KFC case study
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KFC case write-up
Problem statement:
The extent to which the head office (HO) of multinational corporation (MNC) can control the strategies of overseas subsidiaries is an important issue faced by conglomerates. In KFC case, during the international expansion, KFC was facing several problems one of which was that strategic control over overseas subsidiaries was diminishing, resulting in the difficulties of effectively implementing HO strategies and orchestrating operations. KFC-Japan was complaining about the HO staff interference and reluctant to strictly follow HO requirement such as Data base operation system, financial system, capital expenditure, and etc. Due to culture difference, KFC-J was using different Menu and advertising which local manager believed to better fit local market. Other discrepancies such as capital expenditure and performance measurement also existed.
Theoretical rationale:
Normally, HO can retain control through two methods: substantive control and organizational context. Substantive control refers to the use of strategic resources, such as technology, capital, management, and access to market, as a basis of control. HO manager's ability to use strategic resources as levels for control diminishes as subsidiaries matures. Organizational context refers to the blending of organizational structure, information systems, measurement and reward systems, and career planning and a fostering of common organizational culture.
Analysis and Recommendations:
Vertical axis represents HO sophistication of creating and using organizational context for strategic control, and horizontal axis represents extents of dependence of subsidiaries on HO for strategic resources...