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2. Introduction
Creating value for customers require an organization to base its strategies on customers’
preferences. This statement entails that the strategies related to production, pricing, value
chain management, market conditions, segmentation, targeting and positioning of the
products and services should be done, keeping in view the customers’ preferences and their
choice (Holbrook 1999).
KFC Corporation is without doubts, one of the premier fast food chains all around the world.
Having its headquarters in Louisville, Kentucky, KFC has become the most popular fast food
brand for producing quality and delicious fresh chicken based food. KFC was founded in
1930 in Kentucky and its first official franchise was launched in 1952 in Utah. Till that time,
KFC established itself as a quality provider of chicken made fast food. Now, KFC holds
around 15,000 restaurants all around the globe in strive to serve a customer base of over 12
millions in 109 countries (KFC Corporation, 2011).
In this term paper, it is tried to understand the customer perceived value of KFC. Therefore
we will critically analyse the value proposition of KFC by comparing it with McDonald. In
the light of this analysis we will generate the new value proposition and implement it.
1.1. Customer Value
Value creation for retaining customers becomes important when the organization actually
start to implement marketing strategies. Value creation delivers a message to the customer
base that the organizations, whose products customers are going to use, thinks for them and
produce products which are better for them (Holbrook 1999).
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KFC’s fried has been the most successful product that the company has introduced in market
since its inaugural. Hence, for this reason, fried chicken has been opted to define the value
addition systems of KFC. To maintain and enhance our position as the leading WQSR
(Western Quick Service Restaurant) good value, innovative chicken based products through
consistently providing a pleasant dining experience with fast, friendly service at clean and
convenient locations. At all times, we must be dedicating to providing excellent service and
delighting customers ( KCF Download Reports, 2011).
KFC or Kentucky Fried Chicken is among the big names in the world of fast food. This name
is sometimes represented by the acronym KFC in some countries, referring to the literal
translation: Kentucky Fried Chicken which is known by its famous slogan "Finger lickin
good!" KFC is now present around the globe through its 14,000 restaurants. The American
brand is present in approximately 100 countries worldwide including 79% of its tens of
thousands of retail outlets are operated by franchise. According to statistics provided on the
official website of the brand, KFC feeds an average of 8 million people a day worldwide.
Founded in 1952, the company Kentucky Fried Chicken is now one of the fast food chains
popular in the world and belongs to the large group Yum! Brands Inc.
As a subsidiary, as well as Taco Bell and Pizza Hut, with a workforce currently reaching over
75,000 employees, the headquarters of the brand of fried chicken is located in the U.S. city of
Louisville, Kentucky. KFC is the undisputed leader in the fast food whose main base of its
dishes is the fried chicken of course. If earlier the typical menu consisted of fried chicken
pieces, fries, a drink and a salad of white cabbage, it is now diversified across countries. In
North America, the company currently offers mashed potatoes, fries, corn, pies and beans
dish. In some European countries, such accompaniments include red beans in sauce, tomato
mozzarella salad, white rice and fried peppers or cut into sticks and stuffed with herbs
(Webber, 1998).
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1.2. The Competition
KFC's competition consists of all companies operating in the fast food industry, which uses a
technology similar attempt to address the same type of customers. When KFC's began to take
their first steps there were no fast food restaurants, so it quickly became the industry leader. It
was from Ray Kroc organize the KFC's Systems, Inc., on March 2, 1955 when other
companies were already in the business and KFC's was beginning to lose its advantage over
other companies such as Burger King, Kentucky Fried Chicken or Chicken Delight. Kroc was
then in a more competitive market, the hamburgers (Brown, 2003).
KFC's has always tried to differentiate their products from other competitors, not just to
differentiate them is through price but through good quality, service, originality and
innovation.
KFC's also known that the growth strategy was essential and when Burger Chef Burger King
and widened as they were about to catch up, KFC's decided to grow even more. In 1967
Burger King had established himself as the expansion program to reach 100 new jobs per
year, tying for the first time the pace of expansion of KFC's. But the threat of Burger Chef
was even greater, since early 1968 expansion program had shortened the distance between it
and KFC's declined to less than 100 seats.
For example, KFC's decided to challenge the competition by risky expansion program and
what he wanted was to increase the openings of chain restaurants, from 100 to 500 a year.
That's when Burger Chef and Burger King began to lose the pace of growth compared to
KFC's to the present day. That was how KFC's regained its hegemony in the fast food
business at a critical period in the competitive positions were established on the market long
term (Ulrich, Brock bank, 2005).
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Just keep in mind that the market for hamburgers does not provide barriers to entry, anyone
can sell hamburgers, but in reality these new restaurants are not direct competitors of KFC's
because they cannot ever come to their position in the short term, since KFC's is a brand
entrenched in the market (Hollensen, 2003).
There are numerous fast food outlets but few offers a menu as varied as KFC's and almost no
growth is based on the sale of hamburgers.
We have pizza (Pizza Hut, Telepizza, Pizza World...), Baguetterie (boccata, Pans and
Company...), but offer products, in part, different from those offered by KFC's and although
they are competitors do not pose the same threat Burger King, Burger Chef, Kentucky Fried
Chicken, etc. working in the same sector.
But apart from the competition relating to products, competition is also referred to the
services the company offers, whether home delivery pizza is KFC's has Automac. If you are
looking for quality is found in KFC's and that is understood by all consumers.
The closest competitors to KFCs are:
Pizza Hut
McDonald’s
Burger King
Baskin-Robbins
Wendy's
Domino's Pizza
TCBY
Dayry queen
Dunkin Donuts
Taco Bell
Arby's
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Subway
Within the branch sell hamburgers, sandwiches and tacos:
Burger King
Taco Bell
Wendy's
Hardee's
Subway
For 1996 KFC's was already 35% of market share in the business chain sandwiches and
tacos. And its sales amounted to 16.37 billion dollars over its nearest competitor Burger
King.
1.3. New Competitors
The world is becoming increasingly common to hear of new franchise chains, although it is
difficult to enter the KFC's sector experience and business model proposed, these franchises
are becoming more competitive and you will Share market subtracting the users of fast food.
There is mounting members which generate greater competition in the business model of fast
food.
3. The Four P’s of Marketing
Marketing is about understanding the customer and ensuring that products are meeting
existing and potential customer needs. Marketing is a series of tactics, which help to make a
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business successful. The basics of marketing that still exist. The four P’s- Product (goods and
service) Price (value pf the product) Place (distribution of product) and Promotion (aware the
people for product) this leads onto strategic thinking segmenting and targeting which can
earn a competitive advantage. Marketing is a process of determining what customers needs
and want, and then planning how customer requirements and needs can be obtained and then
the implementing of the plans can be carried out. Of example a business company will still
have products services and ideas to sell and will still deliver to customers through some
means of distribution. Organisation must be ready for competitive organisations they must
make sure that any rival competitions do not take advantage by offering lower price or goods
which are of the same quality.
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The diagram above shows the analysis of the four P’s of a marketing mix of KFC
2.1. Product
Product is anything that can be offered to a market to satisfy a want or need. KFC’s specialty
is fried chicken served in various forms. KFC’s primary product is pressure fried pieces of
chicken made with the original recipe. The other chicken offering, extra crispy, is made using
garlic marinade and double dipping the chicken in flour before deep frying in a standard
industrial kitchen type machine.
2.2. Price
Price is any amount of money that customers have to pay while purchasing the product. More
broadly, price is the sum of all the values that consumers exchange for benefits of having it.
2.3. Place
Place includes the target are that KFC is going to cover. This includes:
Free home delivery strategy- they provide free home delivery to offices and
homes (select countries)
Accessibility resulting in several outlets to cater to the needs of people in and
around the city
Hectic lifestyle – due to the hectic lifestyle of office going individuals the fast
food concepts saves time of preparing food and gives the customer a full meal
quickly
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Economically convenient- the pricing appeals to the many classes of the
society.
2.4. Promotion
Promotion is the method used to inform and educate the chosen target audience about the
organisation and its products. Using all the resources of promotion;
PROMOTION
(Source, Author, 2011)
At KFC, promotion is the main tool to bring all chicken lovers attention towards its delicious
one of a kind product, the fried chicken.10 | P a g e
ADVERTISING
SALES PROMOTION
PUBLIC RELATION
EVENT & EXPERIENCE
COUPONS & DISCOUNTS
4. Target Market
The process of evaluating each market segment’s attractiveness and selecting two or
more market segments.
As the outlets of KFC are in posh area and prices are too high (overhead expenses
rent, and air conditioning employees), so KFC targets upper and middle classes.
Target market depends upon size and growth rate of population, company resources
and structural attractiveness of market segment.
5. Market Segmentation
KFC market segmentation is based on three vital segments that give the key advantage in the
success of the chain. These include the following:
4.1. Geographic segmentation
KFC has outlets internationally and sells its products according to geographic needs of the
customer. KFC focuses how geographically its customers demand different products.
Chicken is the main selling product.
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4.2. Demographic segmentation
In demographic segmentation the market is divided into groups based on the age, gender,
family size, income, occupation, religious, race and nationality.
4.3. Psychographic segmentation
Dividing a market into different groups based on social class lifestyle or personality
characteristics is called psychographic segmentation. KFC divides market on the basis of
psychographic variables like;
Social class – upper and middle class
Lifestyle is not specific
Personality is ambitious and authoritarian
6. Channels
In order to remain competitive, KFC believes in first level channels in the order given below:
Manufactures
Retailers
Consumers
Following is the process on which KFC based its channel in order to give edge to other food
chain retailers.
5.1. Channel process
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KFC works on the flow of good operation techniques i.e. “Good Operating Manager- leads to
“Good Team Selection-Good services-Good targets –Good revenues through the following
internal strategies;
Training
Incentive based targets
Recognition for good work
Performance based bonus
Employee benefits to keep them motivated
Promotion.
7. KFC'S Value Chain
KFC's monitor’s product quality and service through ongoing customer surveys and devotes
much effort to improve methods of production of hamburgers in order to simplify operations,
lower costs, speed up service and deliver greater value to customers (Kotler, Keller, 2006).
The company employs extremely rigid system operations. There are specific rules to do
everything from set the distance between the wall and the refrigerator and the exact
temperature that should fry the potatoes. All these methods are detailed in special books.
KFC's will only be effective to the extent that succeeds in establishing a partnership with
their employees (Endomarketing), franchisees, suppliers, to provide an exceptionally high
value for the customer.
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8. Franchising
They have ambitious plans to expand its franchising program, with which the franchisee
provides full support for consolidation, and to maintain the standards required by KFC.
KFC's is successful because it has a system of corporate standards and individual opportunity
and the franchisee is integrated at the same values and expectations clear and shared.
KFC's Franchise system conceived as a genuine partnership between an independent
contractor and the Company, whose reputation and experience are recognized around the
world. 66% of its restaurants are franchised (Lancaster, Reynolds, 2005).
KFC's has two types of contracts with its franchisees: Conventional and BFL
If the franchise the franchisee buys conventional cooking equipment, decoration, signs, etc..,
in the formula "Business Facility Lease" (BFL) KFC's assume the cost of this equipment and
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leases it to the franchisee. This contract gives the franchisee an option to purchase such
equipment, and have 3 years to exercise.
Once exercised the purchase option, the duration of the contract is extended for a total of 20
years. The initial investments of a franchisee BFL is a minimum of $ 51,000, which must
come from own resources.
9. Strategies Used
Given the competitive nature of fast food joints, KFC uses the PUSH strategy to help them
create
Awareness
Be different
Sound attractive
8.1. Strategies For "Global Domination"
KFC in his 1995 annual report proudly announces its "strategy for global domination." He
says that "KFC's vision of global industry dominate the food service. The global dominance
means setting the performance standard for customer satisfaction while increasing market
share and profits with its strategies of convenience, value and execution.
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8.2. Pricing Strategy
Marketing skimming: KFC globally enters the market using market skimming. Their products
are priced high and target the middle to upper class people. Gradually they trickle down the
prices focusing on the middle to lower class people to penetrate both sides of the market.
8.3. Generic Competitive Strategies
KFC's applies the same competitive strategy in all countries: be the first in the market and
establish your brand as soon as possible through intense advertising. It offers customers the
same product with many options, so we are talking about a wide differentiation strategy.
8.4. Growth Strategies
For growth is the strengthening technique in mitigating risky business Franchising generating
a win-win relationship with them, and choosing the talented.
8.5. Sales Promotion Strategies
Finger lickin Good summarizes all this in addition to continuing use of Colonel Sanders
KFC, marketing makes further concentrated in each of the premises which serves the niche
market of KFC's, it still maintains the projection of happiness and interest to children. We
introduce a new strategy for the smile to the customer.
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8.6. Operational Strategies
It continues to maintain the tolerances and specifications approach with a more stringent
approach, the measurement variables are time care and a smile to the customer, in addition to
this the search for improved inventory time is constant (Darden, 2002).
8.7. Social Responsibility Strategy
As can be seen to assume an active role in society is part of maintaining the strategy. The
workplace diversity remains part of what promotes the corporation; in fact, the newly
appointed CEO is not American. The maintenance of the environment strategy and inform the
knowledge of the nutritional capacity of the food is still part of the strategy.
10. Competitive Advantage of KFC in the Industry
KFC's major competitive benefits over its competitors are the constant innovation and
consistent focus. Kentucky through the development of quality assurance laboratories around
the world, involving the ongoing product reviews and on-site inspection of facilities suppliers
offer improved products. While it is true, KFC staff employed, but lack of experience of
management and training company based on their strong product. Customer service training
is provided further KFC (Hollensen, 2003).
KFC is very favorable to the operation of standard KFC, because it not only provides a
channel for cost standards to cost-effective, and can compare their sales outlets and other
shops with shop space ratio. Productivity therefore can be set as a benchmark, as well as sales
targets. Defective region can easily be evaluated (Ulrich, Brockbank, 2005).
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Standardization of more than 15,000 outlets also encourages innovation. Outlets desire to
reduce fees to their interests in the use of cost and no value innovation can export any harm to
others to implement the program as efficiently as possible.
Perhaps the major obstacle to Kentucky is its stringent standards, cannot change the past by
buyers preference. KFC provides a unified food menu, in recent years it has been revised
according to local tastes and preferences, but the new menu and the restaurant cannot, can
provide new and exciting changes in diet and consumers to respond more effectively
(Webber, 1998).
KFC financial management procedures, plans in the form of customer service is very
effective cost and time, and improve the standards of business is to continuously look for
innovative ways to improve efficiency. Kentucky has built a lasting symbol of the image, the
taste of their food. However, only relying on its emblem resembles Kentucky to sell. If
consumers respond to other rapid assessment of nutritional chain is not good considering the
details of the other stores in the commodity markets new and very fast.
KFC report is based on its brand image and the historical development index; of course, the
components Kentucky rank in other countries sign, because it is an agent of American
culture. With incomes and revenues, KFC has the largest and fastest growing revenue
numbers and testament of its better brand image. Other companies can imitate KFC
operational schemes but they cannot contend the invincible and resilient emblem image of
KFC (Brown, 2003).
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11. Competitive Forces Model
In strategic performance management, Porter’s five force industry competitions for the KFC
include the threat of new entrants, the bargaining power of suppliers, the degree of rivalry
among competitors in the same industry, the bargaining power of buyers and the threats of
substitute’s products. Moreover, the competitive forces model argues that the stronger these
forces are within an industrial setting, the more limited companies raise prices and earn
greater profits. As far as this is concerned a strong competitive force can be regarded as a
threat because it would drastically reduce the profit of an organization (Webber, 1998).
10.1. Threat of New Entrants
No specific technology and low investment to enter the market. Multinationals are
"protected" by their reputations and geographic presence. KFC is also having problems
relating to the risk for potential new entrants in the industry; it is to a certain extent feeble as
the threat of the new entrant is tough to set up a sequence of series of the food industry,
moreover, when new entrants enter the industry they tend to take extra effort in order to take
full control of the industry. The extent to which new entrants can enter an industry exerts a
significant influence on the degree to which companies may act to earn above average in
terms of bottom line.
10.2. Threat of Substitutes
Sandwiches, snacks, home delivery meals at home, traditional restaurants are all
interchangeable products for food from fast-food restaurant. But the environment (changing
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habits) Current mitigates these threats. Firms within the same industrial like Subway are
competing amongst themselves. Substitute’s limits potential returns on an industry by placing
a ceiling on the prices companies charge. The risk of substitute product and services is strong.
There is a somewhat swapping cost that is lower producing it is simpler for clientele to move
from retail industry to other associated products. In addition, it should be documented that the
substitute product to a certain extent very improbable than persons will be spending only on
the food business industry and not anything else.
10.3. Bargaining Power of Suppliers
KFC has almost absolute power over its suppliers it manages to be "affiliates. The group is a
key client sees some exclusive agro-food sector. The reorganization of the supply chain of
McDonald's France is working closely with its suppliers. But multinationals also provide
McDonalds (Coca Cola for soft drinks, water DANONE yogurt). Its bargaining power with
suppliers is undoubtedly a major force of KFC. KFC is also facing issues that are related to
the bargaining power of the suppliers. Suppliers can be viewed as threats when they are able
to force up the price for the supplies or reduce quality or quantity of the products though, if
suppliers are weak then Blockbuster KFC can force down their prices and demand higher raw
material quality, moreover, the negotiating supremacy of the suppliers is feeble (Barnes,
Pinder, 2009).
10.4. Clients Bargaining Power of Customers
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The bargaining power of customers is low since they can only be of influence. It may be
more important when consumer association. The pricing policy KFC’s defined very
meticulous in terms of each country, which further weakened the bargaining power of
customers. Buyers are seen as competitive threats when they are in a position to demand
lower prices or better products. Conversely when buyers are weak like in case of the KFC a
company can raise its prices and declare higher profits. The bargaining power of buyers
within the industry where Blockbuster Inc. compete is considered as extraordinarily strong
(Darden, 2002).
12. Analysis of the External Environment
11.1. Economic Context
There is great economic disparity in where this company operates since, as a fast food
company, affordable, end up having more facilities, usually located in places of transit and
recreation, makes not give the right to determine the economic level. And also generates
increased employment rate in the region.
11.2. Politico-Legal Context
This company has a great political stability, it also makes great investments. The level of
competitiveness in the McDonald's remains at the forefront of fast-food companies around
the world, and has a great worldwide recognition.
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11.3. Socio-Cultural Context
There is a big trend towards an aging population where McDonald's is located, and tends to
worsen over time, since the rate of birth rate is low, the average life expectancy is
increasingly high. The context cultural has an impact on how local cultural forms absorbs
global transforms and adapts to its reality, leading global phenomena hybrids
recontextualized (Lancaster, Reynolds, 2005).
11.4. Technological Context
Regarding its technological context this company works with machines highly specialized
and requires large quantities since it is a franchising and is not located in one place but, with
several stores throughout the world
13. Swot Analysis
12.1. Strength
For the business strategy strengths are the key forces for a company as it identifies and help
the organizations to move towards the goals and objectives that were previously set by the
management which ultimately affect the overall efficiency of the organization like
Blockbuster Inc.
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12.2. Weaknesses
These can be in the form of no clear management styles, poor image, research and
development issue, competitive disadvantage, poor track record, insider problems, financing
problems and possible training problems by managers and supervisors for instance like the
retail industry.
12.3. Opportunities
In addition, from the perspective of the strategic business management, these are factors or
the elements that the KFC should concentrate on as they are considered as the core factors
which guide an organisation in moving towards the goals which ultimately affect the
efficiency and effectiveness of the organisation.
12.4. Threats
What makes an organisation to be strong is to identify possible threats within its operational
base in strategic business management, the threats to KFC could be in the form of
government policies, research, competitive pressures, new entrants, changing customers’
tastes, adverse demographic changes, recession, growing bargaining power of suppliers and
customers.
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14. Recommendations
It is clear that KFC's has focused its strategy to position the brand to assure
customers greater security franchise to invest in the business, the strategic shift
Bell has focused in this direction.
As can be seen from the strategic standpoint KFC's has made changes in the menu
locally, and from the strategic point of view has decided to compete with local
customers where there is capacity to capture market.
You can comment on the context of the overall strategy with respect to previous years
has been successful, is keeping the majority of their items.
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