Essay Preview: Kfc
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History and Background
In 1952 Harland Sanders travel the United States pitching his recipe for Kentucky Fried Chicken to prospective franchisees. By 1960, “Colonel” Sanders had granted KFC franchises to more than two hundred retail outlets and restaurants across the US. By 1963 there were over 300 franchises and sales had reached $500 million. The Colonel, who was 74 years old at the time, decided to sell his business for $2 million to Jack Massey and John Young Brown Jr. who focused on expanding KFC throughout the US. In the late 1960s, KFC was stabilized in the US and the owners turned their focus to international markets. By 1971, KFC had established 2,450 franchises and 600 company-owned restaurants in 48 countries.
PepsiCo acquired KFC in 1986 along with Pizza Hut and Taco Bell shortly after. PepsiCo decided to spin off all three restaurants into an independent, publicly held company called Tricon Global Restaurants, Inc. Then in 2002 Tricon acquired Long John Silver and A&W All-American Food Restaurants where they, shortly after, changed their Tricon name to Yum! Brands, Inc. As of today KFC is severing about 8 million customers globally. They have more than 11,000 restaurants in more than 80 countries around the world.
In order to better assess KFC’s strengths, weaknesses, opportunities, and threats I needed to look at the swot analysis of Yum! Brands, Inc since KFC is a part of a larger company.
Strengths
Yum! Brands, Inc has a very successful portfolio including a popular variety of restaurants. The KFC restaurants offer fried on-the-bone chicken, the Pizza Huts offer an array of pizzas, and the Taco-Bells offer a Mexican style product. They also acquired Long John Silver and A&W, who are known for their seafood, beef, and beer products. These are all well known brands with an enormous customer base. By having such a strong portfolio, this allows for better and easier access into new markets. They also have a large operational base which means that they are solely a service industry where their employees play a big role in customer service to maintain their customer base.
Weakness
I believe that Yum! Brands, Inc. is too dependent on the US market, 59% of their total revenue is from the US alone and with the US being such a mature market there is very little room for profitability and innovation to capture more market share.
Opportunities
Basically, the number one opportunity for KFC is to expand in China. Since they already have established a China division and have a small percentage of the market, they can expand further to capture more market share. Compared to the US market, the China market is still immature and growing very rapidly, which will provide much opportunity for KFC. Another opportunity is to create more product differentiation through innovation. This will not only increase their revenue base, but it will also improve customer experience. KFC can start creating a new line of chicken and be more conscious of the consumer’s health by cooking their chicken in organic or healthier oils. They can also create a lot of new salads and kids meals, but still also have their traditionally cooked chicken and sandwiches.
Threats
Yum! Brands competition is a big threat, especially since all other fast-food restaurants carry some form of chicken, like McDonald’s chicken sandwich and Papa John’s buffalo wings, where as KFC only carries chicken and no other substitute. Also, with the economy in a downward spiral and the price of commodities running high, KFC faces higher costs for their product. There are also issues on the quality of chicken because of all the food-borne illness concerns like E. coli and Salmonella.
Value Chain
KFC is more highly regarded on the value chain under marketing and sales. Since KFC is part of a subsidiary, which is owned by Pepsi they have a large amount of experience and a well-developed management system taken from Pepsi’s top managerial crew. Their marketing and sales are high on the chain because Pepsi is a huge enterprise and well-known name which does a lot of advertising. So of course KFC is operating under Pepsi and KFC also does a lot of advertising which works well for both.
An area on the value chain that I believe KFC or Yum! Brands is lacking in is R&D. Although they invest heavily on it their results are not favorable. I believe they have spent approximately 33 million in 2005, 33 million