KFC

Running head: KFC BUSINESS ANALYSIS CASE STUDY 12

KFC BUSINESS ANALYSIS CASE STUDY 17

Abstract

KFC was first introduced by Colonel Harland Sanders in 1952, when he came up with the special fried chicken recipe and got the idea of starting a restaurant franchise for the same. KFC was headquartered in Louisville, Kentucky. Today it is number two in the list of largest restaurant chains in terms of popularity (right after KFC). Over the past decades KFC has spread its business globally to various countries across the world. What initially started off as a fried chicken brand has now diversified its menu and business to other dishes including salads, pastries, desserts, milkshakes etc. Despite having an annual revenue of $23 billion in 2013, it has gradually started falling back and is falling back in the race amongst chicken retailers such as Chick-fil-a. This turning point in KFC’s growth is due to several hindering factors such as consumers health consciousness, stereotypical image of KFC being limited to just chicken items, animal welfare criticisms and environmental criticism. This paper provides an in-depth analysis of the KFC business.

Introduction

Before the birth of the franchise KFC, Colonel Sanders was an entrepreneur who started selling chicken on a roadside restaurant in Kentucky, during the Great Depression. Colonel Sanders discovered the special recipe for the KFC trademark fried chicken and came up with the idea of starting a restaurant franchise in 1952. Initially the idea of hamburgers had started in the US and the concept of a fried chicken restaurant franchise came of as a fresh competitive idea against hamburgers. At some point the KFC franchise grew to such an extent that Colonel Sanders himself couldn’t manage its growth. So, he sold it to investors John Brown and Jack Massey. The KFC franchise was the first fast food restaurant chain to expand globally across other countries. By the 60s-80s countries like Mexico, England, China were its biggest market. Over the years, the management and leadership had changed and transferred over to Heublein (the sprit distributor) to Pepsico and to Yum brands. Even though, for most of its lifespan which is continuing until today, it has received growth and expansion, it is not without its fair share of setbacks and criticisms. It has enjoyed a strong turnover and even boasted of a revenue of #23 billion in 2013. But over the past decade, it has seen some criticism. For example, the franchise in China was accused of using hormone injected chicken to boost the supply of chicken. In the UK, DHL, which was a partner of KFC had some logistics mismanagement issue that caused a nation wide shortage in chicken. Countries such as India were not too welcoming of the menu of KFC as it was not known to be very family oriented to suit the Indian family requirements.

Factors that have made KFC a successful global business

KFC has undoubtedly been a leader and innovator in the fast food industry for several decades. China has been it’s biggest market worldwide. There are several factors that have contributed to the success of KFC globally. But the core factors for its success is its franchise operation protocol. Here are some postulates of this franchise operation protocol that has contributed to its success:

The chicken cooked in KFC has certain specific guidelines with regards to time taken for cooking, the size of the chicken, the margination process and timing.

The age of the chicken used has to also follow a certain limit. It should be within 60- 70 days old from the time it is slaughtered.

The size of the restaurant should be 24x60 feet.

The restaurant washrooms should be cleaned every 3 hours.

The kitchen sink needs to be cleaned every half hour.

Food that is not sold off needs to be trashed

The workers need to have a specific clothing and uniform.

5% of the gross earnings should be used for advertisement.

1% of the gross earning should be used for nationwide advertisement.

3% of the gross revenue should be used for R&D to find new recipes.

The food can be ordered separately.

The restaurants need to have air condition.

Owing to these guidelines that have evolved over time, and management has made it mandatory for all franchise owners to implement them strictly, the quality of the KFC products and the service offered to clients have also been top notch. This is the most important reason contributing to KFCs continued success over the past 60-70 years.

Global number of KFC restaurants in the past decade (Lock, 2020, Feb). Retrieved from https://www.statista.com/statistics/256793/kfc-restaurants-worldwide-by-geographic-region/:

Why are cultural factors so important to KFC’s sales success in India and China?

With regards to the meaning of culture, Hofstede (1984) used to define a really common but vague pair of models: “Culture could be the collective programming of the human mind that distinguishes the members of one human group from those of another. Culture in this sense is really a system of collectively held values.” In the book of Culture and International Business (Becker, 2005), KFC offered an easy but updated definition to produce it straightforward: “Culture is everything that folks have, think, and do as members of these society”, which demonstrating that culture is made up of (1) material objects; (2) ideas, values, attitudes and beliefs; and (3) specified, or expected behavior. This definition proposed by Becker will be the basic guidance in this thesis.

When get down seriously to a narrower idea of cultural adaptation in certain specific market, it can be considered as a type of behavioral adaptation of the current organization as a legal person. Many scholars have theorized and studied the notion of cross-cultural adaptation, which tends to maneuver from one culture to another one, by learning the elements such as for example rules, norms, customs, and language of the newest culture (Oberg 1960, Keefe and Padilla 1987, Kealey 1989). Based on Ady (1995), “Cultural adaptation may be the evolutionary process by which someone modifies his personal habits and customs to fit into a particular culture. It can also refer to gradual changes in just a culture or society that occur as folks from different backgrounds participating in the culture and sharing their perspectives and practices.” More specifically, “Adaptive behavior includes the age-appropriate behaviors required for people to live independently and to function safely and appropriately in daily life expected of his age and social group” (Heward, 2005). To adapt to a different culture is to manage a large challenge and to check out a new system of rules in a certain group, which requires an open mind (Waldron et al, 1994)Generally speaking, cross-cultural adaptation is the process of “adjusting the native ways of thinking and behaviors to be consistent with the local culture” (Kotler, 1982).

Although these scholars mainly centered on the adaptation behaviors for someone in a fresh and unfamiliar cultural environment but not really a corporation within an unfamiliar marketing environment, their theories and works are still extremely valuable and important in guiding this investigation, and provide solid theoretical foundation and methods for the authors to continue the analysis.

Cultural factors in India that go against KFC’s original recipe.

India is known for colorfully exotic food that consumes a lot of the afternoon to get ready, while junk food could be the culinary reflection of the fast-paced, consumerist society the nation has become embracing.

Restaurants, traditionally employed for formal celebrations, are increasingly becoming hangouts for young, working, middle-class Indians with money to splurge. KFC statistics reveal that nearly two-thirds of Indians — or roughly 845 million people, more than twice the U.S. population – eat out at least once a week.

"A very important factor that can draw our attention is that people are eating dinner out more frequently," said Professor Abhirup Sakar of the Economic Research Unit at the Indian Statistical Institute. "Say 30 years ago, you invite someone [over], and you would fix dinner at home. But not really much at present."

Many consumers looking for a quick, tasty, and relatively inexpensive meal are venturing out to KFC, that is considered one of the trendiest restaurants in India, drawing affluent people who wish to be observed, Sakar says.

Changing food trends in India reflect a broad globalization of the culture.

Increased experience of international cuisine through the media and frequent travel encourages people to take part in the ever-growing food trend and to imitate what is trendy in television, movies and other areas of pop culture.

KFC is particularly attractive to the young because of its contemporary look, unique menu, and ability to combine two very distinct worlds into one taste palate. "Its like having American food with a KFC twist to it; it tickles your tastebuds, and that's why people keep returning, " said Soumi Paul Chowdhury, 22, a master’s student at the Rabindra Bharati University in Kolkata. "You can't own it once and be satisfied." Chaudhary said in a December 2014 press conference that he's capitalizing on such sentiments with a "brand-building strategy centered on providing exceptional customer service, localized menu offerings, a talented yet diverse workforce" and a wide presence in big cities.

Why did Kentucky Fried Chicken change its name to KFC?

Kentucky Fried Chicken (KFC) is the biggest junk food chain offering fried chicken products on earth (Deng, 2011). The mother company of KFC is YUM! Brands, Inc. It's the largest junk food chain when it comes to system units—owning 38,000 restaurants all over the world in more than 110 countries and regions (Yum! Brands website, 2012).

KFC first landed in Beijing, the ancient capital of China on November 12th, 1987, and Beijing KFC Co., Ltd. is the very first Sino-foreign joint venture doing junk food business in China. There after this junk food company started its rapid expansion in the United Kingdom with the largest population on the earth. Within their first 5-years (till 1992), they developed 11 restaurants. On June 25th, 1996, KFC opened its 100th Chinese restaurant in Beijing, and just on the very first day of this month, their restaurant of People's Park in Shanghai had an everyday turnover of 400,000 RMB which made the current restaurant a new record of highest turnover one-day in the single store among all KFC restaurants worldwide. Nowadays, KFC restaurants are serving almost 10 million consumers daily in China (KFC website, 2012).

As the group gets more knowledgeable on running their business in China, its team is also getting bigger and stronger. Its rapid development creates a huge amount of positions in China from the beginning of the entry. By the conclusion of 2007, KFC has employed more than 160.000 people as its Chinese

staff, and it had been announced that KFC would insist to employ local people who have a rate of 100 percent (KFC website, 2012).

Meanwhile, whilst the pioneer and leader with this industry, KFC also affects the supply chain from the beginning of these business in Chinese market. Previously 24 years, KFC has purchased more than 700,000 tons of chicken in China, fully from the local suppliers. The group has a unique global standard to coach and evaluate their over 500 Chinese suppliers. These partnerships give you the restaurants with 90% of the rural material from chicken, salad to packages and fixed equipments (Bian, 2009).

How does the SWOT analysis of KFC affect the future of KFC?

The KFC fast food restaurant became famous for its tasty chicken. The company has become successful due to its much strength. However, it suffers from several threats and weaknesses, which can be dealt with on time. One of KFC’s strengths is that it is an internationally famous and well-known venue with over 1500 outlets in 120 countries. Another strength is that it offers non-meat options unlike other fast-food restaurants, and people can enjoy vegan meals. One of the weaknesses facing KFC is they have a flawed menu, which consists of many calories ("SWOT analysis of KFC," 2019. Nowadays, people have become so health-conscious that they do not allow their bodies to be taken over by calories of greasy chicken. Another common weakness of KFC is their franchise system. The management system requires that every outlet is individually managed, and this can lead to poor management and inadequate production, which can affect the overall brand due to one mismanagement. KFC has an opportunity to get into a new market without doing away with their common chicken, specializing their vegetarian meals, which is not familiar with other fast-food restaurants. The most common threat for KFC health-conscious customers and it makes KFC nervous about losing their famous greasy chicken. Another danger is; competition from other fast-food restaurants, and for KFC to remain competitive, they must suffer an increased cost in raw materials.

Closing Summary

KFC is one of the companies that have managed to go global very successfully. The reason that KFC has been able to go global is due to its unique international marketing strategies. KFC knew well how to market its chicken and venture into global markets (Jain 2019). The cultural factors that go against KFCs original recipe in India are that the large Indian families wanted more variety of foods other than chicken, which forced KFC to replace its innovative menus with different preferred menus. There were so many assumed theories as to why KFC changed its name. However, they made it clear that they evolved from Kentucky fried chicken to KFC to get away from the word "fried" due to health-conscious patrons.

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