Yoshinoya’s Current Strategy
Yoshinoya’s current strategy is to maintain market share by offering low price menu items to remain competitive, and at the same time concentrate on market expansion. While global competitors like McDonalds and Yum Brands are expanding through franchising, Yoshinoya fully owns and operates all of its outlets. This strategy has left Yoshinoya with higher operating costs and increasing operational risks evidenced by the increase in its debt to equity ratio and simultaneous decrease in its current ratio. (Exhibit 3 & 4) Even though Yoshinoya has substantially higher gross margins when compared to McDonalds and Yum Brands, (Exhibit 1) their operating margins are must lower due to their higher operational costs. (Exhibit 2) With all its efforts to increase the market share, Yoshinoya is killing the shareholder value and is moving towards a bankruptcy. At the same time McDonald and Yum brands are growing in a healthy fashion. McDonald’s menuofferings to cater to the Japanese market, as well as its convenient drive-through options have made them a force to be reckoned with in Japan. Likewise, Yum Brands chains like Pizza Hut and KFC, through its innovative advertising to make their meals a Christmas tradition, have become immensely popular in Japan. Unlike Yoshinoya, McDonalds and Yum brands have become lean and improved their operational efficiencies.
Yoshinoya is also facing stiff competition from domestic competitors. Zensho a local Japanese company introduced a new chain of suburban fast food restaurants called Sukiya offering exactly what Yoshinoya specializes in, beefbowls. However, Sukiya’s unique mass merchandising concept, where they control every step in the process, allow them to capitalize on economies of scale and keep prices low. Consequently, Sukiya was able to successfully execute an onslaught strategy against Yoshinoya by initiating a price war which saw Yoshinoya lose 20% of its store sales in 2010. Another domestic competitor, Hotomoto, capitalized on the needs of the aging population and the rising females in the workplace to offer 100% home delivery and takeaway boxed meals. Not only did they expand operations in Japan with 100 new outlets, they also launched a Global Strategy in 2010 by opening their first outlet in Beijing, China with plans to open 200 more in the next five years. 7 eleven, being the leading market share holder in Japan driven entirely by their sale of bento boxes, is launching a new strategy to focus on the quality of the food offering as well as expansion into emerging markets.