Marketing of Kfc
Marketing of Kfc
Marketing Analysis – KFC
Introduction KFC operates in 74 countries and territories throughout the world. It was founded in Corbin, Kentucky by Colonel Harland D. Sanders. y 1964, the Colonel decided to sell the business to two Louisville businessmen. In 1966 they took KFC public and the company was listed on the New York Stock Exchange. In 1971, Heublein, Inc. acquired KFC, soon after, conflicts erupted between the Colonel (which was working as a public relations and goodwill ambassador) and Heublein management over quality control issues and restaurant cleanliness. In 1977 a “back-to-the-basics” strategy was successfully implemented. By the time KFC was acquired by PepsiCo in 1986, it had grown to approximately 6,600 units in 55 countries and territories. Due to strategic reasons, in 1997 PepsiCo spun off its restaurant businesses (Pizza Hut, Taco Bell and KFC) into a new company called Tricon Global Restaurants, Inc.
Reasons for going overseas Companies moves beyond domestic markets into international markets for the following reasons: *Potential demand in foreign market *Saturation of domestic markets *Follow domestic customers that go abroad *Bandwagon effect *Comparative advantage – some countries possess unique natural or human resources that give them an edge when it comes to producing particular products. This factor, for example, explains South Africas dominance in diamonds, and the ability of developing countries in Asia with low wage rates to compete successfully in products assembled by hand.
*Technological advantage – In one country a particular industry, often encouraged by government and spurred by the efforts of a few firms, develops a technological advantage over the rest of the world. For example, the United Sates dominated the computer industry for many years because of technology developed by companies such as IBM, Hewlett-Packard and Intel Organization structures for International Markets (Modes of Entry) *The mode of entry affects a companys entire marketing mix Exporting *Export merchant (Indirect) *Export agent (Direct) *Company sales branches Contracting *Licensing *Franchising *Contract manufacturing Direct Investment *Joint venture *Strategic alliance *Wholly owned subsidiaries Criteria for selecting a mode of entry 1.Companys marketing objectives: – production volume – time scale (long/short term) – coverage of market segaments 2.Companys size 3.Government encouragement or restrictions 4.Product quality requirements 5.Human resources requirements 6.Market information feedback 7.Learning curve requirements 8.Risks: political or economic 9.Control needs Mode(s) of entry for KFC *Franchising/Licensing *wholly owned subsidiary *Joint venture Firstly, KFCs traditional franchising strategy, which is emphasizing standardization and reducing financial risk, on the expense of cultural sensitivity and control. Due to Chinas strict foreign investment laws such a strategy is not feasible. In addition, KFC will be pioneering in the fast-food field and thus needs to be highly sensitive to cultural demands. In the past, KFC encountered problems with aligning corporate planning with franchisees short-term focus on profitability.
A wholly owned subsidiary represents the second option. Such a strategy relies upon total control over competitive advantages and ensures complete operational and strategic control. It also involves high investment expenses with no financial risk sharing. With high levels of resource commitment and little country-level flexibility and responsiveness, this option is not recommended.
Recommended market entry strategy: joint venture The essence of a joint venture is the synergy effect of two different entities merging. Such an international business strategy will attempt to; solve many logistic problems such as access to good quality chicken and other supplies, ease the access to the Chinese market, share risk with a local entity, and finally serve as a sign of commitment to the host government increasing goodwill. In addition, due to the complexity of many barriers to entry into China, a potential partner with sufficient contacts/networks with government agency officials may smoothen the process of setting-up operations in the nation.
The potential joint-venture partner should be large, well established, provide excellent distribution channels and have personal network access to government officials. It should also have modern equipment and a good management record. It is recommended that a partner is found by backwards integration. In other words, it is a good domestic poultry supplier. In order to ensure total commitment and balance of power between the two partners, a 55/45 joint venture, with KFC as the dominant partner should be set-up.
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