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Your task is to choose one of the following hospitality or tourism businesses and perform an internal and external environmental scan to identify areas of strength, weakness, potential opportunities and threats.

Thredbo Ski Resorts

Coogee Bay Hotel

Sari Club Bali

Costa Concordia Cruise Ship

KFC

Please remember: Your choice of hospitality or tourism business in this assessment will also be thesubject of your second assessment.

You will be strategic and business minded in your report. You will thoroughly identify:

Key stakeholders

Strengths, weaknesses, opportunities and threats to the business

Internal risks - human factors, technological factors and physical factors

External risks - economic factors, natural factors and political factors

In addition to investigating the stakeholders and internal and external risks, you will provide a summary table of risks, which will illustrate for each risk:

The risk category (internal/external)

The risk type

Stakeholders affected

Likelihood rating

Consequence Rating

Risk Control Method

Stakeholders of KFC

All companies are responsible for the Environment they create, with the organizations’ structure and operations being directly affected by the created environments. The environment of an organization has a great impact on the opportunities and resources. An organization’s primary objective is to take care of its operations and the way they affect the environment. The successful development and growth of a business are critical in the development of strategies which can assist in the operations of the business. In understanding the scanning of a business environment, it is important to understand the operations of the business and their effect on the business environment. Therefore, environmental scanning is a process of dispensing, analyzing, and gathering business information for strategic and tactical purposes. The process of environmental scanning entails acquiring both subjective and factual information on the environment which the organization operates or considering venturing. The report will analyze the link between environmental scanning and business strategy by performing an internal and external environmental scan for Kentucky Fried Chicken (KFC).

In 1952, Colonel Harland Sanders founded Kentucky Fried Chicken in the small front room of a gas station in Corbin, Kentucky where he opened his first restaurant. Currently, KFC has become a successful and renowned fast food restaurants in the world. In the United States alone, the organization has operated more than 5200 restaurants and has more than 15000 active branches around the world. More than twelve million customers are served by the outlets of KFC every day in the organization’s 109 territories and countries globally (Shoyemi, 2014). Currently, customers have been increasingly educated on their daily food and are sensitive to the nutritional and healthy aspects of their diets which has greatly impacted their food purchasing behavior and attitudes. The ethical behavior of the firm influences the sale of their products, brand reputation and its overall image to customers.

Kentucky Fried Chicken has various stakeholders which can be grouped into both internal and external stakeholders. The company’s internal stakeholders include employees and shareholders while the external stakeholders include customers, suppliers, the government, financial institutions, and competitors.

Employees are stakeholders who are important to KFC due to their overall provision of services to the organization’s customers. Basically, employees are responsible for the activities of ensuring that the customers are served with quality food on a timely basis which results in customer satisfaction and loyalty. Therefore, without well-trained staff, the organization would not run smoothly. On the other hand, the company’s responsibility is to ensure that its staff is well catered to be ensuring that they have a secure job and a steady wage. Treating employees fairly ensures that they are happy, active and enthusiastic towards work (Roberts-Lombard, 2009).

Strengths of KFC

Shareholders are the people who own KFC as they have shares in the company. The interests of shareholders are to ensure that the business runs smoothly with the intention of maximizing the revenue of the company so as to maximize their wealth gained from the organization. When the organization incurs losses, the shareholders are directly affected and, therefore, employees at Kentucky Fried chicken are expected to protect the interest of the shareholders by diligently and effectively carrying out their assigned duties and responsibilities in the organization.

According to Hussain (2014), customers are important to KFC since they are the reason why the organization exists. Without customers, the company would not make a profit and would eventually go bankrupt. Therefore, the interest of KFC’s customers is to visit the restaurant and get served with enjoyable fast food. Additionally, suppliers expand the services and products of the organization. Delivery services ensure that KFC is well stocked through timely delivery of services and products. Furthermore, the government sets policies which affect the operations of the organization including taxes. Moreover, competitors offer similar and substitute products which give customers options of where to buy their food which may, in turn, affect the company’s revenue. Consequently, financial institutions fund the company in its operations and are responsible for the safe custody of the company’s finances. Financial institutions also assist the company in audits to ascertain the financial position and performance of the organization (DeHart, 2009).

Strengths

For many years, KFC has had perfect factors for withstanding in the competitive business world. The development of brand equity has enabled many customers globally to believe in their food. Furthermore, in terms of sales, the company is the second largest fast food restaurant worldwide and income is estimated to be 1 billion each year clearly indicating that the company has a strong cash flow for effective operations and expansion (Dumanovsky, Huang, Bassett & Silver, 2010). The company having many branches internationality like in the Middle East, Thailand, Korea, and China have strengthened the company in terms of profit margins (Dubois & Asia, 2015). In addition, convenient and menu variety has linked the company with a high rank and reputation. Other major strengths of KFC include original spices and herbs recipe, a combination of Taco Bell and Pizza Hut and strong market position in China.

Weaknesses

The misleading information about KFC has been its key weakness to why the company failed to be ranked in the top 20 growth in 2000. The company also possess several weaknesses including negative publicity where the company has received criticized from PETA (Pendegrast, 2011). Untrustworthy suppliers have also supplied contracted poultry damaging KFC reputation. Lack of strong market focus and network, high employee turnover and believes by some social class of people that their food menu is unhealthy and contains high calorie that is linked with obesity hence decreasing its popularity.

Opportunities

Weaknesses of KFC

KFC has several opportunities within its business jurisdiction. Increase in healthier food demand is a great opportunity. When there is an increase in demand for healthier food, KFC is in the position of introducing a variety of healthy food choices in its menu. Home meal delivery is another opportunity the company should fully exploit so that it can reach more customers as they can order the products through online platforms. KFC also has an opportunity of expanding its products to its only chicken range due to health issues to customers. The company should consider introducing new meals on its meals and offer vegetarians, beef or pork meals that have a wide consumer segmentation and attracts customers from all perspectives (Perez, Castro & Furnols, 2009).

Threats

Competition is the main threat facing the company. According to Burton, Howlett & Tangari (2009), fast food restaurants have remained to be more competitive as an increase in wage rates has directly affected the prices of the menu. Furthermore, the employee turnover for the fast food market is estimated to be 85 percent. New competitors and supermarkets have further started offering the same services as KFC. In addition, the small shops have improved quality of their food services and retained their customers while attracting new ones. The company is also threatened by International exchange rates and health concerns, as people are caring about their health and stayed away from fried chicken.

Internal risks at KFC include stability, which determines the ability of a business in managing its finances, return capital to its investors and meeting its debt obligations which are an integral part for the success of the organization. In addition, the unsuitable organizational structure can mitigate the success of the organization. Therefore, an efficient and cohesive is maintained and established to effectively carry out the aims and goals of KFC. Furthermore, internal company politics and mismanagement can be debilitating to KFC by making the employees focus on what is happening internally rather than focusing on the job and market. Moreover, lack of enough financial resources can make it difficult for KFC to achieve its business goals. Innovation and incentives also pose a risk to KFC especially when they relate to staff welfare, promotion, marketing, and product development. If KFC fails to allocate fair incentives to its employees, risks may occur which affect the business operations (Achola, 2016).

External risk is defined as risks that occur due to economic events outs corporate structure and they cannot be reduced (El-Sayegh, 2008). These risks are classified in terms of political, economic and natural.

Opportunities for KFC

Political factors have affected KFC significantly, with government policies and regulations interfering with fast food operation. Currently, the government is controlling fast food restaurants because of health concerns such as obesity among young people, cholesterol issue and cardiovascular. Furthermore, the government also controls licensing of KFC to open fast food joints and other business regulations like for a franchise. Other political factors include high-interest rates, unpredictable tariffs and changes in exports and imports laws.  Furthermore, violation of the factors may place the company in risk of closure or heavy fines that may affect the profit margins. In the case of political instability, the company also may be forced to close its operations. Furthermore, the company must establish good relations with the government in giving mutual benefits like tax and employment in order to succeed in foreign markets hence incurring huge costs.

Economic recession, high inflation, and market boom have been linked with change in the way KFC operates presently and plans for the future. Furthermore, these economic factors are difficult to access and control and therefore their impacts on business are very high. High foreign exchange rates, unemployment rates and global economy states interfere with KFC’s ability to maintain profit levels and gain the components it requires. For example, if KFC has business expansions to the UK where the economy is high at 3.3 percent (Smith, Keogh-Brown, Barnett & Tait, 2009), the company might close down because of a decrease in customer footfall.

Natural factors that risk KFC in its normal operation include natural disasters like floods, earthquakes and hurricanes. For example, the occurrence of an earthquake can affect KFC ability to open its business for a number of weeks that can lead to a massive decline in sales on that period. Generally, natural disasters may damage the building and products being sold by the company.

Summary of KFC Risk Analysis Table

Risk category

Risk type

(Human, physical, environmental, financial etc.)

Stakeholders affected

Likelihood rating

(A,B,C,D,E)

Consequences rating

(1,2,3,4,5)

Risk control methods

(elimination, substitution, engineering, administration, process/ equipment)

External

economical

Internal stakeholders

 A- high

4-higher

administration

External

political

Internal and external stakeholders

C-medium

3-medium

administration

External

natural

Internal and external stakeholders

E-low

5- catastrophic

engineering

Conclusion

KFC‘s strengths have enabled the company to maneuver in the competitive hospitality industry. The high market shares and huge cash flow provides a good opportunity for the company to expand its operation to other countries. The competition from small shops and supermarkets are main threats for KFC to sustain in the competitive environment. The complex process of the company gaining a license to expand its operations and changing in foreign exchanges puts the company in closure risks. High inflation rates, GDP and unemployment’s are macro-economies factors that risk the revenues generated by the company. Furthermore, natural risks like earthquakes that have low likelihood occurrence but catastrophic impact puts the business operation in uncertainty risks. 

References

ACHOLA, M. A. (2016). Franchising as a Market Entry Strategy by Kentucky Fried Chicken into Kenya. Unpublished MBA Thesis, University of Nairobi.

Burton, S., Howlett, E., & Tangari, A. (2009). Food for Thought: How Will the Nutrition Labeling of Quick Service Restaurant Menu Items Influence Consumers’ Product Evaluations, Purchase Intentions, and Choices?. Journal Of Retailing, 85(3), 258-273. doi: 10.1016/j.jretai.2009.04.007

DeHart, M. (2009). Fried chicken or pop? Redefining development and ethnicity in Totonicapán. Bulletin of Latin American Research, 28(1), 63-82.

Dubois, P. J., & Asia, E. (2015). An Analysis Into The Consumptive Purposes of China's International Outbound Tourism Market (Bachelor's thesis).

Dumanovsky, T., Huang, C., Bassett, M., & Silver, L. (2010). Consumer Awareness of Fast-Food Calorie Information in New York City After Implementation of a Menu Labeling Regulation. American Journal Of Public Health, 100(12), 2520-2525. doi: 10.2105/ajph.2010.191908

El-Sayegh, S. (2008). Risk assessment and allocation in the UAE construction industry. International Journal Of Project Management, 26(4), 431-438. doi: 10.1016/j.ijproman.2007.07.004

Hussain, S. H. A. R. A. F. A. T. (2014). The impact of sensory branding (five senses) on consumer: A case study on KFC (Kentucky Fried Chicken). International Journal of Research in Business Management, 2(5), 2347-4572.

Pendegrast, N. (2011). Veganism, organizational considerations, and animal advocacy campaigns. In Humanities Graduate Research Conference.

Perez, C., de Castro, R., & Font I Furnols, M. (2009). The pork industry: a supply chain perspective. British Food Journal, 111(3), 257-274. doi.org/10.1108/00070700910941462

Roberts-Lombard, M. (2009). Customer Retention Strategies of Fast-Food Outlets in South Africa: A Focus on Kentucky Fried Chicken (KFC), Nando's, and Steers. Journal of African Business, 10(2), 235-249.

Shoyemi, A. O. (2014). Consumers' perception of international quick service restaurants in Nigeria: a case study of Kentucky Fried Chicken (KFC) (Doctoral dissertation, Dublin Business School).

Smith, R., Keogh-Brown, M., Barnett, T., & Tait, J. (2009). The economy-wide impact of pandemic influenza on the UK: a computable general equilibrium modeling experiment. BMJ, 339(nov19 1), b4571-b4571. doi: 10.1136/bmj.b4571

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