The following report examines and analyses the external business environment of Kentucky Fried Chicken widely known as KFC all over the world. KFC was founded in the year 1952 by Colonel Harland Sanders. The company has become one of the major food chain organisations in the world with more than eleven thousand outlets in eighty five (85) countries. The fast food giant had entered the corporate world after 1980s when it started focusing its market in the Less Developed Countries. The very first franchise of KFC was opened in Utah in the early years of 1950. KFC has a business level agreement with PepsiCo. as the latter supplies soft drinks to the restaurants. Despite winding criticism from the organisations like PETA and Greenpeace the company has developed its market with ease.
Before analysing the external environment of the company one needs to understand what external environment in marketing and corporate means. The external environment of an organisation suggests the entities existing outside the virtual and physical campus of the organisation however having significant roles behind its development and growth (Dawson 2014). According to Baranenko et al., the external environment of a company plays one of the important roles in developing its market in global business. There are nine major domains of external environment. These are- related industries, laws and regulations, technology, finance, raw materials, skilled workers, demographics, customer preference and global context. However, the following paper shall discus with eight major domains of the external environment of KFC i.e. skilled workers, customer preference, laws and regulations, technology, finance, raw materials, global context and related industries (Morschett, Schramm-Klein and Zentes 2015).
External Environment Of KFC:
Since KFC has now become a global organisation in fast food industry, the external environment of the company will be analysed in its global context. In order to maximise the profit margin, the company has taken several steps to ensure best business running options through is franchises. The external environment of the company can be divided into two major categories- task environment and general external environment.
Task environment may be identified as the following factors:-
Customers: Customer identification in KFC has been one of the greatest achievements of the operation managers who take care of the entire operation management of the company and its franchises. The company has been blooming with its growing reputation among the customers around the world thus achieving its customer satisfaction level. After 2000, the company has decided to spread its business wings in the Less Developed or the third world countries offering them fast food in comparatively cheaper price yet maintaining the quality of food. Hence, it has attracted the greater number of customers from the cities. Through its intervention in social media and advertising the company has been able to reach to the huge number of youths in the countries like Pakistan , India, Malaysia, China and Singapore (Trung, Linh and Thi 2015). The customers are quite interested in KFC because of its quality service and affordable prices of the fast food. This good will has helped the organisation grow faster in the industry thus becoming the second largest fast food chain after McDonald’s.
Supplier: the local suppliers of chicken have helped the company develop its business in the local market. Ninety five percent of the total supply is performed by the local suppliers. When asked, the local suppliers reported that they are convinced by the company’s on time payment and constructiveness of the supply chain.
Competitor: KFC no doubt faces competition in the fast food industry. The biggest global competitor of the company is McDonald’s that has been in number one position in the particular industry. However, the competition has made KFC use some strategic planning to remain strong in global competition. KFC is threatened by another emerging fast food chain company called Chick Fila that has already captured the business in USA, Australia, UK and other developed countries. Other competitor AFC has somehow managed to show challenge to KFC in the developing countries with its market intervention. However, most of the people are found to visit the local restaurants because of choice of food and extremely low price. KFC has more than seventy five percent (75%) market share at present (Harrington et al. 2017).
Legal Factors: Legal interventions of the local governments have been a great challenge as well as benefit for the companies to extend its franchises. Stringent taxation has hindered the company from extending margin of profit on the other hand countries like India, Malaysia and Singapore and other who support liberation in international business and trade have allowed the company to perform business without much strain in the market. Hence the company has chosen these particular countries to expand its business franchises.
Technology: KFC is reported using technology of mobile location to promote ts new products in order to eliminate the threat from its local competitors. In London, KFC has achieved notable attraction from the customers after campaigning xAd which a tracker of the market place in the global location. It has resulted in great market success of the company. The campaign has increased customer visit in the restaurants in the United Kingdom more than forty percent (40%). The public relation officer and head brand manager of KFC, UK, Jenny Packwood has informed the media that the company would use market strategies through technological interventions. In China the company is reported using face recognition technology to serve its customer in the restaurants so that it can confirm the return of the customers and assess the company success. Perfectly using AI (Artificial Intelligence) the franchise restaurants are able to identify the number of customers and the proportion of male and female customers in order to ease the internal business analysis process. The tech developers in China and the UK have highly supported the use of technology in the restaurants for branding and analysing business thus creating a notable change in overall business development of the company.
The general external environment consists of the following forces:-]
Economic forces: the economic forces of the company can be categorised into two major parts- thee income method and the payment method. The economic force deals with the feasibility of the customers in a particular country. KFC has mastered its strategy in choosing a particular segmentation of customer. It has created a price list for different customers in different countries. The price of the food in the developing countries has a major difference from that of the developed countries. In the early years the company used to focus only the upper economic class of the society who could visit KFC restaurant showing their financial prowess. However, the great depression of 2008 has taught the company how to reach to the middle class of the society. Now the company offers food in quite cheaper price. It has been found through many surveys that after creating offer for the students and youths, the sale have grown significantly. Therefore, it can be said that the company targets the middle class as well as the upper class as its core customer.
The external analysis of the company is done through constant invigilation of the payment method of the customers. It is thoroughly checked whether the customers pay to the restaurant in the form of hard cash or through card. However, most of the countries have turned cashless thus encouraging digital and online payment method to the company (Masse 2013).
ii) Social forces or cultural Forces: The external socio cultural habit of a country where KFC focuses on expanding its business helps it improvise new fast food depending on the choice of the people. For example, KFC India opts for offering spicy food to the people where as KFC China offers the Chinese cuisine to the people of China (Chan 2015). This strategy helps the company gain trust of the customers thus eliminating the sense of being alien from them. KFC takes good care of the local religion as well. In the Islamic countries, the company offers “halal” foods that are associated to the particular religion. These are the unique strategies to gain trust from the external forces of the company (Hanif et al. 2013).
Core External Environment:
The core external environment of a company consists of the following domains:
Skilled workers: skilled workers are the present workforce in the existing labour market. The supply of the labourers to the company helps develop its business franchises. Skilled workers refer to undergraduate and post graduate students having professional training. The energetic young working group in KFC restaurants have provided good support in the business development of the company. There are risk factors involved in recruiting the young work force i he Survey has found that many young workers have shifted to other food chain companies having work experience in KFC. Since McDonald’s is known as the provider of great working opportunity, many working groups seem to be shifting from one company to the other. Therefore, the prevalence of instability of the working personnel in the restaurant creates problem too KFC business (Dyson 2014).
Demographical Changes: Demographical changes include the mode of changes within the customers present in different countries. These changes are social, economical and cultural. Sometimes the mode of work within the company is highly affected by the demographical changes in the workforce and in customer. For example, the highest number of population in Australia is middle aged. 35% of the total population is more than 40 years old (Gong and Kendig 2016). Hence, there is a scarcity of young working class people in the country. However, social cohesion helps these companies recruit the part time workers in the restaurants. On the contrary 40 % of the total population in India are between 20-42 years old (Kutty and Kutty 2014). This availability of the young working class in that country has provided greater opportunity to the company for increasing the number of franchises based on youths.
Finance: finance is a great support to corporate operations. Since most of the KFC stores are run by franchise work, the local owners of the stores are to depend upon the financing from the local government or private lenders. Hence, finance from the local sources is a determining factor behind KFC’s success story.
Change of Preference of the Customers: The likings and disliking of the customers determine success and falloff any company. Preferential change of the customers is quite vital in making fortune of KFC and of the other food chain organisations (Klein and Murcott 2014). Preference to the local food may hamper the business practice by KFC. It mostly happen in the southern part of India where people are strictly vegetarian and they prefer typical ethnic food. The countries in Middle East are also quite selective about their choice of food. Hence, the company has to take some striking initiatives to retain its hold in the market (Jenkins 2015).
The external environment in marketing and business sector certainly helps a company change its strategy pertaining to marketing and brand advertisement. Te operation manager shoulders the responsibility to take care of these details. After the detailed analysis of the external factors, the OM and his operation team decides to design and follow the most suitable strategy. KFC being an international brand provides ample space to its Operation Managers for making apt decision. KFC has been expanding its global business coping up with the local market demands and customer preferences of food. It has used technology to adapt the local needs. The positive approach of KFC is that the company has not changed its basic fast food supply and quality despite different customer preferences in different countries. It can thus be concluded that the external environment of KFC has positive effect on the company and its growth.
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