Posted at 11.04.2018
(Sunlight Tzu c. 490 BC, Chinese armed forces strategist) - this quotation is something that every manager, officer and university student must retain in head while devising strategies for a business. This quotation is very simply and easy but demonstrates the truth that every corporate and business strategist should be aware of. Here the importance has been directed at the surroundings i. e. the circumstances within which a business must survive. It is therefore extremely vital that these environmental factors are considered comprehensive while taking any proper decisions.
As this record of mine is going to be centered on Kentucky Fried Chicken (KFC) -this quotation is also heading to be relevant. This may be consequently because even though KFC is one of the giants in the food industry by using various well developed strategies over the last few decades, it generally does not essentially imply those strategies will succeed even as of this particular stage of the time and environment. With regular changes just about everywhere - exterior (beyond your business) or interior (within the organization) - the strategies must be retained in alignment with the business's objectives and its own long-term goals. Also it must include the changes in the environment while making those tactical decisions.
In this record of mine, I've discussed KFC's backdrop and its own existing strategies in much details. I also outlined the industry within which my company works and the way the changes within and outside the industry is effecting KFC. Certain tactical research models have been used in this are accountable to understand both the internal and exterior affects over KFC. Analytical models like Porters Five Makes, SWOT and PESTEL Evaluation are also done to illustrate the 'circumstances' effecting KFC. To conclude the record, certain future strategic suggestions have been made for KFC based on all those analysis.
Kentucky Fried Hen (KFC) is one of the largest fast food Franchise ideas of today; it exists in various countries round the world and it's been able to establish a renowned International reputation in multiple continents. Starting in the United States in the 1930s, it has grown to become true multi-domestic company. The Kentucky Fried Chicken was founded by Colonel Harland Sanders in america of America. KFC is currently one of the greatest businesses of the global food service industry and is also widely known throughout the world as the facial skin of Colonel Sanders.
It is at 1965 that KFC first started operating as an individual store in Preston, UK. In 1986, following the worldwide acquisition of KFC by PepsiCo, it was announced that the British isles operation, KFC GB Ltd acquired become a jv - a corporation possessed by Trust house Forte and PepsiCo. In January 1997, PepsiCo Inc. announced the spin-off of its quick service restaurants into an independent restaurant company. Tricon Global Restaurants and Tricon Restaurants International were founded and KFC became part of the Tricon group. In 2002 Tricon transformed its name to YUM! Brand Inc.
Despite these changes in possession, the effectiveness of the KFC brand has seen the extension of the UK & Ireland restaurant network to its current degree of over 700 locations. A few of these 700 stores are company run from the top office and whilst the majority are franchised for better and centered management strategies used by the YUM! Brand Inc.
KFC's eye-sight is to bring people of all age ranges, races and backgrounds alongside one another to enjoy 'Heart Food' 'proper food at reasonable prices' within glowing and fun interiors. KFC is designed to be regarded as a great and inclusive brand.
The United kingdom food-service industry has always put up positive growth, increasing normally by 25% since 1999. Consumer expenses on food and refreshments was close to 173 billion in 2008 up 5. 2% from 2007 even though this tough economy. At the beginning of 2000, KFC's business was at a challenging situation. Its market is at decline, struggling when confronted with increasing competition from pizza, ethnic takeaways, supermarket ready foods and a raft of sandwich suppliers. Moreover, the media concentrate on the evils of junk food experienced fuelled concerns over healthy eating.
In order to go up to the task and keep its competitive advantages KFC needed to overhaul not only its product and traditional presence, but also its image. Through a technique named 'Heart Food', KFC has effectively altered public notion of its brand and built an mental relationship using its consumers, without diminishing the immediate sales requirements of retail marketing. Over the course of 2004 and 2008, KFC efficiently launched several other campaigns to keep the new image.
KFC's LOW PRICED and Differentiation method of business from the very beginning has always been its key success factors, but as time passes and the changes within the industry, KFC had to and can have to constantly adjust to it. Both immediate and indirect competitors like Burger King, McDonalds, Dominoes Pizza and even Subway are nowadays launching differentiated hen lines like Crispy strips and poultry sandwiches to cannibalize the fried hen sales.
Even through the downturn, last year in '09 2009 KFC was awarded No 2 in sales growth. KFC achieved their concentrate on sales growth of 15% using various creative strategies. Their concentration was generally on cheap product and marketing. Dominoes Pizza - though not a direct competitor - had the best sales growth in the UK good industry in 2008-2009.
The company's center products are Buckets, Burgers and Twisters and Colonel's Crispy Strips poultry with home-style area food. The 'Heart Food' strategy provided new focus to the product strategy. The new placement also impacted on the pricing strategy. This was an offering for real people and as a result, it would have to be proper, wholesome food, offered by a reasonable price. Prior to repositioning the brand, the lowest listed item on KFC's menu was 2. 99, which was a barrier to acquire for many consumers. 'Heart Food' meant that rates was looked at in different ways and the situation for a value product at less than 1 was put forward. The Minuscule Fillet Burger launched in 2004 and has had a positive impact upon sales and perceptions of the KFC brand. This 'Soul Food' philosophy in addition has made a genuine impact upon KFC's all areas of communication, from home window posters to the menu boards and staff outfits.
In marketing, one of the better strategies KFC has implemented is the fact KFC restaurants are not restricted from finding within close proximity of other KFC restaurants. Which means that franchisees must locate their restaurants without geographical boundaries. This strategy ensures KFC as easy to get at local restaurants and take-away and also advertises alone brand.
KFC focused on cheap products
Unique Fried Hen with 11 herb recipe
Market Expansion Opportunities
KFC 's Costing and Market Strategy
This particular evaluation model is a very well established technique utilized by strategists to analyse both the external and interior factors effecting an organization.
The internal - talents and weaknesses and
The exterior - opportunities and threats can be blended to make or break any company's future.
Usually a model like the one below is employed to do this sort of analysis, but also for KFC a far more detailed way has been followed in this statement for an improved knowledge of the factors included.
Market head: World's most significant chicken restaurant string and third most significant fast-food chain in 2000
Effective store management
Hard-working and entrepreneurial professionals and franchisees.
Management Shift-Sweeping changes in to the culture was initiated by the new management- this results in demoralization to old KFC employees and even franchisees.
Several restructurings resulted in layoffs throughout KFC, substitute of KFC professionals with PepsiCo managers
Conflicts between KFC and PepsiCo ethnicities- this is manifested with PepsiCo's more powerful focus on performance rather than loyalty portrayed by Col. Sanders to KFC employees over time.
KFC sales stagnated. There was widespread discontent among the list of franchisees, some of whom experienced the new owners didn't understand the rooster business and weren't providing management expected from a franchisor.
Company stores floundered and be underperforming the franchised businesses, further convincing franchisees that the business did not know its own business. (KFC HQ purchased them to company-owned)
KFC was shedding market show as other Rooster chain increased sales at a faster rate.
KFC share of Chicken Segment sales fell from 71 percent 1989, to less than 56 percent in 1999, a 10-years drop of 15 percent.
Failed to rank in top 20 in development in 2000.
Lack of knowledge about their customers.
Question of over franchising brings about lack of control and quality.
Lack of give attention to R&D.
McDonald's accounted for 35 percent of the Sandwich Section while Burger King ran a distant Second, with a 16 percent market share.
In family Portion, Friend's and Shoney's were forced to shut down restaurants because of declining income.
Within the Pizza Portion, Pizza Head wear and Little Caesars Closed underperforming restaurants.
Boston Market was a new restaurant string that emphasized roasted alternatively than fried rooster.
Church's broadened its menu to add buffalo fowl wings, macaroni and cheese, beans and grain and collard greens.
US market maturity- many restaurants expand to international market segments as strategy for growing sales.
Demographic developments (demand for food consumed outside of the home)
Consumer health food trend
Saturated junk food industry
McDonald's with sales of more than 19 billion in 1999, accounted for 15 percent of the sales of the nation's top 100 restaurant chains.
McDonald's generated per store deal 1. 5 million per season.
Much of the growth in dinner houses came from new unit structure in suburban market and small town.
In Family Section, new rooster lines.
KFC nearest competition Popeye, ran a distant second with sales of 1 1. 0 billion.
By using the Porters 5 Makes model the company can determine where its business needs to change or improve to be able to remain competitive in the junk food industry. Porter's competitive forces model really helps to achieve a competitive benefit.
Porter's competitive makes model includes five causes that need to be analysed. These forces include -
The power of rivalry from traditional competitors
Threat of new market entrants
Threat of substitute products and services and
Bargaining vitality of customers and
Bargaining vitality of suppliers
KFC has traditional competitors which include lots of the other junk food outlets across the country, i. e. Burger King, McDonalds, even Subway. It has been shown by Teacher Michael Waterson (2004) that the presence of an Burger Ruler, for example, will increase the likelihood that McDonalds will open up near by. Thus it can be seen that the threat of competition from traditional competitors is intense and should never be over looked.
There are extensive new market entrants emerging constantly but not on the same range as KFC. A number of the newer entrants include chains of Sushi, fowl cottage, dexi poultry,
After studying all the possible factors that may or may not impact KFC via various models, certain long and short term strategies can be advised to KFC such that it retains its competitive advantages and satisfies its stakeholders. Making use of the SWOT, PESTEL and Porter's 5 Makes Model, the factors that influences KFC's actions, objectives, products and prices have been examined. All these with regards to the industry competitiveness, life cycle and market position of KFC can help devise the most suitable and effective technique for the business. The strategies suggested for KFC are the following -
KFC should continue steadily to bring in their present and new products into new geographic/ demographic areas. The Eastern European countries for example will be extremely attractive in the near future as it'll be joining the European Union and offer above-average returns credited to labour and local materials costs. While KFC begin working on new market segments it should retain in mind to focus locally to avoid certain barriers such as dialect, law and a good knowledge of needs.
Halal Market is another rewarding market that KFC is already trying to fully capture but new ways of take it further must be devised. As there are 2 million Muslim populations in UK already and they contribute a hefty 33% towards the UK economy this niche market will surely increase sales and progress prospect of KFC.
Partnership with supermarkets like Tesco and Sainsbury's can be another creative approach to increase the convenience of KFC to the consumers. Similar to the existing strategy of partnering with Motorway petrol stations, this process can capture a completely new market and give access to eliminate market even more.
Even though, KFC will will have an attachment to their original recipe that made their success, they definitely need to diverse and develop new products that customers want to be able to increase their financial performance and value. By constantly expanding the menu and offering mouth-watering chicken products will definitely keep the customers on their toes and retain them.
Public consciousness for healthier choices is also another factor that KFC should think about while product development. With greater emphasis on healthy eating by the public and the government, healthy food choices category will surely start new opportunities for KFC.
As mentioned previously by producing the Halal product line for the ever changing multicultural contemporary society of UK, KFC will be getting close new market segments that the competitors like McDonalds and Burger King still need to touch.
Being socially sensible will put KFC in the set of the 'environment and communal friendly' organisations, keeping the many activisit groupings, trade unions and the government at bay. When you are animal cruelty free and Other Welfare program, KFC has already taken the first rung on the ladder towards that but further innovations in this field can be made.
KFC has responsibilities towards its employees next to the shareholders as well and by devising strategies like increasing revenue posting for employees KFC can reduce employee turnover rate and involve the employees with their organisational targets further. Not just that, KFC has got their suppliers as stakeholders as well. While using unstable UK current economic climate bad, KFC can help their suppliers by easier repayment terms and better facilities. In return KFC will usually get loyal, uninterrupted and reliable items of these produce.
Saying each one of these, it must also be said that KFC always need to stay close to their mission (provide customers with quality food, excellent service and restaurant cleanliness) and make sure that they achieve their long-term targets. In summary they have to keep innovating and coming up with new items regularly. They have to follow the craze and go hand in hand with customers to meet their changing needs, as we have previously talked about with the existing healthier food style. There is also to keep a fantastic image by dealing with employees fairly and keeping a good control over franchises to make sure they follow the company's procedures.
They must constantly keep up with their low-cost/differentiation strategy by better taking advantage of their competitive makes such as economies of scales, bargaining vitality, image/brand worldwide popularity. Keeping an eyes for new technology in order to improve their productivity and be able to compete more proficiently is also very important.
The key success factors are ever before continuing cost benefits through inventions of products and market segments and use of new technology to work efficiently. These success techniques will surely lower costs, increase gains and continue the competitive advantage of KFC.
Last but not minimal it must be said that what KFC adopts from the recommended long and short-term strategies will depend not only on these exterior and inner environmental analyses but also on their mission, eye-sight and the management's team's aims.
The stakeholders i. e. the shareholders and the management team will have to prioritize their future objectives and implement the suggested strategies consequently.
One other concern that must definitely be mentioned here is that, going through these analyses is not a static process but is incredibly vibrant and volatile. The factors based on which strategies are created may change constantly - particularly given the vulnerable state of the market in UK. Factors like inflation, open public health thoughts etc will constantly be modifying the circumstances. This will therefore mean that these recommended strategies should and always be researched and must be kept on top of the situation to attain a long lasting competitive edge within the industry.