KFC Exploring Strategy

Bachelor of Arts International Hospitality and Tourism Management
2014

Topic: Exploring Strategy

Summary
You are introduced to KFC organization. A fast-food chain restaurant comes from North Corbin, Kentucky that featuring fried chicken. KFC is recognized as the best fried chicken with its original 11 herbs recipes and produce most fried chicken to the world. What makes KFC still remain strongly while other companies are struggling to find a spot in the market? To answer this question, you will be finding out KFC strategic profile, vision, mission and values that is created and brought towards customers. Understanding the company strategic development and how the Corporate and Business level create and develop strategies and knowing what your competitors are doing. We will acknowledge about its customers perception, innovation and international strategy. What has KFC been doing to innovate its staffs, how innovation is created, what changes the companies has made and how did it result. The strategy analysis and main focus on home country – competitive advantage developed from home country. At the end of this report, you will be able to perceive the organization values in order to create competitive advantages that make the business sustainable in the presence and future.

1.0 Introduction
1.1 Background
KFC (originally known as Kentucky Fried Chicken) a subsidiary of Yam! Brands. Together with Taco Bell, Long John Silver’s and Pizza Hut they are forming the world’s largest restaurant system with more than 32,500 outlets in 118 countries worldwide. KFC was founded by an entrepreneur named Harland Sanders in North Corbin, Kentucky, 1930. He started by selling fried chicken at his roadside restaurant during The Great Depression and discovered the potential of fast-food restaurant franchising concepts. Since then he expanded his first franchise market in Utah and foreseen a rapid successful business.

1.1.1 Company Vision/Mission/Objective

The company’s vision statement is to be "To be the leading integrated food services group in the ASEAN region delivering consistent quality products and excellent customer-focused service”. Its purpose is to bring people from all religions, ages and backgrounds together to enjoy good food, ‘proper food at reasonable prices’

KFC mission is about reasons to “Celebrate their achievements of others and have funs doing it” by customers focus and belief in people. “Recognition is everybody’s responsibilities” (Adonis Chapel, 2008)

In achieving its vision and mission KFC plans to offer a healthy menu to customers. Providing customers with their best and making customers with smile every time they eat at KFC in order to make repeated and potential customers. On the other hands, all associates need to be trained to be customers maniacs. KFC has invented some options for healthier choices to meet different types of customers and expectation. They still continue to expand their business to get more customers purchasing their food

1.1.2 SWOT

(www.business-docs.co.uk/documents/swot-analysis-template)

Below table is SWOT analysis of KFC in 2013

Strengths
KFC has earned the second largest sales in 2013 among those fast-food restaurants
Secret homemade 11 herbs recipes
First western food style to establish in China
Subsidiary of the second largest fast-food in the world together with of KFC, Pizza Hut and Taco Bell
Offering the most original and the advantage of market leader among restaurants offering chickens as their primary menu
Weaknesses
Too many anonymous suppliers that caused the excessive antibiotics in used chicken
Experience high employee turnover as they always short of long term staffs
Unhealthy menu, most of items are deep fried
Not focusing on advertisement campaign
Negative publicity
Weak in marketing effects

Opportunities
Innovation on healthy menu in order to target different type of customers
Providing customers’ needs by offering 24hour services, drive through and home delivery
Expending on the variety of food choices, not only chicken
Potential growth in Asian countries such as Vietnam, Malaysia and Philippines

Threats
Lawsuits against the company for its unsafe chicken
Consumers are more concerned about their health and tend to reduce on fast and oily food
Ups and downs currency rates in different countries
More people are following the trend of healthy eating

1.1.3 PESTEL

(www.dineshbakshi.com/igcse-business-studies/external-environment/revision-notes/63-external-environment-factors)

KFC combines three major elements PESTEL which are

P- Political: KFC political analysis is their directive to run the restaurant. They use politics to solve the problem. Because the claim of excessive antibiotics in chicken. They made a loss in their profits. CEO of Yum Chinese operations apologized to the public for the mistake and did a makeover menu for China to revive its sales and image.

S- Social: analysis which supports the operation’s progress. It may involve culture, values, norms, behaviour and belief of a particular country and they have social activities for the environment. Malaysia is a Muslim country. In order to understand and satisfy its people, KFC has cut off the other meat in their menu. 100% chicken used is Halal certificate. It is a way to respect a country’s religion and its people.

T- Technological: the most important element in order to be competitive and follow up your competitors and trends. Without modern technology a company will collapse in the market. KFC was the first to introduce new baking system in their restaurant. Preparation process which involves cooking, frying and all other works are seen in front of customers.

1.2 Strategic Development How does KFC create and develop strategies

(www.functionformulabusinessstrategy.blogspot.sg/2010/10/strategic-visioning.html)
1.2.1 Corporate Level

Headquarters are located in Louisville, Kentucky. Working as a whole organization at the corporate level, its headquarters first made KFC as a basic model focusing on limited menu, low price meals and convenience. Chairman and CEO of Yum!, David C. Novak is in control of the operations. He makes most important decisions that will affect the whole organization. His key focus are 1) build leading brands across China in every significant category; 2) drive aggressive international expansion and build strong brands everywhere; 3) dramatically improve U.S. brand positions, consistency and returns; and 4) drive industry-leading, long-term shareholder and franchisee value (source: Taking people with you, David Novak, 2007)

1.2.2 Business Level

In 1987 KFC was the first western restaurant to open in China; the brand has since grown rapidly throughout the island. KFC adapts its menu internationally to suit regional tastes, and there are over three hundred KFC menu items worldwide. The company is now the largest restaurant chain in China. Sam Su is the chairman and CEO of Yum! 's Chinese operations. At the Business Level, the regional executive must have the understanding in the taste and culture of its country, to make some changes from the original menu that will satisfy the citizen but won’t affect the Corporate Level menu. Other than chicken, KFC in China is serving pork and skewers as well. Still keeping the original fried chicken but adding more items to interest customers and more various selections. Porridge is also being served because Chinese used to believe that eating a hot bowl of porridge in the morning is good for health and it is not too heavy. By inventing more items on the menu, Sam Su has only not targeted to the young people, but also people at different ages. Menu includes an average of 50 different menu items per store as he believes different people have different tastes.

1.2.3 BCG
Besides fried chicken, KFC is also known for its delicious Zinger burger, which is at Star and the second best selling in store. Zinger burger is high for both market share and growth. Rice and Spice, newly invented item, high for market share but low growth. Twister is low for market share but high for market growth, certainly public acceptance. Arabian rice is low at both market share and growth. Today we hardly see it on the menu as it has recently removed.

(www.download-reports.blogspot.sg/2011/09/new-product-development-at-kfc.html)

1.2.4 Porter’s 5 forces framework for KFC

(www.hbr.org/2008/01/the-five-competitive-forces-that-shape-strategy/ar/1)

Force 1: Power of Suppliers
Suppliers are in control of providing KFC’s raw materials. Suppliers have the right to decide whether they still want to carry on contract with buyer. Any other buyers want to duplicate KFC menu they can just approach this supplier and offer a better price. If the supplier cut off the contract KFC will lose its market.

Force 2: Power of Buyers
KFC is in charge of making decision of which suppliers to get from. The amount of poultry used for KFC daily use is numerous. So suppliers must be able to supply the necessary amount without fail and ensuring that their raw materials are hygiene standard. Last year in China, KFC was having problem with its suppliers for the excessive antibiotics used in chicken. KFC immediately cut off more than 1,000 their suppliers after the scandal has affected the company’s image.

Force 3: Threat of new Entrants
New entrants are companies that recently enter in the same market and provide the same food. Radix Fried Chicken also specializes in fried chicken and has grabbed customers’ attention by switching their taste. Radix Fried Chicken was found in 2013 while KFC has started since 1930.

Force 4: Threats of Substitute or Services
Popeye’s is known for Louisiana kitchen. Their menu and taste are mostly similar to KFC. While KFC is specialised for its chicken Popeye’s also offer customer few seafood choices such as tempura and shrimp. They also invent biscuit and chicken mashed potato on their menu. Popeye’s is also offering free Wi-Fi.

Force 5: Rivalry among existing competitors
McDonald’s is KFC strongest competitors which also offering its menu items similar to KFC. Speed of service is extremely competitive and set meal price is mostly the same. McDonald’s has been offering its drive thru and 24hour services for years when KFC just recently tried out but only available in certain places.

2.0 Critical themes
2.1Customers
(www.imeeta.wordpress.com/2012/04/27/business-strategy-bowmans-clock/)

As evaluated, KFC is at position 3 which is Hybrid (moderate price and moderate differentiation). Menu items offered like fried chickens, burgers, wings, drumsticks, side dishes, carbonated beverages and desserts are similar to other fast food restaurants such as McDonald’s, Popeye’s, and Burger King. Services are at tip stop speed comparing to other restaurants in the fast-food chain. KFC is always public acceptance and first option when they think of the phrase “fried chicken at an affordable price”.

2.2 Innovation
In order to achieve a company’s success, staffs need to be encouraged. David C. Novak CEO and chairman of Yum! Brands, was recognized as one of the quick-serve industry’s Top 10 Most Innovative People on QRS Magazine. On his interview with “The CEO TV show- Interviewing American’s top CEO” he shared his learning while creating one of the most American products. He believed that people get excited about news and in the food business people love to try new things. The specific thing of what a CEO should do is extremely focus by looking and his own people and the way they do things. Driving innovation by getting out of the company and see what other people are doing. Listen to the voice of our customers, connect with them, and always reach for new innovations and excellence in everything they do He innovate his business by learning from his competitors in order to keep consistence. “Innovation by people’s inspiration” he said.
David C. Novak devotes much of his time to personally train leadership skills for the company 's management staffs and franchisees, emphasizing teamwork and a belief in people that rewards and recognizes customer-focused behavior. In KFC there is no discrimination for old staffs. People after retirement can join KFC as a front clean-up staff.

2.3 International strategy
KFC China’s global growth base on “go global, act local” by understanding the local culture, economic and regulatory differences becomes the key element to perform the business’s success. First KFC identified what the local like and dislike from customers’ feedback. Then they adapt the fast-food model to fit the local cuisine and culture. You won’t be able to find such thing called chicken with Sichuan spicy sauce, rice, egg tarts, and soybean milk on American menu. Chinese people use to in eat large group so KFC has created larger value meal as well. They also hire local management staffs to take good care of customers and understand their way of local doing business well. The company also follows Chinese strict foreigner investment laws and in action with local producers.

3.0 Conclusion
3.1 Value
KFC aims to achieve value by creating quality food at a reasonable price and convenient service. Making customer satisfaction as a priority and fulfill customer’s demands in order to meet their satisfaction. They have also developed value menu for kids and school children with lower prices, value meal and combo for large group of people to share instead of buying each person individually. Value is also created for royal staffs and who are rewarded with good customer services.
3.2 Competitive advantage
KFC biggest competitive advantage is being the first fast-food restaurant chain to grow globally. They have gain popularity among years in the fast food chain featuring fried chicken. KFC is well-known for its homemade 11 herbs secret recipes and the leader market among those restaurants selling the same food. Secondly the company is in charge of setting the lowest price for others to follow. If any restaurant goes lower than that they will fail in the market share.
3.3 Sustainability
For the last 84 years KFC has remained sustainable in the market. In 2016 KFC established the eco environment program by reducing the volume of water used and carbon footprint, encouraging energy efficiency and sensible material use. They have been working with Carbon Trust and to reduce their emissions. KFC is playing its part to reduce the environmental impact and protect our planet.

4.0 Recommendations
Judging on the company business strategy, KFC should improve on its menu by creating for more choices of healthier food options. The purpose is to target different type of customers, customers with special needs or diet or people with obesity problems. They can offer brown rice or whole meal rice instead of white rice, steamed chicken, boiled veggies. Or they can follow up with McDonald’s by offering KFC’s café, serving cakes, hot and cold coffee or tea, more ice cream options for the kids’ craving. In addition, they may also expand their areas for 24hour services and drive through for the convenience of late customers.

References
1. The Associated Press (2011, October). Colonel Sanders secret recipes discovered; manuscript reveals KFC founder’s favorite hometown foods. Retrieved April 18, 2014, from http://www.nydailynews.com/life-style/eats/colonel-sanders-secret-recipes-discovered-manuscript-reveals-kfc-founder-favorite-hometown-foods-article-1.975651
2. Brady, D. (2012, March). KFC 's Big Game of Chicken. Retrieved April 19, 2014, from http://www.businessweek.com/articles/2012-03-29/kfcs-big-game-of-chicken
3. ENP Newswire (2014, March 28). KFC China Launches New Menu and Marketing Strategy Nationwide; Milestone Signifies Next Phase of Company 's Aggressive and Comprehensive Plan to Restage KFC in China. Retrieved April 20, 2014, from http://smart-grid.tmcnet.com/news/2014/03/28/7749628.htm
4. Harvard Business School (2011, June 17). KFC’s Explosive Growth in China. Retrieved April 20, 2014, from http://hbswk.hbs.edu/item/6704.html
5. Jurevicius, O. (2013, March 10). KFC SWOT analysis 2013. Retrieved April 19, 2014, from http://www.strategicmanagementinsight.com/swot-analyses/kfc-swot-analysis.html
6. Kassidy Emmerson, K. (2006, March 10). The History of Colonel Harland Sanders and His Kentucky Fried Chicken. Retrieved April 19, 2014, from http://voices.yahoo.com/the-history-colonel-harland-sanders-his-kentucky-23199.html
7. KFC Development (n.d.). Sustainability. Retrieved April 19, 2014, from http://www.kfcdevelopment.co.uk/sustainability.aspx#tab_greenfacts
8. Lencioni, P. M. (2010). The Five Temptations of a CEO: A Leadership Fable. Hoboken: John Wiley & Sons.
9. Liu, W. K. (2008). KFC in China: Secret recipe for success. Singapore: John Wiley & Sons (Asia.
10. Novak, D. (2012). Taking people with you: The only way to make big things happen. New York: Portfolio/Penguin.
11. Novak, D. (2007). The education of an accidental CEO: Lessons learned from the trailer park to the corner office. New York: Three Rivers Press.
12. QSR Magazine (2010, May). Yum Brands CEO David Novak Tells QSR Customers are Important. Retrieved April 19, 2014, from http://www.qsrmagazine.com/executive-interviews/why-customer-so-important-david-novak
13. Senn, L. (n.d.). Innovation is the CEO’s personal accountability, says Yum! Brands CEO David Novak in this CEO TV Show interview - Senn Delaney. Retrieved April 19, 2014, from http://sdtv.senndelaney.com/innovation-is-the-ceos-personal-accountability-says-yum-brands-ceo-david-novak-in-this-ceo-tv-show-interview
14. Simmons , W., & Crawford, K. (2013, January 15). KFC’s Winning Recipe In China – “Go Global, Act Local”. Retrieved April 19, 2014, from http://www.innovationexcellence.com/blog/2013/01/15/kfcs-winning-recipe-in-china-go-global-act-local/
15. Steyn, L. (2013, June 21). KFC 's secret recipe for growth. Retrieved April 19, 2014, from http://mg.co.za/article/2013-06-21-00-kfcs-secret-recipe-for-growth

References: 5. Jurevicius, O. (2013, March 10). KFC SWOT analysis 2013. Retrieved April 19, 2014, from http://www.strategicmanagementinsight.com/swot-analyses/kfc-swot-analysis.html 6 7. KFC Development (n.d.). Sustainability. Retrieved April 19, 2014, from http://www.kfcdevelopment.co.uk/sustainability.aspx#tab_greenfacts 8 9. Liu, W. K. (2008). KFC in China: Secret recipe for success. Singapore: John Wiley & Sons (Asia. 10 11. Novak, D. (2007). The education of an accidental CEO: Lessons learned from the trailer park to the corner office. New York: Three Rivers Press. 12 15. Steyn, L. (2013, June 21). KFC 's secret recipe for growth. Retrieved April 19, 2014, from http://mg.co.za/article/2013-06-21-00-kfcs-secret-recipe-for-growth