Opportunities Which KFC Can Exploit to Uphold Its Dominance in the Fried Chicken Segment - Example

KFC Australia Name Professor Institution Course Date KFC Australia Executive Summary This report is formulated to evaluate the external and internal environment (SWOT) of KFC Australia, identify and describe a target market in which the company can introduce a new product. KFC is an Australian fast food company which has its parent restaurant in Kentucky, US. KFC (Kentucky Fried Chicken) was first established in the US in 1930 and has now operates 18,875 stores in 118 nations (IBISWorld 2014). IBISWorld (2014) claims that the restaurant entered into the Australian market in 1968, establishing its outlet in Sydney. Currently the company has more than 600 outlets in Australia with the major product being fried chicken while others include burgers, hamburgers, pork ribs, soft drinks French fries, salads and desserts (Monika, Schröder & Morven 2005, p.213). Yum! directly runs 160 KFC restaurants in Australia. Table of Contents Executive Summary 2 Table of Contents 3 I.0 Introduction 4 2.0 The external and internal environment 4 2.1 SWOT analysis 5 2.1.1Strengths 5 2.1.2 Weaknesses 6 2.1.3 Opportunity 6 2.1.4 Threats 7 3.0 Strategy Profile 8 4.0 Target Market 8 5.0 New Product 9 6.0 Conclusion 10 7.0 References 10 I.0 Introduction Globalization, information technology advancement, rising pressure from external forces and other fast food outlets joining the Australian market have prompted managers to rethink their strategies which can help them sustain competition and even have the market advantage (Wilkinson 2012). IBISWorld (2014) contends that most of industry players sell the same products, therefore making it hard to compete unless product diversification is adopted by the company. One of the industry players that have been forced to develop new products to sustain competition is KFC. IBISWorld (2014) argues that this move will be boosted by the growth of disposable incomes in Australia in the previous five years. Trends in customer age, especially the rising median age of the population have driven the demand for healthier food options (IBISWorld 2014). 2.0 The external and internal environment The fast food sector has become competitive with the presence of several established companies in the market (Euromonitor 2013). Currently, company’s major interests is the competitive strategy that will ensure they take the largest share of the market. Euromonitor (2013) argues that to do this, the top management must understand and analyze the strengths. KFC, Inc. has several strengths all over its internal environment. KFC lies in its employees, mission and corporate culture (IBISWorld 2012). The company has hired 12,000 employees to work in its Australian outlets and provides quality customer service. The company remains largest chicken restaurant in Australia and the world. KFC is recognized for its slogan "finger lickin' good," which was then changed to “Nobody does chicken like KFC” (Barnett 2010). This form it corporate culture which is a shared value system which company decisions are derived. However, the company faces external are the competitors and suppliers (IBISWorld 2012). Experts believe that the with many companies getting into Australian Fast Food Services sector, competition is poised to go up (Euromonitor 2013). More of the company internal and external environment can be understood by analyzing its SWOT. 2.1 SWOT analysis 2.1.1Strengths In Australia, KFC operates under Yum!Restaurants Australia, which is the second largest fast food restaurant in Australia (IBISWorld 2014). According to IBISWorld (2014) the company has a market share of 9.3% coming second after McDonald's Australia Holdings, which has the largest share of the market at 15.3%. Globally, the company is the largest fried chicken outlet chain and second largest fast food restaurant (Euromonitor 2013). These attributes make KFC a strong brand that is well recognized both in Australia and worldwide. The attributes also help in terms of brand marketing. Barnett (2010) posits that the company is also a market leader in pressure fried chicken and 11 herbs and spices. 11 herbs and spices remain its most trade secrets in the fast food industry. These are well known product portfolio for the last 50 years. Wilkinson, (2012) asserts that the recognition of its product portfolio is an added advantage to the marketing team and indicates that this restaurant offers high quality foods. The company has the strong and accessible location, such as Sydney, Melbourne, etc, with effective and motivated work force to manage its franchises (IBISWorld 2012). KFC has a well recognized image throughout the world is with a strong distributed network outlets in locations like shopping malls and airports among others. 2.1.2 Weaknesses Even though, the company have trade secrets in 11 herbs and spices it can be argued that KFC Australia is not innovative because they have been serving chicken products to consumers for the large part of their existence (Wilkinson 2012). The company has also opened several outlets in Australia offering the same food making it to lose in terms of sales (IBISWorld 2014). Similarly, many opening many outlets have made it to lose control owing to the fact that it is difficult to control several chains. The company has also suffered the problem of cultural diversities in Australia. This was felt by employees who were ferried from the US to work in Australia (Berger & Huntington 2003, p.95). KFC is suffering from a bad reputation in particular poor hygienic conditions in its Australian outlets. Euromonitor (2013) claims that in 2010, the lawsuit in Australia revealed poor hygiene at its restaurant in Sydney Australia. Wilkinson (2012) maintains that the company has also been focusing on a few locations; a situation that has made it difficult to surpass McDonalds with regards to market share. 2.1.3 Opportunity With the improving disposable income in Australia over the previous five years, KFC can use the opportunity to increase its sales and improve its share of the market (IBISWorld 2014). The company is developing a new product to add to its portfolio. Pride & Ferrell (2011) holds that in the current competitive business environment, any organization must be creative so as to sustain competition. Hence coming up with unique and healthy foods will make not only give KFC market advantage but it will also enhance its image (Monika, Schröder & Morven 2005, p.217). The changing trends in demographic factors, i.e. median age offers an opportunity for KFC to diversify into new products and target new locations. The customers are turning out to be health-conscious; therefore, KFC can use this opportunity to introduce new products for this type of segment (Monika, Schröder & Morven 2005, p.213). The KFC has received backlash with environmental activists in particular from the Greenpeace organization (Yaziji & Doh 2009, p.113). Thus, the company can become responsible in terms of conservation so as to improve its image and in return increase the customer base. 2.1.4 Threats KFC is facing a stiff competition from strong market players such as McDonalds, Subway Systems and Competitive Foods Australia (IBISWorld 2014). KFC Australia has been accused poor hygienic condition and undergoing and has an uphill of in improving its image to match customer standards (Barnett 2010). The company is a market leader in the fried chicken segment and with many companies now offering the same; KFC may struggle in the future to sustain its market leadership position Australian fast-food industry. According to Euromonitor (2013) Inexpensive deals and packages are being provided by its biggest rival McDonalds, a strategy which might just prevent KFC from increasing its customer base. IBISWorld (2014) argues that the fast-food market in Australia is experiencing a shift in customer demand for healthier foods, and keeping away from fried items. Hence, traditional foods have decreased share of market, whilst as opposed to healthier categories which has experienced solid growth. KFC has been condemned for selling unhealthy foods which cause obesity, and should it continue with the same, it is bound to lose customers and even revenue. 3.0 Strategy Profile In introducing new product into the market, KFC is using S-O strategies to improve its strength as a highly diversified restaurant. According to Kotler & Armstrong (2010) diversification strategy helps an organization not only improves opportunity for growth, but also to spread the risks, especially in Australian market where top companies are offering same products. Introducing healthier foods in a health-conscious society depicts KFC, which tries to maximize its opportunity bearing mind the healthy food market segment is growing rapidly. KFC is also using S-T strategies by developing new product and including it into its portfolio (Kotler, & Armstrong 2010). Developing healthy fast foods will enable the company to maximize its strength as a strong brand reduces exposure to external attacks concerning unhealthy foods. Barnett (2010) claims that KFC Australia has always been disparaged as a restaurant which promotes unhealthy living owing to selling junk foods. 4.0 Target Market Ever since KFC target has always been segmented into four categories include children, teens and young adults, family and budget customers (IBISWorld 2012). The company has been targeting children under 12 whom they provide with extra fun activities like bouncing castle. KFC has also been targeting youth, mainly students in the age of 13-25 who craze for fried chicken or burgers. Lastly, the company has been targeting families with special packages for family day-out (IBISWorld 2012). All these segments have been exhausted and the company intends to develop a new product of new target market. With the health issues being raised on the junk foods, the company should invest their time and resources in health conscious segment (Barnett 2010). This can be called “dieters”. This can be customers in the age of 30-65 who feel that they have been eating a lot of junk foods in the past, and eating further could cause them obesity. Yankelovich & Meer (2006, p.4) argue that the category of customers consists of individuals who are in the mid of or late in their careers and high income and wants the best for their lives. This target market has high sense taste and is described as innovator customers (Yankelovich & Meer 2006, p.5). 5.0 New Product As stated by IBISWorld (2013), Australian consumers are becoming health conscious are moving away from unhealthy fast foods. As such, KFC can venture into grilled chicken breast with mashed potatoes and garden salads. This will makes sure that company still remain within its well known brand, i.e. chicken with a little diversification into grilled. Grilled chicken breast with mashed potatoes and garden salads is has low fats with 191 calories compared to fried chicken, which has 440 calories (Simpledish 2014). This means the restaurant will still remain in its chicken business, but with a menu rich in protein. This strategy will be able to convince the consumers the company is truly concerned about the health of its clients. KFC as established itself as chicken fried market leader and can be risky to move from the chicken related product so grilled chicken, a related product, can be a great approach to achieve business synergy by serving dieters (Monika, Schröder & Morven 2005, p.219). Since the target market is individuals with high income, the company should use skimming pricing to target the middle class and gradually lower it to focus also on the lower class individuals. 6.0 Conclusion KFC Australia is the second largest fast-food restaurant and enjoys market dominance in the fried chicken segment. However, the company experiences competition and negative image in its operations in Australia with regards to hygiene and unhealthy foods. There are quite a lot of opportunities which KFC can exploit so as uphold its dominance in the fried chicken segment – the introduction of grilled chicken breast with mashed potatoes and garden salads will most probably improve its image and profits. However, to manage this, the restaurant will have to ease competition created by McDonalds Australia Holdings including other yet to establish fast food restaurants. 7.0 References Barnett, M 2010, Colonel Sanders' new modern army of outlets, Marketing Week. Berger, P.L & Huntington, S.P 2003, Many Globalizations: Cultural Diversity in the Contemporary World, Oxford University Press. Euromonitor 2013, Fast Food in Australia, viewed on 3rdApril 2014 http://www.euromonitor.com/fast-food-in-australia/report IBISWorld 2014, IBISWorld Industry Report H4512: Fast Food Services in Australia, viewed on 12th 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 12th April 2014 http://clients1.ibisworld.com.au.ezproxy.lib.uts.edu.au/reports/au/enterpriselimited/default.aspx?entid=20081 Kotler, P. & Armstrong, G 2010, Principles of Marketing, 13th (Global) ed. Boston, Pearson Education, Inc. Pride, W & Ferrell, O 2011, Foundations of Marketing, Mason, South Western, Cengage Learning Monika J.A Schröder & Morven G 2005, Fast foods and ethical consumer value: a focus on McDonald's and KFC, British Food Journal, pp 107, 212 – 224 Simpledish 2014, Grilled Chicken Recipes - 21 Great Grilled Chicken Recipes, viewed on 12th April 2014 http://www.simpledish.com/search/?q=chicken Wilkinson, S 2012, Competition's hot for lunchtime legend, The Advertiser. 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