SWOT Analysis of KFC Australia - Case Study Example

KFC Australia Name Professor Institution Course Date KFC Australia Executive Summary KFC Australia is a fast food outlet chain which operates as a subsidiary of Yum!Restaurant. KFC (Kentucky Fried Chicken) was first established in Louisville, US in 1930 (Monika, Schröder & Morven 2005, p.212). The company has since grown to second biggest restaurant chain after McDonald's. IBISWorld (2012) claims that currently, this restaurant has 18,875 outlets and operating in 118 countries including Australia. KFC entered into Australian fast food market in 1968 and established its outlet in Guildford in Sydney (IBISWorld 2012). Today, KFC Australia has more than 600 outlets with 12,000 staff, and posted annual revenue of roughly AU$2 billion in 2013 (KFC Australia 2014). Just as the name suggests (Kentucky Fried Chicken), the company is well known for its major product pressure fried chicken. Other products being offered at KFC Australia include burgers, French fries, barbecue baked beans, coleslaw, mashed potato, salads, bread rolls and soft drinks (KFC Australia 2014). It’s initial Recipe "11 herbs and spices” remains one of the most well-known trade secrets to date. Table of Contents KFC Australia 2 Executive Summary 2 Table of Contents 3 1.0 Introduction 4 3.0 Findings 6 3.1 Explanation of SWOT analysis table 6 3.1.1 Strengths 6 3.1.2 Weaknesses 7 3.1.3 Opportunity 7 3.1.4 Threats 8 4.0 Recommendations 9 4.1Target Market 9 4.2 New Product 9 4.3 Customer value proposition 10 4.4 Strategy Profile 10 5.0 Conclusion 11 6.0 References 12 1.0 Introduction Without much regulation in the Australian fast food industry, many international restaurants have since joined this market causing intensification of competition (IBISWorld 2014). The changing consumer needs and health issues have made it difficult for fast food companies to satisfy such demands. As such, companies are now spending most of the time doing research on how to meet those demands. IBISWorld (2014) contends that even for the company which has been known for the fried chicken like KFC Australia has had to shift to healthier foods. The Australian fast is rapidly moving shifting to healthier is the success of the company could be measured by how effective it has managed to meet its consumer needs (Smith 2011, p.612). KFC Australia is not being left behind since it intends to introduce a new product into the market. Based on this information, this report analyses KFC Australia’s SWOT, identify and describe a target market into which the company can introduce a new product. 2.0 SWOT Table KFC Australia capacity to remain as the second largest fast food company in terms market share can be attributed to its internal environment and insatiable desire to control the external environment (KFC Australia 2014). This involves the manner in which customer service is managed by the customer service representatives and the top management who are renowned for their capability. The management team has an avid obsession to enhance efficiency so as to get the market advantage. To completely understand KFC Australia business environment, a SWOT analysis is conducted. Strengths Weaknesses 1. KFC Australia is strong brand with 2. Large customer base with high product loyalty 3. Several products 4. Effective marketing and advertising 5. Strong trademarks menus 6. effective intellectual property (11 herbs and spices) 1. food with high fat contents 2. large restaurant network which is not easy to control 3. rigid to economic changes 4. cultural diversity 5. Poor environmental management Opportunity Threats 1. Developing new brand 2. Adding new vegetarian and healthier foods 3. Establish home delivery 4. Embrace new technologies 5. Environmental conservation and CSR 1. Competition from major market players 2. Consumer and health consciousness 3. Foreign currencies fluctuations 4. Sustaining market leadership 3.0 Findings 3.1 Explanation of SWOT analysis table 3.1.1 Strengths KFC Australia is well known brand in Australia and worldwide. This restaurant operates under Yum!Brand which is the second biggest restaurant chain in Australia by its share of the market (KFC Australia 2014). According to IBISWorld (2014), Yum! Brand has a market share of 9.3% after McDonalds’ which 15.3% share of the market. However, KFC Australia is the largest restaurant in the fried chicken segment both in Australia and globally. Its recognition as strong brand can be used as brand value strategy to communicate a message that this company is positioned as fried chicken restaurant (French & Smith 2013, p.1358). Its strength as the largest fried chicken restaurant in Australia has made it acquire the largest customer base that is also loyalty to its products. This points its quality service and value creation proposition and satisfaction. KFC Australia offers several products to the market including chicken, burgers, French fries, barbecue baked beans, coleslaw, mashed potato, salads, bread rolls and soft drinks and among others (Darden 2004, p.58). As such, it can be conclude that this company is highly diversified. The restaurant has realized that the market is very competitive and it cannot rely on one product to exploit market opportunities. This also serves away of spreading risks should one or more products fail to attract customers. KFC Australia has one of the best known intellectual properties since its establishment called “11 herbs and spices” (Darden 2004, p.58). This factor has made the company remain authentic in its product, thus creating competitive advantage. 3.1.2 Weaknesses Australia fast food consumers have become health conscious making the market to shirt to healthy foods (IBISWorld 2014). KFC Australia is mostly recognized for its fried chicken which is experts argues has high content fats. IBISWorld (2014) posits that Australia consumer now relates fried chicken to obesity, obesity, diabetes and cardiovascular disease, a condition which could make KFC to lose more customers, hence low revenue. The company also has a large network of outlets (600 outlets) that is difficult to bring under one control (Kotler & Keller 2012). Sometimes such situation makes creates confusion and even an avenue of corruption and other unethical conducts. KFC Australia has established itself in the fried chicken segment, and is finding it difficult to shift to healthier fast foods (Smith 2011, p. 612). In a nutshell the company has become rigid to both social and economic changes. Berger & Huntington (2003, p.95) claims that in its earlier years when KFC Australia was first set in Australian market, employees who had moved from America faced the challenges of cultural diversity; though the cultural difference is not that much between the US and Australia. For instance, the power distance of US is rated at 40 compared to that of Australia at 36 (Berger & Huntington 2003, p.95). This often affects motivation and the way managers relate with their employees. The company has faced in negative brand recognition; in particular, being irresponsible with regards to environment conservation. Greenpeace organization in 2008 criticized KFC of irresponsible sourcing paper pulp to use for food packaging its products (Yaziji & Doh 2009, p.112). 3.1.3 Opportunity In the last five years the campaigns have been raised concerning the healthy in Australia increasing health awareness among the consumers (IBISWorld 2014). As such, the demand for fast food that is deemed unhealthy such as fried chicken has decline resulting to decline of revenue. This means KFC Australia has also been affected. In that way, an opportunity has been created in the healthier fast food segment prompting the company to develop new products for this market segment, most probably foods with fewer calories served with vegetables (IBISWorld 2014). People now have tight schedules juggling between work and homes chores, and may not find time purchase their favorite fast food. Therefore, KFC Australia can use such opportunity to increase their home deliveries. New technologies can be used to target various markets especially the youth. KFC Australia can provide free Wi-Fi to attract customers who like surfing the internets especially the youth. Yaziji & Doh (2009, p.113) claims that the company also has had bad reputation concerning environment conservation, they can improve their image by participating in activities which encourages using environmental responsibly. 3.1.4 Threats Australian fast food sector is surrounded by strong market players which look to strengthen their positions (French & Smith 2013, p.1361). This means KFC Australia is facing stiff competition, especially as market shift to towards healthier foods. Retailers continue to maintain their market share by evaluating their menu packages and adopting new products to satisfy the adjustment in demand towards healthy fast-foods (IBISWorld 2014). Economic changes have prompted currency fluctuation since the world economic crisis of 2008. This frequently causes changes in disposable income and as a result affects this industry. IBISWorld (2014) argues that fast food sector revenue depends on the disposable income. 4.0 Recommendations 4.1Target Market From its inception, this restaurant has traditionally targeted three market segments including teens, young adults and families (KFC Australia 2014). It can as well be conclude that KFC Australia is targeting every age. The restaurant is selling foods like buttermilk biscuits that targets teens from the age of 8-18 (KFC Australia 2014). Teens are also offered fun activities like playing toy games, bouncing castles. Young adults form the largest targets market of this restaurant, bearing in mind that people in the ages of 20-30 generally likes social activities and exploring new insights such as fast food and sports (KFC Australia 2014). However, the company feels they have served these targets for a long time to the extent that they cannot provide extra opportunities. With health concerns increasing rapidly the company must venture into a new market segment. The most ideal target market can be dieters; people who are concern about their health and cannot consume foods with high fat contents like fried chicken. The restaurant should target dieters in the ages of 30-50 who are at the height of their careers and have high income. Yankelovich & Meer (2006, p.3) affirm that this group comprise of innovators and achievers customers who are believed to like established products and spends heavily on social activities. In this way, they will be able to maximize their revenue within a short time. 4.2 New Product KFC Australia has served fried chicken for a very long time amid health complaints from various customers. The market is shifting heather option fast foods, and this restaurant must also move with speed to avoid dislodged from its second position in the market (IBISWorld 2014). The better option here is to venture into Oven Grilled skinless chicken served with vegetables. Oven grilled chicken is regarded as ideal source of carbohydrate, protein, mineral and vitamins (Helpguide 2014). Grilling drains off the fats and calories content on the chicken living it more health; it can then be served with vegetables. Since the restaurant is established, and is targeting people with high-income, they can use skimming pricing to introduce this produce. Even though the price could be high, people will buy and KFC Australia will maximize its revenue. Competition may lower the price later, but KFC would have increased it profits. 4.3 Customer value proposition In introducing new product (Oven Grilled skinless chicken) into the market is a sign that KFC Australia has realized that they have saturated their traditional target market and cannot anymore increase revenue through them. Therefore, are pursing S-O strategies to capitalize on the new opportunities to match their strength as a highly diversified restaurant (Kotler & Keller 2012). It should be noted that opportunity are now on the healthier food options. By introducing Oven Grilled skinless chicken which is healthy, the company is also using W-T strategies to stop its weaknesses from making it at risk to threats. 4.4 Strategy Profile In this century of globalization, business environment have changed considerably, and doing business is not only concerned with what one does, but also additional value proposition the manager can add to customer lifestyle (Kotler & Keller 2012). In a nutshell, the customers are more concerned on what additional value they receive on top of money. In the perspective of KFC Australia, the customer is concerned about whether what the company offers can help them contain their hunger and also if the food is healthy (Monika, Schröder & Morven 2005, p.213). To achieve this, the KFC Australia has carried out research of the market and settled on Oven Grilled skinless chicken which is not only nutritious and satisfying but also healthy. Kotler & Keller (2012) contend that getting into the market can be accompanied by effective marketing and advertising both in mainstream media and social media. 5.0 Conclusion At the moment it can be conclude that KFC Australia as strong brand with the most loyal customer. The company also boasts as largest marketer of fried chicken. However, the market is fast shifting to healthier fast foods segments due to criticisms from the obese and health experts. As a restaurant that has positioned itself as fried chicken outlet, the company faces a strong uphill task and competition to change. Nevertheless, its managers must realize that there are quite a number of opportunities in the healthier options which KFC Australia. 6.0 References Berger, P & Huntington, S 2003, Many Globalizations: Cultural Diversity in the Contemporary World, Oxford University Press, p. 95. Darden, R 2004, Secret Recipe: Why Kfc Is Still Cooking After 50 Years, Tapestry Press. (pp. 12, 57–58, 101, 159, 175, 21) French, A & Smith. G 2013, Measuring brand association strength: a consumer based brand equity approach, European Journal of Marketing, Vol. 47, pp.1356 – 1367. Helpguide 2014, Healthy Fast Food: Tips for Making Healthier Fast Food Choices, Viewed on 15th April 2014 http://www.helpguide.org/life/fast_food_nutrition.htm IBISWorld 2014, IBISWorld Industry Report H4512: Fast Food Services in Australia, viewed on 16th April 2014 http://clients1.ibisworld.com.au.ezproxy.lib.uts.edu.au/reports/au/industry/default.aspx?entid=2005 IBISWorld 2012, IBISWorld Company Profile Yum! Restaurants Australia Pty Limited, viewed on 16th April2014 http://clients1.ibisworld.com.au.ezproxy.lib.uts.edu.au/reports/au/enterpriselimited/default.aspx?entid=20081 Kotler, P & Keller, L. K 2012, Marketing Management 14e, Pearson Education Limited KFC Australia 2014, About KFC, viewed on 16th April2014 http://www.kfc.com.au/ Monika J.A, Schröder & Morven G.M 2005, Fast foods and ethical consumer value: a focus on McDonald's and KFC, British Food Journal, 107, pp. 212 – 224 Smith, A.F 2011, Fast Food and Junk Food: An Encyclopedia of What We Love to Eat, ABC- CLIO, p. 612. Yankelovich, D & Meer, D 2006, Rediscovering Market Segmentation, Harvard Business Review, 1–11. Yaziji, M & Doh, J 2009, Case illustration: PETA and KFC". NGOs and Corporations: Conflict and Collaboration, Business, Value Creation, and Society, Cambridge University Press. pp. 112–114 Read More