Role of Information Technology in Kentucky Fried Chicken - Case Study Example

?Role of Information Technology in Kentucky Fried Chicken Table of Contents Table of Contents 2 Introduction 3 Information Technology in KFC 6 Futureopportunities 8 Global Issues 10 Ethical and social standings of IT in fast food industry 11 Conclusion 13 Reference 14 Bibliography 17 Introduction Information technology is the science of collecting, storing, processing and transferring the information to the different parts of the world. Information technology performs two of the most crucial functions; they are processing information and transmitting the information from one part to the other part of the world (Chandra, 2003, p.vi). Advances in Information have led companies to develop strategies in information technology that interrelate with their business strategies and hence support the broader objective of the company. Information system helps to change or restructure the business and also quickens the response time to changes in the environment. There are various features of information system that can help a firm gain competitive advantage. For example the decision support system helps firms to align their information system with the business strategies. Then there is the Enterprise resource planning solutions that link the business process with the firm’s objective of optimizing the enterprise resources. Also there is the database system that having “data mining” capabilities which makes the best use of information for production, innovation and marketing (Hemmatfar, Salehi & Bayat, 2010, p. 158-160). For the purpose of this report let me first describe about the Fast food industry. It is one of the largest growing industries. The industry is characterized by the foods which are prepared and served quickly. Typically, the foods of this industry are sold in retail food outlets or in a packaged form. The major market players of this industry are Kentucky fried chicken, McDonalds, Pizza hut, Dominos, Arby’s, Subway, Fingers and Del Taco among various other players. Franchise operation acts as the most crucial element of this industry. The noticeable foodstuffs includes pizzas, burgers, sandwiches, French fries, fried chicken, ice creams and also foods like noodles, fried rice and soups among the others. Presently information technology is widely used in fast food industry. The market share of KFC and its competitors are as follows:- Figure 1 (Source: pugetsoundoff, n.d.). Information technology plays an essential role in the unprecedented growth of fast food industry. In this sector the functions of Information technology is significant as it helps in research and development process, marketing process and also in the financial segment. Information systems help organisations in the fast food industry to not only deliver products and services at low costs but also deliver differentiated products and services. Organisations are using information system to create niche markets for themselves and at the same time focus on developing new and innovative products. The current applications being used in fast food industry include the following:- Point of sale system – It manages the total selling process of an outlet. This is also responsible for the formation and printing of the receipt. A typical retail food outlet POS includes a computer, receipt printer, bar-code scanner, customer display and a cash drawer. Apart from these basic requirements the system sometimes also consists of debit & credit card reader. The next application includes these cash registers are coupled with the computerized system which automatically prepares accounting reports and facilitates reordering of inventories. It also helps in tracking the internal orders and sales. The other application which is very much in use is the Customer Relationship Management System. Customer relationship management (CRM) is all about managing and increasing customer relationships that can help the company to drive the costs down and increase the viability of products and services. (Anderson & Kerr, 2001, p.1-11). Data about customers like their contact information, preferences and ordering habits are recorded and then this data is used to reinforce a sense of relationship by rewarding repeat customers. The means used to collect data are various touch points such as e-mails, telephones, sales persons, direct mails and coupons. CRM applications such as sales management functions include order entry, proposal generation, and forecasting sales. There is also the customer service functions such as taking order requests, resolving customer queries, informing them about promotional offers help companies remain proactive when dealing with customers (Kumar & Reinartz, 2009, p. 57-58). In this report KFC has been chosen as the company to assess the impact of information technology on fast food industry. The study will be initiated with a brief description of the company and will also analyze the support of information system in gaining competitive advantage. Kentucky Fried Chicken or what we call it as KFC was founded in the year 1930 by Harland Sanders and moved into the franchise system in 1952 (KFC, n.d.). The company is in the business of fast food restaurants spread over different parts of the world. It is headquartered as Louisville, Kentucky, United States. The company is presently owned by the Yum brand which is a division of Pepsi co (Yumfranchises, n.d.). KFC holds the top most position in the category of chicken restaurants chain and has its presence in 109 countries around the world (KFC, n.d.). Information Technology in KFC Computer information system plays a significant role in KFC. The function starts simply by managing the database of the list of outlets and the dishes it serves to its customers. In this context the company manages data by executing electronic database management system (DBMS). The company also focuses on the processors of information that includes software and different other processing tools such as SAP. The next important and crucial function that information technology plays in KFC is the online order placing technology through the use of e-commerce. E-commerce is an exchange of information through digital platforms (Rayport, 2003, p.3). In this process the company makes allows where the customers to places their order through the use of internet and gets their foods delivered to home. This service not only helps in getting a larger base of customers but also helps in customer satisfaction process. Recently, the company has integrated a technology into their system to provide the information on nearest KFC outlet. The technology which is used for serving this purpose is named as Poster-Site technology. The function of this technology is that it will just need the customers to text a message through their mobile phones to a dedicated short code number. As soon as the user sends the text the system will start finding the location of the user. Based on the location of the user the system will search its internal database to find the list of outlets on that region and after finding the outlet it will simply reply back to the sender with the address of the nearest retail outlet and along with it the road direction and map of that place. According to the management of KFC it will not only increase the number of footfalls in the outlet but will also increase the brand awareness of the company. And they also believe that such technologies will give them competitive advantage in the marketplace. The growth rate of KFC is shown below with the help of a diagram:- Figure 2 (Source: yahoo finance, n.d.). Future opportunities Some scholars have identified that the use information technology in gaining competitive advantage is growing at an exponential rate. In this highly competitive and turbulent market companies always want to have an upper hand over their opponents. In order to successfully attain the competitive advantage, information technology and information system should be fully integrated to the existing system of operation. The competitive advantage is gained by applying the utility of information system in the market place. With the use of information system firm’s are able meet their strategic goals. The application of IT is vast, the simpler function that a company may perform in the future is just to maintain a database of its customers and notify them about their price changes, menu changes, opening of new outlets and many other tasks through their e-mail and SMS service. Apart from this simpler function IT can play a major role in business planning as well. Michael Porter has identified that IT can help organizations to reduce their overall cost of products and services, if the technology has been designed correctly. Information system uses bottom line and top line technologies to reduce cost and earn more revenue. Bottom line strategy focuses on increasing the efficiency by cutting down the overall cost of production. On the other hand a Top line strategy looks after the generation of revenues by offering new and improved product and services to the existing customers or by selling the existing products and services to the new customers. As for example e-commerce in the future may hugely decrease the cost of distribution. The companies can also use information system for customer relationship management. There are dedicated software’s which helps a company in tracking the timely response of customer requests, and to manage concrete relationships among the existing clients. Apart from that CRM also helps in setting realistic sales targets and cutting down the sales close rate (Kincaid, 2003, p.52-54). Forecasted growth rate of yum brands are as follows:- Figure 3 (Source: Nasdaq, n.d.). Global Issues The global issues pertaining to the sector where KFC belongs is mainly about the foodstuffs they serve throughout the world. The companies face the following issues in this competing global market. The main issue rises where a particular food may be favoured in some countries and on the contrary the same may not be considered for consuming in some other countries. In other words the difference lies in the culture of the countries. Every country has its own culture and somehow differs to the other country. The best example which can be cited for this particular issue is the use of beef in different cuisines. Countries such as Argentina, Pakistan, Afghanistan, Japan, Brazil and china among others are heavy consumers of beef and whereas in countries like India and Nepal abstain them from consuming beef due to religious issues (Global Issues, 2010) . The seconds issue is that apart from the cultural differences in two countries there are also existence of difference between consumer buying habits, market size, competition, trade policies of the government, distribution channels etc. This issue plays a vital role for a company conducting its operations apart from its home country. The third issue lies in environmental degradation. Fast food industry also gives rise to different environmental degradation problems (Food empowerment project, n.d.). It is considered that with rigorous breeding, poultry and other farm animals causes huge environmental problems in the form of deforestation, land degradation, water pollution and other natural issues. Studies revealed that for producing one pound of red meat, eggs and poultry the farm field looses about five pound of irreplaceable soil. The additional environmental issue stresses on the use of bio degradable products for consuming the foods. Paper plates, plastic cups, polyurethane containers are mainly used. These items are either tossed into the garbage or just mere thrown into the surface. This creates serious water and surface pollution. It also seriously effects the marine environment (Californians against waste, n.d.). So in order to have a successful upper hand over its competitors, companies follow a particular strategy. The strategy includes analysis of the local religious beliefs, culture and the environmental laws of the host country and also to focus on the quality of foods served. Ethical and social standings of IT in fast food industry Ethics has been one of the top business agendas in the recent past (Reynolds, 2009, p.5). The ethical issues in this context include marketing of some unhealthy foods via internet and other forms. Children’s get hugely affected on consuming these foods. Some companies lure children by giving free toys along with their foods (Global Issues, 2010). The other unethical practices occur when sometime customers are exploited through online selling i.e. they are shown something and during the delivery it turns out to be substandard. On the other hand some of the other unethical ways of using information system is sometime the customers privacy is hampered, some of the personal information of an individual may get leaked. Conclusion After going through all the research process from the fast food industry to the scope of information technology it can be clearly stated that IT plays an important role in gaining the competitive advantage. Apart from helping companies gain competitive advantage it also helps in formulating business plans and looks after customer relationship management functions. It is highly recommended that companies must integrate information system in their existing mode of operation. Companies like KFC also use different IT tools to maintain their market position and gain new customer base. Apart from this the key findings include that fast food industry is becoming more global and their main area of competition lies on price, location and food quality. Reference Anderson, k., & Kerr, C. (2001). Customer Relationship Management. India: McGraw-Hill Professional. Californians against waste. (No Date). Fast food waste threatens our marine environment, drags down diversion rates. [Online]. Available at: http://www.cawrecycles.org/issues/fast_food. [Accessed on 23 April 2012]. Chandra, R. (2003). Information Technology: Evolution of Information and communication technologies. India: Gyan Publishing House. Corporate Accountability International. (No Date). Health Problems. [Online]. Available at: http://www.stopcorporateabuse.org/health-effects-fast-food. [Accessed on 23 April 2012]. Food empowerment project. (No Date). Fast Food. [Online]. Available at: http://www.foodispower.org/fast_food.htm. [Accessed on 07 May 2012]. Global Issues. (2010). Beef. [Online]. Available at: http://www.globalissues.org/article/240/beef. [Accessed on 23 April 2012]. Global Issues. (2010). Children as Consumers. [Online]. Available at: http://www.globalissues.org/article/237/children-as-consumers. [Accessed on 23 April 2012]. Hemmatfar, M., Salehi, M., & Bayat, M. (Jul 2010). Competitive Advantages and Strategic Information Systems. International Journal of Business and Management, 5(7), p. 158-160. Available at: http://ccsenet.org/journal/index.php/ijbm/article/download/6631/5247. KFC. (No Date). About Us. [Online]. Available at: http://www.kfc.com/about/. [Accessed on 21 April 2012]. KFC. (No Date). History. [Online]. Available at: http://www.kfc.com/about/history.asp. [Accessed on 23 April 2012]. Kincaid. (2003). Customer Relationship Management: Getting it right. India: Pearson Education India. Kumar. V., & Reinartz, W. J. (2009). Customer Relationship Management: A Databased Approach. USA: John Wiley & Sons. Nasdaq. (No Date). Stock Research - Analyst P/E Ratio Growth. [Online]. Available at: http://www.nasdaq.com/symbol/yum/pe-growth-rates. [Accessed on 07 May 2012]. Pugetsoundoff. (No Date). Sustainability of the Fast Food Industry. [Online]. Available at: http://www.pugetsoundoff.org/blog/cassidyrichmond/15609. [Accessed on 07 May 2012]. Rayport. (2003). Introduction to e-commerce. India: Tata McGraw-Hill education. Reynolds, G. (2009). Ethics in Information Technology. US: Cengage Learning. Yahoo finance. (No Date). Yum! Brands, inc. [Online]. Available at: http://finance.yahoo.com/q/bc?s=YUM+Basic+Chart. [Accessed on 07 May 2012]. Yumfranchises. (No Date). Yum brands. [Online]. Available at: http://www.yumfranchises.com/. [Accessed on 23 April 2012]. Bibliography Forester, T. (1985). The information technology revolution. US: Mit press. Khosrowpour, M. (1994). Managing social and economic change with information technology. US: Idea Group Inc. Scholosser, E. (2012). Fast Food Nation. US: Houghton Mifflin Harcourt. Read More