Académique Documents
Professionnel Documents
Culture Documents
KFC Thailand
Group Assignment
Nandini Bhatia
Salome (Man Wing Ma)
Alice Jordan
Chani Van Der Merwe
1
Contents Page
Introduction Page 5
Conclusion Page 27
Appendix Page 29
2
Executive Summary
This following report analyses the KFC subsidiary in Thailand. KFC is based in the
US with more than 300 franchises in Thailand. While assessing the similarities and
differences in the two cultures, we found that Thailand and the US have very little in
common.
KFC is the third largest fast-food restaurant in the world but it does face a substantial
and growing number of competitors. At present, its main competitors in the fast food
industry are McDonalds and Domino’s Pizza. However, in the future, KFC will face
popularity. Nevertheless, KFC is still a market leader in terms of chicken and has
reputed itself as being one of the most desired places to work in Thailand.
KFC adopts a decentralized regional structure division where managers run operations
according to the country’s culture, political and economic situation. Doing so enables
KFC Thailand more flexibility while still staying within the global guidance of the
flow is not as efficient and ensuring control and consistency of all foreign and local
KFC Thailand has many opportunities in terms of expansion and penetration into
other target groups not yet exploited. Marketing campaigns that publicizes its
3
Nonetheless, KFC Thailand does face certain threats such as the bird flu condition,
the political instability, the food crisis and potential new competitors. To this, we have
recommended that KFC takes corrective actions such as expanding its menu, offer
4
Introduction
implements a multibranding strategy which brings KFC, Pizza Hut, Long John
Silver’s, Taco Bell and A&W, All-American Food together under one corporate roof,
KFC is the world’s largest chicken restaurant chain, owning more than 11,000
Bangkok and 56 upcountry provinces across the nation. By maintaining high quality
food and customer service, KFC is the leader in the quick-service restaurant industry
in Thailand
The aim of this report is to analyse KFC Thailand. In order to understand the cultures
of the U.S. and Thailand, their cultural similarities and differences will be discussed.
Next, KFC’s competitors and the current trends will be explored so as to understand
its position in the market. Thirdly, according to KFC Thailand’s internal capabilities
and external environment, its strengths, weaknesses, opportunities and threats will be
advantages, taking corrective actions towards current problems and proactive actions
5
Similarities and Differences between the US and Thailand
The US is the world’s most powerful nation state with a stable economy and plays an
active part in many trading blocks such as NAFTA, APEC, and ASEAN. The US
operates under common law hence contracts are longer as it needs to encompass all
Asian
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Thailand
(World Factbook, 2008). Unlike the US, Thailand operates under a civil law meaning
contracts would be shorter. Thailand is in fewer trading blocks but it is in the APEC
and ASEAN like the US. The country only has three main ethnic groups and the
11%
14% Thai
Chinese
Other
75%
The religious make-up for Thailand is also less diverse compared to the US with the
0.7%
Buddhist
4.6% 0.1%
Muslim
Christian
Other
94.6%
7
Comparisons in cultures of the home country (the US) and the host country (Thailand)
US 40 46 62 91 29
Thailand 64 64 20 34 56
World 55 43 50 64 45
Average
Source: http://spectrum.troy.edu/~vorism/hofstede.htm
100
90
80
70
60 US
Rating
50 Thailand
40 World Average
30
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Power distance
authority could be questioned and challenged while Thailand respects their authority
contextualized communicating style where titles and positions are given great
Due to this, the KFC subsidiary in Thailand has a bureaucratic system and there is
little communication between top managers and the subordinates. The decision-
Thailand’s high power distant culture reflects its monarchy system while the low
Uncertainty Avoidance
Both Thailand and the US have a high uncertainty avoidance score meaning that they
are risk averse. However, the extent to which the US is threatened by ambiguous
situations and tries to avoid it is lower compared to Thailand where people like
feeling secured. This implies that they are loyal to their jobs and companies.
that Thailand employees work better with a formal procedure where they are dictated
what to do and how to do it. In comparison, The US may find that its employees work
better with an informal procedure with less written rules and guidance. Furthermore,
this dimension can reflect the communication style used in the two cultures. The US
(low uncertainty avoidance), would communicate directly, and pay little attention to
body language, and indirect cues. On the other hand, Thailand, a culture with higher
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uncertainty avoidance might use body language, succinct words and rely on silence to
Masculinity
The US has a masculine culture where people strive for achievement, wealth and
challenge, making them very competitive in the workplace. The organizational culture
has a very low masculinity culture that treasures cooperation within the workforce, a
Individualism/Collectivism
The cultures of Thailand and the US differ most in this dimension. The US favours
individualism where people care for themselves and immediate friends and family.
however, is one that focuses more on group work and prefers rewards to be based on
the group’s performance or seniority. Due to this, the reward and motivation system
in the two countries will be different. Also Thai employees would communicate using
affective style where emphasis is placed on non-verbal cues such as tone while the US
culture is one that has an instrumental communicating style where the encoder ensures
Long-term/Short-term Orientation
The US Buddhist and Chinese community is less than that of Thailand hence making
Thailand one of the Confucius cultured country that gives importance to long-term
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orientation (Spring, 2000). On the other hand, the US is well below the world average
signifying its culture as one that is short-term oriented. Due to this, motivations,
would be looking for long-term promotion while the US employees would focus on
quick bonuses.
Trompenaars’ cultural dimension could also be used to assess the similarities and
differences in the two cultures. The US believes in the idea of a universal way of
emotion, Thai’s are usually more neutral and hold their emotions in while people from
the US express their emotions more freely and openly. Moreover, the US culture is a
specific one where work and private life is separated while in Thailand, long-term
relationships are built by diffusing work and personal life. Furthermore, status in the
sequential approach where businesses operate according to set plans within a time
frame. However, they differ in the environment dimension as the US adopts an inner-
direct belief where they think they control outcomes while in Thailand; people believe
Due to the differences in both cultures, it is important for the KFC subsidiary in
Thailand to operate differently from the one in the US, despite it being a franchise.
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Competitors and Current Industry Trends.
KFC is the third largest fast food chain in the world, with approximately 55% of its
restaurants in the United States and the remainder in the international market. Of the
worldwide chicken chain shares, KFC which is now owned by PepsiCo and has
55.2% market share, followed by Popeye’s with a market share of 12.7%. The
chicken chain market comes in fifth in sales within the fast food industry. Fast food is
still a growing industry however has slowed recently because fast food markets, such
as the United States market is becoming saturated. The industry is however still
experiencing a growth of 5.4% however this has been overshadowed by the full
service dining industry which is growing at a rate of 7% in the same period, showing
a reversal of trends that were observed in the mid-1990s. However, KFC has had a
decline in its market share over the last 10 years of 15%. (Hoover, 2008)
Over the years, in the highly competitive market of fast foods, KFC has established
itself as one of the market leaders, and this success can be attributed to a variety of
factors. Firstly KFC has developed a unique culture, centred around its origins and the
eleven secret herbs and spices used in the recipe creating a unique and attractive
concept. It is also extremely difficult for competitors to now enter the market as it
nearly reached full saturation levels. Not being as established as companies such as
KFC, new competitors strive to tap into the price sensitive fast food market however
lacks the bargaining power needed to reduce costs which lead many to exit or even
restaurants are owned by local entrepreneurs. This has been a very successful model
because it overcomes barriers such as language, law and culture. They have therefore
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However KFC has also experiences its share of weaknesses and threats. It is not
known for its radical changes in menu and is slow to develop new products to suit the
ever changing fast food market. One of its main criticisms was the amount of fat that
is used in KFC’s food. For this reason, Kentucky Fried Chicken officially changed its
name to KFC in the late 90’s however their menu has changed little. (Hoover, 2008)
One of its main competitors, McDonalds has been quick to respond to new social
expectations and public pressures, redeveloping their menu completely to offer choice
to their customers. KFC followed with a chicken sandwich however this proved not to
be successful and was quickly removed from the menu. In addition to this, KFC uses
Genetically Modified chicken and this has caused many ethical concerns around the
locality and health of the meat it uses and its social responsibility to the environment.
The main competitors of KFC are those companies that have been well established
and have been proven successful. As mentioned before these would include
competitors Domino’s pizza and also McDonalds who poses the bigger threat,
particularly in the United States. However the market share of each of these three
competitors is quite different in the host country (Thailand) which we have chosen to
focus on.
In this culture, chicken is the preferable dish and therefore KFC has gained a larger
market share over its competitors such as McDonalds whose food primarily consists
of beef. In addition, because the restaurants are locally owned, KFC has been able to
adapt and create dishes unique to Thailand to suit its residents taste, incorporating the
local culture, language and politics. This has been the key to their success in the
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international market and of all their restaurants 69% is now part of a franchise model.
(Hoover, 2008)
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Internal and External Analysis
KFC Thailand is placed in Cell 2. This means KFC Thailand has to improve its
existing strengths.
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Stregthes and Weaknesses
Structure
KFC uses a regional structure. The purpose of this structure is that regional heads
need to account for specific regions in terms of production and marketing, and
subsidiaries report to the headquarters in the US. Different countries are under the
four regions. Each of these countries has separate departments such as production,
marketing.
KFC CEO
Production Marketing
Finance HRM
Management
Americas Europe Asia Australia
Thailand
Production Marketing
Finance HRM
Strengths
regional office (Rodrigues, 1996) hence; responding to changes is faster because KFC
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management has the knowledge about local conditions. In response to a 12-month
market survey conducted by Nielsen Media Research in 2002, KFC found that
customers have negative comments on ambience and service area; therefore, KFC
culture, customs, law, and marketing characteristics (eCheat, 2007). Yum! believed
that basing the Thai subsidiary on the US model is not a superior strategy to become a
successful global firm; instead, they should adapt to local tastes, and consider cultural
changes and political climates simultaneously (O'Keefe, 2001). For example, fresh
rice (O'Keefe, 2001) and spicier chicken (Tanzer, 1993). Moreover, KFC Thailand
even customizes their own slogan—‘The Spice in your Life’ which implies happiness
is not only from food but also from the overall service experience (Mulchand, 2002).
Being a single management unit under this structure, regional managers can
conducted in 2005 by Hewitt Associates, SASIN Institute and Bangkok Post, Yum
Restaurants Thailand was awarded Number One Best Employer in Thailand and
Weaknesses
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Given the fact that KFC Thailand and KFC America have geographical distance and
communication costs will be high and additional expenditures will arise such as high
To ensure that the structure does operate efficiently, the parent company should also
consider the factors of host country’s relative sales other than the impact of
(Rugman and Verbeke, 2004). Yet, some corporate executives of PepsiCo possess
Warner, 1994). In other words, the profit performance of subsidiaries may well be
distorted.
Operations
Strengths
By achieving economies of scale, KFC Thailand can keep the production cost low.
Chicken, KFC’s main ingredient, is much cheaper and more widely available in Asia's
developing countries than beef (Tanzer, 1993). Additionally, their labour cost can be
lower than their principal competitors. This is due to favourable working conditions
Marsh, 2004). This competitive advantage allows KFC Thailand to occupy 49%
Furthermore, KFC Thailand fulfils the corporate social responsibility by applying the
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responsibilities, and the four levels of the philosophy of responsiveness (Deresky,
2002). In fact, all chicken that KFC Thailand uses are from domestic suppliers
adopting animal welfare standards based on those set by the EU (KFC, 2008). The
chicken is cooked ina manner approved by the Ministry of Health and the World
Weaknesses
In Thailand, all meats are consumed but KFC, focusing only on chicken have not been
able to exploit the meat eating consumer market to its full potential.
KFC Thailand is currently facing the danger of the growing trend of full-service
dining industry. Provided KFC Thailand continues to operate by this model, its
restaurants.
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Opportunities and Threats
Opportunities
Even after six years of expansion in Thailand KFC can still do more. In 2001
(Bangkok Post, 2001) and 2007 Yum announced room for expansion, intending to
double the size of its business in Thailand over the next five years, increasing KFC
franchises from 313 to 600 (Rungfapaisarn, 2007). It is important that KFC continues
to expand, making the most of the market, keeping the jobs local and the business
locally oriented.
KFC’s target market of youth has a lot of potential in Thailand but can still be
improved. Thailand’s population reached 63.36mil at the end of 2003. 25% of this
population is under the age of 15years (Thailand Investor Service Centre, 2001).
Presently KFC Thailand is targeted more towards young children. It would be greatly
beneficial to increase customers from the age group of 13-20 such as high school and
KFC can also expand the services offered by their franchises. In 2002, KFC
announced the plan to shift their image from takeaway to fast casual dine in restaurant
(Suwanprakarn, 2002). During this expansion Yum Restaurants has begun to group
their restaurants including KFC, Taco Bell, Pizza Hut, Long John Silver’s and A&W
All-American Food (Jobsdp) This will allow customers a greater choice from the one
location while generating a greater customer pool. This is attractive for both families
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In a fast changing world dominated by technology, consumers demand more for less.
KFC Thailand has a home delivery service but does not have an online order system.
This could be an opportunity for KFC to capture consumers who use internet
frequently.
In March this year, KFC launched a non-fried chicken menu in Thailand (Retailnu,
2008). Introducing healthy options to the menu at KFC would not only help keep
mothers bringing their young children but also attract health conscious teens and
adults. As in Australia, Thai people’s demand for healthy food options is increasing. It
is important for KFC to make this move to healthier options successful or they will
lose health conscious customers to other fast food chains with a healthier image.
Traditional Thai fast food is much healthier than western fast food such as KFC
(Babcock, 2002).
Showing its consumers how the product is being made would emphasise these healthy
changes. Television advertisements showing how the chicken is cooked and the
ingredients used would inspire confidence in the product and help consumers feel that
Another current social responsibility issue is the environment. McDonalds has taken
the stance of environmental care (McDonalds in-store pamphlet, 2008) while KFC has
taken the care of animals under its wing (KFC Animal Welfare Program, 2008). KFC
is yet to really highlight to the public in Thailand and the rest of the world its concern
for the welfare of animals. Being seen as socially aware and responsible will improve
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Threats
The bird flu that infected Asian countries is still an issue in Thailand particularly for a
restaurant like KFC. A pandemic that has caused so much social and political interest
The American Centre for Disease Control and Prevention stated that not only is the
bird flu not likely to diminish in the near future it has also infected one Thai person
(Centre for Disease Control and Prevention, 2007). This may not seem much but it
does prove that the virus can be transmitted to humans and thus most of the
Restaurants has stated that they believe sales will not decline in the event of another
Being such a popular and widespread brand name, KFC probably will always face
some public criticism. Like other fast food restaurants, the source and quality of the
food is consistently being questioned. One critic claimed that KFC was genetically
modifying its chicken resulting in beakless and feetless chickens (Hsu, 2000). Such
reports can make consumers think twice about purchasing the product or even choose
another brand.
The political situation in Thailand has been and continues to be very unstable. With a
coup as recent as September 2006 there is a split between the people of Thailand,
those for and those against former Prime Minister Thaksin Shinawatra (Economist,
2008). Such instability affects peoples’ confidence and feeling of security in their
country. They are more likely to save and less likely to invest. In this situation, fast
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food is likely to become a luxury. Political instability may also decrease the tourists
visiting Thailand. KFC is a popular choice with tourists due to its familiarity and in
The fast food industry has an increasing number of players. One particular
competitive advantage that another brand may have over KFC is a healthier image,
menu and cooking method. Given the rise in health conscious consumers this may
take customers away from KFC. For example, Subway sandwich bar is already well
The most recent of KFC’s threats and probably the most concerning is the food crisis
in Asia, particularly concerning rice. On May 7th the Sydney Morning Herald (2008)
reported that because of the food crisis and the dramatic increase in food prices,
Thailand had to drop its exporting prices for rice and forget plans to impose a rice
cartel, which would fix the price. Being the world’s biggest rice exporter, the drastic
drops in rice prices are likely to cause economic uncertainty in Thailand. Again fast
food will begin to be seen as a luxury. People will start to save more money and
consume local Thai food that is half the price of a burger meal at KFC.
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Realistic Solutions
In order to make the most of their opportunities and the best of their business, KFC
Bird flu
If the bird flu was to return to Thailand, KFC needs to keep its consumers feeling
confident about the product. Introducing new menu items including beef, pork and
keep profits high it would be necessary to keep chicken dishes on the menu and
ensure sales. Currently KFC uses Thai chicken from domestic suppliers. It would help
to import chickens from countries where bird flu is not an issue and in a way that the
chickens will not be contaminated. Informing the Thai public as to where the chickens
come from, how they are prepared and how they are cooked would encourage
Political instability
neutral. By doing this, KFC loses none of its customers based on political opinion.
Emphasising the fact that the franchises are owned and run by Thai people will keep a
Despite the political instability, economic projections remain positive with expected
This may mean KFC has nothing to worry about but it is important they be aware of
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As the economy may suffer, keeping KFC affordable is an important part of keeping
that KFC reassures investors with financial reports and managerial reports that
Bad Publicity
Bad publicity is a problem for many brands that are so prominent in the public eye
marketing that gives a positive image of the company, concentrating on any current
issues the brand is having. Generating good word of mouth about both the brand and
the product will help keep a positive brand image in the minds of consumers. It would
help to ensure that all customers’ experiences at KFC are positive and meet
expectations. Due to this Total Quality Management is advisable. This will help to
assure that the quality of the product and level of service is at its level best and that
there is a good communication flow both within the business and externally to its
consumers.
In order to keep new and existing competition at bay, it is important that KFC
customers to evaluate their experiences during and after their visit to KFC by
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Sponsorship of events or teams that are popular with the youth target market will aid
this strategy. It is important that KFC always be locally responsive1 in order to meet
Food Crisis
Thailand has already reacted to the food crisis by dropping rice exporting prices
which will help reduce the global effect. At some point in time KFC may need to
import rice. It may become impossible for KFC to serve rice and this may mean they
only keep their prices fair, remain politically neutral and keep a careful eye on their
costs.
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Conclusion
KFC is sustaining its leadership position in the chicken restaurant chain, while there is
more flexible and adaptative. However, due to cultural differences between the U.S.
Although being the leader in the fast food chain in the world becomes a strength for
KFC, weaknesses still exist due to lack of diversification on the menu choice,
consciousness. Yet, provided KFC can introduce more healthy options to the menu by
promoting through television and sponsorship, change its image from quick-service
will not only enlarge its target audiences but also increase its growth potential.
Given that some uncontrollable factors influence KFC’s image or performance, KFC
should deal with these carefully. In case bird flu outbreaks again, KFC can diversify
its menu by the use of beef and pork. When facing bad publicity, KFC can augment
its social responsibility regarding animal welfare and generate a positive brand image.
27
politically neutral and keeping an eye on production cost and price respectively are
With continuous improvement and maintaining the competitive advantages, KFC can
endure its strong position in the fast food chain in spite of keen competitors.
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APPENDIX
Carroll’s Model
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