KFC
Transcript of KFC
1. Answer:
Founded in the year 1954, by Colonel Harland Sanders, Kentucky Fried Chicken (KFC) has
come a long way. KFC now remains the world’s largest chicken restaurant chain and the
third largest fast food chain. A multinational company, KFC, has over 9000 restaurant all
worldwide, of which over 5000 are based in the United States of America, giving KFC a
hold of almost 50% of the US market in terms of sales.
A rapidly growing company, KFC has a high product quality and consistency, giving it the
advantage in the fast food industry. Although a huge brand in itself, KFC faces critical issues
that challenge its position domestically and globally.
KFC’s major problems are attributed to their transition from the old Kentucky Fried Chicken
into the new KFC so as to appeal to the ever changing consumer demands for healthier food
items at lower prices, greater variety in food selection, higher levels of service and
cleanliness.
KFC’s obstacles also arise from their entire business strategy reflecting on its menu
offerings, pricing, advertising and promotion, points of distribution, restaurant growth and
franchise relationships.
Despite its success , KFC, has seen slow growth domestically as there has been an increased
competition coming from among the largest fast food competitors, along with the creating
obstacles for its expansion within the US market for KFC (where growth has been only of
13% in terms of domestic operations, whereas 87% from international operations).
Even though KFC previously faced competition from other fried chicken chains, today it
also faces competition from non-fried chicken chains as well, to whom it has lost business
and customers, due to menu differences in chicken products.KFC is also facing constant
competition from all other types of contenders in the food service industry, e.g. fast food
outlets, full service outlets, cafeterias, institutions, etc.
After PepsiCo acquired KFC RJR Nabisco, in the year 1986, KFC faced some difficult
parent-subsidiary relationship. PepsiCo follow different types of organizational culture than
KFC.KFC’s strategy was focused on longer relationship with employees and creating an
environment where all were treated like a family member, whereas PepsiCo depends more
on performance, where employees non-conformance in performance will result in instant fire
and hire decision and without any hesitation long-term employees are sacked. Employees are
always in a threatening position from where it is tough to provide better service, affecting
their overall service.
Another problem was decentralization. PepsiCo decision making process was decentralized
so that problem was created from different level and lack of coordination was occurred.
KFC’s offerings were relatively limited before PepsiCo purchased them, after PepsiCo
purchased them, they came up with wider variety of food variety, extending the existing
menu, although some of these new product offerings were some were not successful .That
means they had a problem with their offerings .They did not differentiate their offerings for
different targeted segments. They were not as fast as their competitors to build restaurants,
which creates problems in their delivery channels. They were only in fried chicken market
which is also a drawback as their competitor have the advantage in non fried chicken menu.
Health issue was another problem. Franchising problem was that they were not maintaining
distance that they maintained between franchiser and their own outlets .They did not able to
deal with franchiser uniformly.
Based on the case study, an industry analysis identifies the following issues which serve as a
driving force in the U.S. fast food industry. These factors shape the market environment for
each fast food outlet as it portrays current trends which are emerging and trends already in
place in this competitive environment:
Industry sales growth in the U.S. fast food industry is falling. This occurs as the
industry is maturing. As a result there is intensive competition among fast-food
chains. Market share gains are increasingly achieved by taking customers away from
existing competitors rather than by attracting new customers into the industry.
There is also a significant amount of industry consolidation. Significant merger and
acquisition activity during the last decade has consolidated many fast-food chains
within the same organization. Some of the most noticeable acquisitions are
Pillsbury’s acquisition of Burger Kings, General Food of Burger Chef, United brand
acquisition of Baskin Robbins Great Western acquisitions of Shaky Pizza and
PepsiCo acquired Pizza Hut and Taco Bell.
The globalization of the fast food industry has seen many of the top 20 fast-food
chains have expanded aggressively abroad as a means of growing sales outside of the
U.S. market.
Diversification of fast-food outlets (e.g., McDonald’s, Wendy’s, Arby’s, and
Hardee’s have aggressively marketed a variety of chicken sandwiches, and Hardee’s
has introduced fried chicken).
Customers are increasingly becoming health conscious in the United States. This has
increased pressure on fast-food chains to offer products with lower fat content and
cholesterol, with the healthy image.
There is also greater consumer demand for a wider variety of menu offerings and
food selection.
As most consumers are experienced, repeat buyers are familiar with their favorite
chains’ products. Therefore, competitors are increasingly turning to promotions, price
reductions and other techniques to attract repeat customers.
There is a huge consumer demand for fast-food in non-traditional outlets (e.g.,
shopping malls, airports, etc.).
Profit margins are also lower as operating costs increase along with pressure from
competitors lower pricing strategies.