marketing

Maraniara Davy C. Villarama
MM1-Marketing Management

BCG Matrix of KFC
The need for strategy, in order to expand its existing product in very promising markets for KFC is very essential. KFC, along with McDonalds, and other major fast food chains have dominated the American continent as well as elsewhere. Since the1950’s when the founder of KFC had a dream, of building an empire in the fast foodmarket, the company has undergone lots of changes. The company has changedownership; it has taken over from Pepsi and passed over to Tricon, which owns Pizza hut, Taco bell and others. Nowadays, KFC, still dominates the chicken fast food industry while has stores inmore than 100 countries operating vast profits.
(De Witt 'et al.2004a) Although, due to increased conditions of life, and differentiation of the life style of the population around the world, there is still a lots of room for expansion, especially in countries with large population, and high development rate. KFC using the BCG matrix and SWOT analysis to analyze what is the current position of the company and identify that the company has the potentials to growth in fast food market.

In the late 1960s the Boston Consulting Group, a leading management consulting company, designed a four-cell matrix known as BCG Growth/Share Matrix. This tool wasdeveloped to aid companies in the measurement of all their company businessesaccording to relative market share and market growth. The BCG Matrix made a significant contribution to strategic management and continues to be an important strategic tool used by companies today. The matrix provides a composite picture of the strategic position of each separate business within a company so that the management can determine the strengths and the needs of all sectors of the firm.
The development of the matrix requires the assessment of a business portfolio, which include an organization’s autonomous divisions ( activities, or profit centers).The BCG or growth- share matrix imposes a two- dimensional analysis on management of Strategic Business Units: a comparative analysis of business strength andan assessment of the environment. The business strength measure is the business Relative Market share.
The environmental measure is the Market Growth Rate.BCG Matrix: The market growth rate measures industry attractiveness. Because for the case of YUM Brand, all SBUs (KFC, Taco Bell, Pizza Hut, Long John Silver’s, A&W) are located in the same fast- food industry, the referent standard is the industry growth rate measured against the SBUs’ growth rate. The underlying theory for examining market growth rate is the industry life cycle. The BCG assumes that growth rates (life cycle stages) affect a firm’s finances. Placing products in the BCG matrix results in 4 categories in a portfolio of a company: 1.Stars (=high growth, high market share).

•Use large amounts of cash and are leaders in the business so they should also generate large amounts of cash.

•Frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold share, because the rewards will be a cash cow if market share is kept. So, KFC Malaysia is under Star position.2.Cash Cows (=low growth, high market share)
•Profits and cash generation should be high, and because of the low growth, investments needed should be low. Keep profits high.3.Dogs (=low growth, low market share)
•Avoid and minimize the number of dogs in a company.
•Beware of expensive ‘turn around plans’.4.Question Marks (= high growth, low market share)
•Have the worst cash characteristics of all, because high demands and low returns due to low market share
•If nothing is done to change the market share, question marks will simply absorb great amounts of cash and later, as the growth stops, a dog.

The Characteristics of each SBU

Type SBU
Strategy
SBU profits
Required Investment
Net Cash Flow
STAR
Hold/ Increase
High
High
- or +
Cash Cow
Hold
High
Low
High+
Question Mark
Increase/Divest
0 or -
Very High or Disinvest
High or+
DOG
Harvest or Divest
Low or-
Disinvest
+

The analysis requires that both measures be calculated for each SBU. The business strength dimension, relative market share, is included to measure competitive advantage. The KFC is falling on cash cow where a low growth and high market share is. So, the profit and cash generation is high and because of low growth, investments needed should be low. The funds received from cash cows are often used to help other businesses within the company, to allow the company to purchase other businesses, or to return dividends to stockholders. So the KFC should hold on what it has doing now. Three Paths to Success (star-cash cow-question mark).

Continuously generate cash cows and use the cash throw-up by the cash cows to invest in the question marks that are not self-sustaining

Stars need a lot of reinvestments and as the market matures, stars will degenerateinto cash cows and the process will be repeated.

As for Dogs, segment the markets and nurse the dogs to health or manage for cash Three Paths to Failure (star-question mark-dog, cash cow-dog)

Over invest in cash cows and under invest in question marks
Trade further opportunities for present cash flow
Under invest in the stars
Allow competitors to gain share in a high growth market
Over milked the cash cows

Evaluation at KFC
KFC has been known as the leading fast-food chain and restaurant in many countries; it serves its famous original recipe “fried chicken” that contains 11 secret herbs and spices that cannot find in other fried chicken brand. For this reason, KFC has been branded as the fast-food that serves “a finger-licking good food” that are safely processed through the company's high-quality control team.
KFC quality control starts its job from the supply of all raw materials. Then, it conducts an annual supplier audit, STAR Audit which comprises the two areas, the Food Safety and the Quality Systems Audits. The STAR audit is conducted by either third party international auditing firm assigned by YUM or the company's own team of expert team of food technologists in the Quality Assurance Section. They are similar with ISO approach. Furthermore, these food technologists regularly do the experimentation of new flavors and do research for more creative and enticing food concepts in order to provide high-quality, nutritional and best choices of food for the customers. In similar way, they also

developed some famous local flavors designed to enable the customers to enjoy an exciting dining experience. Moreover, the supplier quality are scrutinized and reviewed by KFC regional franchisor to enable to improve the products in continuous manner. Hence, the products and services of the suppliers are being checked regularly by submitting quality reports about their products and performance. More than that, the food technologists are also doing their quarterly QA evaluations on in-house suppliers. The fast-food chain only uses quality raw materials from reputable suppliers. All chickens are all slaughtered by certified slaughters.
The Ayamas chicken supplier is closely monitored by the Department of Veterinary Service and obtains the Veterinary Health Mark (VHM) logo. Apart from it is an ISO 9001 certified supplier.
In addition to that, KFC products are cooked well over the minimum heat or temperature under standard procedure that is required by World Health Organization (WHO) in order to prevent the risk of contamination among the raw and ready- to- eat products. For all the products, KFC uses non-hydrogenated palm oil that is 100 percent cholesterol free. In this relation, KFC provides an informational campaign through media forms in order to promote the nutritional values of KFC products to the wide array of customers, as well as to promote a wholesome and balanced menu. The fast-food chain quality of KFC mainly attributed by the CHAMPS.

C- for cleanliness
H- for Hospitality
A- for Accuracy
M-for Maintenance
P-for Product Quality
S- for Speed of Service

SWOT Analysis of KFC
This is KFC (Kentucky Fried Chicken) SWOT analysis for 2013.

Company background
Name
KFC (Kentucky Fried Chicken)
Industries served
Restaurants
Geographic areas served
Worldwide
Headquarters
U.S.
Current CEO
Roger Eaton
Revenue
$ 9.5 billion (2012)
Profit
N/A
Employees
N/A
Parent
Yum! Brands
Main Competitors
McDonald’s Corporation, Burger King Worldwide Inc., Subway, Wendy’s Company.

KFC is a fast food restaurant chain, which specializes in fried chicken. It is the world's largest fried chicken chain with over 17,000 outlets in 105 countries and territories as of December 2011

SWOT
KFC SWOT analysis 2013
Strengths
Weaknesses
Second best global brand in fast food industry in terms of value ($ 6 billion)
Original 11 herbs and spices recipe
Strong position in emerging China
Combination of KFC – Pizza Hut and KFC – Taco Bell
KFC is the market leader in the world among companies featuring chicken as their primary product offering
Untrustworthy suppliers
Negative publicity
Unhealthy food menu
High employee turnover
Lack of strong marketing efforts

Opportunities
Threats
1. Increasing demand for healthier food
2. Home meal delivery
3. Introducing new products to its only chicken range
1. Saturated fast food markets in the developed economies
2. Trend towards healthy eating
3. Local fast food restaurant chains
4. Currency fluctuations
5. Lawsuits against KFC

Strengths

1. Second best global brand in fast food industry in terms of value ($ 6 billion). KFC is known by many and is a trustworthy brand in many countries mainly due to its early franchising and international expansion.
2. Original 11 herbs and spices recipe. KFC original chicken recipe is a trade secret and a source of comparative advantage against firm’s competitors.
3. Strong position in emerging China. KFC receives half of its revenue from China, where it operates more than 4,000 outlets. KFC position in China is one of its main strengths as

China’s fast food market is growing steadily.
4. Combination of KFC – Pizza Hut and KFC – Taco Bell. KFC partnership with other Yum! Brands yields some advantage as the restaurant can offer items from its partners it doesn’t have itself and satisfy more customers’ needs.
5. KFC is the market leader in the world among companies featuring chicken as their primary product offering. KFC has positioned itself clearly among other fast food chains bearing its famous slogan and trademark chicken products.
Weaknesses
1. Untrustworthy suppliers. Over the years, KFC has been contracting suppliers, which supplied contaminated poultry to KFC or were mistreating chicken, thus resulting in falling sales and damaged reputation.
2. Negative publicity. KFC receives much criticism from PETA over the conditions chickens have been raised. Furthermore, it received bad publicity for selling chicken wing with kidney. There are many more or less bad news from KFC, which damage firm’s reputation significantly.
3. Unhealthy food menu. KFC menu is largely formed of high calorie, salt and fat meals and drinks. Such menu offering prompts protests by organizations that fight obesity and hence, decreases KFC popularity. Consumers also often opt out for healthier choices.
4. High employee turnover. Employment in KFC is a low paid and low skilled job. It results in low performance and high employee turnover, which increases training costs and add to overall costs of KFC.
Opportunities
1. Increasing demand for healthier food. While demand for healthier food increases, KFC could introduce more healthy food choices in its menu and reverse its weakness into strength.
2. Home meal delivery. KFC could fully exploit (it test deliver services now) this opportunity and reach more customers.
3. Introducing new products to its only chicken range. KFC could introduce new meals to its menu and offer pork, beef or only vegetarian meals, which would target wider consumer group and would result in more costumers.
Threats
1. Saturated fast food markets in the developed economies. The fast food market in the developed countries is already overcrowded by so many fast food restaurant chains and this already proves to be a threat to KFC as it finds it hard to grow in the developed economies.
2. Trend towards healthy eating. Due to government and various organizations attempts to fight obesity, people are becoming more conscious of eating healthy food rather than what KFC has mainly to offer in its menu.
3. Local fast food restaurant chains. Local fast food restaurants can often offer a more local approach to serving food and menu that exactly represents local tastes. Although KFC does a great job in adapting its own menu to local tastes, the rising number of local fast food chains and their lower meal prices is a threat to KFC.
4. Currency fluctuations. KFC receives part of its income from foreign operations. That income has to be converted into dollars and may affect the business' profits, especially when the dollar is appreciating against other currencies.
5. Lawsuits against KFC. KFC has already been sued for many times and lost quite a few lawsuits. Lawsuits are expensive as they require time and money. As KFC continues to operate more or less the same way, there is high probability for more expensive lawsuits to come.