kfc india

An Operational Study at KENTUCKY FRIED CHICKEN BY RAVI KUMAR RAHUL PB1222 I & II SEMESTER PGPM Guide Prof Anil B Gowda
Operation Report submitted to the Ramaiah Institute of Management in partial fulfillment of the requirements of I & II semester PGPM

Ramaiah institute of Management Studies #15 ,New Bel Road ,MSRIT Post .M S Ramaiah Nagar Bangalore - 560054 DECLARATION

I, hereby declare that this Project Report on “Operational Study” at KENTUCKY FRIED CHICKEN (KFC), BANGALORE submitted in partial fulfillment of the requirements for I & II Semester PGPM examination 2013 of RAMAIAH INSTITUTE OF MANAGEMENT STUDIES is my original work and not submitted to any other university. This work has been done under the supervision of Mr. Anil B Gowda in Ramaiah Institute Of Management Studies, Bangalore.
I take the responsibility of any kind of wrong information if provided in the report.

Place:
Date : RAVI KUMAR RAHUL PB 1222

ACKNOWLEDGMENT
“No creative work can be done in isolation , I need guidance and motivation at every step of success”.
My case was also not an exception. I always feel guidance, motivation for the fulfillment of the project. This report bears the imprint of many personalities who have made contribution to the success of the project. So I must express my sincere gratitude to those who made this project a successful incident.
Words alone cannot express our deep sense of gratitude to Mr.luv (Manager at KFC), who provided me an opportunity to be a part of KFC. Their valuable guidance & support made this Project an enlightening educational experience.

Table of contents

Industry Profile 5
Fast Food Industry 6-7
Introduction 8
History & Background 9-10
Company Profile 11
Mission & Vision 12-13
Assignment Problem 14-18
Anova problem 19-21
Problems faced by KFC 22
SWOT Analysis 23-26
PEST Analysis 27-28

INDUSTRY PROFILE

FAST FOOD INDUSRTY
The Indian fast food market has been witnessing rapid growth on the back of positive developments and presence of massive investments. Currently, market growth is largely fuelled by the rising young population, working women, hectic schedules, and increasing disposable income of the middle-class households. Some of the unique properties of fast food like quick served, cost advantage, etc are making it highly popular among the masses. Thus, India offers enormous opportunities for both domestic as well as international players.
The fast food industry in India has evolved with the changing lifestyles of the young Indian population. The sheer variety of gastronomic preferences across the regions, hereditary or acquired, has brought about different modules across the country. It may take some time for the local enterprise to mature to the level of international players in the field.
Many of the traditional dishes have been adapted to suit the emerging fast food outlets. The basic adaptation is to decrease the processing and serving time. For example, the typical meal which called for being served by an ever alert attendant is now offered as a Mini-Meal across the counter. In its traditional version, a plate or a banana leaf was first laid down on the floor or table. Several helpers then waited on the diner, doling out different dishes and refilling as they got over in the plate.
According to this new research report, “Indian Fast Food Market Analysis”, the Indian Fast Food Industry is anticipated to grow at a CAGR of around 34% during 2011-2014. Anticipating the future growth, many big international players are entering into the market by making deals with the domestic players.
The diversity of Indian cuisine poses logistical problems when it comes to handling. Hence it is common to serve different cuisines at different counters within the same premises. Presence of a large vegetarian population, who eschew non-vegetarian food, has given rise to outlets which exclusively serve vegetarian fast food. Also, different variety of food may be served depending on the times of the day. Beverages such coffee, tea, soft drinks and fruit juices may also be served in such outlets. Some outlets may additionally have specially designed counters for ice-cream, etc.

Popular formats of fast food business in India have the following features in common:
Wide opening on the road side
Easy to maintain and durable décor
A cash counter where food coupons are sold
A food delivery counter which invariably is granite topped
Additional counters for Ice Creams, Beverages etc.
A well fitted kitchen located so as to be visible to the customers
Tall tables, usually of stainless steel, where one can eat while standing
Rust-proof and non-breakable crockery

INTRODUCTION
KFC India
KFC is the world’s 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 it’s 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 Sander’s 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 1930’s Colonel Harland Sanders got some distinguished Kentucky folks lickin’ their fingers. It’s 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 Colonel’s 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!

COMPANY PROFILE

KFC BANGALORE
MISSION OF THE COMPANY
“To be the leader in western style quick service restaurants through friendly service, good quality food and clean atmosphere ”
VISION OF THE COMPANY
The vision is to sell food in a fast, friendly environment that appeals to pride conscious , health minded consumers .

KFC PRINCIPLES

PASSION: To satisfy our customers every time they visit our restaurants and to do it better than our competitors and A yam as offer customers delicious food, good value, and customer-focused teams. Our associates in all our restaurants and integrated Strategic Business Units are trained to serve customers in the best possible way.

FORMULA FOR SUCCESS: People capability comes first - satisfied customers and profitability follow If we have the right people, properly trained, then satisfied customers and Profitability will follow. We recognize that we are a people-dependent business. Our people must be more motivated, better trained , and better resourced than the competition. This will ensure that we have happy customers, which will lead to more profit.

HOW WE LEAD: Know and drive the business, and build and align teams Take responsibility for and be passionate about exceeding customer needs

Be committed to executing 100% CHAMPS at the restaurants. This means ensuring that

C: Cleanliness is maintained at our restaurants at all times

H: We are hospitable and courteous at all times

A: We always ensure that orders are taken accurately

M: We maintain our restaurants to the best standards

P: Our products are of the highest quality

S: Our service is speedy

Support restaurant teams with reliable services and tools. Act like an owner
Know and drive the business, understand the demands and issues affecting the business.
In 2012, KFC was the first American fast food restaurant to operate in the West Bank; it opened in Ramallah; a Pizza Hut is also planned.
In 2013, a few KFC locations in China supplied chicken found to contain "excess levels of chemical residue". Yum! has lost 6% of sales from publicity in China as of January 25.

Assignment Problem
An assignment problem is a particular case of a transportation problem where the sources are assignees and the destination are tasks. Furthermore, every source has a supply of 1 (since each assignee is to be assigned to exactly one task ) and every destination has a demand of 1 ( since each task is to be performed by exactly one assignee) .Also ,the objective is to minimize the total cost or to maximize the total profit allocation.
The problem of assignment arises because the resources that are available such as men, machines ,etc , have varying degree of efficiency for performing different activities .Therefore the cost profit or time of performing different activities is also different .Thus , the problem is : How should the assignments be made so as to optimize the given objective .
Some of the problems where the assignment technique may be useful are assignment of : workers to machine , salesman to different sales areas , clerks to various checkout counters , classes to rooms , vehicles to route ,contracts to bidders , etc .
SOLUTION METHODS OF ASSIGNMENT PROBLEM
An assignment problem can be solved by the following four methods .
Enumeration method
Transportation method
Simplex method
Hungarian method

Though I have used Hungarian method to solve this assignment problem on KFC.
HUNARIAN METHOD: The Hungarian method (developed by Hungarian mathematician D.Koing) of assignment provide us with an efficient method to finding the optimal solution, without having to make a direct comparison of every solution. It works on the principle on reducing the given cost matrix to a matrix of opportunity cost .Opportunity cost show the relative penalties associated with assigning a resource to an activity as opposed to making the best or least cost assignment .If we can reduce the cost matrix to the extent of having at least one zero in each row and column, it will be possible to make optimal assignment (when the opportunity cost are all zero ).

The Hungarian Method:
The following algorithm applies the above
Theorem to a given n × n cost matrix to find an optimal assignment.
Step 1. Subtract the smallest entry in each row from all the entries of its row.
Step 2. Subtract the smallest entry in each column from all the entries of its column.
Step 3. Draw lines through appropriate rows and columns so that all the zero entries of the cost matrix are covered and the minimum number of such lines is used.
Step 4. Test for Optimality:
(i) If the minimum number of covering lines is n , an optimal assignment of zeros is possible and we are finished.
d. (ii) If the minimum number of covering lines is less than n , an optimal
Assignment of zeros is not yet possible. In that case, proceed to Step 5.
Step 5. Determine the smallest entry not covered by any line. Subtract this entry from each uncovered row, and then add it to each covered column.

PROBLEM
The workers at KFC are rotated at four different departments which includes Kitchen, Supply base, Front house & Delivery. Performance of each worker is evaluated after training. This evaluation is based on a rating in their productivity quality of services and product (out of 100) after training has been provided. worker S R D L
Kitchen
60
55
80
71
Supply Base
75
83
77
56
Front Base
72
66
70
67
Delivery
50
70
69
81

Find the optimal assignment that will result in their productivity quality ?

Solution since there are four different workers and for that we have for different departments that is we have equal number of worker and department. worker S R D L
Kitchen
60
55
80
71
Supply Base
75
83
77
56
1Front Base
72
66
70
67
Delivery
50
70
69
81

Since number of workers = number of departments
Therefore the assignment problem is balanced.
Since this is a maximization problem, can be converted into a minimization problem by subtracting from the largest element ( i.e.83 )all the elements from the given table .

Therefore the new data so obtained is given as : worker S R D L
Kitchen
23
28
3
12
Supply Base
8
0
6
27
Front Base
11
11
13
16
Delivery
33
13
14
2

Row Reduction worker S R D L
Kitchen
20
25
0
9
Supply Base
8
0
6
27
Front Base
0
6
2
5
Delivery
31
11
12
0

Column Reduction worker S R D L
Kitchen
20
25
0
9
Supply Base
8
0
6
27
Front Base
0
6
2
5
Delivery
31
11
12
0

Apply Hungarian method in order to get the reduced matrix that has at least one zero , either in a row or column , as shown in the table below .The assignment is made in row I . All zeros in column I are in a circle as shown in the table .Column II has one zero . Assignment is made in this column and other zeros are also in circle , similarly . Optimization Phase worker S R D L
Kitchen
20
25

9
Supply Base
8

6
27
Front Base

6
2
5
Delivery
31
11
12

Through the Hungarian Method to make assignments in the given table below. Since the number of assignments is equal to the number of rows or column, this solution is the optimal solution.
The optimal is as follows: Optimization Table
Department
worker
Quality Ranking
Kitchen
D
80
Supply Base
R
83
Front Base
S
72
Delivery
L
81

ANALYSIS OF VARIANCE
In this section, we will learn a technique known as analysis of variance ( often abbreviated ANOVA ) that will enable us to test for the significance of the differences among more than two sample means . Using analysis of variance , we will be able to make inference about whether our samples are drawn from populations having the same mean .
In order to use analysis of variance , we must assume that each of the samples is drawn from a normal population and that each of these populations has the same variance “ .
However if the sample sizes are large enough , we don’t need the assumption of normality .

ANOVA
Problem
Since it has been observed that the worker at KFC are providing different qualities in different areas .Before this a training was conducted on them in all four different four areas . Training Areas Worker Kitchen Supply Base Front Base Delivery S
60
75
72
50 R
55
83
66
70 D
80
77
70
69 L
71
56

81

Test for differences with the training programme in the above mentioned categories .

Solution :

Worker Kitchen Supply Base Front Base Delivery S
60
75
72
50 R
55
83
66
70 D
80
77
70
69 L
71
56
67
81

Null Hypothesis:
H0 : There is no significance difference in training provided to the workers
H1 : There is the difference in the training provided to the worker at KFC
Since criticality has not been mentioned, therefore we can assume it to be
Degree of Freedom (nume) = 4 – 1 = 3 ( K – 1 )
Degree of Freedom (deno) = 16 – 4 =12 ( N – K )
F(TAB) = 3.49
T S = ∑Xi = 1102
C F = TS2 / N = 11022 = 1214404 / 16 = 75900.25
T.S.S = 77296 – 75900025 = 1395.75
S.S.B = 2662 / 4 + 2912 / 4 + 2752 / 4 + 2702 /4 – 75900.25 = 75990.5 – 75900.25 = 90.25
SSW = TSS – SSB = 1395.75 – 90.25 = 1305.5
MSB = SSB / DoFW = 90.25 / 3 = 30.08
MSW = SSW / DoFW = 1305.5 / 12 = 108.79
FCAL = MSB / MSW = 30.08 / 108.79 = 0.276
FCAL is less than the FTAB ,therefore null hypothesis is accepted .
Hence there is no significant difference between processing provided to the workers at KFC .

Source of Variation
DoF
SS
MS

FCAL
0.276
Between
3
90.25
30.08

Within
12
1305.5
108.79

PROBLEMS FACED BY KFC IN INDIA
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

Though 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. They 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.

Swot Analysis

STRENGHTS OF KFC
Strengths can be found internally in a company and can be used to the company’s 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 Logo Value Survey, done by The Schechter Group, the KFC logo was the only one which significantly enhance the brand's image.
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.

4. Traditional employee loyalty:
"KFC's culture was built largely on Colonel Sanders' laid back approach to management" . 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.
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 company’s 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.
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". 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: Globalization 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 organized, 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 generations are more open to fast foods and demand it more, this is good news for the company.
New variety: Company can also come up with new variety in the menu like Pizzas, garlic breads to attract more customers. THREATS TO KFC
Competition: Competitor companies like McDonalds are fast catching up with the market. McDonald’s with sales of more than 19 billion in 1999, accounted for 15 percent of the sales of the nation’s 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 KFC’s suppliers are threatening the chicken, before they got slaughtered. Anti-KFC campaigns, such as the one from PETA are affecting KFC’s 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.

PEST ANALYSIS
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; India’s 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 Domino’s 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.