Strategy analysis: KFC

Résumé du document

Kentucky Fried Chicken or KFC is an American fast food chain founded in 1939 by Harland D. Sanders. Firstly, we examine the sharp rise of the KFC corporation between 1964 and 1986. Sanders had sold his own business for 2 million dollars in 1964, and, 22 years later, PepsiCo, a multinational firm, acquired this same business for 840 million dollars. This figure leads us to examine the profitability and the success of this company. KFC, along with its different franchisees in worldwide operations, is one of the famous fast food chains all over the world, along the lines of McDonald's. However, the fast food market is saturated in USA with many competitors and scarce market shares.

Hence, in 1987, KFC, supervised by Tony Wang, decided to seize a huge opportunity in the world fast food market and entered the Chinese market. In 1987, the gamble was beginning to look very risky. Chinese food habits were very difficult to foresee and they didn't know if the Chinese were ready to adapt to this difficult lifestyle move.

Notwithstanding these trials, KFC and Tony Wang succeeded in convincing the Chinese by a suitable strategy and goodwill techniques. In fact, KFC became the leading fast food chain in China and continues to be the only one .

To understand this Chinese success and analyze KFC‘s strategy in this country, we will examine the external environment and the value chain of this incredible company.

Extraits

[...] In fact, the first supplier of KFC is his chicken supplier. Though, there a lot of chicken suppliers in china (and every country worldwide) and KFC has a huge chicken demand. His supplier supply only KFC, so he is totally dependant from KFC. In another hand, KFC need a lot of chicken every day and it could be a big issue to change supplier. Besides, KFC and his suppliers have database to increase their effectiveness. At least, both would be happy but sure that suppliers have a low bargaining power if they want to keep their lease. [...]

[...] Threat of substitute The threat of substitute is high. There are many alternatives to eating rapidly in the town centre or anywhere else. You have restaurants, snack, cafeteria, corner shops or eating at home can be a substitute too!!!(If you live near the fast food). As you now that china is very rich in different culture and so in different food: it means that several cooking lifestyle can be represented. Bargaining power of customers The bargaining power of customers is low mainly due to the small price, volume of the goods and specially, the rapidity of the service. [...]

[...] to attract again or being present in all the provinces of china. That's for sure to be service but also new customers and new receipts and new returns. In conclusion, as the worldwide and especially fast food business reached the saturation stage, China's market seemed to be an antidote for KFC: first fast food chain in this country in outlets, units and influence. To sum up, KFC had always been and is still in advance of his competitors on the Chinese market. [...]

[...] However, the skill levels of the staff can be fairly small. But, at least, some issues are redundant in several fast food chains like standard tasting food (it's very difficult to produce the same product exactly everywhere). Another big barrier is the capital and the return on investment. It's a risky market and start up can loose a lot of money. To be an actually fast food chain, you need 5 or 10 outlets minimum at the beginning and if you miss your target, it can be a financial disaster. [...]

[...] Also, KFC spends a lot of money in advertising with television campaigns, local newspapers. As we know, Chinese people often watch TV. Finally, technological abilities are used to gather suppliers to produce same products in each outlet of the world with same taste and same aspect: it's the major condition to be recognized as worldwide fast food chain. Porters' five forces analysis Barriers to entry There are no major legal requirements to start up in the fast food business actually. [...]