Background, Strategy, And Business Model Of KFC Essay.

The objective of Assessment 1 is to build students' research, critical thinking, business evaluation and entrepreneurial skills. While researching the case study, students are encouraged to explore and learn about different business models, including the type of business models that are most associated with success and high levels of profitability. By learning about a number of businesses and their business models, including their competitive environment, and writing a deep case description of a particular innovative business venture, students will not only learn how to identify the most important aspects of a successful business model but also how to effectively explain winning business models to others.

KFC's History and Operations

KFC is short form of Kentucky Fried Chicken. Initially company was recognized by this name only but later company was popularized by ‘KFC’ name. It is world’s best Chicken QSR restaurant. The company is mainly specialized in fried chicken. It is one of the few QSR restaurants in America that has achieved success in short period of time. The given report gives details about company’s background, description, strategy and business models. Some challenges that company faced in initial days are also explained in the report. With all the information company’ SWOT analysis, PEST analysis and VRIO analysis frameworks are also presented. At last recommendation is also provided to improve efficiency and effectiveness.

KFC was founded in 1952 by Colonel Harland Sanders. It has world’s largest sales chain after McDonald’s. The company is proving services in more than 115 countries. KFC is serving more than 12 million customers daily. KFC is also famous in UK, South Africa, China, Malaysia and other countries (KFC, 2017).  

KFC is related with restaurant industry.  It is famous fast food restaurant.

The company’s headquarter is in Louisville, Kentucky, United States. The company is operating in more than 36,000 locations all over the world. In only United States the company has around 5200 restaurants. The company operates in multiple countries through franchise stores.

The size of business is very large as the company has many outlets in different locations. The company started by one cook, Harland Sanders and now the company is giving employment to many people. Today around 6,50,000 employees are working in KFC.

Previously market conditions were supportive for KFC but not it has been analyzed that KFC has lost its leading position in United States. KFC is facing strong competition from its competitors like McDonald’s and other local restaurants. It has been investigated through various reports of recent years that the market share of McDonald’s is greater than KFC but KFC has more market share than Burger King and Pizza hut. The market conditions in developing nations are favorable for the KFC.

KFC’s customer segment can be divided into four parts – children, young adults, budget customers and families. Primarily company was focusing on teenagers and families as these sources mainly contribute in revenue (Bojanic, 2007).

It has been analyzed that the demand of KFC products is decreasing as now people are shifting their attention towards healthy and nutritious food because many people are facing obesity problem. In the market, the supply of KFC products is higher than demand of products (Brindal et al., 2008).

Challenges and Competitors

Major competitors of KFC are McDonald’s, Chick-Fil_A, EI Pollo Loco, Greenpeace, Popeyes, Chicken Licken, Kokoriko, Kyochon, Burgen King, Nando, Papa Johns and Subway.  

The founder of KFC is Colonel Harland David Sanders. He was born on September, 9, 1890 in Henryville, Indiana. He started doing jobs at the age of 10. He did various jobs like farmer, railroad fireman, insurance sales and streetcar conductor. He started KFC at one location and then opened various franchise outlets. He is the person who made the business popular. At the age of 90 on December 16, 1980 he died in Louisville, Kentucky.

Products - Famous KFC products are Chicken snacker, Chicken Burger, Wraps, veg snacker, Chicken Bucket, Chicken Zinger, Crispy chicken, popcorn chicken and Chicken Zing Zong Box.

Services – KFC is providing various services to its customers like self-service, home delivery on call, parcel service, wifi service, easy payment services like payment options availability like cash, debit cards, master cards and credit cards. Company uses servuction model to manage services.

The competitors of KFC are rising so fast. The company is solving problems related to competition by its different products and services.

• Previously KFC was facing problem as the company’s operations were limited to some regions only.
• Company was facing various organizational and operational challenges.
• KFC was also facing problem in supply chain management.
• Company faced cultural issues too.
• Lack of fund availability was also an issue company faced in initial days.

The business model company adapted helped to deal with these challenges.

KFC is using franchising as a business model. Franchising can also be known as hybrid business model. Franchising business models helps in growth of the business by giving the rights to others to use brand name and products instead of building new business units (Chesbrough, 2010).

The business model company is using helps in innovation as company can introduce new creative services easily through which customers get attracted. The company can use different business strategies. Franchisor earns revenue from different locations. Many companies like McDonald’s and Subway are using Franchise business model.

KFC is using market expansion strategy for expanding the business. Till today company has various franchise outlets and company is also taking entry in new countries by opening restaurants (Shuailing & Zhi, 2015). Company could use other strategies like market penetration and product expansion. Both these strategies can help to attract more customers. In market penetration the existing products are sold in low prices in the existing market and in product expansion the company adds new features and expands the product line.

KFC uses multiple delivery approach like home delivery, Pickup delivery and free delivery. Customers can select any delivery method according to their convenience.

Strengths

• It is the second largest global brand in fast food industry.
• It includes various herbs and spices recipes.
• Strong position in China.
• Market leader, highest rank among all chicken restaurants.
• Hygiene policy, availability of fresh products all the time.

KFC's Products and Services

Weakness

• Weak in advertising
• Increase in food prices
• Lack of focus on Research and development
• Coordination problem
• Limited product line

Opportunities

• Product line expansion.
• Increase delivery services.
• Introduction of new products like deals menu and fish.

Threats

• Increase in competitors.
• Changing customer demands.
• Increase wage rage.
• High prices of products.

Political factors: KFC is a well-known company. The company has opportunity to expand business in Australia. In Australia the government supports food laws and standards related to safe and hygienic food. Australia has stable political environment.

Economic factors: Australia has a strong economy. Mainly service sectors are contributing in economy. The economic condition, government policies, industrial policies, import export policies, open market, increasing demand and growing income level of consumers are positive factors. KFC can easily expand business in Australia.

Social factors: 58 percent of Australians are aged from 25 to 50 and people of this age group like to eat fast food. There are so many higher income earners and KFC can target these persons. The results came out from the research that 86% Australians aged between 14 to 29 years go to fast food outlets monthly.           

Technological factors: Technology advancement helps to reduce cost and time and also helps to improve quality. In Australia the technological factors are strong and KFC can take advantage of them (Soliman et al., 2010).

Value: KFC Company holds high value as the company has established good brand image in the market.  The company has maintained its strong position in fast food industry.

Rare: The Company uses franchise business model but still top 50 management authorities control the all the important matters. All franchisees follow company’s rules strictly.

Imitability: Other competitors can easily imitate KFC’s products but the functionality cannot be achieved easily.

Organization support: KFC is always ready to use new opportunities as the organization structure of the company is well organized. Proper organization structure provides essential support in franchise operations (Aaltonen et al., 2015).

KFC Company can also adapt direct sales model as business model. Company can directly provide products to customers at the places where the company is facing challenges to find franchisees. Through direct sales model, company can enter into new regions. Internet medium can help to develop connectivity between consumer and company (Zott & Amit, 2010).   

Conclusion

It can be concluded from the case that KFC is good company. Although The Company is facing some problems due to its competitors but the company has maintained good position in the market. The company has adopted franchise business model and can improve effectiveness by using direct sales model.

References 

Aaltonen, S., Heinze, A., Ielpa, G., & De Tommaso, D. (2015). Enterprise cultural heritage: The source for sustainable competitive advantage and survival for food sector SMEs, The International Journal of Entrepreneurship and Innovation, 16(2), 73-83.

Bojanic, D. C. (2007). Customer profile of the “carryout” segment for restaurants, International Journal of Contemporary Hospitality Management, 19(1), 21-31.

Brindal, E., Mohr, P., Wilson, C., & Wittert, G. (2008).Obesity and the effects of choice at a fast food restaurant, Obesity Research & Clinical Practice, 2(2), 111-117.

Businessinsider (2015). KFC founder Colonel Sanders didn't achieve his remarkable rise to success until his 60s. Viewed on 28 July, 2017 from < https://www.businessinsider.in/KFC-founder-Colonel-Sanders-didnt-achieve-his-remarkable-rise-to-success-until-his-60s/articleshow/47822395.cms>.

Chesbrough, H. (2010). Business model innovation: opportunities and barriers, Long range planning, 43(2), 354-363.

Croatiaweek (2017). KFC to open first outlet in split. Viewed on 28 July, 2017 from < https://www.croatiaweek.com/kfc-to-open-first-outlet-in-split/>.

Insideyoursearch (2017). KFC franchise business plan. Viewed on 28 July, 2017 from < https://www.insideyoursearch.com/tag/kfc-franchise-business-plan/>.

KFC. (2017). What made us great is still what makes us great. Viewed on 25 July, 2017 from < https://www.kfc.com/about>.

Shuailing, L. I., & Zhi, Y. U. (2015).KFC development in Chinese market–based on the social responsibility and ethics, International Business and Management, 10(3), 142-146.

Soliman, T., Mourits, M. C. M., Lansink, A. O., & Van der Werf, W. (2010). Economic impact assessment in pest risk analysis, Crop Protection, 29(6), 517-524.

Zott, C., & Amit, R. (2010).Business model design: an activity system perspective, Long range planning, 43(2), 216-226.