Kentucky Fried Chicken Strategic Management

Kentucky Fried Chicken (KFC): Strategic
Management
Introduction:
Kentucky Fried Chicken (KFC), is a world renowned fast food brand. The
company is based in the United States but has expanded its operations in
numerous countries worldwide. The company operates through a franchise
model, whereby it established the brand in the international markets and allots
franchising license or the brand and the company to local businessmen.
Kentucky Fried Chicken in Asia

In In 1967, when Kentucky Fried
Chicken was approached to expand

to Japan,
executives were preoccupied with
domestic expansion in the USA.
When the
enterprise did invest in Japan, the
venture proved highly profitable,
as it
corresponded to a period of rapid
growth in Japan ± a time during
which the
standard of living was rapidly
increasing, along with disposable
income. The
years from 1985 to 1992 came to
be known as the ``Bubble Year
Strategic Group Theories
The KFC Corporation tends to comply with the strategic group theories. The
strategic group theories state that when the industry is taken as a group, the
players in the industry tend operate in a similar manner, employing the same
strategies. This is true for the KFC Corporation as well. The company which is
now owned and operated by Yum Brands is tends to follow the same strategies
that are employed by its competitors in the industry as well.
The company has been responding to the customers demand for healthier food.
This promoted the company to come up with food which was prepared in trans
fat free oil while also include salad, and green based vegetable side dishes in its
menu.
The strategies for operations employed by the KFC Corporation are similar to the
ones employed by Wendy’s Burger King, Pizza Hut and McDonalds. The
marketing strategies employed by the company are also similar to the ones
employed by its competitors. The company leverages its bran on the combo
meals offered, the convenience of the fast food and the happy environment
which is depicted in its advertisements.
Porters Five Forces

The Porter’s analysis has been performed specific to the KFC Corporation and
the fast food industry in the United Kingdom.
The power of the buyer in the fast food industry in the United Kingdom is weak as
while not everyone in the UK likes to eat fried fast food, this kind of food is widely
popular in the region. Moreover the extensive effort put by the KFC Corporation
and its competitors for brand building activities also weakens or moderates the
power of the buyers by making the product offering uniform for all buyers.
There exists intense rivalry between the players in the fast food competition in
which the KFC Corporation operates. “Players of all sizes in this market tend to
be highly focused on fast food, which means that their survival depends on
maintaining profitability in this business. Furthermore, the UK is a large market,
which means that revenues from this country may be important even for
geographically diversified players. Overall, rivalry is assessed as strong.”
(‘Industry Profile: Fast Food in the United Kingdom’, 2007)
Management Analysis
The management of the KFC Corporation has changed many a times. After the Pepsi
Co acquired the business of KFC, the company made significant change in its
management. They had little control on the KFC franchises (Krug) which they wanted to
rectify. As a result the company employs strategies of staff reduction, replacement of
KFC managers and changing the corporate culture to the one which was not mutually
exclusive for the two organizations.
Strengths
The strengths of the company include the brand name of the KFC which is recognized
by people all around the world and the desires it invokes in the consumers for food
related to fried chicken. Aside from this the good quality of hygienic food provided and
the product offering of the company is also strength for the company. The diverse and
expansive market which is catered by the KFC Corporation and its franchises provides it
with a large share of the consumer’s specific to the fast food market.
Weaknesses
The weaknesses and the constraints that the company and the fast food brand is
exposed to is its lack of innovation to come up with new products on a periodic or a
regular basis to meet the needs to the customers. The research and development is not
investment in by the company which enables other competitors for the company like
McDonalds to take pioneering advantage for new products launched by them in the
market.
Reasons for KFC’s Strategy Change

The strategy change for the KFC operations was much required as mentioned in the
case as a result of the strategies employed by the company in the 1980s. In the 80s, the
company was highly dependent on its unique recipe for its popularity, bard image and
the growth of its business. However as the fried chicken based fast food industry
increased the company has been facing significant loss of market share as the
consumers switch between different fast food brands.
The earlier strategy of the company ha also resulted in a restricted and limited menu
offering by the KFC company which can become boring and unattractive in the long run.
Aside from this the different franchises in the international and the local markets which
are not operated directly by the company have been depicting degrees of neglect and
falling standard which eliminates the uniformity of the product and service offering at the
eating outlets as well as presented a bad image of the company and the KFC brand.
Market Situation
The fast food industry is a highly competitive market with dynamic change staking
place. “The global fast food market generated total revenues of $102.7 billion in 2006,
this representing a compound annual growth rate (CAGR) of 3.5% for the period
spanning 2002-2006. In comparison, the United States and European markets grew
with CAGRs of 3.7% and 3.3% over the same period, to reach respective values of
$55.2 billion and $19.5 billion in 2006. Market consumption volumes increased with a
CAGR of 1.5% between 2002 and 2006 to reach a total of 80.3 billion transactions in
2006. The market’s volume is expected to rise to 86.4 billion transactions by the end of
2011, this representing a CAGR of 1.5% for the 2006-2011 period.”
(‘Global Industry Profile: Fast Food’, 2007)
Some of the significant changes taking place in the industry pertain to increased
attention being paid to recyclable packaging, green operations and introducing healthier
menus which are demanded by the consumers in the market. The future growth of the
fats food industry is predicted to “have a volume of 86.4 billion transactions, an increase
of 7.6% since 2006. The compound annual growth rate of the market volume in the
period 2006-2011 is predicted to be 1.5%.”
(‘Global Industry Profile: Fast Food’, 2007)
Advantages and Disadvantages of KFC

Competitors
The main competitors that are present in the fast food market for KFC are Popeyes
owned by AFC Enterprises, McDonalds and Burger King. The following depicts the
various advantages that are experienced by the competitors of the KFC Corporation
and the disadvantages or the weaknesses that the competitors have to face while
operating in the fast food industry.
The advantages that are available to Popeyes is its unique fried chicken offering and
the distinct favors in which its products are prepared. “AFC’s signature Cajun fried
drives its Popeyes brand chicken. Popeyes’ specialty menu consists of hand-battered,
bone-in fried chicken available in two flavors, New Orleans Spicy and Louisiana Mild,
and a wide assortment of signature Cajun cuisine side dishes, including red beans and
rice, Cajun rice, Cajun fries and buttermilk biscuits.” (‘AFC Enterprise Inc’, 2008)
McDonalds has the advantage of diversified operations worldwide, it’s expansive and
quick distributive network, the established high level of customer service and the wide
range of packaging options that are available to it for its products. The advantages that
are available to the Burger King Company pertain to the significantly strong market
position of the company and its brand, the brand image of the company which it has as
a perceived image and value in the minds f the consumers. The franchise mix, and
global franchise network of the company is also one of the main advantages that the
Burger King company has and has been exploiting for market diversification.
The weaknesses of the Popeye brand pertain to the limited scale of operations of the
company.
The weaknesses for McDonalds include the high bargaining power of the customers for
McDonalds, the limited diversification of its products, and the lacking scale to compete
with larger competitors in the market. The weaknesses for Burger King include the
market concentration of the company and the weak operating performance of the
company in the recent past.

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Kentucky Fried Chicken (KFC): Strategic

Kentucky Fried Chicken in Asia

Chicken was approached to expand

Porters Five Forces

Reasons for KFC’s Strategy Change

Advantages and Disadvantages of KFC

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