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Marketing Strategy of KFC Corporation - December 7th, 2010

KFC Corporation (KFC), founded and also known as Kentucky Fried Chicken, is a chain of
fast food restaurants based in Louisville, Kentucky, in the United States. KFC has been a
brand and operating segment, termed a concept[2] of Yum! Brands since 1997 when that
company

was

spun

off

from

PepsiCo

as

Tricon

Global

Restaurants

Inc.

KFC primarily sells chicken pieces, wraps, salads and sandwiches. While its primary focus is
fried chicken, KFC also offers a line of grilled and roasted chicken products, side dishes and
desserts. Outside North America, KFC offers beef based products such as hamburgers or
kebabs, pork based products such as ribs and other regional fare.[citation needed]

The company was founded as Kentucky Fried Chicken by Colonel Harland Sanders in 1952,
though the idea of KFC's fried chicken actually goes back to 1930. The company adopted the
abbreviated form of its name in 1991.[3] Starting in April 2007, the company began using its
original name, Kentucky Fried Chicken, for its signage, packaging and advertisements in the
U.S. as part of a new corporate re-branding program;[4][5] newer and remodeled restaurants
will have the new logo and name while older stores will continue to use the 1980s signage.
Additionally, Yum! continues to use the abbreviated name freely in its advertising.

Introduction KFC operates in 74 countries and territories throughout the world. It was
founded in Corbin, Kentucky by Colonel Harland D. Sanders. y 1964, the Colonel decided to
sell the business to two Louisville businessmen. In 1966 they took KFC public and the
company was listed on the New York Stock Exchange. In 1971, Heublein, Inc. acquired
KFC, soon after, conflicts erupted between the Colonel (which was working as a public
relations and goodwill ambassador) and Heublein management over quality control issues
and restaurant cleanliness. In 1977 a "back-to-the-basics" strategy was successfully
implemented. By the time KFC was acquired by PepsiCo in 1986, it had grown to
approximately 6,600 units in 55 countries and territories. Due to strategic reasons, in 1997
PepsiCo spun off its restaurant businesses (Pizza Hut, Taco Bell and KFC) into a new
company

called

Tricon

Global

Restaurants,

Inc.

Reasons for going overseas Companies moves beyond domestic markets into international
markets for the following reasons: *Potential demand in foreign market *Saturation of
domestic markets *Follow domestic customers that go abroad *Bandwagon effect

*Comparative advantage - some countries possess unique natural or human resources that
give them an edge when it comes to producing particular products. This factor, for example,
explains South Africa's dominance in diamonds, and the ability of developing countries in
Asia with low wage rates to compete successfully in products assembled by hand.

*Technological advantage - In one country a particular industry, often encouraged by


government and spurred by the efforts of a few firms, develops a technological advantage
over the rest of the world. For example, the United Sates dominated the computer industry for
many years because of technology developed by companies such as IBM, Hewlett-Packard
and Intel Organization structures for International Markets (Modes of Entry) *The mode of
entry affects a company's entire marketing mix Exporting *Export merchant (Indirect)
*Export agent (Direct) *Company sales branches Contracting *Licensing *Franchising
*Contract manufacturing Direct Investment *Joint venture *Strategic alliance *Wholly
owned subsidiaries Criteria for selecting a mode of entry 1.Company's marketing objectives:
- production volume - time scale (long/short term) - coverage of market segaments
2.Company's

size

3.Government

encouragement

or

restrictions

4.Product

quality

requirements 5.Human resources requirements 6.Market information feedback 7.Learning


curve requirements 8.Risks: political or economic 9.Control needs Mode(s) of entry for KFC
*Franchising/Licensing *wholly owned subsidiary *Joint venture Firstly, KFC's traditional
franchising strategy, which is emphasizing standardization and reducing financial risk, on the
expense of cultural sensitivity and control. Due to China's strict foreign investment laws such
a strategy is not feasible. In addition, KFC will be pioneering in the fast-food field and thus
needs to be highly sensitive to cultural demands. In the past, KFC encountered problems with
aligning

corporate

planning

with

franchisee's

short-term

focus

on

profitability.

A wholly owned subsidiary represents the second option. Such a strategy relies upon total
control over competitive advantages and ensures complete operational and strategic control.
It also involves high investment expenses with no financial risk sharing. With high levels of
resource commitment and little country-level flexibility and responsiveness, this option is not
recommended.

Recommended market entry strategy: joint venture The essence of a joint venture is the
synergy effect of two different entities merging. Such an international business strategy will
attempt to; solve many logistic problems such as access to good quality chicken and other

supplies, ease the access to the Chinese market, share risk with a local entity, and finally
serve as a sign of commitment to the host government increasing goodwill. In addition, due
to the complexity of many barriers to entry into China, a potential partner with sufficient
contacts/networks with government agency officials may smoothen the process of setting-up
operations

in

the

nation.

The potential joint-venture partner should be large, well established, provide excellent
distribution channels and have personal network access to government officials. It should
also have modern equipment and a good management record. It is recommended that a
partner is found by backwards integration. In other words, it is a good domestic poultry
supplier. In order to ensure total commitment and balance of power between the two partners,
a 55/45 joint venture, with KFC as the dominant partner should be set-up.

By building on each partner's core competencies, knowledge, and efficiencies, a mutually


beneficial synergy effect could be achieved as a result of joint venture activities. For instance,
the local partner can learn from KFC how to produce a better product at a lower cost and
further expand on its new competitive positioning. KFC, on the other hand, can maintain
quality

supply

which

is

detrimental

to

its

success.

A joint venture will also significantly ease the entry to the virgin Chinese market. A new
entrant would find it very difficulty to form local and personal networks between businesses
and government agencies, which are crucial to success and provide access to the local market
and domestic suppliers. In addition, local business customs and laws can be quicker
understood and established ways to cut bureaucratic red-tape can be further utilized. Also, the
local knowledge of culture, language and geography is beneficial for any foreign entrant into
a

relatively

unknown

market.

In order to cope with the significant political risk of investing in China, a local joint venture
partner will share this risk. There is always a risk of domestication measures imposed by the
host government, often leading to major financial losses for the foreign investor. By having a
55/45 joint venture agreement, this risk is potential eliminated, since only 55 percent of
operations are domesticated. If such an unfavorable situation would arise, KFC has clearly
less to loose in such an agreement. In addition, by being the dominant partner, KFC will be
able

to

ensure

cost,

quality

and

strategic

control

measures.

The Chinese government may very well find KFC beneficial to the nation, as it is the
pioneering western fast-food outlet. Training the joint venture partner, personnel and other
institutions in the value chain can reduce learning and experience curves. KFC's operations
may also inspire local competitors to increase service and quality of food. It can also help to
create a competitive fast-food industry in China as new competitors respond to KFC's ideas.
Moreover, a joint venture agreement commonly produces goodwill and commitment between
the host government and the foreign investor. In such a relationship, the foreign investor is
not seen as trying to take advantage of the nation for profit purposes, but rather show
willingness to share. Maintaining good relations with the host government is a critical success
factor

as

government

policy

impacts

intensely

upon

business

activities.

Factors that influence marketing decisions Social and cultural forces *Family *Social
customs and behaviour *Education *Language differences Economic environment
*Infrastructure *Level of economic development *Competition Political and legal forces
*Trade barriers oTariff oImport quota oDumping oLocal-content law oBoycott *Trade
agreements oGATT oWTO oEU oNAFTA oAPEC oASEAN Information gathering
(Marketing Research) Marketing research - the systematic and objective identification,
collection, analysis, and dissemination of information that is undertaken to improve decision
making related to identifying and solving problems (opportunities) in marketing. It is indeed,
has a broad range of applications and plays a crucial role in the marketing decision-making
process.

The task of marketing research is to assess the information needs and provide management
with relevant, accurate, reliable, valid, and current information to aid marketing decision
marking. Company conduct and use marketing research to stay competitive and to avoid high
costs

associated

with

making

poor

decisions

based

on

unsound

information.

Marketing research plays a significant part in the development of marketing plans because it
allows the organization to become less isolated from the key trends and changes, which
surround their product. To continue to be successful, organizations must receive information,
from the researcher that is clear and accurate. It also has to satisfy your pre-determined goal
for

your

research.

Steps in international marketing research: 1.define research problem(s) 2.develop a research


design 3.determine information needs 4.collect the data (secondary and primary) 5.analyze
the data and interpret the results 6.report and present the findings of the study Major research
challenges 1.Complexity of research design due to environmental differences 2.lack and
inaccuracy of secondary data 3.time and cost requirements to collect primary data
4.coordination of multicountry research efforts 5.difficulty in establishing comparability
across multi-country studies Primary Research The use of: - *Focus group *Survey methods
for cross-cultural marketing research - Questionnaire - Sampling (unit, size, procedure) Contact Methods (mail, phone, personal interview, online survey) *Collecting information
Secondary Research Use of : *Secondary data (data which is already available) *Primary data
(when information is not useful or not exist) *Secondary data sources: government,
Lexis/Nexis, FINDEX, ACNielsen, etc., Problems with secondary data research: *Accuracy
of data *Age of data *Reliability over time *Comparability of data - triangulate - Functional
or conceptual equivalence *Lumping of data *The data may have been collected and
manipulated for a specific use, therefore it may be incomplete, ambiguous or out of context.

*Data may be compiled in different ways in different countries making comparability


difficult. For example, in Germany consumer expenditures are estimated largely on the basis
of turnover tax receipts, in the UK they are measured on tax receipts plus household surveys
and production sources. Similarly with GNP measures, it only reflects average health per
head of population and not how it is dispersed. As seen earlier, bimodalities are normal, thus
introducing bias. GNP may be understated for political reasons and may not reflect education
(i.e. wealth based on minerals). Also infrastructure may reflect channelled funds, say for
tourism, rather than society as a whole - typical of many African countries.

*Data may be corrupted by methodological and interpretive problems, for example,


definitional error, sampling error, section error, non response error, language, social
organizations,

trained

workers,

etc.

*Data may be nonexistent, unreliable or incomplete thus making inter country comparisons
very difficult *Data may be inflated or deflated for political purposes *Data from
documented sources must, therefore, be treated with care and caution Special problems in
international marketing research As well as the difficulties associated with secondary data
described earlier, there are a number of other problems connected with obtaining data in the

global context. These are as follows: *Multiple markets need to be considered each with
unique characteristics, availability of data and research services *Many markets are small and
do not reflect the cost of obtaining data for such a small potential *Methodological
difficulties may be encountered like nuances of language, interpretation, difficulty of
fieldwork supervision, cheating, data analysis difficulties (lack of computer technology)
*Infrastructure difficulties - lack of telephones, roads, transport, respondent locations and,
*Cultural difficulties - reluctance to talk to strangers, inability to talk to women or children,
legal

constraints

on

data

collection/transmission.

*Many of these facets apply more to developing than developed countries. However using a
variety of methods, outlined in the section, a lot of them can be ingeniously overcome
*Whilst the gathering of information in the international context is fraught with difficulties,
without it the marketer would be planning in the dark. The two most important modes of
scanning are surveillance and search, each giving data of a general or specific kind,
invaluable to the strategy formulation process. In all decisions whether to obtain data or not,
costs versus benefits have to be considered carefully SWOT SWOT is a method of analysis
which examines a company's Strengths, Weaknesses, Opportunities and Threats. Often used
as part of the development process for a marketing plan, or to feed the results of a marketing
audit back into a revised plan According to the analysis, there are mainly two weaknesses for
KFC. One of them is financial problem and the other one is that KFC concentrates on only
one single market. For its strength, it has its own unique skill in fried chicken and it has
established a good brand name. However, it is now facing a threat. Nowadays, people are
more concerned with the healthiness in food and their demand for high quality of food is
increasing. Also, it is now under economic crisis. Nevertheless, it still has an opportunity in
its market. It is because KFC is an leader in fried chicken market. (Fried chicken) The early
entry into international markets placed KFC in a strong position to benefit from international
expansion. Most of KFC's international expansion was through franchises, due to the fact that
they were owned and operated by local entrepreneurs with a deep understanding of local
language, culture, customs, law, and marketing characteristics. In larger markets there was a
tendency to build company-owned restaurants. The rationale was that fixed costs could be
spread over a large number of restaurants and lower prices on products could be negotiated.
China

was

one

of

the

international

markets

KFC

focused

on.

Influences in marketing decisions Cultural factors Cultural: the basic beliefs and values

cherished by a society as a whole and handed down from one generation to the next.

Let us consider how culture influences the marketing decision. Before we go into detail,
should

we

first

consider

the

elements

contributing

to

the

culture

context.

The elements of culture: *Language *Religion *Values *Attitudes *Manners and Customs
*Material culture *Aesthetics *Education *Social Institutions Language Language can be
categorized into verbal and non-verbal one. For verbal language, messages can be conveyed
into words, by the ways the words that are spoken. For non-verbal language, it refers to
gesture,

body

position

and

eye

contact.

A new entrant would find it very difficulty to form local and personal networks between
businesses and government agencies, which are crucial to success and provide access to the
local market and domestic suppliers. In addition, local business customs and laws can be
quicker understood and established ways to cut bureaucratic red-tape can be further utilized.
Also, the local knowledge of culture, language and geography is beneficial for any foreign
entrant

into

relatively

unknown

market.

Religion and Superstition Religion is one of most sensitive elements of a culture.

To appreciate people's buying motives, customs & practices, awareness & understanding of
their religion is often crucial. When marketer has little or no understanding of a religion, it is
easy

to

offend

unintentionally.

In numerous Asian countries, ancient Chinese philosophy of feng shui (wind-water) plays an
important role in design & placement of corporate buildings & retail spaces According to
feng shui, proper placement & arrangement of a man-made structure & its interior objects
will

To

bring

avoid

good

conflict

fortune

against

home

to

its

place's

residents

religion

is

&

visitors.

very

important.

Religion has an impact on international marketing that is seen in a culture's values and
attitudes

toward

entrepreneurship,

consumption

and

social

organization.

Values They are enduring moral beliefs shared by members of a society and contributing to
its culture and beliefs of what is "good," "right," and appropriate in behaviour Attitudes For
marketers, a crucial value distinction is a culture's attitude toward change Societies that are
resistant to change are usually less willing to adopt new products or production processes
Local attitudes toward foreign culture will drive product positioning & design decision.

In South Africa, goods with American roots are strongly valued - using as a selling point, the
amount

of

affect

or

feeling

for

or

against

stimulus.

KFC uses GM chicken. This arouses a great controversy in many places. In some places,
people think that as long as KFC can give delicious fried chicken, it does not matter what
kind of chicken they are using. On the other hand, some 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. Take China as an example, the people there do
not have very strong and clear idea on GM food. There is not as many problems that has to be
faced

as

in

other

advanced

placed

in

the

world.

Different values will influence if the product can be consumed by the market. It will also
determine the marketing segment, like if the selling point has to very verify. Different attitude
will determine the ease of entering the market. According to the above data, the demand and
supply of the host country can be known so what the related produnt decision can be made to
match

the

demand

of

the

market.

Manners and Customs Potential problem areas for marketers arise from an insufficient
understanding of: *Different ways of thinking *Necessity of saving face *Knowledge &
understanding of the host country *Decision-making process & personal relations
*Allocation of time for negotiations When you understand the customs and manners of the
host country, you can determine what kind of promotion and organization is best for that
country. Also, the attitude will also determine what kind of industry can enter the host
country. For example, if a place likes having home made food, it can tell if a fast food shop or
take

away

is

more

suitable.

For example, in China, people there begin to try and accept new and foreign stuff. It is a good
opportunity

to

enter

the

market

at

this

moment.

Managers must be concerned with differences in the ways products are used.

Material culture Results from technology and is directly related to the way a society
organizes its economic activity. It is manifested in the availability and adequacy of the basic
economic, social, financial, cultural convergence, and marketing infrastructures. The basic
economic infrastructure consists of transportation, energy, and communications systems. The
degree

of

industrialization

can

provide

marketing

segmentation

variable.

When KFC first went into the Japanese market in the early 1970's, the company chose to
form a joint venture with a large scale poultry producer with excess capacity. This 50/50 joint
venture served the two partners very well, as KFC was able to ensure a stable supply of
quality supplies to its operations, and the local corporation was able increase efficiencies in
production by selling its excess supply. Furthermore, KFC was able to utilize existing
distribution networks serviced by the partner and at the same time, adhere to exiting rules and
regulations imposed by the Japanese government on foreign direct investment.

Aesthetics Each culture makes a clear statement concerning good taste, as expressed in the
arts and in the particular symbolism of colors, form, and music. What is and what is not
acceptable

may

very

dramatically

even

in

otherwise

highly

similar

markets.

In China, the packing has been well accepted in the worldwide so it can be easily accepted by
the people in China. Moreover, red which is a main color in its package and logo symbolize
wealth and happiness. So it can be well accepted by people in China without much difficult in
establishing

good

image.

It will seriously affect how the product is promoted and its design. For example, the original
packing

might

not

be

as

well

as

accepted

in

host

country.

The international firms have to take into consideration local tastes and concerns in designing
their facilities. They may have general policy of uniformity in building or office space design,
but local tastes may often warrant modifications. Respecting cultural traditions may also
generate

goodwill

toward

the

international

marketer.

Education Education is one of major vehicles to channel culture from one generation to the
next Two facets of education that matter to international marketers include: level & quality of
education.

Education affects employee training, competition for labor and product characteristics marketers need to exercise caution such as product labeling, print ads, & survey research. For
KFC in China, it has advantage that it is easy to employ manual labors as there is a large pool
of manual workers suitable for it. As this job does not require a very high education and the
general education is not very high yet, this helps to balance the supply and demand in the
market.

Education in general affects employee training, competition for labor and product
characteristics. Marketers need to exercise caution such as product labeling, print ads, and
survey research. The international marketing manager may also have to be prepared to fight
obstacles

in

recruiting

suitable

sales

force

or

support

personnel.

Social Institutions They refer to the positions of men & women in society, family, social
classes, group behavior, & age groups are interpreted differently within every culture.

Each institution has an effect on marketing because each influences behavior, values, &
overall patterns of life The fitting of an organizational culture for internal marketing purposes
to the larger context of a national culture has to be executed with care.

The internationally successful companies all share an important quality: patience. They have
not rushed into situations but rather built their operations carefully by following the most
basic business principles. These principles are to know your adversary, know your audience
and

know

your

customer.

Summary Culture is one of the most challenging elements of the international marketplace.
The most complicated problem in dealing with the cultural environment stem from the fact
that we cannot learn culture - we have to live it. Two schools of thought exist in the business
world on how to deal with cultural diversity. One is that business is business the world
around, following the model of Pepsi and McDonald's. In some cases, globalization is a fact
of

life;

however,

cultural

differences

are

still

far

from

converging.

The other school proposes that companies must tailor business approaches to individual
cultures. Setting up policies and procedures in each country has been compared to an organ
transplant; the critical question centers on acceptance or rejection. The major challenge to the
international manager is to make sure that rejection is not a result of cultural myopia or even
blindness.

Political/Legal factors Economic factors Appendix Marketing Research Methods Marketing


research plays a significant part in the development of marketing plans because it allows the
organization to become less isolated from the key trends and changes, which surround their
product. To continue to be successful, organizations must receive information, from the
researcher that is clear and accurate. It also has to satisfy your pre-determined goal for your
research.

"Marketing research is the function which links the consumer, customer and the public to the
marketer through information." Market research identifies issues that have a direct effect on
the organization, through the analysis of the results. The results and obtained information
must be collated and presented in a form that is easy to understand. Instead of raw data, you
have

series

of

graph,

charts

and

tables.

There are three main types of research, diagnostic, descriptive and predictive. Diagnostic
research is used when you need to analyze the effectiveness of an advertising campaign.
Descriptive research is fact finding secondary data. You would use this when you planned to
sample a section of a target audience for a particular product. Predictive research is about
identifying new opportunities in a market place and calculating the effect of marketing
decisions. You would use this if the organization were planning to expand or regenerate their
product.

When conducting research, you have to use a sample of your population. The reason why you
use a sample is because you can't physically research every single person in the country,
unless you are the Government and you are conducting a census. Your sample should consist
of people who fit into the research requirements. Sampling is cost and time effective, which
are extremely important to the organisation that is commissioning the research because they
are

anxiously

waiting

for

the

results

of

the

research.

The research data, which has been collected, can be categorized into two main sections,
qualitative research and quantitative research. Usually most research contains particles from
both

sections.

Qualitative research is when the information is open to broad interpretations. It is not


concerned with finding statistics, which relate to the product but focuses on the reasons lying
behind

certain

areas,

for

example

consumer

feeling

and

motivation.

Qualitative research is a more flexible approach as it explores customer behavior, it identifies


and analyses their emotions. This research is usually conducted on small samples because the
finding will be divers and full of 'richness'. This research cannot be generalized as it deals
with complex issues that tend to be unique to the individual, human emotions.

When using Qualitative research, there are several research techniques that you can use. The
techniques must be on a more personal scale, in comparison with quantitative research, as the
research requires that source of information. Primary data is excellent as it is specifically
designed to address the problems identified in the research objectives. Primary data includes
information that is 'first hand', as it is collected directly from the respondent. Examples are
surveys,

group

discussions,

interviews

and

observations.

Surveys are an excellent form of researching. The survey has been carefully designed to
address your objectives. It can be quick and accurate in pinpointing the information required
because there is no room for distraction. Respondents either chose an answer or make their
own. It is relatively cheap and less time consuming. The results are excellent to interpret,
evaluate

and

are

affectively

displayed

in

several

formats.

Group Discussions (Focus Groups) is when six to ten people, who are recruited according to
the pre-determined criteria, exchange experiences, attitudes and beliefs about certain topics. It
is a semi controlled environment and a moderator lead the conversation flow. The whole
discussion is recorded and everyone is informed about the recording, following ethical
guidelines. With a group environment, the respondents are less intimidated because they are
not alone, Observational research is when a person, who satisfies the criteria, is being
observed and recorded. The observer will note the person's body language and behavior and

will analyze it in order to understand the problem. The observer will either be conducting this
research in a controlled or non-controlled environment. A controlled environment would be a
room with only the observer and subject present. A non-controlled environment would be a
busy street. Most observational research is conducted in controlled environments because
fewer ethics are involved. Ethics are breached when someone is being recorded against their
will or are unaware. High street clothing companies, such as Arcadia, Mark and Spencer's
and Next all carry out observational research. The research is through a 'mystery/test
shopper'. The researcher takes on the role of a customer and rates the staff's performance.
Again I have been involved in an observational research campaign. I was asked to look at
several different types and styles of packaging for "Southern Comfort" whiskey. The
researcher recorded my expressions and feelings towards each packaging idea.

The remaining section from your collected data is quantitative research. This type of research
involves a mass collection of measurable information, which is not open to interpretation.
This type of research can be conducted through the use of telephone interviews, face-to-face
interviews and mail questionnaires. Quantitative research also utilizes secondary data
sources.

The types of secondary data sources are information that has already exists, from an external
body. Government published data, trade press or association files, press articles or report
commissioned by independent authorities or watchdogs. However secondary information is
complicated, it may take a long time to get relevant information that you can use. The
majority of the information may not be relevant to your research. This is an example of low
cost

research,

most

sources

are

available

free

of

charge

to

the

public.

When using quantitative research the methods differ from qualitative methods. Quantitative
methods tend to be more impersonal, and direct to the point. Telephone interviews are
excellent because the survey 'script' has been designed to combat the issues that the research
is trying to find out. The speed of the interview must be fast and last no longer than ten
minutes. You have to keep the respondent interested in order to get a response.

Individual interviews are another form of research. The process can last up to an hour. During
this hour the researcher is recording your responses and is able to expand on your answers
because a rapport has been built up. This form of research is more common as you see the

researcher,

with

their

clipboards

on

most

high

streets.

Mail questionnaires are a more popular form of research. It involves sending out selfcompletion surveys to a population sample. The sample is then supposed to fill them out and
return them to the researcher. With mail questionnaires you can cover a vast amount of your
sample, as you are able to send out thousands of questionnaires. The only problem is that
response rate tends to be low, With the types of research available, I personally believe in
qualitative research because there is a greater need to expand and develop your research. This
is useful because it allows your finding to be more accurate and richer in source. When
conducting research I suggest that you use both types of data. Secondary data will allow you
to build up a background and may even hold some relevant information to your research.

Sources of global information Sources of information include documented sources, human


resources

or

perceived

sources.

Documented sources In recent years there has been an information explosion, especially in
the documented or "secondary" source area. (Primary data collection will be dealt with later).
Various sources of documented data are available including: i) Governments *Central office
of information (UK) *Central Statistical Office (Zimbabwe) *EU documentation centres
*Boards of trade, or Ministry of Commerce ii) International bodies *the UN Statistical
Yearbook *World Bank - general statistics *OECD - general statistics *ITC - Geneva
(information service) iii) Business, trade, professional *Chambers of Commerce *Institute of
Marketing *American Management Association *The Market Research Society iv) Foreign
embassies, trade missions *Commercial newspapers *Financial agencies - Price Waterhouse
*Kompass Register of companies *Economist Intelligence Unit (UK) v) Other *Libraries,
universities,

colleges.

There are excellent sources of overseas data, in the horticultural industry, giving information
on markets, prices and produce required for those wishing to sell into Europe. Examples of
these are given below: *International Trade Centre (ITC) Geneva *COLEACP, Paris
*Natural Resource Institute (NRI) UK *GTZ, Germany *CBI, Netherlands *IMPOD,
Sweden *Chambers of commerce *Food and Agriculture Organization of the United Nations
Conclusion This analysis is focused by exploring, through different perspectives, the pros and
cons of KFC investing in China. What can make this region attractive to so many companies?

First, the size of the market - it has a population of more than 1.6 billion. Second, most
countries are becoming fully functional democracies. Third, most countries are successfully
stabilizing their economies. These factors make investment in this market less risky.

In a competitive market, companies are not only dependent on their strategy but also on the
strategy of their competitors. If the competition is exploring the China market and you aren't,
can't that be risky? For example, if McDonald's invest in the risky market X and KFC doesn't,
two situations may happen. First the investment succeeds, in which case McDonald's gains
the advantage. Second the investment fails, in which case KFC gains the advantage from
McDonald's misfortune. To playing safe, KFC can follow the competition into the new
markets. That way the chance of all loosing or all winning is quite the same.
ABOUT

KFC:

Introduction
Kentucky Fried Chicken (KFC)- one of the most known fast food chains in the world started
in the early 1930's by Kernel Sanders in the Southern USA as a small franchise operation.
Colonel Sanders has become a well known personality throughout thousands of KFC
restaurants World wide. Quality, service and cleanliness (QSC) represents the most critical
success

factors

to

KFC's

global

success.

Food, Fun & Festivity, this is what KFC is all about. Leading the market since its inception,
KFC provides the ultimate chicken meals for the Chicken Loving Nation. Be it Colonel
Sanders secret Original Recipe Chicken or the Hot & Spicy version, every bite brings a YUM
on

the

face.

At

KFC

we

proudly

say:

KFC has more than 11,000 restaurants in more than 80 countries and territories around the
World. In 1971, Heublein, Inc. acquired KFC, soon after; conflicts erupted between the
Colonel (which was working as a public relations and goodwill ambassador) and Heublein
management

over

quality

control

issues

and

restaurant

KFC is part of Yum! Brands, Inc., however in the case of Pakistan KFC builds the relation of
Quality

Service

and

cleanliness

for

Customer.

KFC was acquired by PepsiCo in 1986; it had grown to approximately 6,600 units in 55
countries and territories. Due to strategic reasons, in 1997 PepsiCo spun off its restaurant
businesses

(Pizza

Hut,

Taco

Bell

and

KFC)

Perfecting its secret recipe of 11 herbs and spices in 1939, KFC has come a long way, with
over 10,000 outlets in the world; KFC has maintained its title, for the last 60 years, of being

The

Chicken

Experts.

KFC

in

Pakistan:

Presently KFC is branched out in thirteen cities of Pakistan (Karachi, Lahore, Rawalpindi,
Faisalabad, Multan, Peshawar, Sialkot, Hyderabad, Islamabad, Gujranwala, jehlum, sukkur
and Murree) with 45 outlets nation-wide. Opening the first KFC outlet in Gulshan-e-Iqbal,
Karachi in 1997, and KFC wore the title of being the market leader in its industry. Serving
delicious and hygienic food in a relaxing environment made KFC everyones favorite. Since
then, KFC has been constantly introducing new products and opening new restaurants for its
customers.
In Pakistan totally Chicken buy from Pakistani Poultry Forms, and also this Chicken is 100%
Halal.

Marketing

Mix:

Marketing mix consists of 4Ps. It contains everything a firm can do to influence the demand
for

its

product.

The

4Ps

are:

PRODUCT
PRICE
PLACE
PROMOTION
These

marketing

mixes

are

described

in

detail

as

under.

PRODUCT:
Product

planning:

Their product is classified as consumer product as it has no intermediates. It also offers


specialty goods. The stock turn over of KFC is relatively high. The prices and quality of the
product is always compared. Their product includes Goods (Burgers, Chicky Meals etc) and
Services

(cleanliness,

quick

service,

parties,

Product

and

meetings).

Strategy:

It was launched here as an innovative product. KFC has got one product line but later they
introduced products in the same line to protect their market share. New product ideas are
generated
Customer

from:
services

(comments

cards)

Gallops

survey

(mystery

shoppers)

They have a Quality Assurance department that decides the new product innovation. Q.A.
department prepares screening of new ideas and products feasibility report. This department
does the technical evaluation (whether it is practical to produce the new product or not). The
products are tested externally by offering trials to customers by giving them free samples.
KFC uses telemarketing, print media, billboards and most recently televised marketing for
promotion.
KFC adds a new product in its present assortment based on their competitors, products
adequate demand, the satisfaction of key financial criteria and its compatibility with
environmental

standards.

Product
KFC

Line:
product

line

includes

all

chicken

based

products.

Burgers:
The burger category includes the Zinger Burger, Colonels Chicken Burger, Colonels Fillet
Burger, SUB60 and 80, and Zinger Jr. They have also introduces a Fish zinger burger.
Chicken

Pieces:

The chicken involved the product line with different number of chicken pieces like 1 piece, 2
pieces,

pieces

and

10

pieces

chicken.

Combos:
The combo includes the different meal as Chicken Meals, Sandwich Meals and Family
Meals.
Desserts

&

Beverages:

The desserts and beverages offered by KFC are Fruit Salad, Regular & Large Drink, Regular
&

Large

Mineral

Water,

Snacks

Tea,

Scoop

&

of

Walls

Ice

cream

and

Side

Coffee.
Orders:

The snacks and side orders served by the KFC are Arabian Rice, 5 & 10 Pieces Hot wings,
Dinner Roll, Regular & Large Fries, Hot Shots, and Corn on the Cob, Hot & Crispy Soup and
the

Cole

Slaw.

Product

Mix

strategies:

The

product

Competitors:

mix

strategies

are

in

relation

to:

KFC has a head-on competition with McDonalds so wherever they place their products; KFC
goes there as well. Locally in Pakistan KFC face a close competition with the local brands
like AFC (Al-Baik Fried Chicken), Fried Chicks, Dixy Chicks etc which are producing more
or

less

the

same

product

as

KFC.

attribute

itself.

and

prices.

Attributes:
The

brand

KFC

is

so

strong

that

it

is

the

Quality:
KFC

products

Product

are

based

Mix

on

high

quality

Expansion

and

Contraction:

KFC keeps on modifying their product through line extension and other methodologies. Line
Extension is being done through introducing new meals offers. The alteration of existing
products is also done and this function is performed by the Quality Assurance department.
The department decides which product should be sold and when (seasonal products as rice
and soups offered in winters). Functional modification is also done by the Q.A. department to
introduce new recipes. Other than expansion contraction is also being dealt with as when the
new deals or offers are not sold as expected, Q.A. department contracts the previous offers
and

introduces

Change

new

in

offers.

Product

Positioning:

KFC products were first offered to upper socio-economic group. Later, introducing
discounted and lower price deals, they are now dealing in masses. So, KFC has traded down.
In doing so KFC has used the same brand name and same high quality product.

Product

Branding,

Packaging

and

Labeling:

Brand

Name:

KFC

Color:

Red,

white

Symbol:

Colonel

Harland

Sanders

picture

and

KFC

written

with

it.

Master Brand: The brand itself is so dominant, that it immediately comes in mind.

KFC

Brand:

KFC's brand identity is the logo featuring Colonel Harland Sanders, one of the bestrecognized icons in the world. It is trade marked registered brand and is distinctive, adaptable

to addition to product line. It suggests something about product. It is legally protected and
registered.
Brand

Equity

and

Strategy:

The brand equity is very high as the value added by brand to the product effects the product
selling. And the Brand strategy followed is that the KFC is marketing the entire output under
products own brand. Pepsi and Nescafe are the complementary brands associated with KFC.
Packaging

Strategy:

KFC makes its own disposable packaging. If they need promotion Pepsi contributes in
improving the packaging quality. KFC does family packaging. They use paper material for
packaging

to

avoid

health

hazards

and

environmental

pollution.

Labeling:
KFC does brand labeling. Some of its products also have informational labels such as Halal,
Veggie

Burgers

and

Chicky

Meals.

PRICE:
In introduction stage KFC entered the market using market-skimming strategy. Their
products were high price and targeted only upper class. Gradually they trickle down focusing
on the middle class to penetrate the market. Also KFC follows one price strategy. Price is
determined according to the rates of the raw materials and policies of the Govt. The political
and legal forces often affect the policies of KFC and eventually results in change of prices
that

is

due

to

imposing

of

taxes.

PLACE:
Distribution

Channel:

KFC has only one channel of distribution i.e. direct where the goods are transferred to the
consumer

directly.

Distribution

of

KFC

has

Consumer

Goods

no

middlemen.

and

Services:

KFC does distribution of consumer goods directly to the consumer. It also does distribution
of services to the consumer like parking, sitting, home delivery, etc. KFC does intensive
distribution
KFC

on

its

outlets.

(All
gets

and

everything

on

every

outlet).
Wheels!

KFC launched its first mobile unit, which took the streets of Karachi by storm. The mobile
unit has been designed to cater to the needs of those who are on the go, and have little time to
stop by at a restaurant. It also provides a unique convenience of enjoying the delicious KFC

offering anytime, anywhere, thus making fast food truly fast and convenient.
It intends to further develop its mobile network nationwide through more such units.

PROMOTION:
The logo features Colonel Harland Sanders that is one of the best logo in the world has
created its name as a standard in the market. Today the Colonels Spirit and heritage are
reflected

in

KFCs

brand

identity.

KFC by its advertisements derives the desire in the customer to come and enjoy healthy food
in their favorite restaurant. They spend 2% of its profits on advertisement. They use print
media and most recently doing televised marketing to promote it products. Their advertising
media involve: Newspapers, Pamphlets, Billboards and Television. KFC does both the
primary demand advertising (Become a Chicken Fanatic) and the selective demand
advertising (e.g. Zinger Meal). In its advertising it give informative messages like Keep
the city Clean. KFC does institutional advertising to stimulate demand. When KFC offers
new products then it does product advertising. KFCs ads act as counteracts which means to
drive the customer to KFC i.e. it uses pull advertising strategy. They also provide wit the key
chains, watches, bags, tee-shirts etc. to its customers with the purchase of different meals as a
part of their promotional activities. They also provide with certain midnight packages,
birthday

packages

and

lot

more.

KFC has put big hoardings on the busy areas of Pakistan and have an effective advertisement
campaign on the media in order to motivate its customers. The colors used in advertising are
Red,

White

and

blue

which

itself

is

recognition

for

the

brand.

KFC have joint sale promotions with different companies like HP, Philips, Value Meals,
Pepsi-Cola. And most recently with ARY Gold digital and World Call Internet services. Also
KFC Proud Partners are Del Monte, Culligan, Shan and Peek Freans (EBM).
PSO had made a scheme in which PSO had given the coupons of KFC having 10% off. (1
coupon

KFC
Nobody
We

was

given

after

in

each

purchase

its
does
do

of

10

liters

of

petrol)

advertisements

says;

like

KFC

chicken
chicken

right

Hence, focuses on product advertising. KFC does mass selling in order to reach its target
market (as it has trickle down). KFC in its ads try to convert people to people who eat boring

bland

fast

food

over

to

KFC.

The message conveyed in the ads is recognition for the brand. KFC does competitive
advertisement with its head on competition with McDonalds. Regarding this KFC uses
Pricing

below

competition

strategy.

KFC sponsors many NGOs and other social welfare organizations. They also offer different
deals

according

KFC

to

the

as

season

and

occasions.

market

leader:

It has covered 80% of the market share in fast food industry KFC has recognition around the
world and has been globally positioned for many years in Pakistan and to capture the market
share

in

Pakistan

adopts

champs

philosophy.

Strategic Planning is the process of developing and maintaining a strategic fit between the
organizational goals, capabilities and its changing marketing opportunities and is done by
KFC

in

well

defined

manner.

Strategic planning sets the stage for the rest of the planning in the firm. KFC is looking that
how much its current strategies are beneficial for them. Although these are good and
profitable but dynamic changes in environment are requiring identifying the attractive
opportunities.
That is the reason that they are expanding there market size by focusing on sub urban areas
and targeting middle class people by providing them differentiated products at a fair price.
They are opening their new mobile outlets in there potent ional markets. KFC is also going to
increase
KFC

its

sweet

dishes

to

in

avail
a

the

opportunity
Growing

available

for

them.
Market:

The market of KFC is increasing day by day. Being a food market it is always considered in a
growing market because it increases continually with the population. Their growth is
continuously increasing and if they want to be a leader, they has to develop a strategy which
is predominantly a market expansion strategy and in this way they will not loose their
leadership. It has greatly increased their market share in Pakistan by following different
strategies that may be regarding their products, prices, placement or promotions. They have
been following the strategies for market expansion by targeting the new users of the product,
describing the new uses of the product and by showing them more usage of the product.
Describing

the

New

Uses:

In this method, the new uses of the product are being described. As the motto of KFC says
we do chicken right, here they claims that they are the best in using the chicken correctly. In

the early days the chicken was simply used in a simple way for cooking, but KFC has
introduced it in a number of ways and described it to the people by launching it as a meal as
well as in the snacks form. They prove them with the best cooked chicken with a great taste.
Instead of the chicken pieces, they also serve chicken nuggets, burgers, hot shots, twisters etc.
many new innovative products are being introduced by KFC that is greatly helpful in
attracting

the

customers

and

increasing

its

More

market

share.
Usage:

In the advertisement of KFC mostly seen on the bill boards, they have shown in the new
scheme of zinger deal of Rs.290 + 10 and u get zinger + another chicken burger. And in
Ramadan, they launches the deal of Rs. 500 and it says that all you can eat, it gives the
unlimited zinger burgers and chicken pieces. In this way they have greatly increased their
usage

of

their

products.

New

Users:

The people who do not eat KFC should be attracted, that may be by attracting the non users
of the product, non users of the brand or the non believers. They are done in the following
ways.
Non

users:

The people who do not eat the fast food, they should be attracted like KFC has been attracting
their customers by providing deals with Ufone. If the person is an Ufone user and he is not a
KFC customer, they simply receive a message on their hand set and they jus have to show it
on the KFC and counter and get a free meal. Its a strategy to attract the non users. In a
similar way, distributing deal coupon on specific purchases, in shopping malls may also be
very
Non

effective.
Users

of

the

Brand:

The non users of KFC can be attracted by describing them the quality features of the product
that they think of trying the product once. In this case promotional activities play an
important role. If the promotions are done in an effective manner, people would definitely try
the product and also lowering the prices may be very effective that people may switch from
other
Non

brands

to

KFC.
Believers:

KFC is quite successful in attracting the non users of the product and the brand as well, so it
is not really necessary to hit the non believers. This is because they are the most difficult
people as it is very hard to break their social, religious and cultural believes.

SWOT

ANALYSIS:

The swot analysis includes the strengths, weaknesses, opportunities and threats faced by KFC
in

Pakistan.

These

all

are

described

in

detail

as

under:

Strengths:
It is the oldest and finest in Business having a high Goodwill. It does not have any Core
competitor in chicken serving. They have a large Number of Outlets at prime locations in
Pakistan. They serves variety of items under single menu. They are successful in maintaining
their loyal customers. It has an incentive of being a Multinational Organization e.g.
economies

of

scale,

government

incentives

etc.

Weaknesses:
Its major weakness id the presence of Multinational competitors in the market e.g.
McDonalds(specialized not in chicken serving but in burgers) and the other weakness faced
by KFC is the imported raw material which usually rise their prime cost.
Opportunities:
The opportunities are the cheap and easy availability of labor. The increase consumption of
fast food has increased the market size of KFC. As the consumer usually prefer All under
one roof, therefore, in order to increase their sales turnover they can increase or add the
served

items.

Threats:
The threats faced by KFC are the entrance of many new competitors into the market that may
be local or international brands. And being in Pakistan, there is high political
instability/uncertainty

involved.

PEST

ANALYSIS:

The Pest Analysis includes the political, economical, socio-culture and technological factors.
These

Political

are

described

in

detail

as

under:

Factors:

The political factors includes the government policies as KFC being a foreign company, but
they have to obey the policies of the Government laid by the government of Pakistan, the

country where the business activities are being carried out. KFC has handled this situation
very tactfully and has obeyed the policies of the Government as prescribe by the government
in order to run this kind of business. The other major factor is the pricing policies. KFC
maintain & design its price policies keeping in view the income & income distribution of the
people living in the country. Thats why all the classes are the target market of KFC. And the
most important factor is the political instability. As in Pakistan, there are political crises faced
by

the

government,

these

greatly

affect

the

business

of

Economical

KFC.

Factors:

The economic factors includes the income of the people, KFC is going to target. Income is an
important economical factor of the KFC. This factor decides which class KFC is going to
target. In the early time of KFC, they were focusing on the upper class but they after some
time changed their strategies and started to target the mass market by introducing some
different kinds of meals and offers through which we can say that they target the middle &
the upper level as well. The consumption behavior of the people plays an important role.
KFC also estimated the consumption behavior of the people, their liking and disliking and
make decision accordingly. Payment method is an important factor in the economical factor
of the KFC. They check the behavior of the regarding the payment methods of the people.
They check whether the gives money in the form of cash or plastic money.

Socio-culture

Factors:

The Social/Cultural Factors includes the Social Class, as it is discussed earlier that KFC
target all the class including the upper class, upper middle and lower middle class etc.
Although the culture of KFC from where they come is entirely different but they have
adopted the Pakistani culture as they had to serve the people living in Pakistan having
entirely different culture from other areas. And it has not only adopted the Pakistani culture
but also the Religion as well. They offer Halal foods to the customers, which is the symbol
that they adopted the Muslim religion strategies as they had to serve in the Muslim country,
to

the

Muslim

customers.

Technological
The

technological

Factors:
factors

include

the

Pace

of

change

at

fast

level.

Pace of change mean rate of change. KFC has strategy to introduce new technology
whenever they think that it is a time to introduce new technology. Research & Development

is also an important factor in the Technological factor. KFC always support the work of
research & development in order to introduce the new technology. Capital formation means
stock of machinery. KFC has a stock of machinery in order to run its business activities. In
other

words

KFC

has

good

amount

of

Capital

Formation.

Recommendations:
KFC is a market leader in providing Fried chicken. As KFC, so it is competing with the
prominent market signs like pizza hut, McDonalds. N its product category, it is doing really
well but they need improvements in their hot menu. They should also make their menu
dynamic, by introducing new meals after certain period of time. New items should be
introduced by varying the taste. They should also try the local desi taste addressing the desi
food

lovers,

thus

it

will

help

to

increase

their

market

share.

The prices of KFC are reasonable as compared with other fast food restaurants. But as price
is always a primary concern for the customer, therefore, they should adopt certain strategy to
attract the customers. And it can only be done by lowering the prices. It could be by
introducing some discount packages for families, employees, students or regular customers.
The membership card can be used to provide certain extra value to the customer.
AS far as placement of the products is concerned, it is an important factor, for a company to
increase its market share, by targeting the right customer. KFC needs to have more outlets, at
commercial areas. It will help to target the actual as well as the potential customers. Mobile
outlets

may

be

an

effective

addition

as

well.

KFC has large customer equity, but being a market symbol, a company should strive for
having more actual customers. KFC should work for having more solid marketing
departments. They should organize and run the proper advertisement campaign. It would
definitely be an incremental factor for their sales. They can also use the brand promotions.
They can set up the promotional campaigns. All they need is an effective marketing
department

to

facilitate

he

promotional

activities.

Conclusion:
KFC is a very strong chain of fast food restaurants with more than 10,000 restaurants all over
the world. KFC is providing employment to 1200 Pakistanis an around 6000 Pakistanis

dependent on KFC. They are paying Rs. 10 million to government of Pakistan as direct taxes.
95% of its food and packaging material used in KFC produced in Pakistan locally which
sums up to the purchase of 35 million per month. Each new outlet developed by KFC in
Pakistan spends 40 million rupees, thats a massive amount for this industry.
From all of the above detailed discussion about KFC in Pakistan, it is really clear that KFC
and Pakistan are growing together. KFC is doing well in Pakistan and keeps following its
marketing strategies as a market leader and segmenting the market into different variables
and increasing their market share. KFC is leading in Fried Chicken. It gives quality, variety
and fresh meals as of its competitors.

PROJECT OF
INTERNATIONAL BUSINESS

SUBMITTED TO:

SUBMITTED BY:

MRS. SHELLY

TANYA SHARMA
B.B.A. L.L.B.
V TRIMESTER.

DECLARATION

I, TANYA SHARMA pursuing BBA LLB (honors) (5th trimester) at Institute of


Technology and Management i.e. ITM University School of Law hereby declare that I
have completed my project on KENTUCKY FRIED CHICKHEN (KFC) in the
academic year of 2011-2012. The information submitted is true and in the best of my
knowledge.

SUBMITTED TO:

SUBMITTED BY:

MRS. SHELLY

TANYA SHARMA
B.B.A. L.L.B.
5TH TRIMESTER.

ACKNOWLEDGMENT

This project report could not have been prepared, without the help and encouragement from
various people. Hence, for the same reason I would like to thank my guide, mentor and of
course my professor Mrs Shelly . It was from her support that I got proper guidelines for
preparing this project. There are many other people I would like to thank on the same line
without which this project would have been nonsense over stilts and the ones who made my
project and the product work for me. All these information is collected from various sites
including the companys site. Which is being the most helpful area from which I have

gathered the information and completed this project. I thank all for making my project good
enough.

INTRODUCTION

KFC India

KFC is the worlds No.1 Chicken QSR and has industry leading stature across many
countries like UK, Australia, South Africa, China,USA, Malaysia and many more. KFC is the
largest brand of Yum Restaurants, a company that owns other leading brands like Pizza Hut,
Taco Bell, A&W and Long John Silver. Renowned worldwide for its finger licking good
food, KFC offers its signature products in India too! KFC has introduced many offerings for
its growing customer base in India while staying rooted in the taste legacy of Colonel
Harland Sanders secret recipe. Its signature dishes include the crispy outside, juicy inside
Hot and Crispy Chicken, flavorful and juicy Original Recipe chicken, the spicy, juicy &
crunchy Zinger Burger, Toasted Twister, Chicken Bucket and a host of beverages and
desserts. For the vegetarians in India, KFC also has great tasting vegetarian offerings that
include the Veg Zinger and Veggie Snacker . In India, KFC is growing rapidly and today has
presence in 21 cities with close to 107 restaurants.

HISTORY AND BACKGROUND

KFC History

Way back in 1930s Colonel Harland Sanders got some distinguished Kentucky folks lickin
their fingers. Its been in fashion since then!
Colonel Harland Sanders, founder of the original Kentucky Fried Chicken, was born on
September 9, 1890.When he was six, his father died and his mother was forced to go to work
while young Sanders took care of his three year old sibling. This meant he had to do much of
the family cooking. By the time he was seven, Harland Sanders was a master of a range of
regional dishes.
After a series of jobs, in the mid 1930s at the age of forty, Colonel Sanders bought a service
station, motel and cafe at Corbin, a town in Kentucky about 25 miles from the Tennessee
border. It is here that Sanders began experimenting with different seasonings to flavor his
chicken which travelers loved and for which he soon became famous.
During the next nine years he developed his secret recipe of 11 herbs and spices and the basic
cooking technique which is still used today. Sander's fame grew. He sold his chicken on the
highway! But when the highway was removed, he sold up and traveled the United States by
car, cooking chicken for restaurant owners and their employees. If the reaction was favorable
Sanders entered into a handshake agreement on a deal which stipulated a payment to him of a
nickel for each chicken the restaurant sold.

By 1964, from that humble beginning, Colonel Harland Sanders had 600 franchise outlets for
his chicken across the United States and Canada. Later that year, Colonel Sanders sold his
interest in the United States operations for $2 million. The 65-year-old gentleman had started
a worldwide empire using his $105 social security cheque. Sadly, Colonel Harland Sanders
passed away on December 16th, 1980 aged 90.

His legacy lives on with KFC restaurants all over the world. KFC now stretches worldwide
with more than 13,000 restaurants in more than 80 countries and territories around the world
serving up the Colonels Original Recipe. It is a $13 billion brand based out of Kentucky and
is the leading QSR around the world which is based in Louisville, Kentucky. Yum! Brands
own 5 brands, out of which KFC is the largest brand within the Yum! Portfolio, founded by
Colonel Harland Sanders in the year 1938.

PROBLEMS FACED IN GLOBAL WORLD

In the latest salvo against fast-food chains, KFC is being sued for frying its chicken in
cooking oils that contain trans fats, which can contribute to heart disease and diabetes. Here's
the skinny on the fat fight:

Why doesn't KFC use a healthier oil? Like most fast-food chains, KFC cooks with partially
hydrogenated vegetable oil, which doesn't turn rancid as quickly as healthier,
nonhydrogenated oils. "Extra crispy" chicken may also taste better when fried in this oil.
"The flavor is crunchier, and you don't get that feeling of fat coating your mouth," says Ted
Labuza, a food scientist at the University of Minnesota. But the oil does have dangerous
trans-fatty acids.

What's so bad about trans fat? It raises one's bad cholesterol, which boosts the risk of
coronary disease. A federal dietary panel has recommended that people consume no more
than 2 g per day.
Is KFC's food really that unhealthy? The company says its products "meet or exceed all
government regulations." But as the Center for Science in the Public Interest, the activist
group behind the lawsuit, points out, a three-piece extra-crispy combo meal contains as much
as 15 g of trans fat--more than a person should ingest in a week.

What are other chains doing? Wendy's plans to eliminate trans fats from its food; the
Cheesecake Factory is doing so already. McDonald's backpedaled on a promise to cut trans
fats and says it's studying alternative oils, as is Burger King.

PROBLEMS FACED BY KFC IN INDIA

The case highlights the ethical issues involved in Kentucky Fried Chicken's (KFC)
business operations in India. KFC entered India in 1995 and has been in midst of
controversies since then. The regulatory authorities found that KFC's chickens did not
adhere to the Prevention of Food Adulteration Act, 1954. Chickens contained nearly
three times more monosodium glutamate (popularly known as MSG, a flavor enhancing
ingredient) as allowed by the Act. Since the late 1990s, KFC faced severe protests by
People for Ethical Treatment of Animals (PETA), an animal rights protection
organization. PETA accused KFC of cruelty towards chickens and released a video
tape showing the ill-treatment of birds in KFC's poultry farms. However, undeterred by
the protests by PETA and other animal rights organizations, KFC planned a
massive expansion program in India

RE-ENTRY OF KFC INTO INDIAN MARKET

A case in point is KFC. KFC entered India in 1995, but a controversy surrounding the
levels of MSG in its preparations and subsequent protests from farmers' groups and
animal rights activists spelt trouble for the company. Ultimately, the company had to
shut all but one outlet in the country. Only recently in 2003 it made a quiet re -entry
into the Indian market. Then came up with the strategies and menu that is desirable by
the Indian consumers. And since 2003 it is expanding successfully its business in India.

Mission statement
To be the leader in western style quick service restaurants through friendly service, good
qualit food and clean atmosphere

Goals of KFC

Build an organization dedicated to excellence.


Consistently deliver superior quality and value in our products and services. Maintain a
commitment to innovation for continuous improvement and grow, striving always to be the

leader in the market place changes. Generate consistently superior financial returns and
benefits our owner and employees. To establish in India our position as leading WQSR
(Western Quick Service Restaurant) chain, serving good value. Innovative chicken-based
products. Consistently, providing a pleasant dining experience, with fast friendly, in a clean
and convinient locations. All the times we must dedicated to providing excellent and
delighting customers.

OUTCOME OF CASE STUDY OF KFC IN RESPECT OF SRC


(SELF REFERENCE CRITERION)

KFC has not understood the significance of cultural, economic, regulatory and
ecological issues while establishing business in a country like india
.
KFC has not Appreciated the need for protecting animal rights in developed and
developing countries like India.
They have not understood the importance of ethics in doing business.
They have not examine the reasons for protests of PETA.

The case highlights the ethical issues involved in Kentucky Fried Chicken's (KFC)
business operations in India. KFC entered India in 1995 and has been in midst of
controversies since then. The regulatory authorities found that KFC's chickens did not
adhere to the Prevention of Food Adulteration Act, 1954. Chickens contained nearly
three times more monosodium glutamate (popularly known as MSG, a flavor enhancing
ingredient) as allowed by the Act. Since the late 1990s, KFC faced severe protests by
People for Ethical Treatment of Animals (PETA), an animal rights protection
organization. PETA accused KFC of cruelty towards chickens and released a video
tape showing the ill-treatment of birds in KFC's poultry farms.

STRENGHTS OF KFC

Strengths can be found internally in a company and can be used to the companys advantage.
The strengths identified are as follows:

1. KFC's secret recipe.

The secret recipe has long been a source of advertising, and allowed KFC to set itself apart.
Also, KFC was the first chain to enter the fast-food industry, just before McDonald's, which
opened its first store a year later, and the "secret recipe" was the initial home replacement
strategy.

2. Name recognition and reputation.

KFC's early entrance into the fast-food industry in 1954 allowed KFC to develop strong
brand name recognition and a strong foothold in the industry. The Colonel is KFC's original
owner and a very recognizable figure, both in the U.S. and internationally, in their new logo.
In fact, in the fourth annual LogoValue Survey, done by The Schecter Group, the KFC logo
was the only one which significantly enhance the brand's image (Logos add1).

3. PepsiCo's success with the management of fast food chains. PepsiCo acquired Pizza Hut in
1977, and Taco Bell in 1978. PepsiCo used many of the same promotional strategies that it
has used to market soft drinks and snack food. By the time PepsiCo bought KFC in 1986, the
company already dominated two of the four largest and fastest-growing segments of the fast
food industry (Wright, p.424-426).

4. Traditional employee loyalty:


"KFC's culture was built largely on Colonel Sanders' laid back approach to management"
(Wright, p.433). Before the acquisition of KFC by PepsiCo, employees at KFC enjoyed good
benefits, a pension, and could receive help with other non-income needs. This kind of
"personal" human resources management makes for a loyal workforce (Wright, p.434).

5. Improving operating efficiencies by reducing overhead and other operating costs can
directly affect operating profit.
Due to the strong competition in the US, the fast-food chains are reluctant to raise prices to
increase profit. Many of the chains are turning to operating efficiencies to increase profit. For
many companies, operating efficiencies are achieved through improvements in customer
service, cleaner restaurants, faster and friendlier service, and continued high-quality products.
WEAKNESS

Weaknesses are also found internally like strengths. Weaknesses, however, can limit a
companys potential. The weaknesses for KFC are identified as follows:

1. The many sales of KFC lead to a confusing corporate direction.


Between 1971 and 1986, KFC was sold three times. The first two sales, to Heublein, Inc and
to R.J. Reynolds, left the company largely autonomous. It wasn't until the sale to PepsiCo in
1986 that changes in top management started to take place. These changes happened almost
immediately after the sale.

2. KFC has a long time to market with new products.


Because of the nature of the chicken segment of the fast food industry, innovation was never
a primary strategy for KFC. However, during the late 1980's, other fast food chains, such as
McDonald's, began to offer chicken as a menu option. During this time, McDonald's had
already introduced the McChicken while KFC was still testing its own chicken sandwich.
This delay significantly increased the cost of developing consumer awareness for the KFC
sandwich.

3. Conflicting cultures of KFC and Pepsi Co.


While KFC's culture was largely based on the Colonel's laid back approach to management,
while PepsiCo's culture is more of a "fast track" attitude. Employees do not have the same
level of job security that they enjoyed before the PepsiCo acquisition.

4. Turnover in top management.

PepsiCo bought KFC in 1986. By the summer of 1990 PepsiCo's own management had
replaced all of the top KFC managers. However, by 1995 most of this new PepsiCo
management had either left the company or been moved to a different division. In addition,
Kyle Craig, who was named president of KFC's US operations in 1990, left in 1994 to join
Boston Market.

5. Recent contractual disputes with franchisees in the United States.


This is also an example of the conflicting cultures of KFC and PepsiCo. KFC's franchisees
had been used to little interference from corporate offices. In 1989, the CEO announced new
contract changes - the first in thirteen years. "The new contract gave PepsiCo management
greater power to take over weak franchises, to relocate restaurants, and to make changes in
existing restaurants" (Wright, p.434). The franchisees protested these changes and the
relationship between the corporate KFC and the franchisees in the United States have been
strained ever since this announcement.
OPPORTUNITIES TO KFC

New Markets: Globalisation has opened doors for new markets for the company. As
the developed markets are mostly saturated, the developing countries like India and
China promises a good market and generation of demand in the future. With more
than 70% of the markets in india being unexplored and un organised, KFC has a good
scope of expanding its operations in the country.
Cross Culture: Generally there is a good acceptance of American culture of fast food
in India. People are opening up to fast foods more regularly in their daily lives and not
just keeping it a once in a month affair. Thus Indian mindset is fast changing.
Large Youth population: India has a very large share of youth population a compared
to other countries. More than 60% of the population is under the age of 30yrs. As the
young generation are more open to fast foods and demand it more, this is a good news
for the company.
New variety: Company can also come up with new variety in the menu likePizzas,
garlic breads to attract more customers.

THREATS TO KFC

Competition: Competitor companies like McDonalds are fast catching up with the
market. McDonalds with sales of more than 19 billion in 1999, accounted for 15
percent of the sales of the nations top 100 restaurant chains.
Organizations like PETA People for Ethnic Treatment for Animals have given a bad
name to the company which may prove disastrous to the image of the firm. Currently,
KFC is under massive attacks from animal organizations, questioning the way KFCs

suppliers are threatening the chicken, before they got slaughtered. Anti-KFC
campaigns, such as the one from PETA are affecting KFCs brand image in a negative
way and result in direct dollar losses, as less people are consuming KFC chicken.
Saturated US Market: Now KFC cannot rely on just its home market to generate
sales. As the US markets are already saturated and leave no or little scope for growth,
company necessarily needs to look at offshore foreign markets to generate sales and
keep up the profits.

PROBLEMS

Through an analysis of the strengths, weaknesses, opportunities, and threats of KFC, the
following potential problem areas were identified:

1. No defined target market.


The advertising campaign of KFC does not specifically appeal to any segment. It does not
appear to have a consistent long-term approach. The U.S. has enormous changes in its
demographics. Single-person households have increased from 12% in 1970 to 25% in 1995.
With this kind of dramatic change, KFC does not have a proper approach to its target market.

2. Saturation of the U.S. Market.


There has been an increase in the overall number of fast-food chains. Access to restaurants is
now easier due to non-traditional locations, for example in airports and gas stations. Also, the
age of Americans tends to change the frequency of eating out.

3. Health Conscious Consumers.


There has been a trend toward an increasingly healthy diet in America. This put KFC at an
extreme disadvantage due to its fried product offering.

4. Increased Start Up Costs.

Prime locations have increased in cost due to limited room for expansion. New technology
has increased efficiencies, but resulted in greater increased start up costs. Restaurant and
equipment packages range from $500,000 to $1,000,000.

ENVIRONMENTAL FACTORS AND OPPORTUNITIES

Political

The operations of KFC are affected by the government policies on the regulations of fast food
operation. Currently government are controlling the marketing of fast food restaurant because

of health concern such as cardiovascular and cholesterol issue and obesity among the young
and children in the country. Governments also control the license given for open the fast food
restaurant and other business regulation need to follow such as for a franchise business. Good
relationship with government in giving mutual benefits such as employment and tax is a must
for the company to succeed in any foreign market.

Economic

Though for last 1 year their was economic slowdown all across the globe but the sales of
KFC and other fast food chains did not slow down to that extent that of other sectors in. The
GDP (Purchasing Power Parity) is estimated at 2.965 trillion U.S. dollars in the year 2010.
The GDP- per Capita (PPP) was 2700 U.S. dollars as estimated in 2008. The GDP- real
growth rate in 2007 was 8.7%. India has the third highest GDP in terms of purchasing power
parity just ahead Japan and behind U.S. and China. Foreign direct investment rose in the
fiscal year ended March 31 2007 to about $16 billion from just $5.5 billion a year earlier.
There is a continuous growth in per capita income; Indias per capita income is expected to
reach 1000 dollars by the end of 2007-08 from 797 dollars in 2006-07. This will lead to
higher buying power in the Hands of the Indian consumers. So taking into considerations the
economic factors of India KFC is safe. The only danger to it will be if there is a terrorist
attack in India and the victim is KFC

Socio Cultural

India is the second most populous nation in the world with an approximate population of over
1.1billion people. This population is divided in the following age structure: 0-14 years
31.8%, 15-64 years 63.1% and 65 years and above 5.1%. There has also been a
continuous increase in the consumption of fast food in India. The social trend toward fast
good consumption is changing and India has seen an increase of 90% fast food consumption
from the year 2002- 2007. This increase is far greater than the increase in the BRIC nations of
Brazil (20 per cent), Russia (50 per cent) and China (almost 60 per cent) Thus this shows a
positive trend for fast food industries in India.

Technological

The Indian fast food Industry is heating up with a lot of foreign players entering the Indian
market. The technological knowhow and expertise will also enter the Indian market with an
increase in competition. With the lower rates and increase technology the fast food counters
are attracting youth by giving them attractive deals. For e.g. KFC and Dominos pizza. For a
fast food restaurant, technology does not give a very high impact on the company and it is not
a significant macro environment variables. However KFC should be looking to competitors
innovation and improve itself in term of integrating technology in managing its operation. For
example in inventory system, supply chain management system to manage its supply, easy
payment and ordering systems for its customers and wireless internet technology.
Implementation of technology can make the management more effective and cost saving in
the long term. This will also make customer happy if cost savings results in price reduction or
promotional campaign discount which will benefits them from time to time.

Environmental

As one of world largest consumer of beef, potatoes and chicken, KFC always had been critics
for world environmentalist. This is because high consumption of beef causing the green
house effect by methane gasses coming from the cows ranch. Large-scale plantation has
effect the environment and lost of green forest opening for plantation activities. Vegetarian
environmentalist criticizes the fast-food giant for cruelty to animals and slaughtering. In
America, once KFC want to introduce whale burger causing uproar because whales are
endangered species. Before using paper packaging, KFC once had been criticized for being
insensitive to pollution because of using ne based packaging for its food products. Imagine
millions of people purchase from fast food operator and how is the impact to world
environment by throwing away those hard to recycle packaging.

Our world is getting concern on environment issue and business operating here should not
just care for profit, but careful usage of world resources for sustainable development and care
for environment safety and health for our future generation. Critics and concern from all
public or activist should be review and support if necessary to ensure we play our social
responsibility better.

Legal factors

As a certified fast food operator, there are many regulations and procedures that KFC should
follow. For example is the Halal certification that becomes a concern to Muslim consumers.
KFC should protect its integrity and consumer confidence by ensuring all materials and
process are as claimed or must followed. Other legal requirement that the business owner
should follow as stipulated in laws are such as operating hours, business registration, tax
requirement, labor and employment laws and quality & environment certification (such as
ISO) in which the outlet has been certified. The legal requirement is important because the
offenders will be fined or have their business prohibited from operating which can be
disastrous.