Kentucky Fried Chicken Industry - Term Paper Example

This paper is going to look into one of the biggest brands that exist in the fast-food industry today and going to deeply analyze its current market position on the basis of thorough first and second hand research. Introduction Kentucky Fried Chicken (KFC), incorporated in 1955 is one of the world’s largest international fast-foot chains that have about 150,500 franchises in over a 100 countries. Its fast-food variety includes the scrumptious Colonels trademark fried chicken in both the Original Recipe and Extra Tasty Crispy varieties along with a range of chicken sandwiches, mashed potatoes and gravy, chicken pot pies, crispy chicken strips and potato wedges. The menu does differ country to country according to the tastes, culture, want and demands of the people. Around 20% of the restaurants are owned operated by KFC Corporation itself while the rest have all been off as franchises around the world. Based in Kentucky, KFC makes more than half its profits from international franchises and its largest division is in China having about 1700 outlets. KFC is division of the global fast-food franchiser YUM! which is the world’s largest restaurant companies in terms of system restaurants (Scribd, 2009). Past Performance The last decade was when KFC realized the extent to which the international market was contributing to its huge success. Between 1988 and 1992, the companies profits and sales from the international arena nearly doubled, particularly in Asia where from 1993, KFC outlets were growing at 30% a year. Delivery, drive-through, carryout, and supermarket kiosks were all used to gain orders and customers around the world (WikiInvest, 2009). The market in China continued to expand and by 2001, KFC was the most recognized brand in China with over a 500 outlets there. By 2006, the number of outlets rose to 1700 in China. In the year 2000, it was proclaimed the world’s largest Fried Chicken Corporation and third largest fast-food chain. Profits and sales were often seen growing at 25% in some quarters while in others they remained highly competitive relative to the rival fast-food chains. Competitors KFC generally faces direct competition from chicken chains but it ranges greatly from prices to product features and even advertising. The major competitors of KFC are McDonalds Corporation, Burger King, Popeye’s Chicken and Biscuits and Faircloth Food Services Inc. Market position of KFC Secondary Research KFC has a very long history of over 50 years in as the most recognizable brand in chicken. It is indeed the leader in chicken thanks to KFC’s secret recipe of 11 herbs and spices which has clearly given it a 50% market ownership in chicken chains (Levere, 2005). KFC faced a competitive challenge in 1990s due to its inability to come up with product innovation and suffered a declining market share. However, in the late 1990s it started expanding its menu and also its number of outlets and so able to combat the fall in market share. The market in china expanded greatly after the strategic change and now KFC has been able to mobilize its position in the market. In context of United States, KFC’s closest rival is Popeye’s (Long, 2008). However, if we take the sales of KFC and Popeye, we come to know that KFC makes six times the turnover than Popeye. In the US, in 2002, it was estimated that KFC has about 46% of the fast-food chicken market. KFC leadership in the US was in fact so string that it has become saturated and there were fewer opportunities for them to somehow expand their restaurant base and their growth was limited to only 1% per year. Despite this huge market dominance, KFC does not have the highest average sales per outlet. It is in fact another rival Chicken Fill-A which enjoys a sale per outlet 4% more than KFC. KFC has in certain areas always underperformed compared to the industry benchmark. With respect to the 7% benchmark growth rate in sales turnover between 1994 and 1999, KFC’s growth arte was 4%. As per the sales per unit, where the benchmark was to be 4%, and 3%, KFC had growth rates of 3% and 1% (Insead Knowledge, 2009). KFC has expanded tremendously in China and has huge future plans to open even more outlets there. KFC plans to open more outlets in China than there are in the United States. KFC entered the second largest population market in the world that is India in the early 1990s, becoming the first fast-food multinational to enter the country. A downside for KFC has been that it has not been able to target it market segment which it had initially intended. The original target market for KFC had been the four person middle class family. However, what really turned out to be the real market are the middle aged businessmen and young crowds. Their inability to gain complete knowledge of their customers and what they like and don’t like along with a loss of quality in the services at some franchises and less investment in research and development led them to not being able to make it to the top 20 companies in growth in 2000. However their recent strategies have been able to expand their customer base and they are rightly standing as the third largest fast food chain in the world. It is estimated at everyday 12 million customers are served at KFC restaurants (Lewis, 2005). Currently, KFC enjoys a market share of 46% in the US in the chicken market which is nearly four times higher than the next competitor of KFC. It is the leading fast-food and quick serving restaurant in China with 2250 units and accounts for about 86% of YUM’s presence in the country. Primary Research To find out the market competitiveness and position of KFC among the general consumers, a primary research was conducted which looked at the different aspects that people use to assess a fast-food restaurant. It looked at what the consumers like and dislike about fast-foods in general as well as KFC and how they rate KFC compared to its competitors (Etzel, Walker, Walker & Stanton, 2000). The sample representative to be questioned and interviewed for the research was randomly selected from three different groups. First were the youngsters who belonged to schools, colleges and universities. Then there were the single middle aged professional people who had just stepped into their corporate lives. Finally there were the middle size and middle class families comprising of four to five people. A total of hundred people had been giving the questionnaires to fill comprising of 40 youngsters, 30 middle aged people and 40 families. The questionnaire had been designed keeping in mind those aspects that were the key competitive factors between KFC and its rivals. It asked questions about the frequency of having fast food, the qualities that people like about KFC, their satisfaction levels, their liking of other fast food chains comparatively and their recommendations on how KFC can improve its service. The results from the questionnaire laid out that on average youngsters tend to have the most amount of fast food compared to middle aged people and families. On average, youngsters have fast-food at least once a week while middle aged people have it less frequently while families often tend to dine out (Fast food linked to child obesity, 2003). They do not have a special preference for any one fast food chain but it depends on the mood of the people primarily. They tend to switch between McDonalds, Popeye’s and Burger Chain quite frequently. 25% of the respondents said they go mostly to McDonalds, while 10% said they enjoy Burger King, 20% said they like KFC and the rest were indifferent. 40% of the respondents felt that KFC lacks in its variety of food items while 60% were extremely satisfied with the current range and offers of KFC. The rest were undecided (Fast food linked to child obesity, 2003). The price seemed extremely competitive and hence it was on the same line as other fast food chains. The offers and deals by KFC were seen by 50% of the people as satisfactory while 20% showed dissent over it as they said they lacked in attraction as the deals seemed to ruefully pocket more money from the people rather than giving them more value. 30% seemed to be undecided. Asked if KFC gives value for its money in general, 30% people were of the view they can considerably improve their services and provide more in the same price while 30% were highly satisfied and the rest undecided. 55% people were of the view that there are sufficient number of outlets in the region while 45% feel that there should be more outlets as if there will be more, people will be inclined to go more to KFC as they often choose to go to those fast-food chains which are less distant (Foundation, 2006). Almost 60% of the people never had a bad incident with KFC and the rest who did seemed to have their problems or issues cleared with the customer service department which reflects that KFC personnel is highly customer-oriented and aims to solve customer issues or problems to the best of their ability. The recommendations that came from people included that KFC should include greater varieties of their fried chicken; they should enlarge some of their outlets; they continuously bring in greater offers and deals; have more employees at the counters at rush hours and peak times and some even said that they should improve their layout (Hanna, 2001). Overall, the response from respondents was quite informative and constructive. The feedback from people can significantly be used to alter the business way of working and even in developing a new or better strategic business model that would kept KFC to look into areas that they have previously ignored ot left out on. They should take all those areas that the people have recommended as their opportunities that they can definitely build on. However, based on the results, the market position of KFC is stable and very much competitive. Around 50 to 60% of the respondents showed extreme satisfaction over KFC operations, their food and the amount of value they create for the people (Akra Pulse, 2009). However, we cannot underestimate the limitations of these surveys as they are only from samples and hence KFC should despite satisfactory comments strive to work hard towards what people really want and try to beat their competition in whatever way they can. Recommendations KFC made efforts to increase its market share in South American countries beside Mexico and Caribbean. However, due to financial constraints they could not, so it is for the benefit of KFC to strengthen and expand their customer base in Mexico and Caribbean for the time being (Target Market News, 2009). KFC should try to increase its own corporation’s restaurants instead of just KFC units or outlets. This will allow KFC to be in a better position to keep a check on quality, services, customer service, cleanliness and a more customized service. However, franchises around the world should not be cut down as they significantly help in brand recognition and building and strengthening its image and market position. It also gives them a first mover advantage (Hodgetts & Chamberlain, 2006). KFC can make strong relationships with suppliers and gain a competitive advantage. These strategic alliances will lead to cost reductions for KFC as well as better corporate relations and a better ability to cater to customers. KFC can take advantage of developing countries where barriers to entry are low but growth potential is high. So KFC can strive to expand their customer base in such developing nations like Latin America which can help in bringing in more customers and hence sales and profits for the company (Lee, 2007). KFC can benefit from developing or re-developing its existing business model which will be both global and for individual states where KFC operates and has franchises. This will help them frame rules, guidelines, recommendations and strategies that will enable to capture a larger market segment. KFC should strongly focus on the largest growth markets in the world which are China and India as they are great areas for the company to exploit their own potential and by utilizing the excess man power in these countries, it may be able to identify and take advantage of new opportunities (McCarty, 2006). KFC can look at the strengths and weaknesses of competitors and their strategies in each of the country to build its own strategies. KFC can also look into the prospects of going into roasted chicken instead of only fried chicken. Boston Market was a new restaurant which offered roasted chicken and gained quite a success. Like Pizza Hut and Little Creasers, KFC should also shut down all those units are underperforming or are failing to meet their standards (McDonald’s growth in India, n.d.). 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Brands, Retrieved on November 30, 2009 from http://www.wikinvest.com/stock/Yum!_Brands_(YUM) Write Investor’s Service (2009), KFC Holdings (Malaysia) Berhad - Company Profile Snapshot, Retrieved on November 30, 2009 from http://wrightreports.ecnext.com/coms2/reportdesc_COMPANY_C458W2530 Read More