AN ANALYSIS OF THE YOGO GAME: STRATEGY IN THE UNITED STATES CASE BY IVEY SCHOOL OF BUSINESS
Executive Summary
Yogo Game America is currently at a crossroad, the decision of how to proceed forward with the organization structure, corporate culture and overall strategy of their company is something that must be done right the first time or else they risk completely failing in their expansion into the western market. Given the trade-off between Japanese and Western management styles, Yogo Game would best find a suitable compromise that brings out the benefits of both while mitigating the detriments. A cohesive and familiar organizational structure and culture is core to employee satisfaction and productivity, which in turn, is a primary driver to the company’s success and their strategic goals. The company should find an integrative policy that promotes both the collective group work efficiency symbolic of Japanese organizations as well as individualistic initiatives and innovations of the American organizations . On top of that, the organizational structure should adopt the fluid American-style structure but also place emphasis on Japanese-styled group work efficiency. To be successful within this highly competitive market, it would be necessary to the firm that the initial entry into the market be done with care. The organization is recommended to hold off the entry of their existing products until they have fully analyzed the different consumer preference within the foreign market and have adapted their products and services accordingly to ensure the maximum probability of success. After the initial success upon entry, the company should then aggressively expand their assets and talents using mergers and acquisitions to gain increasingly larger market shares within the market. Yogo Game America definitely have the potential to be great, but the realization of that potential can only come after an arduous term of preparation before their market entry.
Background
Yogo Game, Inc. is a multinational corporation that operates within the internet commodities and services industry, employing over 2000 individuals across all their subsidiaries within America, China and Vietnam as well as their home nation of Japan. Having captured great success from their home country of Japan as well as a couple other surrounding countries in east Asia, the firm looked towards the west as the next step in their efforts to globalize to become an international presence within the industry. Tracing its humble beginnings to 2002, when company founder Kenzo Makoto and associates kick-started the company’s legacy with the launch of a simple advertisement product called “Yogoclick”, the company quickly gained traction and attained success within the following year, and was awarded Venture of the Year in 2003 (within the Japanese market). Following this momentum, Yogo Game soon entered the Tokyo Stock Exchange in 2004 and, despite sub-par conditions within the industry due to the recent dotcom crash, thrived and diversified their product portfolio to include other services such as Mobile Applications, Virtual Communities, Venture Capital Investments and Search Engine Optimization. By 2008, the company announced its first year of operating within the black, as well as launched their most successful products to date, the online blogging service named Zemba, which would become the core of their operational strategy due to its long-term potential and profitability. Supplemented by their other pre-existing internet services, the blogging platform would quickly grow and become Japan’s overall leader within the market in under just 4 years from its introduction, with over 20 million unique registered users. Zemba’s success helped push Yogo Game’s profitability to become one of the industry leaders within the Japanese market, and it even helped generate 2 other profitable spin-off products; Zemba Now, a twitter-like blogging platform, and Zemba Pegg, a virtual community whereby players create avatars and partake in events and minigames online. By this time the company realized the limits of the Japanese market and sought to expand into the larger Western markets in America, hoping to capitalize on the rising trend of social mobile applications and services there. The creation of their American subsidiary Yogo Game America was established in Menlo Park (a city within Silicon Valley), California in 2012 and Hiro Keigo was sent to act as CEO and ensure the success of their operations.
Problem Definition
Shortly after the establishment of Yogo Game America, management quickly realized the obstacles that the firm will need to face within this foreign market. The most notable of that would be the cultural difference and the many implications it has on their internal policies and overall strategy going forward. Currently the workforce of the subsidiary is composed of only 35% American employees, while the rest are made up of Japanese expatriates, and there are plans to triple the number of workers by 2017 and have it be composed of 70% of Americans, double the current ratio. This expansion in progress proved to be difficult, as there exists clear corporate culture gaps between the Japanese and their American counterparts. Keigo knows that great talent is hard to come by within Silicon Valley and the firm needed to act quickly and decisively in order to stay competitive within the market against their competitors. However, externally, the Japanese mentality towards jobs and careers differs too much from the American customs. There also exists a point of tension between offering competitive salaries for top talent and the need to save on costs within their operations. Internally, there exist obstacles regarding the cooperation between the American and Japanese employees. The obvious would be the language barrier that prevents the workforce to communicate clearly and efficiently with one another. Besides that, the Japanese expatriates still clearly clutch onto the culture of the Japanese business society, where everything was very formally structured and hierarchical decisions needed to be conformed upon by all levels of management before talks of implementation. Adding onto that, the Japanese corporations induced enthusiasm and motivation through collective team-based competition; employees are pitted against the opposition within competitor companies to promote in-group cohesiveness. Internal individual competitiveness were shunned on, which clashes against the American norm of individual-based competition on creativity and resourcefulness. Finally, the Japanese thrived on perfectionism and excellence, and generally shied away from being embarrassed through making mistakes or public disputes and conflicts. This might prove detrimental towards facets of the operation within the American subsidiary in areas such as marketing, sales, and research and development. The key problem that faces Yogo Game America is how they should proceed forward facing these issues, when it comes to internal management and company culture should they adapt a westernized approach that is familiar to local employees, or should they implement the standardized approach that their parent company in Japan has found success with given the cultural barrier? Or should they fuse, adapt and go forward with something that integrates the two that best works for their situation? On talent recruitment and employment, should they adhere to the rigid Japanese structure and aim to save costs or strive to be competitive in an industry where human talent is a necessity for firms to succeed and develop long term competitive advantages?
Key Criteria
In order to design a comprehensive solution to both internal and external problems that the firm is currently facing, there needs to be a clear guideline on how to properly gauge the potential effectiveness and feasibility of each possibility. The following criteria is laid out to guide the analysis and the design of alternatives in the direction that would result in the best outcome for the company going forward.
Theoretically, an optimal solution for Yogo Game America would be one where they could achieve the duality of achieving success within the competitive talent recruitment against its rivaling competitors while doing so at lower costs than needed. In addition to that, it would also be most optimal for the company to internally develop a corporate culture that would bridge the gap between the Japanese and American styles and approach to management. The following list of questions should be used to evaluate any possible approaches to solve their problems:
- Does the solution include considerations for both sides of the very divided workforce?
- Does the solution bridge the gap between Japanese communication and mentality and their American counterparts?
- Can the solution promote individual competitiveness while still help maintain productive and cooperative work between employees?
- What type of company structure does the solution propose and would it be effective and cohesive with the proposed company culture and human resource policies?
- What is the tradeoff between talent recruitment and talent quality proposed by the solution?
- What types of policies regarding the compensation of employees are considered?
- How profitable is the solution for Yogo Game America?
- Is there a long-term competitive advantage that could be derived from the solution that will help drive the company’s success within the market going forward into the future?
Internal Analysis
Cultural Impact Analysis
From the perspective of Yoga Game America, their most important policy concerning the company’s livelihood going forward would be the corporate culture. Within this umbrella term, there exists many points of tensions that top management needs to consider implementing a culture that is most fitting for their situation. As a Japanese subsidiary, the firm would like to keep attached to some of their parent company’s management philosophy whilst also considering the different cultural climate of workers within America. Listed below are the 3 main points of tension and some insights pertaining to each one:
- Japanese Collectivist vs. American Individualist Mentality: One of the key things that the case focused on when it mentioned the clash in culture was the difference in Japanese and American worker mentality. While the Japanese cultural Taxonomy focused heavily on the wellbeing of the collective group, the American counterpart emphasizes the personal initiatives of the individual. The Japanese expatriates working under Yoga Game America will undoubtedly prefer to keep the status quo and move forward with the corporate culture promoting actions that enhance the overall organization. However, this will only stifle growth and creativity from local American workers as they are accustomed to taking on personal initiatives that they see will be beneficial and being resourceful without the impulse to continuously check with management. That is something that must be absolutely promoted, as the technology industry within America is based heavily off of constant innovation and the market is constantly on the lookout for the next industry disruptor/trend setter. Vice versa with promoting an American individualist focused mentality that would cause confusion among the Japanese workers and lower productivity and expatriates’ job satisfaction. A satisfying middle ground between these two ends needs to be found; one that can satisfy both the Japanese value of collectivist group welfare as well as promote individual initiatives that the American locals bring to the firm.
- Japanese Hierarchical Business vs. American decentralized Business Structure: Another key piece of the puzzle is the design of the organization structure that Yogo Game America will lay the foundation to build as they expand and move forward. On one side the bureaucratical Hierarchical structure that Japanese companies are known to have allows everyone within the company on all levels a say into the decision and strategy of the company going forward, which is important to boost employee satisfaction by allowing them to see the bigger picture that they’re working towards and is key to the collectivist mentality that Japanese workers have become accustomed to. With this type of structure all important decisions must go through each level of management and reach a consensus before being implemented into action. However, that is not without its fault, as this structure and its decision-making process is extremely arduous and time consuming, and in many cases, may represents costs that far outweighs the benefits that it may bring to the company. On the opposite end of the spectrum is the more decentralized structure of the typical American business, this structure’s strength lies in its management autonomy across all levels, which opens possibilities that the Japanese style would not allow. By having the authority to make decisions tailored to each management level’s situation, each level of the organization can thrive alone and perform outstandingly when brought together. But this structure also has flaws in that management on lower levels may not align their actions with overall corporate strategy, which represents its own list of potential obstacles. A middle ground would allow management the autonomy to make decisions quickly while always keeping updated on corporate strategy.
- Japanese vs. American style Human Resource Management: The final point was not mentioned extensively in the case like the other two, but it is equally as important as it relates to the level of employee productivity within the company. The style of human resource management pertains to policies regarding employee performance evaluations, salary and compensation (bonuses, increases, benefits), and employee support within the organization. All of which will have a visible impact on each employee’s level of satisfaction in the company which in turn translates to their level of productivity. An American style will place emphasis on current employee satisfaction and performance by giving them great benefits and opportunities for promotion, but the American system often neglects the worker’s career progression and harsher performance evaluation systems which results in higher turnover rates in comparison with the Japanese counterpart. Which traditionally allows the worker to work for the company for the duration of their lifetime until their retirement, giving promotions based off seniority instead of merit but has great career planning and progression support from their HR departments. Between these two it should be important to note that because Yogo Game America is subsidiary with many Japanese expatriates on all levels of operations, that their intrinsic want of being taken care of by the company as is custom in their culture be satisfied. This option should also be extended to the American workers who prefer it as well, but their desires should also be addressed as well by promoting meritocracy within the company.
Diamond-E Framework
The key takeaways from the above Diamond-E analysis for Yogo Games going forward would be to import and leverage their pre-existing successful line of products and services to ensure a stable and conservative entry into the American market. These products and services should have adjustments made to them to account for the cultural and consumer behavioral differences between the Japanese and US market. On that note Yogo should ensure due diligence through extensive market research to best adapt their products to the new consumer base using their existing industry knowledge. The company should go forward paying mind to the management preference of keeping cost efficiency and profitability high, and although these two goals may not be achieved within the short-term for the near future, Yogo should enact policies that build the foundation of a successful company’s strategy to achieve these goals in the long term. Finally, the analysis shows that the company’s future is greatly hinged on the success of their talent recruitment as they further expand their workforce.
External Analysis
From the porters 5 analysis of the company’s current situation, it seems like at a glance that Yogo Game’s chances of success are slim, as they have no concurrent userbase nor do they have any brand loyalty or recognition within the new market. With the buyer power, threat of substitution and competition so high, it will be difficult for the firm to gain a foothold within the industry without struggle. Being the new entry themselves, the company really needs to tap into the innovation of their R&D department to deliver products and services that are differentiated from the sea of available pre-existing substitutes and competitors. To accomplish that, the company must have an organizational structure that promotes innovation and resourcefulness in order to stay competitive within this market. Therefore, product positioning is the crucial part of their operation that they must really take heed and do well with establishing to set them apart from their competition from the perspective of the consumers.
Value Proposition (Employee) Analysis
From the analysis done so far, it seems that human talent is the key for the firm to do well, and therefore it would be crucial to Yogo Game that they develop a comprehensive and attractive recruitment campaign aimed towards the qualified individuals who have yet to find employment. Similar to other competitors within the industry, the company should place emphasis on recruitment of young university graduates, who are going to become the primary driving force behind Yogo Game America’s innovation in their products and services. While it might be portrayed to be unethical within the corporate culture, the company may even consider the possibility of poaching excellent workers from other firms (GREE, Inc. and DeNA Co.) as well which would bolster Yogo Game’s human talent pool while also setting back the talent pool of its direct competitors. The company also have the option of sending out excellent workers to their corporate headquarters in Japan as an added benefit (among other ones that should also be considered) for performing well, which would further promote the innovation within individual and groups of employees within the company.
Assumptions for Alternatives
- The quality of recruited workers for Yogo Game America is proportional to amount of compensation given in their salary and benefits. In other words, mediocre compensation would attract mediocre talent, and industry leading compensation would attract likewise talent.
- That the company can remain solvent for the future period of 6-12 months knowing that the likelihood of turning a profit within that period is unlikely.
- The firm can successfully position themselves within the market to gain a stable foothold.
Alternatives
- Refocus onto another area of expertise with less competition: While there already exists heavy competition within the mobile applications and online social community services, Yogo Game has other areas of expertise that they developed over in the domestic Japanese market that they can choose to focus on in their business model. Instead of placing heavy emphasis on their Zemba product line, most of which has existing substitutes within the already heavily saturated American market (Facebook, Twitter, Tumblr etc.), they have the option to develop a model whereby the main stream of revenues are from Online Advertising, or venture capital investments in tech startups within Silicon Valley. Yogo Game Japan has already succeeded in both these areas of business and it would cut down on the costs necessary to adapt their mobile applications and online community platforms to the western consumer preferences. Although if they were to focus on these two areas it still pertains to areas of risk, however, the market conditions for these two services are significantly less competitive than the mobile application counterpart.
- Implement an Organization Culture that promotes only the Japanese/American corporate culture values: This would allow one side of the culturally diverse workforce to feel completely comfortable while subjecting the other side to adhere to foreign workplace policies that they probably find confusing and difficult to implement or navigate around. But the positives of this alternatives would be that if a Japanese corporate culture is implemented, many of the existing policies from Yogo Game Japan can be directly imported into the new workplace setting whereby fewer resources and time is spent on developing a comprehensive policy for both sides. Vice versa if an American culture is adopted then the locally hired American employees would thrive really well under the management policy and style, which also carries the benefit of cutting down on resources required to design and implement a “middle-ground” policy that satisfies both sides and allows for the employees the room for individual initiatives for innovation, which is necessary for the company to thrive under the given market competition.
- Merger and Acquisition with competitors: In order to reduce competition and have their products stand out when they are introduced to the foreign American market. Product positioning is not the only way to reduce competition, Yogo Game America can choose a different approach to reduce competition as well as bolster their human talent pool at the same time by seeking out Merger and Acquisition deals with suitable companies. With this method, not only can the company prevent the market from further saturation, it can also reduce the time and effort invested into their recruitment programs and with a proven track record of successful venture capital investments back within the domestic Japanese market, it would not be extremely difficult for the firm to translate the necessary skills and knowledge required to carry out a M&A deal within the American market. While this may seem perfect from a glance, the one important underlying assumption is that underlines this alternative is that Yogo Game America, or their parent company in Japan, has the required capital to carry out Merger and Acquisition deals, as evaluations of tech companies are often overestimated due to the nature of their potential earnings which can range widely from time to time depending on industry trends.
Since the case did not provide any detailed outlines of the financial or market situation for Yogo Game America, these evaluations are estimated based on assumptions and are the best estimates given the limited information.
Recommendation
The key for Yogo Game America’s success lies in its corporate culture policies, the company needs to go forward with a policy that brings out the groupwork efficiency that is traditional to Japanese corporations while also actively promoting individual initiatives and innovation processes. It is the key point of tension that will determine the competitiveness of Yogo Game America in their expansion into the North American market. As such, a recommended example of the policy must decide on the 3 main tradeoffs noted in the corporate culture analysis from above between the Japanese and American management styles that will become a cornerstone of the foundation of this American subsidiary.
Corporate Culture Policy
The first tradeoff involving an overall collectivist or individualist organization mentality should consider the impact of the resulting policy on the job satisfaction and productivity of both the Japanese expatriates and American local employees. Yogo Game America should not shy away from openly promoting active individual initiatives, but rather handle this in a way that does not spawn off unhealthy internal competition between workers, which would only lead to distrust and lack of group work efficiency. A way to achieve this effect would to be to instill a subtle message of collectiveness within the company, that each individual will always be recognized for their personal achievements in a larger picture that helps everyone within the company move forward. If handled properly like so, Japanese workers will still retain the familiar work climate of cohesiveness and group efficiency that they are accustomed to, while also promoting the innovation of all employees across the organization. It will not only help promote crucial personal initiative to be taken on by individuals but also eliminates the side effect of unhealthy internal competition. In this way Yogo Game America can set an organization mentality that appeals to and reaps the rewards of both sides of the spectrum.
The second tradeoff ties into the first, and it would be recommended for the firm to ditch the rigidness that is so often seen tied with the traditional Japanese hierarchical structure for the American styled that emphasizes openness. Due to the nature of the tech industry, it is much more important for daily operations and decisions to be made with haste, and therefore a Japanese style organizational structure and its decision-making process would only become an obstacle in the company’s road to success. Each tier of management would be given autonomy to make decisions based off what they think is best for the firm’s future. To circumvent the possibility of misalignment with overall corporate strategy, the company can choose to retain the Japanese daily company meeting that involves all employees. Which will allow everyone to get onboard with the current situation of the company which they will factor in when performing their daily tasks but also motivates the workers through feedback and allow them to witness the results of their collective work, which would also further enhance intra-company relationships between employees.
The final tradeoff on HR policies is the one issue where Yogo Game America should not be recommended to find a middle ground for as a potential solution. Instead, the firm should prepare and present several different packages that are either American or Japanese styled to the employees and allow them the final choice in which HR policy they would like to partake in. These packages would include different details concerning compensation, benefits, and performance evaluations. Since the style of HR management is so vastly different between Japanese organizations and their American counterparts, it would be very difficult to find a compromise between the two that would serve to satisfy most of the employees. Another trouble with finding a middle ground would be that it would contain policies that seem foreign to both American and Japanese employees and furthermore. In the long-term future of the company, most of the expatriates will want to return to Japan and when the time comes, many of the Japanese style HR policies will simply become alienating for the company made up of mostly American workers. Therefore, it presently the best option for the firm to present options and allow the employees on both sides of the issue choose the option that best fits their situation.
Market and Operational Strategy
With a comprehensive corporate culture that proves to benefit all workers, the next step for Yogo Game America is to design their overall strategy in gaining a foothold within the highly competitive American market. As already noted, the success of the firm depends heavily on how innovative their products and services are as well as how quickly do they catch onto and leverage industry trends to their benefit. Neither of these two strategic elements would be possible without excellent human talent, which is why the company is recommended to delay the entry of the mobile application and internet community service market for another 6 months. During which, the firm should heavily focus on analyzing the differences between American and Japanese consumers and adapt and tailor their existing products to best suit the new demographic. On top of that, it is also very crucial that they company uses this time to recruit top talent. Keeping in mind the strategic goal of being cost efficient in the process of recruitment, it would be fairly difficult in which Yogo Game American can do so without offering competitive wages and compensation when going up against their competitors who shares and suffers from the same lack of talent after their expansion into America. That is why that the company should not just focus on recruitment from well-known sources, but innovatively source talent from other areas. One of the alternatives talked about the possibility of focusing on merger and acquisition within the industry for their entry into the market and that is exactly what Yogo Game should do. With the necessary knowledge and know-how from their domestic Japanese markets, it would not prove to be difficult for the company to scout out suitable startups that would prove beneficial to the company’s future, providing much needed talent and assets that they can leverage over their competitors within the market. Complementary to this, their industry trend analysis that is being done within the company allows the merger and acquisition deals to be done within times where the potential candidate would not be overpriced, allowing the firm to contain their expenses when expanding with this method. After the 6-month period of doing their due diligence within this new market, the company should slowly rollout the products and services that are well-tested and adapted to the preferences of the American consumer, paying crucial attention to the positioning of their entry to distinguish themselves from their competitors. It would be at this point where the firm can more aggressively expand and penetrate the market, starting with establishing a foothold by introducing their line of pre-existing products and rapidly adjust and innovate within the industry in tune with market trends to capture increasingly larger shares of the market.
By using this strategy to expand into the American market and loosely base their decisions around the timeline above, Yogo Game America will at the very least gain themselves a comfortable share within the highly saturated market while not exposing themselves to excessive risk.
JERRY'S PORTFOLIO 