The distinctiveness of KEF lies in the Colonel’s secret recipe, a unique blend of 11 herbs and spices. This recipe is securely kept in a Kentucky vault and known to only a few individuals, resulting in the distinctive taste of KEF. With its renowned international reputation, KEF continues to dominate the chicken segment. Cuff’s prior experience operating overseas has positioned it well to capitalize on the increasing trend of global expansion.
The main objective of KEF is to continue expanding its presence in new growing markets, like China, India, and Latin American countries (especially Brazil, a part of the BRIGS), where its closest rivals are already well-established. KEF aims to gain faster acceptance of its concept in these markets. Therefore, KEF needs to develop a competitive marketing strategy in the global market to retain its leadership position in the fast-food industry worldwide. It is projected that the value of this industry will reach $239.7 billion by 2014, representing a growth of 19.2% since 2009.
According to French Philosopher Jean Jacques Rousseau (1712-1778), going against customs usually leads to success. However, the strategic planners at KEF also need to develop strategies to monitor the environment, evaluate opportunities and threats, consider local responsiveness and global integration, assess country risk, and build productive relationships to establish a worldwide KEF culture. (329 words)
Question One: a) In the context of strategic thinking and strategy formation, explain what SWOT and Porter’s Value Chain techniques are and how they are relevant to strategic planners at Kentucky Fried Chicken (KEF) Corporation. In today’s competitive business environment, relying solely on forecasting is not enough for a multinational company to thrive. Strategic planning is necessary to handle unexpected challenges.
The significance of strategic thinking and strategy formation in achieving successful strategic reasoning and renewal processes is crucial (See Reference 1). Analyzing the business environment through techniques such as SWOT and Porter’s Value Chain is essential in the rational model of planning. SWOT analysis is a valuable tool for examining the overall strategic position of a business and its environment (See Reference 2 and Appendix 3). Porter’s Value Chain technique helps identify key activities within an organization that contribute to its value-chain. It emphasizes nine activities that promote goodwill, standardization, positive synergy, and the notion that all links form a cohesive whole (See Appendix 4). This approach is applicable across various processes and provides different ways to enhance value in the work.
Forward or backward, the support of secondary activities is crucial for effective chain formation. Strategy formation requires KEF to adjust to the interplay between its internal systems and environmental pressures. (See Appendix 5). Suppliers of KEF, for instance, make stock management easier and less costly by providing raw materials through daily deliveries. Raw materials are received and handled in appropriate infrastructure.
The Human Resources department offers training to employees on handling materials, which leads to a competitive advantage by standardizing activities and enhancing the organization’s image. This process ensures a smooth flow of input processing and real-time output, resulting in customer satisfaction, loyalty, and repeat purchases. Strategic planners find practical relevance in using SWOT analysis to identify and improve upon limitations, strengthen existing capabilities, and discover opportunities that can benefit the organization.
Assessing wreaths and their impact contributes to preparing the organization for potential occurrences (scenario building). The practical relevance of the value chain to strategic planners is that it ensures a proper relationship between KEF and its franchise, leading to competitive advantage. Strategic planners will focus on creating positive synergy, team orientation, collective management, involvement, and high commitment. This team-based approach integrates activities and promotes team spirit, collective responsibility, and efficiency. To critically evaluate the opportunities and threats faced by KEF Corporation from the mid-1990s to the year 2000, Porter’s Five Forces framework can be used. This framework analyzes the competitive environment through factors such as bargaining power of customers and suppliers, threat of new entrants, threat of substitute products, and intensity of competitive rivalry. These forces shape the profitability of an industry (Figure 1).From 1995 to 2000, KEF experienced both opportunities and threats when PepsiCo. Inc announced the spin-off of its quick service restaurants – KEF, Taco Bell and Pizza Hut – into Triton Global restaurants. The strategic plans of organizations are strongly influenced by the five competitive forces depicted in Figure 1, as well as the buyer’s bargaining power. PepsiCo’s strategy to diversify in three related markets (soft drinks, snack foods, and fast-food restaurants) helped it become one of the world’s largest food companies, with only a few close competitors.
Customers cannot negotiate with the company unless a significant issue arises that affects a group of clients. The presence of more competitors gives buyers a greater choice and bargaining power. To mitigate the negative impact of buyers’ bargaining power, KEF had to develop a close relationship with customers, encouraging brand loyalty and reducing customer mobility. The threat of substitute products is growing due to growing health and obesity concerns.
KEF has made efforts in terms of advertising and launching trans-fat meals with low fat content and salads. To improve future performance, a new product positioning is needed, as outlined in the Insofar Product-Market Matrix (see Appendix 6). Burger King, Wendy, and Node’s (known for their grilled healthy foods) are substitutes for KEF. From the mid-1990s to the year 2000, KEF continued to pursue an expansion strategy by steadily increasing its number of outlets.
Due to the growth and stiff competition in the US fast-food industry, as well as the aging of KEF and Pizza Hut restaurants, margins at KEF, Pizza Hut, and Taco Bell decreased from an average of over four percent in 1996 (See Reference 4). In response, PepsiCo had to analyze competitors’ strategies and reposition itself as a Beverage and Snack Food Company. Despite the omnipresent competition in the market, major players like Mac Donaldson have strong brand names. CIFS, on the other hand, differentiates itself through moderate product differentiation and price competitions.
New entrants face challenges in trying to compete with KEF due to economies of scale, significant capital requirements, and the need for access to distribution channels. However, after PepsiCo acquired KEF and transformed Taco Bell and Pizza Hut into Triton Global restaurants, there was better risk management in countries with demand for the product. Supplier bargaining power is significant when there is only one supplier. Ideally, having multiple options is preferred, although most of KEF’s suppliers are local.
PepsiCo supplies KEF with Pepsi soft drinks, but it will not be greatly affected if KEF ends their agreement. KEF benefits from the partnership because it knows that Coca Cola is available in Mac Dona’s and other competitors’ outlets. These two companies benefit each other. In terms of the threat of new entrants, a competitor with its own technology and know-how must acknowledge that new entrants will affect their activities and require them to review their strategies. Although there is an increase in demand for fast-food, KEF has established moderate barriers to entry for potential competitors.
During the period under review, it proved challenging for both local and multi-national companies to establish a position in the market due to KEF’s strong presence after being acquired by PepsiCo. In order to strengthen its foundation after being in existence for 80 years, KEF should expand its product range and target additional sectors within the fast food industry. C) In the current global fast food industry, discuss the pressures for global integration of activities and the pressures for local responsiveness that KEF Corporation faces.
Strategic planners must screen the international environment before developing strategies tailored to specific countries. This includes evaluating the influence of buyers and suppliers, assessing market flexibility, and understanding competitor actions. Global integration involves adopting a standardized approach to capitalize on opportunities such as government incentives, increased demand, utilization of new technology (e-buying), similarities in needs and preferences, removal of trade barriers, and market openness.
KEF offers global integration of activities by implementing best practices such as maintaining the same level of service, image/brand/goodwill, training, and standardized menu across all locations. As an example, KEF received requests to provide Hall food in certain parts of the UK, and in response, KEF conducted Hall trials in specific communities as part of their global integration efforts today (See Reference 5).
Any multinational company is obligated to pursue globalization, which involves developing and selling products or services for the global market while adapting them to suit local culture and behavior, taking into account the existing pressures within the dynamic global industry (See Reference 6).
KEF has had to adjust its strategy due to the increasing number of health-conscious individuals and their inclination to avoid switching brands. In response to this trend, KEF introduced ‘Kentucky Grilled Chicken TM’, which has lower calories, fat, and sodium content (a form of local responsiveness).
By respecting the specificities of the local environment, KEF has had to adapt to new cultures and incorporate local elements into their Original Recipe Chicken. For instance, in India, KEF had to make changes in terms of raw materials by using recycled wrapped paper to demonstrate their commitment to social responsibility (See Appendix 7).
Furthermore, KEF employs domestic suppliers instead of relying on external traditional suppliers to foster a win-win approach and create a sense of belonging for customers within the organization. In Mauritius, KEF first acclimated to the local environment before expanding its product range locally. Cuff’s chicken is supplied by Food and Allied Industry Ltd, while Golden Bakery provides the bread, and the ingredients are sourced domestically to cater to Mauritania’s spicy preferences. Since taste, values, attitudes, and beliefs vary across different locations, organizations must practice adaptability when operating in various countries.
In Brazil, KEF had to shut down due to poor sales related to differences in consumer acceptance of the fast-food concept and cultural factors. Therefore, it is crucial to monitor the environment. Strategic planners need to assess the impact of various factors, their interactions, and the business. Thus, conducting a PESTLE (Political, Economic, Social, Technological, Environmental, and Ethical/Legal) analysis is necessary. Kettle (1998) argues that this analysis is a valuable strategic tool for comprehending market growth or decline, business position, potential, and operational direction. For further details, refer to Appendix 8.
Question Two:
a) To elucidate your understanding of Whittling’s ‘Evolutionary’ and ‘Systemic’ Schools of Thought related to strategy development at KEF Corporation, consider Figure 2: Schools of Thought in Strategic Management – including the Generic perspectives on strategy by Richard Whetting (2000). Whetting identifies the Classical, Processors, Evolutionary, and Systemic approaches as significant components of strategy formulation.
Strategy, viewed from an evolutionary standpoint, places importance on innovation as a key management objective. It emphasizes the ability to recognize and evaluate changes and adapt to the surrounding environment. In addition, the systemic generic approach comprises a carefully planned series of steps and procedures that has demonstrated its effectiveness and provides a competitive advantage. It establishes parameters and decisions based on sequencing for monitoring the environment (refer to Figure 2). Cuff’s exceptional capability to handle change is a remarkable endeavor throughout its strategy aimed at gaining a competitive edge over its rivals and enhancing the brand’s position in the minds of customers.
In order to create brand awareness and maintain its presence, KEF marketing experts develop standardized concepts for TV and radio commercials that are broadcast globally (systemic approach). Some of these concepts are tailored to fit specific countries, adapting to the culture and environmental changes without negatively affecting the overall image (evolutionary). Cuff’s main strategy for growth involves expansion through franchising, mergers, and joint ventures.
The KEF concept has evolved from a sole trader restaurant business in the sass’s to a multinational company present in over 100 countries today. However, the outlets of this company follow a systemic approach to achieve optimal performance. Standard practices and procedures are implemented to ensure quality in customer service, delivery, training, and physical evidence such as uniforms, greetings, and store layout. These practices are regularly reviewed to maintain high standards.
The bureaucratic system of KEF involves an inter-relationship and inter-dependency, as well as the integration of activities and well-defined rules. KEF has learned from past problems by implementing new systems, such as a new computer processing system, to increase efficiency. The Systemic School of thought helps strategic planners anticipate what may occur in situations with less certainty, but a high level of predictability in environments that are less dynamic. On the other hand, the evolutionary approach helps strategists be more responsive and adaptable to change in dynamic and unpredictable environments.
KEF has demonstrated its capacity to adapt and innovate in uncertain times by responding to evolving health trends. This was evident when the company introduced grilled products and repositioned itself against its closest competitor, Monads, in this market segment. These adaptive approaches were still in effect when PepsiCo acquired KEF in 1986. However, due to significant changes at the management level aimed at gaining better control over KEF franchises, there was resistance to change among the staff, resulting in layoffs of certain employees.
For PepsiCo, it was standard procedure to replace KEF Managers with PepsiCo Managers, as this aligned with the company’s policy of rotating managers among its business units to enhance their managerial skills. While there are distinct differences between these approaches, KEF strategic planners have actually utilized a combination of both schools of thought as needed to maximize the benefits for KEF. B) Evaluate in depth how you could apply the two Schools of Thought to KEF. Elaborate on your preferred school of thought and the reasons behind your choice.
KEF used a blended approach in strategy development, but placed more emphasis on an evolutionary approach due to its dynamic setting and the need to adapt to environmental changes. Drawing from past experiences would provide valuable insights for future strategies. Initially, KEF adopted a classical approach and was content in a less competitive environment, prioritizing profits over change (see Appendix 9). However, when competitors like McDonald’s and Wendy’s expressed interest in expanding into Latin American countries like Argentina and Brazil, KEF had to adjust to the evolving environment (evolutionary-emergent process), despite its competitors being there first. Leveraging past experiences, KEF must devise a competitive marketing strategy to penetrate other international markets with significant potential, particularly in Asian countries like India and China where local responsiveness and market structure play crucial roles.
KEF, for instance, has established a strong presence in China and is currently operating 3200 CIFS in 650 Chinese cities. In comparison, Mac Dona’s and local competitors are being overshadowed by KEF’s dominance. Mac Dona’s has already stated its plans to increase its number of stores in China by 2013. This systemic approach is also useful for strategic planners as it allows them to integrate their activities to meet local demands. Although Cuff’s parent company sets the standardized corporate strategy, it also demonstrates flexibility by adapting to the local market.
Feedback on customers’ taste and preferences is typically obtained by the headquarters through KEF staff, who largely consist of local community members, as well as through the Customer’s Comments Card. Subtle modifications, like incorporating local flavors, may be implemented while still maintaining certain core standards (Global integration) (refer to Appendix 10). In the case of evolutionary approach, changes are introduced gradually over time, such as introducing only Hall chicken in Cuff’s outlets globally.
With the change in lifestyle and customer behavior, KEF may want to think about expanding its delivery service to all countries and providing free printable coupons online for discounts on the full price. This could lead to a global integration of activities. Starting in early 2011, KEF has replaced its Styrofoam packaging with reusable food containers for side dishes and started using plastic plates. In all outlets, KEF aims to decrease foam usage by 62% and overall plastic usage by 17% by 2011.
According to Whetting, the Evolutionary approach utilizes the concept of biological evolution but replaces the law of the jungle with the discipline of the market. After evaluating both schools, I found CIFS to be particularly skilled at applying the evolutionary perspective, which focuses on survival and adapting to competitive forces in the environment, as well as evolution, symbiosis, and cooperation.
My opinion is that it is a more realistic approach for a rim like KEF, which depends on its environment. It is like a living creature mingling with businesses of the same species, some of which may be vulnerable while others may be predatory. According to Question Three: “Hypotheses (1993) theory of cultural dimensions implies that although not all individuals within a country’s population will have the exact same traits, the cultural dimensions will affect the institutional and administrative arrangements in that country and establish behavioral norms.
