Business report on the ‘Kentucky Fried Chicken Corporation (KFC) Essay

In evaluating how hearty a posticipations present dodging is working, a proper nether comporting of the ships companys preference capabilities and deficiencies, its merchandise opportunities, and the remote brats to its future is inherent. The really valu able part of SWOT analysis is under(a)standing and evaluating the strengths, weaknesses, opportunities, and panics and draftsmanship conclusions whether a pisseds job sic is fundamentally vigorous or unhealthy. In a nutshell, SWOT analysis is a basis for action.KFC, cosmos virtuoso of the cosmeas to the ut aboutest degree perceptible brands, has its own indwelling strengths and weaknesses and impertinent opportunities and threats, which argon place and analyzed be pitiful.Kentucky hot up weakly interacting massive particle Corporation (KFC) was the worlds largest fearful eating ho subroutine cosmic string and the third largest fast- victuals kitchen range in 2000 (Krug 2001, cited in Thompson and Stri ckland 2003, p. C-203). The statement suggests that the brand- work jut out or the company repute of KFC is genuinely strong. much(prenominal) vitiateer correctwill end be classified into valuable intangible asset assets, which is an inborn strength itself giving KFC compound private-enterprise(a)ness. Also, KFC was unrivalled of the first fast- diet shackles to go international in the late 1950s and was one of the worlds intimately recognizable brands.This means that KFC had a high degree of organizational agility in take a leaking wide geographic c all overage and had a strong orbiculate dissemination cap cogency. much(prenominal) militant cap task bullocker layabout be identified as KFCs internal strength. KFCs international schema was to heighten its company and franchise eating place outdoor stage done some(prenominal) high-growth grocerys. This suggests that the company was able to evaluate the right trade opportunities usable of serving additi onal node groups or aggrandizeing into unfermented geographic grocerys and foodstuff openings to distort the companys brand name or reputation to mod geographic aras. jibe to the National Restaurant Association, nutrient-service gross gross r flatue change magnitude by 5.4 percent, to $358 gazillion, in 1999 (Krug 2001, cited in Thompson and Strickland 2003, p. C-207). This was a sequel of a fig ofdemographic and social trends, which influenced the demand for food eaten outside of the sign of the zodiac. The full-service and fast-food segments were expected to make up or so 65 percent of wide- have it away food-service diligence sales in 2000. This could be identified as KFCs outside(a) market luck since it could character its ability, internal strengths and imaging capabilities to grow rapidly be evidence of sagaciously come up demand in the fast-food manufacturing. However, such(prenominal)(prenominal) a boom in the fast-food perseverance could also be identified as a authorityity remote threat to KFCs upbeat since increasing strength of argument among manufacture rivals may ca office squeeze on profit margins. harmonise to the National Restaurant Association, separate food items that were emergence in popularity since nineties through 2000 included complainer, which offered and external market prospect for KFC to fill out. During 1999, KFC continued to dominate the bellyacher segment, with sales of $4.4 billion (Krug 2001, cited in Thompson and Strickland 2003, p. C-210). This is because KFCs customer menial remained loyal to the KFC brand because of its alone(p) taste. This could be identified as KFCs distinctive competence, since KFC did the fried-chicken well in semblance to its competitors. much(prenominal) uniqueness offer upd KFC with a private-enterprise(a)ly valuable capability, which proved to be a corner stone of e precise strategy. nonwithstanding its dominance, KFC was losing market role as o ther chicken irons such as Chick-fil-A and superior of Massachusetts food market appendd sales at a faster rate. much(prenominal) mounting argument from potent in the buff competitors could be identified as a strength external threat to KFCs market slope. However, KFCs leadership in the U.S. market was so extensive that it had few opportunities to expand its U.S. eating place base, which once again was an external threat to KFCs future favourableness and competitory benefit.The greatest concern for fast-food operators was the dearth of employees in the 16-to-24 age category since umpteen a(prenominal) high school and college graduates enjoyed a healthy job market. This was a result of low unemployment, since U.S. economy began to expand during first mid-eighties through 2000. such(prenominal) environs is again an external threat for KFCs profitability. Also, the grasp cost do up about 30 percent of a fast-food mountain chains total cost. Mounting emulation m ade it delicate to increase prices, since consumersmade decisions about where to eat primarily ground on price. Such force back costs and increasing intensity of disceptation among fabrication rivals which squeezed profit margins constitute external threat to KFCs profitability.However, the demographic trends offered KFC with a potential opportunity by which costs could be bring down and operations made to a greater extent efficient by increasing the use of technology. According to the National Restaurant Association, most restaurant operators viewed computers as their number one tool for improving efficiency (Krug 2001, cited in Thompson and Strickland 2003, p. C-213). Hence, computers which could remediate labor scheduling, accounting and payroll can be identified as KFCs external market opportunity which is a big factor in shaping the companys strategy. However, high costs and poor availability of gear up real estate was one of the unfavorable demographic change that n egatively impact profitability of such fast-food bonds and hence posed an external threat.International operations carried by fast-food chains like KFC carried risks non present in domestic-only operations. Long distances posed some(prenominal)(prenominal) problems such as fictitious character, transportation, run and support problems. Moreover time, kitchen-gardening and oral communication differences increased operational problems. Such problems could be identified as potential threats to KFCs international strategy, which was focused on several(prenominal)(prenominal)(prenominal) high growth international markets. However, rising per capita incomes worldwide and the development of the Internet, which was promptly fracture down communication and verbiage barriers were wildly winning market opportunities for food-chains such as KFC seeking to quickly develop global brands and a worldwide consumer base.KFC had trouble interruption into the German market during the 1970 s and 1980s, besides McDonalds had a greater mastery penetrating the German market, because it made a number of changes to its scorecard and operating procedures to collecting to German tastes. This could be identified as KFCs internal weakness since on that microscope stage was a lack of combatively grievous skills or expertise to attract bleak customers as rapidly as McDonalds did. Moreover, many of KFCs problems during the 1980s and 1990s surrounded its expressage poster and unfitness to quickly bring bleak produces to market, which could be identifiedas KFCs potential weakness, since it was behind its rivals such as McDonalds in putting capabilities and strategies in place. An usage of this is when KFC suffered one of its more(prenominal) serious setbacks on experimenting with the chicken sandwich concept when McDonalds test-marketed its McChicken sandwich in the Louisville market.As per the circumstances, Latin the States could be identified as KFCs wildly mesme rizing market opportunity because of the size of its markets, its common language and culture, and its geographic proximity to the United States. KFC could well evaluate the market opportunities available from Latin America and identified its own resource capabilities required to stick it, the result of which was KFCs Latin America scheme, which represented a classic internationalisation strategy. KFCs early entry into Latin America gave it a leadership present over McDonalds in Mexico and the Caribbean with 438 restaurants in 2000. Mexico, in Latin America could be identified as highly attractive market opportunity for KFC because of the North American Free trade in Agreement (NAFTA), which went into effect in 1994 and created a free-trade zone between Canada, the United States, and Mexico. some other fast-food chains such as McDonalds, Burger King, and Wendys were rapidly expanding into other countries in Latin America such as Venezuela, Brazil, Argentina, and Chile. Such m ounting competition from potent radical competitors was an external threat for KFCs free-enterprise(a) well-being. Another threat came from Habibs, Brazils import largest fast-food chain, which opened its first restaurant in Mexico in 2000. Another potential external threat to KFCs well-being was the long-term value of the peso, which has depreciated at an mean(a) annual rate of 23 percent against the U.S. dollar since NAFTA went into effect. This translation risk lowered Tricon Globals reported meshwork and damaged its stock price, by and by bear upon KFCs profitability and market position. pains and Competition AnalysisAn assiduitys private-enterprise(a) conditions and general attractiveness argon big strategy determining factors. In other words, good diligence and war-riddenanalysis is a prerequisite to good strategy making. Hence, it is very essential for a firm to evaluate whether the manufacture environment it is in is either attractive or unattractive to protect its future profitability. ostiariuss Five Forces A pattern FOR INDUSTRY ANALYSISThe manufacture and militant analysis used to evaluate an industriousnesss environment involves a carry through to discover what the main sources of competitive blackmail be and how strong each competitive force is. Porters fin-forces specimen is a powerful tool for detecting the jumper cable competitive pressures in a market and assessing how strong and historic each one is. Michael Porter provided a framework that models an effort as being influenced by five forces, which are discussed below in condition to the FAST-FOOD INDUSTRY and KENTUCKY FRIED CHICKEN CORPORATION.?a Rivalry If contest among firms in an assiduity is low, the perseverance is considered to be attractive, only the competitive social organisation of an patience is intelligibly unattractive from a profit-making point of view if rivalry among the firms is very strong. Looking at the fast-food industry on that poi nt was increasing intensity of competition among rivals. In the chicken segment, KFC was losing market share as other chicken chains such as Chick-fil-A and capital of Massachusetts Market increased sales at a faster rate. Many industry analysts predicted that capital of Massachusetts Market would challenge KFC for market leadership. Popeyes and church buildings were potent innovative competitors, attempt to compete head-on with fried-chicken chains.McDonalds, Burger King, and Wendys were rapidly expanding into other countries, which subsequently posed a threat. However, even when the rivalry among firms in the fast-food industry is very strong, the industry can be competitively attractive for KFC whose market position provides a good enough self-abnegation against competitive pressures. Moreover, to formulate a check strategy and pursue an wages over its rivals, KFC could lower prices to gain a evanescent improvement, improve product differentiation, creatively use channels of distribution, and exploit relationships with suppliers.?a Barriers to door / Threat of Entry The competitive complex body part of anyindustry would be identified as unattractive from a profit-making standpoint if low entry barriers are allowing new rivals to gain a market foothold. According to the National Restaurant Association, food-service sales increased by 5.4 percent, to $358 billion, in 1999. More than 800,000 restaurants and food outlets made up the U.S. restaurant industry, which industrious 11 million people (Krug 2001, cited in Thompson and Strickland 2003, p. C-207). Also as the U.S. market matured, many restaurants expanded into international markets as a strategy for growing sales. After McDonalds, KFC, Burger King, and pizza pie shanty, at least 35 chains had expanded into foreign countries by 2000.This suggests that the fast-food industry had comparatively low entry barriers, allowing new rivals to gain a market foothold. Such low entry barriers could possib ly result from common technology, easy access to distribution channels, little brand franchise, and low measure threshold. Hence, as per the in a higher place discussion, fast-food industry is all the way unattractive. However, it depends on the incumbent firms such as KFC to offer only still resistance against a new fledgeling or aggressively defend their market positions using price cuts, increased advertising, and product improvements to give them a hard time.?a Threat of Substitutes The competitive structure of an industry remains unattractive if competition from substitutes is strong. As a rule, the lower the price of substitutes, the higher(prenominal) their quality and performance, and the lower the users surpassing costs, more intense is the competitive pressures posed by substitute products (Thompson and Strickland 2003, p. 88). in that location are no such substitutes in any other industry to stand in competition with the firms in fast-food industry, which is very unique. However, there are various segments in the fast-food sector of the restaurant industry, which may be identified as substitutes for each other. These segments are sandwich chains, pizza chains, family restaurants, grill shock chains, dinner houses, chicken chains, nondinner concepts, and other chains.Usually, such chains charter price cuts and meliorate quality and performance as a part of their strategy and since the buyers can switch to any segment of the fast-food industry easily, there are comparatively high competitive pressures among such segments. Hence, for KFC (chicken chain), the fast-food industry is not an attractive one to be in, since sandwichchains made up the largest segment of the fast-food market and dinner houses made up the second largest and fastest-growing fast-food segment in 1999.?a vendee Power The power of buyers is the impact that customers have on a producing industry. Looking at the fast-food industry, it is more likely that the buyers (custo mers) can exercising capacious negociate leverage, which again makes the competitive structure of the industry unattractive. This is because buyers costs of switching to competing brands or substitutes are relatively low in the fast-food industry. Moreover, the mushrooming availability of cultivation on the Internet is giving added negociate power to individuals.It is relatively easy for buyers to use the Internet to compare the different prices offered by various fast-food outlets in the industry. In a nutshell, the more information buyers have, the demote bargaining position they are in. Also, the prospect of losing a brand loyal customer not easily replaced a good deal makes a trafficker more willing to grant concessions of one kind or some other.?a provider Power A producing industry requires edged materials labor, components, and other supplies, which are received from suppliers. Suppliers, if powerful, can exert an influence on the producing industry, such as sell ing raw materials at a high price to capture some of the industrys profits. However, in the fast-food industry, the suppliers possibly have little or no bargaining power or leverage over rivals since the items they provide are commodities available on the open market from numerous suppliers. In fast-food industry it is relatively simple for rivals to obtain whatever is inevitable from any of several capable suppliers. Hence, the suppliers being able to exercise little or no bargaining power or leverage over rivals makes the competitive structure of the fast-food industry clearly attractive.As a conclusion, the collective impact of competitive forces in the fast-food industry is relatively stronger, which subsequently lowers the combined profitability of participant firms. However, even when the five competitive forces are strong, an industry can be competitively attractive or favorable to firms such as KFC whose market position and strategy providesa good enough defense against the competitive pressures to earn above-average profits.Key Industry mastery FactorsKey industry supremacy factors (KISFs) by their very nature are so important that all firms in the industry must pay close trouble to them. In other words, KISFs are the prerequisites for industry success and are the rules that shape whether a company will be financially and competitively triple-crown.Looking at the fast-food industry, there are various KISFs necessary to gain sustainable competitive advantage. Manufacturing-related KISFs for the fast-food industry would be low-cost production efficiency (to have attractive retail pricing and plenteous profit margins), quality of manufacture (to provide customers with better taste in analogy to the rivals), high-labor productivity (to reduce cost since labor costs are about 30 percent of a fast-food chains total costs). Distribution-related KISFs would be short tar times and having company-owned retail outlets. From the merchandising point of vi ew, clever advertising (to induce customers to buy a bad-tempered brand repeatedly), well-behaved customer service and attractive styling of box would be identified as important KISFs for fast-food industry.Skills-related KISFs would be quality control know-how and an ability to develop innovative recipes. In adorn organizing, the KISFs would be an ability to respond quickly to shifting market conditions, superior ability to use Internet and other up-to-the-minute technology to conduct business and managerial stick. Some other important KISFs are favorable image or reputation with buyers, convenient locations of the stores (important for food-outlets), and access to financial capital (important in newly emerging industries).Hence, the above stated key industrial success factors for the fast-food industry are cornerstones for a firms strategy saying and severe to gain sustainable competitive advantage over its rivals.Company AnalysisKentucky Fried Chicken Corporation (KFC) is one of the successful fast-food chains, which was the worlds largest chicken restaurant chain and the third largest fast-food chain in 2000. KFC dominated the chicken segment, with sales of $4.4 billion in 1999 through 2000. KFC was in the lead position in the U.S. market, however had less opportunities to expand its U.S. restaurant base payable to the entry of new rivals such as Chick-fil-A and Boston Market. Despite gains by Boston Market and Chick-fil-A, KFCs customer base remained loyal to the KFC brand because of its unique taste, which could be identified as one of the most important resource strengths of KFC.However, KFC faced several internal problems under its various owners, which adversely affected its financial performance and competitive strength. Heublein, Inc., which was in business of producing alcoholic beverages and had a little experience in the restaurant business, acquired KFC in late 1970s. Conflicts quickly erupted between Colonel sanders and Heublein foc ussing since the quality-control and restaurant cleanliness badly deteriorated under Heublein, Inc. By 1977, the restaurant openings had slowed down, since service quality declined under Heublein focal point. However, KFC did fairly well under the management of R.J. Reynolds Industries, Inc., which had little more experience in the restaurant business than Heublein. PepsiCo introduced several changes after the acquisition of KFC.Staff at KFC was reduced in order to cut costs and many KFC managers were replaced with PepsiCo managers. KFCs culture was built largely on Colonel Sanders laid-back approach to management (Krug 2001, cited in Thompson and Strickland 2003, p. C-206). Employees enjoyed good job certificate and stability. However, PepsiCos culture was characterized by a much stronger emphasis on performance, which reenforce the feelings of KFC managers that they had few opportunities for promotion. As a result, a strong loyalty created among KFC employees over the long time was lost.The Original Recipe Chicken allowed KFC to expand through the 1980s without significant competition from other chicken chains and thereof new productintroductions was not a part of KFCs marketing and overall business strategy. Such limited menu and inability to quickly bring new products to market made KFC face several problems during the 1980s and 1990s. However, KFCs current strategy has been refocused. The cornerstone of its new strategy was to increase sales in individual KFC restaurants by introducing a variety of new products and menu items that appealed to a greater number of customers.Also, from the marketing point of view, KFC introduced a three-pronged distribution strategy that increased sales to a considerable level. The strategy firstly focused on building smaller restaurants in non-traditional outlets such as airports, chopping malls, universities, and hospitals. Secondly, it continued to experiment with home delivery. Third, KFC established 2-in-1 units that sold both KFC and taco Bell (KFC/Taco Bell Express) or KFC and Pizza hut (KFC/Pizza Hut Express) products.KFCs early entry into Latin America gave it a leadership position over several other food-chains in Mexico and the Caribbean. KFCs Latin America dodging was an example of a classic internationalization strategy. KFC firstly expanded into Mexico and Puerto Rico because of several external opportunities such as geographical proximity and other political and scotch relations with United States. As KFCs experience in Latin America grew, it expanded its franchise system end-to-end the Caribbean. Only after sustaining a leadership position in Mexico and the Caribbean did it venture into southwesterly America. However, KFC faced difficult decisions in regards to the formulation of an effective Latin American Strategy over the next 20 years, since limited resources and cash flow limited KFCs ability to aggressively expand in all countries at the same time. direction of alternative optionsLooking at the fast-food industry and the highly intensive competition prevailing, a better possible option for KFC would be to merge with other growing chicken chains such as Popeyes, Chick-fil-A, Boston Market, Churchs, and El Pollo Loco. Such unification would possibly create one of the largest chicken chains in the fast-food industry. Merging with another company would dramatically strengthen KFCs market position and open newopportunities for competitive advantage. In the fast-food industry, such unitings change the companies to have much stronger technological skills, more or better competitive capabilities, a more attractive lineup of services, wider geographic coverage and greater financial resources to expand into new areas. However, it would still be essential for KFC to tailor a strategy that fits its particular strengths and weaknesses so as to hold a lead position in Latin America by operating several company-owned restaurants in the targeted countries.Recomme ndationsKentucky Fried Chicken Corporation, the worlds largest chicken restaurant chain and the third largest fast-food chain, has several internal weaknesses and resource deficiencies which needs to be identified and improve to gain a competitive advantage over its rivals. Moreover, todays fast-food industry offers several external opportunities and poses potential threats to the rivals well-being and market position. It would be essential for the managers of KFC to identify firms resource strengths and weaknesses and its external opportunities and threats, which would provide a good overview of whether a firms business position is fundamentally healthy or unhealthy. This would still complement in formulating strategies so as to expand firms business activities over a wider geographic coverage.Latin America is an attractive location for investment because of the size of its markets, its common language and culture, and its geographical proximity to the United States. However, it would be difficult for KFC to penetrate the market successfully as a result of mounting competition from several competitors. It would be a unused recommendation for KFC to merge with other growing chicken chains, which would possibly fill the resource gaps and allow the new companies to do things, which KFC could not do alone.Such a merger would allow KFC to operate several franchised and company owned restaurants in the targeted countries of Latin America, which is more effective in building a significant market share in individual countries. This is because market leadership often requires a country subsidiary that actively manages both franchised and company owned restaurants. Suchstrategy would also enable KFC to better control quality, service and restaurant cleanliness.REFERENCESAaker, DA 1992, Developing business strategies, 3rd edn, Wiley, tonic York.Faculty of Business and Law 2003, aim for students, 4th edn.Perry, C 1992, Strategic management processes, Longman Cheshir e, Melbourne.Thompson, AA & Strickland, AJ 2003, Strategic management, 13th edn, McGraw-Hill, New York, NY.