Strategic Business Planning for KFC - Case Study Example

Abstract KFC is a world leading brand in chicken and fast food business industry. It has a wide chain of franchise all across the globe. The company started from a small town to a big multinational corporation over the years. It functions and strategies are very much oriented in the direction of achieving its mission. The project brings forward the operational strategies, its internal analysis as well the standing of the company with reference to the five force model. The future positioning in the existing and new markets and the opportunities for growth and expansion is also well discussed. Sl. No. Table Of Contents Page No. 01. Introduction 3 02. History and features 3 03. External environment of the company 3 04. Mission and vision 4 05. Strategies 5 06. Formation of strategies 5 07. Future intent 6 08. Monitoring the strategies 6 09. Opportunities and threats 7 10. Internal analysis 7 11. Porter’s five force model 8 12. Positioning for future 10 13. Conclusion 10 14. References 11 Introduction KFC is the world’s largest chicken restaurant chain business and is based in Louisville, Kentucky. After the purchase of the company by PepsiCo in 1986 the business operations, style and product offerings have significantly changed. The business of KFC has faced many problems over the years in the international markets. In this project we study the internal features and operations of the company along with the future opportunities and recommendations for the same. History and Features Harland David Sanders commonly called The Colonel, after changing many jobs, finally owned a petrol pump business in Kentucky, USA. Many travellers stopped there for refreshment and food. This developed an idea in him to open some food station for those travellers. His use of the pressure cooker to cook chicken was very unique and it also helped in reducing time and serving faster. This process is still followed by the franchises. His recipe was a hit in some few years and the demand was immensely increasing. The original recipe of 11 Herbs and Spice produced the best cooked chicken which was named ‘Finger Licking’ taste of KFC. External Environment of the Company There are many external environmental factors that affect the business of the company internally or externally. i. Political Factors: The political factors don’t much influence the operations of the company as the company to free to sale. But in some countries the beef based items are restricted keeping in mind the faith of some communities. ii. Economic Factors: The economic conditions of the country largely influence the business of any company. This condition also affects the consumers as the cost of franchising, set up costs, etc. rise which ultimately leads to the increase in the cost of the final product. The suppliers of the goods bear the local economic pressure which is indirectly transferred to the buying of KFC. iii. Social & Cultural Factors: The social factors and the different social groups also can affect the working of a business. KFC being an American based fast food company also faces the problem about the social reservations of the home country. Increasing effect of people adapting vegetarianism is also influencing the sales to some extent. iv. Technological Factors: The world has become very technologically advanced over the years. Some customers are very rational in their approach towards quality, price and utility of the product. KFC once suffered a rumour on the issue of animal cruelty, but it fought through the situation to ensure its quality and position. Also with the use of technology, KFC has increased its sale by the process of online booking and quick services to customers using the technology. v. Environmental Factors: Different companies and product are facing different environmental issues like recyclable packaging, ISO approval certificates, global warming, etc. KFC has showed responsibility in this field and has ensured zero discharge to the environment which has increased the company’s cost but also helped in building a big brand image. KFC has also launched and supported many environment safety campaigns. Mission and Vision The mission of the company is to maximise its profits and deliver sustainable growth year after the year. The vision of KFC is to become the leading fast food chain business develops keeping up with the existing competitors and also maintaining the quality. To develop a friendly environment that appeals to pride conscious and health minded consumers (Fox, 2011). Strategies The company follows a basic strategy formula for meeting customer demands. It ensures good quality through a quality management program. They manage quality by understanding customer expectations, defining product specification through the understandings and finally ensure development of such products. KFC hires a professional interviewing service to survey the customer reactions to study their impression of products and services. KFC regularly uses market tracker to understand and survey its performance to other close competitors. KFC carries out quality, service and cleanliness program from a very early age of its business. This program follows a close study to evaluate the quality at each KFC restaurant, either owned or franchised, as per the viewpoint of a customer. The company has grabbed the opportunity of technological advancements to its advantage to provide quick services to the customers and a programmed online booking process. Formulation of Strategies In pursuit to enter different new markets and make substantial growth in the existing ones the company follows the following steps to device a best working strategy. i. Market Penetration Strategy: The Company focuses on the existing customers and products to increase its sales. They often apply special promotional schemes or low prices to increase their sales. ii. Product Development Strategy: With the application of this process KFC new product for its existing customers. They move into the direction of making a totally new product or improving the earlier product with new flavours and pack sizes. iii. Market Development Strategy: This is the most basic strategy applied by the company. With the acceptance of this strategy the company has been able to enter global market on such a large scale. New markets may not only be new geographical area or international market but it may also be new group of customers. KFC also looks to accept different advertising ways as a part of their strategy. For example the front of a KFC franchise in Asia may be much larger than those in USA. Future Intent The future strategies of the company are to enter into the non-catered markets with the best possible local taste and preferences. The company looks to open more franchises in better suited locations in existing markets. Another special strategy that the company looks to adapt is the food safety accusations in different countries. Also to meet the close competition from nearest rivals the company needs to plan out the food and rising labour costs (Brosnan and Sun, 2004). Monitoring the Strategies To ensure the food safety and control over the standards of their products the company follows some strict policies to monitor their existing and future strategies. i. Our Products: KFC cooks its products well above the minimum temperature recommended by WHO. The company has adapted a standard procedure to minimise cross contamination between raw and ready to eat products. Quality control is executed from purchasing of raw materials to final delivery of products. ii. Supplier Quality: The quality of the raw materials purchased is monitored by an ISO certified company to ensure best quality chicken. iii. Restaurant Quality: The main attributes of KFC restaurant are cleanliness, hospitality, accuracy, maintenance, product quality and speed of services. Also the set norms for any franchise of KFC require sanitation or personal hygiene and pest control. Opportunities and Threats KFC has the opportunity to enter markets in Africa and Latin America, with high potentials. It has the benefit of altering its global strategy for products as per the local food preferences of the people to attract more sales. The company has the advantage of a big brand name which makes entrance into new markets easier. It also can take over other small companies for sunken costs or bankruptcy business counters for low price and revive the sales under its name. With the increasing demand for healthier foods, home meal delivery system and introduction of new products to its chicken range provides ample opportunity for further growth (DeMaria, 2003). KFC faces threats from the growing legislation policies of international business which takes toll on the costs. New entrants in fast food industry and global health related norms and rumours can affect its business adversely. Internal Analysis i. Firm’s Infrastructure: Its strength lies in its brand reorganisation, financial strengths and franchising. KFC is also amongst the top leading fast food chains business in the world. The weaknesses in the infrastructure are lawsuits of different companies and cultural insensitiveness. ii. Inbound and Outbound Logistics: Good quality and supply chain control are the biggest positives for the company. Also the sustainable packaging and just in time order and delivery add to the inbound logistics of KFC. Refrigerated trucks and distributor agreements are specific outbound logistics features. iii. Operational Strengths: The Company focuses on research and development in target customer demands and trends. The franchises are required to purchase the supplies under a specific minimum requirement quality criterion. iv. Marketing & Sales: KFC has great stress upon the product, price, promotion and place for better operations. The company values the health and wellness of its customers and it makes great research and campaign in the market. The pricing of the product has a great influence on different class of buyers. Different value pack and family pack offers have enhance the business. The promotions through wide advertisements and proper place location and environmental friendly moves have helped in contributing to the sales figure. So the company is very well placed to run a business in its favour and operate with its systematic business planning. Porter’s Five Force Model Porter’s five force analysis is used to analyze the characteristics which affect the competition within an industry. The combination of the forces together combines to determine the level of competition that the company shall face. With the help of the analysis that KFC performs it helps them build the gaps and perform better. The five forces are: i. Intensity of existing rivalry: This is the most important determining force amongst all. It considers the level of competition between rivals who have close competition on prices and quality. There is a huge competition for KFC from its near competitors so the company has to strictly focus on quality and service to keep the sales high. ii. Threats to substitutes: The availability of substitute to the product increases the chance of losing the customers. Substitution thus has a direct effect on profitability of a business. With the existence of so many firms in the quick service industry and low switching costs, KFC is facing tough competition from its close rivals. iii. Threat from new entrants: The possibility of new entrants into chicken fast food market is quiet moderate as compared to big hotel industry where the same is very low as the cost involved is very high. But barriers in this industry are also very high as the market is flooded with big players like KFC. With large size and volume they achieve advantage in cost structures. Also the brand loyalty of customers is very high, so KFC has very moderate threat from new competitors. iv. Bargaining power of suppliers: The bargaining power of suppliers is very low in the case with KFC. As KFC has a huge number of food chains spread in large numbers across its operating countries, they select their suppliers through a competitive bid process. Any switching of its suppliers could immensely affect the revenue of the supplier. So the analysis states that KFC has a very low level of threat from its suppliers. v. Bargaining power of customers: Although the customer switching cost is next to zero, the fast food industry is very rarely concerned about the loyalty of its customers. In this modernising world the fast food eaters have grown tremendously. So the fast food industry has a very low level of threat from the customers. The huge volume of fast food eaters dilutes the bargaining power of customers to a minimum level. The five force model brings the advantages of KFC to the forefront and also points out the problems that the company is facing in its day to day business. Positioning for Future KFC looks forward to position itself as the number one fast food chain brand globally. Although it has good local business in the mother country it still is quiet behind its nearest competitions in the international market. SO the biggest challenge is to meet the global requirements to gain be the top. Also to make itself more appealing KFC needs to bring products with lower range and also specific changes in the existing ones (Sweet and Balakrishnan, 2010). It also should look forward to invest in its old policy of Defend and Extend Management. KFC is very well placed amongst the top chain fast food business competition and is very well equipped with a good strategy and future prospect. Conclusion This project brings forward the business operations and strategies of KFC in the fast food business world. It outlines the initial days of the business formation to the up to date status and future opportunities. Also the future strategies and existing study of management through the five force model brings a very vivid picture of the company. The company is also performing very well in this close competitive market, competition from big players, to achieve its mission and objectives. Although being the second best fast food industry in terms of value, globally, KFC has a very strong home market with plenty of opportunities in the international markets. References A. Fox, (2011). Do Restaurants Really Need CRM? Win Win Restaurant Marketing. Brosnan, T. and D.-W. Sun (2004). "Improving quality inspection of food products by computer vision-a review." Journal of Food Engineering. DeMaria, A. N. (2003). "Of Fast Food and Franchises." Journal of the American College of Cardiology. 41(7): 1227-1228. Sweet, T. and J. Balakrishnan (2010). "Applying quality function deployment in food safety management." British Food Journal. Read More