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1. Critically evaluate classical and corporate approaches to entrepreneurship

2. Display a critical awareness of the role of creativity in the innovation process and the approaches through which creativity can be developed in the individual

KFC: A Brief Overview

Innovation is one of the modern day concepts that most organisations tend to implement in order to get an advantage. According to Drucker (2014), innovation requires a high skill-set and an individual involved in the innovation of products or tactics need to be creative. It provides a sense of uniqueness to the products and the strategies that are employed by an organisation. The assignment talks about the application of innovation and change model in an organisation. The effectiveness of the concept is discussed and the manner in which organisations can use it to gain a competitive advantage is discussed in the assignment. For the purpose of the discussion, the assignment focuses on KFC and the innovative strategies implemented by the organisation.  

KFC is an American fast food restaurant chain specialising in fried chicken. It is one of the most popular restaurant chains in the world and is second only to McDonald's in terms of earning revenue. It is a subsidiary company of Yum Brands but has over 20,000 locations in almost over 123 countries across the world (Kfc.com 2018). Colonel Harland Sanders started the company as a roadside business in 1930. It became popular among the local people, and Colonel Sanders soon developed the concept of franchising and the first franchise of the company was set up in 1952. Since then the company have grown steadily and have been the central point of attraction, particularly for the young people. Currently, the revenue of the company is about $US23 million.

Reports suggest that currently, the sale of the fried chicken in America have taken a considerable drop. However, in 2016, after the company brought back the recipe used by Colonel Sanders the sales have considerably increased. As observed by Johnston and Marshall (2016) KFC lost about 1,200 restaurants in the last 14 years in the US. In 2002, the number of restaurants in the US was 5472, however, in 2016 the number dropped to 4270. This is mainly due to the rumours that the restaurant serves chicken using steroids. This led to a huge loss in the US market, and its rival company, Chick-fil-A became the number one restaurant chain in the country.

However, the company have done better in countries outside the US. Reports have shown that the number of restaurants has increased rapidly over the last six years. In 2010, the number of restaurants was about 16,853; however, the number increased to 20,604 in 2016.

Production and sales budget

Units in opening inventory

Units produced

Units sold

Units in ending inventory

February

5

10

10

5

March

5

11

10

6

April

6

12

10

8

May

8

13

10

11

June

11

15

20

6

July

6

16

10

12

August

12

18

20

10

September

10

19

15

14

October

14

21

20

16

November

16

24

20

19

December

19

26

30

15

January

15

10

30

(5)

12-month period

5

195

205

(5)

Sales Projection of KFC

Figure 3: Sales projection of KFC

(Source: Created by author)

Based on the number of units sold by the company, it can be said that the sales projection of KFC is continuously on the rise. From February to May, the company manages to sell its product at a steady rate at 10 units. However, the sales increased on the month of June by 10 more units before dropping down in the months that followed. From October to January the sale of the items in KFC had grown at a steady rate and it is seen that on an average, KFC sales about 205 units of its product. This indicates a surplus amount of goods sold as the company only produces 195 units to cover a year. This indicates high rate of profit for the company.

Having analysed the sales performance of KFC, Porter’s five-force analysis can be conducted that highlights the resources and capabilities of the restaurant.

Bargaining power of suppliers- For KFC the suppliers of the company is more hence; this has posses a low threat.

Bargaining power of buyers- KFC is one of the biggest chicken selling restaurants in the world. Hence, the bargaining power of the buyers are pose less threat to the company as people visit it to get good quality food.

Threat of substitutes- The threat of substitutes mainly comes from the fact that the company sells burgers that are not as popular as the ones sold in Burger King or McDonald’s. Hence, this proves to be a high threat for the company.

Threat of new entrants- KFC has already established itself in the global market. Hence, this particular threat proves to be low for the company, as the new restaurants cannot match the standards of KFC.

Industry rivalry- The industry rivalry mainly arises from McDonald’s and Burger King that have already gained international recognition. Hence this proves to a high threat for KFC. 

According to Joyce and Paquin (2016), business model canvas helps to analyse the products, value proposition, customers and revenue streams and so on of an organisation. It is considered as a strategic management technique that can be used by start-up firms as well as existing organisation to analyse its situation and make improvements. In the case of KFC, the business canvas model portrays the elements that define the success of the business. The analysis of the canvas model shows that KFC collaborates with Pepsi, Coca-Cola and Nestle for enhancing its sales of products. This is evidenced by the fact that recently the restaurant provides meal combos that involve a soft drink as well as a cookie manufactured by these partners.

Porter’s Five-Force Analysis of the Restaurant Industry

This provides KFC with an added advantage of gaining its revenue. Euchner (2016) stated that the franchising of the restaurant is one of the key strengths as it is the main source of revenue streaming. The fact that it provides fast delivery of online orders via a website is another strategic master plan adopted by the restaurant. The fact that the company targets customers of all segments including children is a huge strategic step for improvement of the restaurant. However, with variable sources of revenue, it is important that the restaurant adopt certain changes for improving the condition of the market in the US. 

According to Cantamessa and Montagna (2016), innovation can be considered as new ideas, devices and methods that can be used by organisations to gain an advantage in the market. However, Sapra, Subramanian and Subramanian (2014) view innovation as a method of applying better and unique solutions that meet the requirements of an organisation. An organisation can be innovative by manufacturing products that are more effective, processes, services as well as technologies. The idea related to an innovation of products involves the application of original and fresh ideas.

These ideas need to be supported by the managers and leaders so that the employees gain the confidence of showing an applying their creativity. However, it is to be noted that the term is confused with the invention (Chesbrough, Vanhaverbeke and West 2014). This is mainly because an invention is the creation of products for the first time. Innovation, on the other hand, involves applying changes and new ideas to products and services that already exist in the market. Nicholls et al. (2015) stated that innovation could act as a catalyst for the growth of an organisation. Products sold in the market need to be unique in a manner that attracts the customers into purchasing those products.

According to Christensen, Raynor and McDonald (2016), disruptive innovation can be considered as a form of innovation that creates new market and value for an organisation. Such a strategy results in the disruption of the old market, and the new technologies or ideas that have been developed are taken into consideration by an organisation. The concept of disruptive innovation has been termed as the most influential business idea of the 21st century. However, Quitzow et al. (2014) countered this by stating that the not all the ideas about innovation are disruptive. Most of the plans are revolutionary in nature, however; disruptive nature exists only in terms of changing the face of the market with new and unique ideas.

Business Model Canvas for KFC

In this regard, an example of disruptive change model can be taken into consideration. The very first automobile that was manufactured was not considered as a disruptive innovation. This is mainly because of the fact that automobiles existed in the early days in terms of horse-drawn carriages. Thus, the mere introduction of a four-wheel vehicle that runs on an engine is a simple innovative process that was introduced in the market. However, once the vehicles were started to be produced at a mass rate, the innovation was called disruptive innovation. This is because it brought the new ideas and marketing strategies in focus and slowly wiped out the old market in which horses were used as vehicles. The transportation market changed drastically in the 1900s with the introduction of such marketing scheme.

People outside of a company along with the entrepreneurs bring about disruptive innovation. The existing market-leading companies do not undertake initiatives to bring about disruptive change in the market. Some of the reasons behind the rejection of disruptive innovation are the fact that these changes do not bring about profits at the beginning (Christensen, Raynor and McDonald 2015). The development of a disruptive change involves the intake of scarce resources as a huge mass of production need to be done to enforce the changes in the market. Apart from this, a disruptive process takes a long time to develop. A test subject needs to be launched in the market and based on its success, mass production can be maintained. Moreover, as observed by Shigabieva et al. (2014), the risk associated with the application of disruptive innovation is also high.

Hence, it can be said that such a strategy can be used after a considerable analysis of the strengths and weakness of an organisation. This is mainly because of the fact that disruptive innovation is a force and not a tool. Managers cannot predict the success they may have from the application of this method (Goffin and Mitchell 2016). The method generally exploits the failure rate of large companies rather than the success of smaller companies. However, for a restaurant chain like KFC, the disruptive innovation can bring out considerable improvement. This is mainly because, over the last few years, KFC has failed to create a significant impact in the American market. 

Having analysed the innovation concept one can say that KFC can apply innovation to improve its number of restaurants in the American market. According to Westland (2016), it is important for managers to introduce employees to the concept of innovation and the benefits that can be reaped from being creative. Without the support of the employees, it can be difficult for an organisation to implement changes and be innovative in a challenging environment (West and Bogers 2017). Innovation is a type of change that is undergone in an organisation. It has been evidenced that employees do not like changes as it disrupts the flow of work. Hence, it is necessary to ensure that the innovation tactics applied in an organisation are done taking into consideration the interests of the employees.

Importance of Disruptive Innovation in Growing an Organisation

In this regard, it can be said that a systematic approach is necessary for the application of innovation in an organisation. The initial step is to ensure that the employees are well aware of the change or innovative practice that is applied in the organisation. This is because if employees feel involved in the decisions of the organisation, the more they can invest in the idea (Lopez-Valeiras, Gomez-Conde and Naranjo-Gil 2015). The idea of innovation needs to be approved off by the managers as well as the employees. Only after the approval, the ideas can be critically evaluated. After this, it is necessary to define the roles of the employees. This can help in making the employees more comfortable with the role that they take up in the organisation. However, as stated by West and Bogers (2014), not every issue that arises in the organisation can be addressed due to certain variables. These variables include the internal as well as the internal environment.

Hence, it can be said while implementing the disruptive innovation strategy, KFC needs to ensure that the opinions of the employees are taken into consideration. The employees need to be involved so that the innovation process can take place. As seen from the 5 forces analysis, the employee turnover of KFC is a threat to the restaurant. Hence, the involvement of the employees is necessary to reduce the turnover. As observed by Bain and Kleinknecht (2016) the introduction of new concepts and models required for innovation need to be evaluated properly before its implementation. To do so it is necessary that the restaurant undergoes an analysis of the external as well as the internal environment.

Keeping the factors in mind and the type of change that is to take place in the organisation it can be said that KFC needs to make innovation in the type of food they supply. The introduction of a full family meal using ingredients from the land can be an innovative strategy that can help KFC to regain its status in the American market (Kogan et al. 2017). Thus, the application of the disruptive innovation tactic needs to be smart and need to ensure that the target customer gets the expected result from the restaurant. In this regard, a recommendation can be provided that highlight the innovation that needs to be considered. 

Based on the innovation tactic that KFC needs to use and the manner in which it needs to use it, a recommendation can be made that highlights the time required for its implementation. The innovation needs to be in the type of food that the company serves. In this case, KFC can introduce a full course family meal that will involve rice, chicken pieces, cookies, cold drinks and dessert. Customers can choose from the type of chicken they want to consume along with the type of drink and dessert. Thus, customers can be given the opportunity to create their own meals. The effectiveness of this innovative strategy can be measured by the response it receives from the customers.

However, the foremost measurable factor needs to be the response of the employees. Without a positive response on the part of the employees, it can be difficult for the managers of KFC to implement the changes. This is another factor that needs to be measured by the company. The rate at which the implementation of such a strategy can be achieved will depend upon the response of the employees and the customers. Apart from this the financial factor of the company also need to be taken to account.

In the case of KFC, such a practise can be achieved if the company focuses more on improving the motivation factor of the employees. This strategy can be made realistic by analysing the extent to which the competitors are implementing the bundling of food. Moreover, it has been seen that KFC had introduced such tactics before by giving out meals to the customers. Hence, such a tactic can be implemented again for earning the trust of the customers in the American market. Implementing this innovative strategy may take a minimum of 3 months. This is because it is necessary for KFC to conduct a test run by analysing the responses of the customers before implementing it in the market.

Conclusion

Hence, after the analysis of the innovation model, it can be said that the implementation of the disruptive model of innovation can help an organisation change the force of the market. This can create a huge competitive advantage for a company if they can implement the tactic successfully. For a restaurant chain like KFC, this strategy can help it dominate the American market and the market around the world. It has been seen that the introduction of KFC has created similar other business franchise in some countries. Hence, innovation can help KFC to regain its stature in the market. 

Reference

Bain, D. and Kleinknecht, A. eds., 2016. New concepts in innovation output measurement. Springer.

Cantamessa, M. and Montagna, F., 2016. Business model innovation. In Management of Innovation and Product Development (pp. 115-135). Springer, London.

Chesbrough, H., Vanhaverbeke, W. and West, J. eds., 2014. New frontiers in open innovation. Oup Oxford.

Christensen, C.M., Raynor, M.E. and McDonald, R., 2015. What is disruptive innovation. Harvard Business Review, 93(12), pp.44-53.

Christensen, C.M., Raynor, M.E. and McDonald, R., 2016. What is disruptive Innovation. The Encyclopedia of Human-Computer Interaction, 2.

Drucker, P., 2014. Innovation and entrepreneurship. Routledge.

Euchner, J., 2016. Business Model Innovation. Research-Technology Management, 59(3), p.10.

Goffin, K. and Mitchell, R., 2016. Innovation Management: Effective Strategy and Implementation. Palgrave Macmillan.

Johnston, M.W. and Marshall, G.W., 2016. Sales force management: Leadership, innovation, technology. Routledge.

Joyce, A. and Paquin, R.L., 2016. The triple layered business model canvas: A tool to design more sustainable business models. Journal of Cleaner Production, 135, pp.1474-1486.

Kfc.com. (2018). KFC: Finger Lickin’ Good. [online] Available at: https://www.kfc.com/ [Accessed 2 Feb. 2018].

Kogan, L., Papanikolaou, D., Seru, A. and Stoffman, N., 2017. Technological innovation, resource allocation, and growth. The Quarterly Journal of Economics, 132(2), pp.665-712.

Lopez-Valeiras, E., Gomez-Conde, J. and Naranjo-Gil, D., 2015. Sustainable innovation, management accounting and control systems, and international performance. Sustainability, 7(3), pp.3479-3492.

Nicholls, A., Simon, J., Gabriel, M. and Whelan, C. eds., 2015. New frontiers in social innovation research. Springer.

Quitzow, R., Walz, R., Köhler, J. and Rennings, K., 2014. The concept of “lead markets” revisited: Contribution to environmental innovation theory. Environmental Innovation and Societal Transitions, 10, pp.4-19.

Sapra, H., Subramanian, A. and Subramanian, K.V., 2014. Corporate governance and innovation: Theory and evidence. Journal of Financial and Quantitative Analysis, 49(4), pp.957-1003.

Shigabieva, A., Mazitov, V., Safiullin, L. and Saipullaev, U., 2014. Some methodological foundation of an innovation theory.

West, J. and Bogers, M., 2014. Leveraging external sources of innovation: a review of research on open innovation. Journal of Product Innovation Management, 31(4), pp.814-831.

West, J. and Bogers, M., 2017. Open innovation: current status and research opportunities. Innovation, 19(1), pp.43-50.

Westland, J.C., 2016. Global innovation management. Springer.

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