Kentucky Fried Chicken Corporation SWOT Analysis - Case Study Example

KFC Corporation SWOT Analysis Report (Name) (Institution Affiliation) (Date) Executive Summary This report aims to highlight the SWOT analysis for Kentucky Fried Chicken Corporation (KFC). Further, the analysis will be used to make recommendations concerning the corporation’s future action in order to remain competitive in business. To achieve this, the report will uses a myriad of data resources such as the company reports, academic journals, government statistics, books, newspapers and magazines. The findings depict that KFC has a great potential in expanding its market overseas, that is makes use of the opportunities and reverses the weakness into strengths. The report also finds out that KFC has strong brand having been in the industry for decades. Introduction Founded in 1952 by Harland Sanders, Kentucky Fried Children, commonly known as KFC, is the second largest fast food chain restaurant in the world after MacDonald’s as measured using companies’ sales (Yum.com, 2014). Headquartered in Kentucky, in the U.S, KFC has over nineteen thousand outlets in one hundred and eighteen countries as of December 2014. Notably, KFC Corporation is a subsidiary of a renowned restaurant known as Yam Brands, which also owns Taco Bell and Pizza Hut fast food chains. As a young entrepreneur, Harland Sanders started from a humble beginning, whereby he sold fried chicken in his small restaurant that was by the roadside in Corbin, Kentucky. Later, Harland realized that the concept of restaurant franchising could be a great idea as it would expand his business and as such established the first franchise in Utah February 1952 under the name “Kentucky Fried Chicken.” Ideally, KFC diversified the already hamburger dominated fast food industry through the introduction of fried chicken. However, Harland Sanders did not own the company for long as the rapid expansion was overwhelming his aging and as such sold it to Jack Massey and John Brown: prominent investors (Yum.com, 2014). The company primarily sells fried chicken pieces, sandwiches, salads and wraps. Though company’s focus is on fried chicken, it also sells a line of roasted and grilled chicken, desserts and side dishes. The company started to use the abbreviated form, KFC, back in 1991, but later began using its original name in April 2007 for its advertisements, signage and packaging. Thus, the name, Kentucky Fried Chicken, became part of the re-branding program, which meant that all its new restaurants would use the new logo, while the older restaurant would continue with the 1980s signage. Notably, Yum! Brands always use the abbreviated name in its advertising activities (Yum.com, 2014). According to (Shoyemi, 2014), KFC’s 4 year compound annual growth rate stands at 24 % as the sales continued to bourgeon to yet another high at $ 243.4 million in 2014, up 4.6% million on the preceding year. From a larger perspective, the company’s total revenue in 2014 stood at $3.193 billion, up from $3 billion in 2013 thus representing a five percent increase. KFC has since increased its sale of franchise with $ 3.7 billion in 2010, $3.8 billion in 2011, $4.1 billion in 2012, $4.12 billion in 2013 and $4.41 billion in 2014. Internationally, KFC Corporation business model is considered incredibly strong. As Devi and Ruby (2014) observes, KFC is an emerging market leader as it is franchise-led and its line of sight is based on having its operating growth profit double in the future. According to KFC’s 2014 annual report, the company delivered a strong year of sales because of its emerging markets in Africa, Russia, Thailand and its already established markets such as the U.K and Australia. Interestingly, the company opened approximately 670 restaurants in 2013 and 2014 thus depicting its international power as an iconic company (Devi & Ruby, 2014). KFC operates in a competitive environment as many fast food restaurants have since been opened in the U.S with branches internationally. Its fiercest competition is in the U.S as the American market is mostly saturated with fast food restaurant chains. However, KFC has a strong position internationally and plans to increase its already successful international division such that it has many branches in continental India, Russia and Europe. Notably, KFC’s most immediate competitors include McDonalds’s, Burger King and Subways. The table below shows KFC’s competitors as well as their financial performance. KFC Competitors Activity KFC Corporation MacDonald’s Subways Burger King Market Capitalization $ 32.4 billion $ 94 billion $ 12 billion $ 11.2 billion Employees Over 600, 000 1.7 million 492,000 400,000 Revenue Growth 24% 2% 3% 4% Gross Margin 27% 37.64% 13% 69% EBITDA $ 102 million $ 9.4 billion $ 168 million $ 194.2 million Operating Margins 13.57% 28% 2% 0.32% Net Income $500 million $4.76 billion $ 1.2 billion $ 142 million Source: Marketwatch.com, (2015). In the next section, this report will highlight different strengths, weaknesses, opportunities as well as threats facing KFC Corporation. To begin with, the section below gives a brief overview of the company’s SWOT analysis followed by a comprehensive discussion of the same in the subsequent sections. The report will also provide several recommendations, which the company needs to consider for its future success. SWOT Analysis Strengths 1. It is the second best brand globally in the fast food industry. 2. The company has 11 unique herbs as well as spice recipe. 3. Has strong position in China 4. Leads in chicken food market Weaknesses 1. Undependable suppliers 2. Regular negative publicity 3. Unhealthy dishes 4. Low pay and high employee turnover Opportunities 1. The burgeoning demand for healthy dishes 2. Doorstep food delivery 3. Coming up with new range of new food products Threats 1. Saturated fast food restaurants in the first world countries. 2. Healthy eating trend 3. Local fast food chain restaurants 4. Constant currency fluctuations Strengths To begin with, KFC enjoys a large market share and is the second biggest fast food chain brand in world with a value of $ 6 billion, after Macdonald’s company. The company is known by many as a trustworthy and quality fast food selling business entity, and this is due to its early international expansion as well as franchising ventures. As such, the company enjoys an already established reputation thus easy to open up new markets in various continents. Further, the company boasts of its eleven original herbs and spices recipes which are rarely offered in other renowned fast food chain restaurants both in the U.S and internationally. This unique chicken recipe gives KFC an added advantage over its competitors as it remains to be its trade secret. Moreover, the company enjoys a strong position in China as it continues to receive half of its revenue from China. Evidently, China has the largest population in world and as such KFC has managed to capitalize on this opportunity thus opening more than four thousand outlets. Additionally, the Chinese prefer fast foods to long-cooked meals in order to save more time for working (Shoyemi, 2014). Accordingly, China remains KFC’s primary strength as its food market is ever growing. The other significant strength is associated with the combination of KFC, Taco Bell and Pizza Hut under one umbrella known as Yam! Brands. With this combination, the company can offer products from its partners in case it does not have thus satisfying more patrons’ needs. Moreover, the company can benefit from the sale of its products by it partners. The company also benefits from cost-effective marketing due to collective promotions done by its partners. Last but not least, KFC enjoys being the world market leader as far as selling of fried chicken is concerned as it is its primary product offering. Evidently, the company’s slogan and trademark, has contributed to its fame as it has been maintained since the KFC’s inception. Weakness First, the company has often experienced problems with unworthy suppliers. Over the years, Kentucky Fried Chicken Corporation has been getting contaminated poultry from its contracted suppliers. These incidences have often made the company to experience falling sales as well as damaged reputation. Second, the company often faces constant protests from non-governmental organizations, which claim that the company offers unhealthy food menu. The company’s menu is often composed of food products of high calorie and fats thus posing a health risk to its customers such obesity and hypertension. Accordingly, the company’s popularity often decreases due to the NGO’s regular protests. In addition, consumers are nowadays looking for healthier choices thus disadvantaging the company. The other notable weakness is associated with Negative publicity. Over the years, the company has often suffered from criticism by animal rights organizations such As PETA, which hold that the company mistreats chicken birds. Moreover, the company reputation is often damaged by its competitors, who assert that the company used many chemicals in preparing the dishes (Khan & Ullah, 2009). Further, statistics indicate that KFC offers low payment packages for its employees as it often targets low-skilled workers compared to its competitors such Macdonald’s. The low pay often results in low performance as workers are not motivated. The target for low-skilled workers often results in high employee turnover thus increasing the training cost and the company’s overall costs. Opportunities To start with, the increased interest in healthier food choices seen in today’s consumers offers KFC an excellent opportunity to research more and invest in such choices. The company could benefit from an introduction of healthier foods in their menus such vegetables and fruits. Thus, this would reverse the company’s weakness into a major strength. The other opportunity is the home food delivery venture. Today’s customers’ needs are changing and many clients would want goods and services to be brought to their doorsteps. As such, the company can take advantage of this opportunity to increase its sales and markets share by establishing home dish delivery orders. The final opportunity is associated with the introduction of new products to the company’s most factored chicken range. In light of this, the company can introduce vegetarian meals as well as beef and pork products in its menu as consumers often want to change their diet once in a while. With this venture in place, the company would benefit from a wider consumer target thus getting more clients. Threats The most immediate threat is the high saturation of fast food restaurant chains in the developed economies. Evidently, the fast food industry in the developed markets is overcrowded and more brands are coming up every day thus threatening KFC’s ability to expand. Second, is that there has been constant sensitization of the benefits of having healthy eating thus pushing consumers to develop a healthy eating trend. The governments together with non-governmental organizations are always initiating programs that are aimed at fighting obesity and overweight. This poses a threat to KFC as most of its menus are associated with high-fat content foods such as fried chicken and eggs. Third, the local fast food businesses overseas also pose a threat to KFC’s international branches. Accordingly, many locals can be attracted by local restaurants as their food takes a more local approach in its preparation as well as serving thus identifying with them. Many local restaurants offer menus that comprise of local tastes thus increase in local restaurants is a threat to KFS as their prices are also lowered. The other important threat to be noted is the currency fluctuations. Much of KFC’s income comes from its foreign operations and therefore, such incomes must be converted into dollars and this can sometimes affect the company’s profits. This is often seen when the dollar is appreciating, at a high rate, against other currencies. Recommendations 1. Adjust employee wages and salaries upward The company is currently underpaying their workers more so in China as the labor is cheap. With an increase in employee pay, overseas markets such China would expand rapidly as it would gain a good reputation due to its care for workers’ welfare. When workers are compensated properly, they get motivated thus preparing quality food, which in turn attracts more customers. 2. Adopt local methods of preparing and serving food in overseas markets. Research indicates that many customers love to identify themselves with local dishes thus; the company should focus on learning about the local food preparation in the respective countries (Canak, 2006). The company should hire local chefs, who in turn should train other workers on how to prepare local dishes. This would neutralize the already rising threat that is associated with coming of new local restaurants. 3. Carry out constant researches in regard to the new customer needs and healthy eating Due to the increased sensitization of healthy eating by governments and non-government organizations, the company should invest in research development. They should aim at looking for new methods of cooking that is void of a high percentage of fats and cholesterol. In addition, the research would help the company in knowing customers new preferences with regard to various foods. References Yum.com,. (2014). Yum! Brands - Defining Global Company that Feeds the World. Retrieved 12 April 2015, from http://www.yum.com/investors/addl_info.aspBottom of Form Devi, P. S., & Ruby, T. T. (2014). A STUDY ON CUSTOMER SATISFACTION WITH SPECIAL REFERENCE TO KFC, ANNA NAGAR. International Journal of Retailing & Rural Business Perspectives, 3(2), 1027-1030. Canak, N. (2006). YUM! Business Case Study. Shoyemi, A. O. (2014). Consumers' perception of international quick service restaurants in Nigeria: a case study of Kentucky Fried Chicken (KFC) (Doctoral dissertation, Dublin Business School). Khan, M. J., & Ullah, I. (2009). To investigate Brand Awareness & Brand Image of KFC in Sweden. Marketwatch.com,. (2015). McDonald's Corp.. Retrieved 12 April 2015, from http://www.marketwatch.com/investing/stock/mcd/financials/ Read More