kikkoman Corporation continues to face competition from competitors such as Ajinomoto, Heinz as well as Suntory Ltd. To deal with the threat of competitors, Kikkoman Corporation continually applies strategic measures in all its important decisions. Kikkoman’s performance has been termed as sterling by many business analysts. The chain of 8 family-owned businesses, recorded sales revenue of above $3,060 million in the physical year ending March 2006[6]. By applying consents like vendor managed inventories as well as just-in-time concept, Kikkoman Corporation has continued to maintain leadership in the food seasoning and beverages market in Japan. It also endeavors to remain a low-cost producer so as to maintain market attractiveness. By all standards, Kikkoman Corporation has achieved low-cost retail prices something, which has contributed to client faithfulness or royalty. This is core in terms of ensuring that the company saves extra costs associated with poor planning and wastage.

By keeping products and services as low as practically possible, Kikkoman Corporation has afforded to maintain lower prices than most of its competitors and this is also a strategy geared towards industry attractiveness. The other area in which the company has achieved competitive advantage is in terms of adapting information system technology. By choosing to be a low-cost producer through utilization of modern technologies, the organization has set out to be a market leader. To this end, the organization has incorporated information technology into its external and internal processes through computerization of its purchasing systems and value-chain distribution to incorporate e-purchasing. As a purchasing strategy, e-purchasing as well as e-marketing are economical, reliable, and cost-effective. Compared to a competitor who does not utilize the e-business concept, Kikkoman Corporation has been able to save a lot of undesirable costs and expenses by embracing e-business as a marketing strategy as well as incorporation e-business in its business processes.

For any company, competitive advantage also depends on how that company utilizes and takes advantage of buyer-power at its disposal. This is important in that if a company spends less amount of money to make purchases and to buy raw materials, what this means therefore is the fact that eventually, the company will achieve economies of scale[7]. Equally important is the ability of an organization to access and analyze the threat of substitutes. In a fast-globalized world economy, there is usually the threat of substitution in as far as market leadership is concerned. It is upon the management of an organization to constantly strategize and keep ahead of competitors so as to avoid substitution. Other considerations, which management of organizations have to keep in mind include supplier power, ease of entry into new markets as well as the intensity of intra-industry activity[8]. Kikkoman has succeeded in its operations largely because it has converted all of the above variables to its advantage. For instance, by integrating IT throughout the whole business chain, Kikkoman Corporation has ensured that its partners are free and feel respected and therefore trade is done in an environment of cordial relationship.

Kikkoman Corporation main competitive advantages lies in the ability of the organization to identify new opportunities as well as staying ahead of competitors in terms of innovativeness and adoption of effective business systems. With a branch network of more than 10 outside Japan, Kikkoman Corporation continues to enjoy a market edge and is set to continue functioning in profitability in the foreseeable future. The company has a workforce of more than 6,000 employees. With such a big number of employees, success can only be achieved only if the proper human resource management strategies are put in place. At Kikkoman Corporation staff are valued and the organization makes every effort to maintain a well-motivated staff.

A well-motivated staff is the greatest asset for a company and therefore Kikkoman Corporation has been able to achieve that through introducing modern employee management systems, which aim at ensuring that, the best staff is maintained and also that staff get good compensation for their hard work. This has given Kikkoman Corporation a cutting edge advantage, in that it is able to attract and keep the best workers. In terms of supplies, Kikkoman Corporation has been able to cut lead-time by streamlining its supply chain management. By doing that, Kikkoman Corporation have come to be regarded as the industry leaders in terms of efficiency and cost cutting. Of all strategies, it is its quality of products as well as affordability that has made the biggest contribution to its market attractiveness as well as its competitive advantage.

Kikkoman Corporation has over 6,000 employees all of whom are trained through programs initiated by the organization. The company invests in knowledge management and development through ‘on the job’ training, ‘off the job’ training as well as ‘technology-based’ training methods. Also as a strategy in supplies management, the organization has avoided reliance on single suppliers but has instead engaged different suppliers. This is effective in that it becomes very difficult for suppliers to collaborate and decide the terms for the organization. Kikkoman also ensures proper communication both vertical and horizontal through setting up of intranet and Internet, which interlinks all its departments to a central command.

All has not been smooth for Kikkoman Corporation as several problems and challenges have at times affected the company. For instance, during the 1980s the slow economic growth in Japan made it very difficult to project growth and therefore plan well.

Globalization is the processes through which countries as well as states of the world have increased their ability to connect and depend on one another to improve the worlds markets as well as businesses regardless of their cultural diversity[9]. In terms of globalization, the company has fully tapped into emerging opportunities. However, it has to deal with some negative publicity touching on ethics. There has been isolated media reports accusing the company of oppressing employees to an extent whereby lay-off of employees has been accused of leading to joblessness.

Financial performance for Kikkoman Corporation is exemplary with physical results for the year ending in March 2006 showing great improvement in sales volumes, which stood at $3,060 millions. This is a 4.5% annual growth indicating a net income of $86.1 millions and an income growth of 2.4% in the financial year ending in March 2006[10]. It is forecasted that growth for 2007 may hit a 6.0% mark.

Recommendation

It is highly recommended that Kikkoman Corporation address the threats of current economic climate by further diversifying its brands and stop over reliance on soy sauce. The company must exercise caution in projecting future results because of the political and economic threats, which are unforeseen. The company must utilize the strengths it is enjoying and continue maintaining the high budgets it has been allocating to advertising and promotion. The company should also further diversify its utilization of Internet as well as web-based technology to its advantage. The company needs to tap into opportunities occasioned by globalization and expand to new markets.
S.W.O.T. Analysis of Kikkoman Corporation

 

STRENGTHS

·   Strong brand name.

·   Extended customer base in more than 10 countries.

·   Low threat of new entrants.

·   Continuous training programs for employees.

·   High budgets of advertising and promotion.

·   Good relations with the media.

·   Web-based presence.
WEAKNESSES

·   Low ROE as compared to its close rivals; Ajinomoto, Heinz and Suntory Ltd.

·   Creates legal and territorial problems.

·   Lack of funds for regional expansion.

·   Old image still exists.
OPPORTUNITIES

·   Expansion in terms of introduction of new and innovative products.

·   Expanding market due to globalization.
THREATS

·   Current turbulent economic climate.

·   Over reliance on one brand, soy sauce.

·   Results to be achieved in future can be less projected.
 

P.E.S.T.L.E. Analysis

 

POLITICAL

·   Taxation may be high.

·   High interest rates.

·   Price regulations.

·   Mandatory employee benefits.
ECONOMIC

·   Strong economic system in Japan.

·   Established infrastructure.

·   Employment creation.
SOCIALOGICAL

·  Appeal to different social classes.

·  Leisure interests are catered for.

·  Entrepreneurial spirit amongst Japanese.
TECHNOLOGICAL

·   Improved technology.

·   Impact on economic growth.

·   Strict intellectual property licensing.

·   Strict patenting requirements.
LEGAL

·   Different legislations depending on markets.

·   Many regulatory bodies.

·   Strict employment laws.

·   Tough consumer protection legislations.
ENVIRONMENTAL

·  Strict customer values.

·  High market values.

·  Strict environmental regulations.

[1] http://www.kikkoman.co.jp. Accessed on 12/05/2007.
[2] http://www.kikkoman.co.jp. Accessed on 12/05/2007.
[3] http://www.kikkoman.co.jp. Accessed on 12/05/2007.
[4] Clancy, Kevin, J. & Peter, C. Krieg. 2000. PP.114-116. Marketing Management. Counter-intuitive Marketing. The Free Press.
[5] Ernest, J. 2004. PP.103-109. Strategic Management. 3rd Ed. London. Macmillan Publishers.
[6] http://www.kikkoman.co.jp. Accessed on 12/05/2007.
[7] Fred, R. David. 2003. Strategic Management Concepts and Cases. PP.165-166. New York: McGraw Publishers.
[8] Porter, Michael. 1998. PP.50-70. Competitive Advantage. (Revised Ed.). The Free Press.
[9] Kirby, P. 2004. PP.45-51. Globalization, the Celtic Tiger and Social Outcomes: Is Ireland a Model or a Mirage? Durblin. Routledge.
[10] http://www.kikkoman.co.jp. Accessed on 12/05/2007.