KFC's Risk Management Essay in Hospitality Industry.

a) Identify and describe concepts and theories of risk and crisis management within the context of the Hospitality and Tourism industries

b) Analyse and evaluate principles and strategies of risk and crisis management within the context of the Hospitality and Tourism industries

Internal and External Risk Factors in Hospitality Industry

Risk Management is the identification, evaluation, and prioritization of risk which is followed by coordinated of resources to minimize, monitor, and control the probability or impact of unfortunate events. An organisation can achieve the considerable gains but the chance of risk is increases with the gains in the future. It is necessary for the organisation to analyse the risk in order to balance the potential gains against the potential losses by avoiding the expensive mistakes. An organisation achieves the success in the market when it performs well and facing less risk. It is essential for the organisation to analyse the risk in order to reduce the future risk to sustain the growth and profitability (Aven, 2016). The main aim of this report is to analyse the risk of hospitality industry. KFC has been taken into consideration to analyse the risk of the organisation.

At the beginning of the report, the discussion is made on the internal and external risk factors which affect the growth of organisation. The SWOT Analysis will used to analyse the internal and external risk. After that, the table will be formed as per the analysis of factors.

KFC is an American fast food restaurant chain that specialise in fried chicken. It is the world largest restaurant chain with 26,621 locations globally in 136 countries. It also has the subsidiaries company of Yum! Brands, and a restaurant company that also owns the Pizza Hut, Taco Bell and Wing Street chains. It is the first fast food company of America who expand the business at the international level. It is continuously increasing with the rapid rate and earned revenue with amount of US $23 billion. KFC expand its menu to offer other chicken products such as chicken fillet sandwiches and wraps as well as salads (KFC, 2019).

The resort also faces the internal and external risk that affects the growth of the organisation. In this report, the analysis has been done in the different segments such as stakeholders, SWOT analysis, internal and external risk.

Customers, Individuals, End Users, sponsor, employees, suppliers and partners are the stakeholders of the company. Pizza Hut is the partner and Yum! Brands are the subsidiary company of the organisation. Pizza Hut and Yum Brands are the main key stakeholders of the organisation who helps the company to grow in the market. It has been seen that the company have the risk related to its stakeholders (Yum! Brands, 2019).

SWOT Analysis of KFC

As per the analysis, it is observed that the organisation have the risk of its new supply chain partners. Chicken suppliers are the new suppliers of the organisation that affects the demand of the food. The transition between the two models always raises the risk due to high level of disruption and another. It is difficult to maintain the relationship between the two suppliers in the organisation. As the company develop their relationship with the Chicken suppliers, it has a risk of disruption in the organisation that affects its brand image in the market. It is also important to maintain the relationship with the exiting or former partners because it directly affects the future partners. The risk of affecting the new relations is increases that directly affect the supply chain network of organisation. The company have a risk of decreasing the quality due to unhealthy relations with the organisations (Giannakis, & Papadopoulos, 2016).

KFC changes its supply chain network from its shipping companies. The organisation closes their restaurants in UK and Ireland for several days after changing the shipping companies. The new companies fail to fulfil their expected deliveries on time, due to which the reputation of the company is decreases. The risk of financial damage, unsatisfied stakeholder expectation and actual performance is arises due to changing the channel of distribution. Retailers are the stakeholder of the company that is why; they expect from the companies to deliver the products on time. The company also has the risk of decreasing the demand of the services due to unsatisfied retailers (Yum! Brands, 2018).

Strength

· Global presence is strength for the company because it is located at the many places. It is the second largest supply chain network who has 18000 KFC outlets around the world. It is also a market leader in Non-veg food joints in majority of countries.

· The company uses the secret recipe in their product. It uses 11 herbs and spices as the most famous trade secrets in the catering industry (Takata, 2016).

· It is a strong parent company because it has the subsidiaries of Yum! Brands and a restaurant company. The subsidiaries of the company are famous for their services in the world. That is why; it can be said that the company is strong parent company (Bull, et. al, 2016).

Weakness

· As discussed above, the organisation has many franchises in the different location. It is observed that the company fails to maintain its franchises. It is difficult for the organisation to manage the large number of franchises (Mind Tools, 2019).

· Use of fatty ingredients is considered as the harmful for human. It is an issue of all fast food chain which is not an exception for KFC.

Opportunity

· The company can expand its business in online market as the company has high brand image in the market.

· As per the changing lifestyle, the demand of consumers is changing towards the fast food. It is observed that the company also offers the vegetarian and non-vegetarian fast food to consumers. It offers the non-vegetarian fast food which is different from its competitors. The company has to take the advantage of its services in order to beat the competitor and helps to expand to business at the international level (Kossovsky, 2018).

· It has been seen that the company has the opportunity to become the no. 1 fast food network as it have the high brand image in the market. The company provides the both services such as vegetarian and non-vegetarian due to which it can attain the high market share (Phadermrod, Crowder, & Wills, 2019).

· It has been seen that the demand of health conscious consumer is increases that is why; it has the opportunity to attract the health conscious customer by providing the healthy products.

Threat

· The company has the high risk of competitors. The competitors copied the services of the organisation in order to give competition. As the company have high brand image in the market that is why; the competitors copied the services of the company and give it close competition in the terms of revenue and services.

· It is observed that the company provides the services of fast food that are considered as the unhealthy product for human. The company has high risk of losing the customer as the demand of consumer is changing towards the healthy products.

· Due to channel conflict, the company has to close the franchises that affect the brand image due to which the risk of losing the customer is high with the falling demand (Future Insights Network, 2019).

· Price rising by the suppliers affects the industry of fast food and the risk of losing the middle class customer is also high.

· Rise in the raw material prices may affect the industry, of which KFC business is not an exception.

It has been seen that the employees face the issue of health and safety. The employees work in risky environment that is not safe for their health. As per the employee case of KFC, a 16 year casual worker falls down into a container of hot oil which is placed on the floor behind him without any information. As per the investigation, the company is failed to maintain the safe work environment. It is observed that the employees have the risk of their health (HRD, 2017).

According to the case, it has been seen that the company have the high risk of losing the employees. The accident indicates the sign of death for the employees that is why; they left the jobs. KFC also fined for the amount of $105,000 after the accident of employee fall into oil. The company has the risk of increasing the employee turnover rate. The employees are the main asset of the organisation that’s why increasing turnover rate affects the profitability and growth (Saltan, 2017).

Stakeholders and Supply Chain Risks

The company are very backward in the case of introducing new technologies. It has been seen that the US companies invest the major amount in order to deliver the services through mobile ordering and employee replacing roots. It is observed that the company does not have a mobile application with the new payment system so that the customer can easily pay the amount. The other fast food chains have their own mobile application with the new payment system. In this case, it has been seen that KFC have risk of losing the customer as well as competition in the market. The competitors of the company grab the whole market share by adopting the new technology.

Social media is another factor of technology due to which the brand image is affected. The negative point capture by the media develops the negative image in the mind of consumers as well as in the market. One negative review of consumer affects the brand image in the market (Taylor, 2016).

The workplace of KFC is dirty because it is observed that the ice cubes used by the company is dirtier more than the toilet water. Incorrect use of replacement fuses, faulty wiring, and poorly installed equipment harms the health of employees. The quality of product is also getting poor due to poor condition of workplace. The company has the risk of getting poor quality of product which is the main strength (Guilford, 2013).

It has been seen that the economic factors affects the growth of the organisation. The subsidiaries companies of KFC such as Yum, Pizza hut are struggling with the economy of China. The competitor companies change their menu card as per the changing demand of consumer towards the healthy product but KFC stick on the chicken services due to strength. The company has high risk in the financial terms during the period of inflation as it continuously invest in its chicken services. Investors and shareholders of the company have the high risk of facing lose during the organisation face the losses.

The company serves the chicken service that is why; natural factors affect the quality of services. The decreasing quantity of chicken affects the prices of raw material of KFC products. The increasing price of raw material affects the productivity of the organisation because it increases the risk losing the customers due to unsatisfied demand.

It has been evaluated that the organisation is criticized by nutritionist all over the world as it provide the unhealthy products. It is playing with the health as well as mind of consumer by using the influencing words. The company has the risk of banned the advertisement on television as well as the franchises. As per the nutrition report, people are dying for the heart diseases due to fast food. The sponsors also have the risk as per the rules and regulation of government. Export and import services are also banned by the government due to which the suppliers also face the risk of losing their business (Glendon, & Clarke, 2015).

Risk Category	Risk Type	Stakeholders Affected	Likelihood Rating	Consequence Rating	Risk Control Method
Internal Factor	Human factors	Employees	A	1	It has to use the safety hazards
	Technological factors	Customer Sponsor	B	2	Adopt advance technology by investing the high amount on it.
	Physical factors	Employees	D	4	It has to offers the multiple number of facilities to its employees such as medical insurance, incentives, safe and secure environment
External Factor	Economic Factors	Investors Shareholders Sponsor Owners	F	6	It has to adopt the cost leadership strategy in order to manage the production cost
	Natural Factors	Customers Franchise holders	C	3	It has to adopt the new techniques and strategy in which it has to provide the less quantity with same price rate in order to maintain the prices.
	Political Factors	Sponsors Customers Suppliers	E	5	It has to provide the healthy product to consumers in order to retain in the market for long time (Burton, 2015). It has to advertise the legal product so that the investors, sponsors can easily invest without any risk of wasting money.

Opportunities and Threats for KFC in the Market

Conclusion

From the limelight discussion, it has been concluded that the company has high level of risk. As per the analysis, it has been seen that the company fails to build the strong relationship with the stakeholders. The brand image of the company is affected due to increasing conflict between the stakeholders. As per above discussion, it is observed that the company has the high risk of increasing employee turnover due to lack of safety hazards. It is observed that the organisation have the high level of internal and external risk due to many reasons such as financial risk, losing consumers, shareholders and sponsor. It is recommended that the company has to adopt the technology and safety hazards as per the requirement to overcome the issues.

References

Aven, T. (2016). Risk assessment and risk management: Review of recent advances on their foundation. European Journal of Operational Research, 253(1), 1-13.

Bull, J. W., Jobstvogt, N., Böhnke-Henrichs, A., Mascarenhas, A., Sitas, N., Baulcomb, C., ... & Carter-Silk, E. (2016). Strengths, Weaknesses, Opportunities and Threats: A SWOT analysis of the ecosystem services framework. Ecosystem services, 17, 99-111.

Burton, L. (2015). How to Avoid Electrical Hazards at Work. Retrieved from: https://www.highspeedtraining.co.uk/hub/electrical-hazards-workplace/

Future Insights Network. (2019). The KFC crisis – a lesson in relational risk management?. Retrieved from: https://www.futureinsights.org/insights/the-kfc-crisis-a-lesson-in-relational-risk-management

Giannakis, M., & Papadopoulos, T. (2016). Supply chain sustainability: A risk management approach. International Journal of Production Economics, 171, 455-470.

Glendon, A. I., & Clarke, S. (2015). Human safety and risk management: A psychological perspective. Crc Press.

Guilford, G. (2013). KFC’s ice cubes are 12 times dirtier than toilet water, says China’s official media. Retrieved from: https://qz.com/106688/kfcs-ice-cubes-are-12-times-dirtier-than-toilet-water-says-chinas-official-media/

HRD. (2017). KFC fined $105,000 after employee fell into boiling oil. Retrieved from: https://www.hcamag.com/au/news/general/kfc-fined-105000-after-employee-fell-into-boiling-oil/149460

KFC. (2019). About KFC. Retrieved from: https://online.kfc.co.in/about-kfc/about

Kossovsky, N (2018). Why Reputation is a Vital Enterprise Risk, Not a Marketing Issue. Retrieved from: https://www.qsrmagazine.com/outside-insights/why-reputation-vital-enterprise-risk-not-marketing-issue

Mind Tools. (2019). SWOT Analysis. Retrieved from: https://www.mindtools.com/pages/article/newTMC_05.htm

Phadermrod, B., Crowder, R. M., & Wills, G. B. (2019). Importance-performance analysis based SWOT analysis. International Journal of Information Management, 44, 194-203.

Sadgrove, K. (2016). The complete guide to business risk management. Routledge.

Saltan, J. (2017). KFC worker trips and falls into hot oil. Retrieved from: https://www.healthandsafetyhandbook.com.au/kfc-worker-trips-and-falls-into-hot-oil/

Takata, H. (2016). Effects of industry forces, market orientation, and marketing capabilities on business performance: An empirical analysis of Japanese manufacturers from 2009 to 2011. Journal of Business Research, 69(12), 5611-5619.

Taylor, K. (2016). KFC is making massive changes to speed up service. Retrieved from: https://www.businessinsider.in/KFC-is-making-massive-changes-to-speed-up-service/articleshow/52540707.cms

Yum! Brands. (2018). About Us. Retrieved from: https://www.yumcsr.com/about/

Yum! Brands. (2019). Stakeholders. Retrieved from: https://www.yumcsr.com/food/stakeholders.asp

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