Kentucky Fried Chicken (KFC) | Free essay | Management essays

Introduction

KFC in the beginning was changing companies which belonged, since in 1964 Colonel Sanders first sold KFC. It was sold in a small group of investors who promoted KFC in public. In 1971 Heublein was highly involved in the day to day operations. However, R.J. Reynolds then acquired Heublein in 1982. R.J. took a more laid back approach and allowed business as usual at KFC. After that in 1986 PepsiCo bought this company and tried to grow it very fast and as well the restaurant segment even if KFC and PepsiCo had a very different culture and style which means that it was totally different. PepsiCo is a big company which recognized itself in 1985 and owns as well Pizza Hut, Taco Bell and now KFC. PepsiCo has a consumer product orientation and found that the marketing of fast food was very similar to the marketing of its soft drinks and snack foods. PepsiCo combines snack food, soft drinks and restaurants together and it’s a huge company in the world with many restaurants.

Nowadays KFC belongs to YUM international and is the largest chicken restaurant in the world with over 32,500 restaurants with, A&W All-American Food™, Taco Bell, Long John Silver’s and Pizza Hut in more than 100 countries. Today, some of the older KFC restaurants have become famous in their own right. One such restaurant is located in Marietta, Georgia. This store is notable for a 17m tall sign that looks like a chicken. The sign, known locally as the Big Chicken, was built for an earlier fast-food restaurant on the site called Johnny Reb’s Chick, Chuck and Shake. It is often used as a travel reference point in the Atlanta area by locals and pilots.

The original handwritten recipe is kept locked away at the KFC corporate headquarters in Louisville, Kentucky as a closely-guarded secret. Only two members within the Yum! Corporation knows the recipe in its entirety.

Mission and Objectives

“we find reasons to celebrate the achievements of others and have fun doing it”

The mission of the KFC is to sell food in a fast ,to have a friendly environment that appeals to pride conscious, to be in a health minded consumers. The objectives of KFC is to increase the variety of menu, to introduce desert menu and introduce buffet to restaurants. Another objective goal is to target Menu items of African Americans in major cities with the following foods: greens, macaroni and cheese, peach cobbler, red beans and rice. However there are also menu items which should be target in Hispanics major cities are the fried plantains, flan, tres Leches. The implementations on non-traditional units are including the shopping mall food courts, universities, hospitals, airports, stadiums, amusement parks, office buildings, mobile units.

Pest analysis

Political

  • UK Government has launched a new corporate tax scheme in April 2008, in which the tax is to decrease from 30% down to 28%, helping revive the economy and boost competition (BBC, 2008, p.1). Fast food companies like McDonald’s, KFC, etc. could save millions of pounds from this stimulus.
  • The Government is considering a proposed ban on junk food advertising to billboards, computer games and cinemas act in the face of the public health of child obesity. A blanket ban would be a hammer blow to companies such as KFC, McDonald’s, Coca-Cola, Nestle, etc. (Mintel, 2009m, p.1)

    • Economic

  • As a result of the credit crunch and market instability, global markets are in disarray, deleveraging is under way (Kohler, 2009, p.27). The UK economy is now challenged by serious economic downturn. Latest Indicators published by Office for National Statistics (2009, p.1) states that all indexes are at negative interpretation, such as unemployment rate increased, GDP and national productivity decreased.
  • The UK is heavily impacted by the economic downturn. Hickman (2007, p.1) argues that the era of spend, spend, and spend no longer exists. Britain shoppers’ habit of depending on credit cards is now forced to change. They have to cut back their expenditure since credit availability would be now a historic concept.
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    Social

    • Work mobility, working under pressure seems to force people to go out to eat and drink rather than cook at home for themselves (although this trend is moderated by credit crunch recently). People enjoy their spare time by spending hours in coffee stores, restaurants, cinemas, and fast foods are indispensable items in their orders.
    • Bird and Hughes (1997, p.159) state that consumer is more and more concerning for “ethical products”. They are not only paying attention to product’s quality, but also ethical aspects of the goods purchased. This raises a question to all businesses, however, it is also an opportunity for those who care of their customers, their communities, like KFC, for instant.
  • Customers concern about environmental issues in every item they buy (Mintel, 2009p, p.1). Environmental concerns are now a key priority among UK consumers and their importance is continuing to grow. Consumer concerns are encouraging retailers to introduce green products and to put their entire operations on a greener footing (Mintel, 2009c, p.1)
  • Consumers may be increasingly turning to chicken outlets as a relatively healthy alternative to red meat, particularly on the back of recent government and health campaigners’ concerns over the nutritional content of fast food (Mintel, 2009a4, p.1)
    • Attitudes towards burgers are changing. Burgers are no longer seen as should-be-avoid foods, but are positive ones instead (Mintel, 2009d, p.1). In addition, microwaveable burgers have been welcomed to serve a new “snack-on-the-go” audience (Mintel, 2009d, p.1).

    Technological and environmental issues

  • The Internet is changing the way that many businesses are operating (Avinash and Minh, 2008, p.83). The Internet accounts for 8% of global advertising spend and growing rapidly (The Economist, 2007, p.124). It is an opportunity for fast food companies enabling its customers to order online easily via its website, creating competitive advantage for the company.
  • Technology helps to shorten the geographic distance, booting business communication. Technology also helps to design and manufacture modern machines to produce high quality foods, saving time and human capital.
  • Global warming, green house gas, recyclable materials are among most interests of environmental supporters.

    • Swot analysis

    Strengths

    • KFC has a very long history and has the most recognizable brand in chicken. KFC has name recognition around the world and has been globally positioned for many years. KFC’s secret recipe of 11 herbs and spices has made it the leader in chicken for the last fifty years. KFC is the 2nd only to McDonald’s in the UK and USA and ranks highest among all chicken restaurant chains for its convenience and menu variety.
    • The quality of food is a key strength to KFC. The quality is defined by the YUM! and controlled by the local franchisees. There is a global standard, with regard to the quality of the KFC meals.
    • The KFC recipes allow for quick a processing time, which makes it all the more convenient and more attractive to prospective clients.
    • Customer-focused approach brings advantages to KFC. The company cares about the health of its customers. Recently, in 2008, KFC signs up to the Food Standards Agency commitment to providing healthier meals, helping its customers enjoy a healthier, more balanced diet. The commitments include: working with suppliers to reduce salt and saturated fat levels, dressings and frying oils for alternatives that are lower in saturated fat, increasing the number of healthier options on the menu and making nutritional information more readily available to customers (Mintel, 2009l). The company also puts nutritional information of its products online and in stores.
    • KFC does business ethically and environmentally. KFC UK has promised to reduce packaging and waste by selling products such as its Fillet and Zinger burgers just wrapped into paper rather than in a cardboard box. The chain said it aimed to reduce waste by up to 14000 tonnes over 2009 (Mintel, 2009p).
    • KFC has a strong development plan. In February 2009, KFC announced to open 300 new UK outlets between 2009 and 2014, creating 9,000 jobs. This expansion was designed to capitalise on “really strong growth” and customers increasingly turning to cheaper food options amid the credit crunch (Mintel, 2009q).
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    Weaknesses

    • Rumour: There is a rumour about using GMO chicken (Genetic Modification Organism). This arouses a great controversy in many places. For a developed market like the UK, this impacts negatively on KFC image since people think that the use of GM chicken will have great influence on the food chain which is very crucial to the environmental health and nature development.
    • Legal issues: KFC has been ordered to pay a £24,000 fine following the discovery of poor hygiene standards at its Bridgend branch in South Wales. The branch’s staff did not wash their hands and wore dirty aprons, while the site’s hot water was turned off, meaning that staff were also unable to wash food preparation equipment (Mintel, 2009k).
    • Trans fats issues: KFC predominantly cooks its chicken in vegetable oil called trans fats, an unhealthy method of cooking (Oppapers, 2009).
    • Lacking fun: Since majority of KFC’s customers are people between 14 and 44, who are young, dynamic, and proactive, store decoration and atmosphere play a critical role for the company’s success.
    • Lack of knowledge about their customers: KFC does not have its own customer database.

    Opportunities

    • The chicken and burger bar market reached £3.6 billion in 2007 and is predicted to rise following years. The traditional low-cost fast food outlets are well placed to remain relevant as economic conditions tighten. The burger market reached nearly £2.5 billion 2007 whereas chicken outlets were valued at nearly £1 billion, however, the latter showed higher growth rates over the past six years. The takeaway market continues to outperform the eat-in sector (Mintel, 2009z).
    • Despite the economic downturn, consumers are still likely to continue eating out, according to a survey of 1,000 UK diners by Survey Shack. 63% said price wasn’t the major factor influencing whether they chose to eat out or not, and 77% said they would pay more if a meal was made from high-quality ingredients (Mintel, 2009y).
    • Grab-and-go culture: The convenience of takeaway meals has a clear demographic bias towards men, younger consumers and those who are single. Factors such as lack of motivation to worry too much about nutrition (eg the absence of children) or that it is expensive or wasteful to cook for one-person meals will play a part in this motivation (Mintel, 2009c).
    • Growth in the 15-24-year-old age group has benefited the chicken/burger sector as they represent the core market, however, the predicted drop in 15-19-year-olds in coming years will present challenges (Mintel, 2009a1).

    Threats

    • Supermarkets and new competitors: Supermarkets’ own-label offerings have long been a significant part of the UK food sales, holding a share of nearly 29% and continuing growth in market share (Mintel, 2009a).
    • The National Minimum Wage (adults now receive £5.52 an hour) continues to have an impact on the fast food market. These increases can have a major effect on the cost base of the larger chicken and burger bar operators, particularly when you consider KFC has some 8,000 employees in the UK (Mintel, 209b).
    • The introduction of the Licensing Act 2003 (for England and Wales) in 2005 has led to many pubs having extended opening hours, generating further competition for fast-food chains, both in terms of the later nights and daytime trade (Mintel, 2009b).
    • Health trend away from fried foods: According to campaign group Consensus Action On Salt and Health, some meals from top fast food chains conceal “shockingly high” salt levels. The worst contain more than double a child’s recommended daily salt intake in a single meal. Customers react negatively to this news (Mintel, 2009x)
    • Recent survey by Mintel (2009) states that growth in fast food industry has slowed in recent years. It implies of an intense competition in the eating out market and the maturing of the.
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    BCG MATRIX

    KFC uses large amounts of cash and is leader in the business so since it is a leader it should use a large amount of cash.

    The company has the worst cash characteristics of all, because there are high demands and low returns due to low market share. If there is not market share, question marks will simply take in great amounts of cash and when the growth will stop then there will be a dog.

    CASH COW

    Profits and cash generation should be high, and because of the low growth, investments were low. Keep profits high

    DOGS

    KFC should avoid and minimize the dogs in the company.

    As I mentioned before the BCG Matrix of KFC is depending totally from the YAM! Company which includes as well the other companies the referent standard is the industry growth rate measured against the SBUs’ growth rate.

    Product life cycle

    All the products have their life cycle whether it is very successful or not. The life cycle has four stages.

    The first stage is the introduction of the product and such an example will be the hot wings.

    The second stage is the growth of the product and the product is the hot shots.

    The third stage is the maturity and the product is zinger, chicken mania, chicken burger.

    And the fourth stage is the decline which is the twister.

    Task environment

    My company diversified in many industries and for each industry has different suppliers. It audits its suppliers for compliance and non compliance.

    1. “Kentucky Fried Chicken” Garcia, Augie. Discussions, March 12, 1999
    2. www.scribd.com “applied marketing” Mr. Muhammad Nouman
    3. BBC (2008). Call for corporate tax clampdown. Available at http://news.bbc.co. uk/1/hi /uk_politics/7681165.stm. Accessed 3 January 2009
    4. Mintel (2009m). Proposed banned on junk food advertising could be extended. Available online at: http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&/display/id=118422/display/id=218594 Accessed 07 March 2009
    5. Office for National Statistics (2009). Latest indicators. Available online at: http://www.statistics.gov.uk/instantfigures.asp. Accessed 09 March 2009
    6. Hickman M. (2007): First the credit crunch… now the spending squeeze, The Independent on Sunday (2007) Thursday, 13 September 2007.
    7. Bird K and Hughes D. (1997). Ethical Consumerism: The Case Of “Fairly-Traded” Coffee. Business Ethics A European Review Volume 6 Issue 3,Pages159-167
    8. Mintel (2009p). KFC reduces packaging. (27/1/2009). Available online at: http://academic.mintel.com/sinatra/oxygen_academic/search_results/show&&set_access_filter=all-ZUK/display/id=280379/display/id=227776/display/id=438171. Accessed 08 March 2009
    9. Mintel (2009c). Internal market environment. Available online at http://academic.mintel.com/sinatra/oxygen_academic/subject/view=reports_category&levels=90849&list=cat_items&cat=17&lev=1/display/id=394656/display/id=442497. Accessed 07 March 2009.
    10. Mintel (2009a4). Chicken and Burger Bar UK March 2008: Market in brief. Available online at: http://academic.mintel.com/sinatra/oxygen_academic//display/&id=280379/display/id=329487. Accessed 07 March 2009
    11. Mintel (2009d). Burgers UK – 2008. Available online at http://academic.mintel.com/sinatra/oxygen_academic/my_reports/display/id=227787&anchor=atom/display/id=227776. Accessed 07 March 2009
    12. Avinash, W. and Minh. Q. H. (2008) How Can Internet Service Providers Tap into the Potentially-Lucrative Small Business Market? International Journal of E-Business Research, 4(1), p.82-98
    13. The Economist (2007). The world in figures: industries. The world in 2008. p124, 126.
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