Kentucky Fried Chicken and the Global Fast-Food Industry Essay Example
Kentucky Fried Chicken and the Global Fast-Food Industry
Case Analysis
1.0 Source Problem
The change in demographic trends in the past two decades has seen an overall increase in costs for KFC and other fast food chains. Due to immense price competition and saturation of the US market, KFC is unable to raise its prices to cover the increased costs. The slower US population growth rate, oversupply of fast food chains and the minuscule 1% growth in the US restaurant industry per year has resulted in KFC¡¦s focus on expansion of their international markets.
2.0 Secondary Problems
2.1 Short Term
Ü New product introductions are slow.
Ü Market research inefficiency. Eg. Germans were not accustomed to buying takeout or ordering over the counter. McDonalds performed better in this aspect.
Ü Crispy strips and chicken sandwiches cannibalized the fried chicken sales.
2.2 Long Term
Ü Differences between the PepsiCo and KFC corporate strategy and culture.
Ü PepsiCo/KFC poor relationship with franchisees.
Ü Increased competition from direct and indirect competitors.
Ü Reduction in market share in the US market.
Ü Risks involved in international operations: long distances made it difficult to control quality and service, increased transportation and other resource costs, and time, culture and language differences increased communication and operational problems.
Ü Fast food sales grew at a slower rate (5%) in comparison to other sectors in the restaurant industry.
Ü Shortage in staff.
Ü Higher costs and poor availability of prime real estate.
Ü Increased labor costs. Intense competition made it difficult to increase prices to cover these increases in cost.
Ü Other chicken chain competitors differentiate their products. For example Boston Market introduces new restaurant chain that emphasized roasted chicken rather than fried chicken.
3.0 Analysis
The Five Forces Model
The five forces model of competition expands the arena for
Case Analysis
1.0 Source Problem
The change in demographic trends in the past two decades has seen an overall increase in costs for KFC and other fast food chains. Due to immense price competition and saturation of the US market, KFC is unable to raise its prices to cover the increased costs. The slower US population growth rate, oversupply of fast food chains and the minuscule 1% growth in the US restaurant industry per year has resulted in KFC¡¦s focus on expansion of their international markets.
2.0 Secondary Problems
2.1 Short Term
Ü New product introductions are slow.
Ü Market research inefficiency. Eg. Germans were not accustomed to buying takeout or ordering over the counter. McDonalds performed better in this aspect.
Ü Crispy strips and chicken sandwiches cannibalized the fried chicken sales.
2.2 Long Term
Ü Differences between the PepsiCo and KFC corporate strategy and culture.
Ü PepsiCo/KFC poor relationship with franchisees.
Ü Increased competition from direct and indirect competitors.
Ü Reduction in market share in the US market.
Ü Risks involved in international operations: long distances made it difficult to control quality and service, increased transportation and other resource costs, and time, culture and language differences increased communication and operational problems.
Ü Fast food sales grew at a slower rate (5%) in comparison to other sectors in the restaurant industry.
Ü Shortage in staff.
Ü Higher costs and poor availability of prime real estate.
Ü Increased labor costs. Intense competition made it difficult to increase prices to cover these increases in cost.
Ü Other chicken chain competitors differentiate their products. For example Boston Market introduces new restaurant chain that emphasized roasted chicken rather than fried chicken.
3.0 Analysis
The Five Forces Model
The five forces model of competition expands the arena for