Famous Fast Food – KFC Corporation in Nepal Analysis

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“KFC Corporation, based in Louisville, Kentucky, is the world’s most popular chicken restaurant chain, specializing in Original Recipe, and Colonel’s Crispy Strips® chicken with home style sides and new freshly made sandwiches. ” Everyday nearly, KFC serves eight million people in the world with the same old crispy crunchy recipe Sander developed more than half century ago. With their old recipe they are moving ahead in more than 300 countries serving their mouth watering dishes.

The mission statement of “to be leader in western style through serving quality food, friendly service and clean atmosphere” has led KFC to grow their industry in the foreign market. So KFC has to standby to prove them to be number 1 in the market. They had set many strategies and faced tough competition to be able to stand in the market which definitely proved to be fruitful for them. KFC (Kentucky Fried Chicken) based in Louisville, Kentucky is one of the leading fast food industries in the world.

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The origination of KFC goes to “Harland sanders in 1930s” who started cooking and serving foods for the hungry travelers who passed the way of his place in Kentucky, US. In the beginning he did not have place to serve his customers so he used his service station living quarters to serve the food. The secret recipes of cooking chicken with the mixture of 11 herbs and spices and frying the chicken under pressure made him famous in Kentucky. The unique taste of crispy chicken attracted the customer that people started stopping by just to eat. As more people started coming just for food, he moved across the street to a motel and restaurant that seated 142 people. ” As the business started picking up it became hard for sanders to operate the business smoothly because of its expansion so he decided to franchise its unique concept of foods. “In 1964, at the age of 74, Harland Sanders finally agreed to sell the business in exchange for US$2 million and a promise of a lifetime salary.

The sale of the business to John Brown, a 29-year old Kentucky lawyer, and his financial backer, Jack Massey 60, was accompanied by the assurance that Sanders would maintain an active role in both product promotion and quality control of the new venture. ” KFC got the extreme growth with such aggressive manager and within the next five years, sales of KFC grew by an “average of 96 per cent per year, topping $U5200 million by 1970”.

This same year almost 1,000 new stores were built, the vast majority by franchisees. “With such kind of expansion in the business, KFC is now the collaborated with Yum brands Inc, which includes pizza hut, Taco bell and Long John’s Silver. ” It has more than 14000 restaurants in more than 18 countries making it one of the best fast food chains in the world with its delicious recipe of fried chicken. KFC has gained top market position both domestically and internationally.

The main vision statement of KFC is “to protect, promote and advance the mutual interests of all member franchisees and the Kentucky Fried Chicken system” along with consistently providing excellent quality and services, commitment of innovation with the target of being number 1 in the market, and provide superior financial returns and benefits to all of its members and employees. With the global expansion and motto of “no stopping”, KFC targeted Nepal as well with the position of leading “WSQR (Western Quick Service Restaurant) chain” for providing quality goods and services.

Nepal is one of the smallest countries in the world with the population of around 28,676,547. Most of the people here are Nepalese of Indo-European and Tibetan-Nepalese. People here speak Nepali as their 1st language, English and other language depending upon the ethnic group they belong to. Nepal is the country rich in its religion, culture and tradition. Main religions they follow are Hinduism followed by Buddhists, Muslims and Christian. It is said to be one of the least developed countries due to the geographic isolation which it faced in the past.

The people here are poor, and the market mainly depends on agriculture somewhat in tourism which contributes the current GDP of 40%. “Apart from agriculture, Livestock rising is the second largest economy of Nepal, oxen predominates in the lower valleys, yaks in the higher, and sheep, goats, and poultry are the major source of economy in the country. ” “According to the Doing Business Report, Nepal is ranked 55th in position which indicated the ease of doing business in the country. But Nepal’s economy is characterized by a combination of rapid population growth and inadequate economic growth that has led to country in the severe poverty all over. The state continues to hamper private-sector development, and political instability weakens the country’s ability to implement economic reform or create a stable environment for development. Even though Nepal’s trades are having some positive effect, the average tariff rate remains high. “Foreign investments must be approved or face licensing requirements”.

The improper management system, inadequate direction, corruption and a lengthy approval system has blocked much in the growth of the private investment system. Also the judicial systems are very slow which undermine the property right which is vastly affected by corruption and political influence. “Unfortunately for Nepal, the on-going political and security crises have not helped its quest for economic development. One of the poorest nations in the world, Nepal relied heavily on foreign aid and development loans to run the country.

The present crisis has forced many business closures, cancelled foreign investments and overall eroded the confidence of the business community”. This may be very surprising for foreign investors why interested to invest in Nepal? “According to the CIA fact book, Nepal has GDP growth rate of 2. 50 % (2005 est. ), which is better compared to Somalia, Morocco, Maldives. GDP of the nation is $1,500 (2005 est) which is better compared to $600 in Somalia and $1,200 in Kenya.

Nepal has lot of potential, in spite of all the troubles facing the nation. ” Information technology, including software development, calls centers and training, education and fashion, and food services are some of the emerging attractive investment opportunities in Nepal. Thus, seeing the advantage of Nepal being one of the growing industries, KFC targeted Nepal to start the business. People in Nepal are said to be the food lovers. They are always eager to try new foods.

The craze for the fast food in Nepal is one of the major factors that a company can have to enter a food industry market. According to Nepal’s food industry, it is not hard for a company to enter the market only the thing that they should be aware is of the competitors. There are numerous fast food chains like “Naglo Bakery Cafe, Kathmandu Food Cafe” which are the proof of how the eating habit of the people is outside of the house and the fast food industry can take rapid expansion. Moreover, international brand plays a major in people’s mind.

In such situation KFC takes the first-mover advantage of international food chain to be operated in Nepal. Since last few years, Nepal has been seen exponential growth of huge capital in the country like shopping malls and designer branded clothes which were only seen the TV or magazines are become the part of Nepal shopping center. With the view of such expansion and expanding purchasing power of the people, KFC entered Nepal market with the hope of gaining attraction of the international standard food service and quality by the local consumers.

KFC officials of Nepal were very excited about entering the food service to Nepal and hopeful for the growth and expansion of the business all over country. “Consumers in Nepal are ready for the international eating-out experience,” a statement issued by the company said. “Nepal is a promising market for these brands and their entry will give the Nepali economy a boost by creating job opportunities for the locals. ” Despite this advantage KFC had lots of problem prior entering Nepal. They had to undergo political trauma created by Maoist against the westernized or American Ventures in Nepal.

Since years Nepal is politically instable, the downfall of the monarchy system and the power being in the hand of prime minister has always created chaos in the country. The economic position of the country is falling by 5% each year. Due to such kind of governmental issue caused KFC to delay in opening its franchise in Nepal for 2 years. Many other franchisers had already backed by the unsuitable environment of Nepal. Another problem they faced at the time of opening was of animal right. Animal right committee blamed KFC for the treatment they do to the chicken to fill the KFC bucket.

The news of “Roughly 1 billion chickens killed each year for KFC’s buckets are crammed by the tens of thousands into excrement-filled sheds that stink of ammonia fumes and the birds’ legs and wings often break because they’re bred to be too top-heavy and because workers carelessly shove them into transport crates and shackles. Chickens’ throats are slit and the animals are dropped into tanks of scalding-hot water to remove their feathers, often while they are still conscious and able to feel pain” has made crucial effect on the health govern ent. Along with these challenges, KFC also faced a social issue raised by the public and media about the health problem like those fat filled food will increase diabetes and heart disease that these fast food will have on people after they eat such kind of food. After long struggle, research and study, KFC however entered the Nepal market. They used the concept of franchising the brand in the Nepalese market because Nepal’s market is not so established like India or china or any other market.

The resources, quality product, good management team, and stable political situation are crucial in Nepal. In order to open the wholly owned or any kind of other market, it would be the challenging opportunity for KFC in Nepal regardless of other challenge. In order to run the business smoothly they adopted franchising which will help to grow the business as in the foreign country like Nepal. “Though the country has seen a lot of local fast foods chains expanding and thriving in recent years, global brands like these have so far eluded people with an ever growing power to spend. For a business to run smoothly and make it possible to stay there for the long run, it is very important to understand the market situation and the taste and preference of the local customers. KFC has always focused on core market value and attracted its customers. The philosophy used by KFC called “champs” ( Cleanliness, Hospitality, Accuracy, Maintenance of Facilities, Product quality and speed of Services) has helped them to ensure that the customer has the consistent quality experience in their restaurant.

After 2 years long market research and study, KFC opened its food chain in Kathmandu, capital city of Nepal. Their location is situated in the heart of the Kathmandu city in Durbar marg. After evaluation of various segment they focused in this area because of the following reason: • most of the people are high class and upper standard • People know the brand name and they come to eat in the place. • Income levels of people are high where they can spend quite more in comparison to other local food market. Population density is also higher in these area because all the major industry, education sector, government are settled here, so people have to come to Kathmandu valley whenever they need to have benefit from these areas. The system of self-service in KFC is trying to appeal to a range of wider class of people by offering its patented fried chicken and burgers. “Prices start at Rs 69 for a Veggie Snacker and Rs 79 for the same type of burger to Rs 899 for a 40 piece chicken bucket.

Products include burgers, hot wings, combo meals (which combine burgers, fries, soft drinks and other products), wraps, Krushers drinks and shakes, ice-cream, Thalis and other side dishes. ” Most important that KFC got priority was due to the product customization based on the local need. Nepal people love to have spicy food, so KFC added the Spicy chicken, Ginger burger which turned out to be the best selling product among many groups. Their menus were also standardized depending on the all group from children –adult, individual-group-family.

People in Nepal are always looking towards good food with quality. If they liked the food they don’t care about price. This became advantage for KFC concerning about the pricing policy. Though their price was higher than the other fast food in the region they were able to grab the customers’ attraction. That is why they were able to earn the heavy rate of return just in couple of months. The fabulous decoration of the restaurant gave another boost in the market in comparison to the competitors that people preferred to dine in the restaurant rather than take out.

In order to provide quality service, their employees are trained in India. They should also have a pleasant personality to work in the restaurant so that KFC can maintain their “CHAMPS” strategy to satisfy the customer need and get their support. KFC did not have to invest a lot in the marketing because their brand name was already popular in the country by the young generation who live overseas for education and also the tourist who visit Nepal who bring new experience and expectations.

On the top media and top industry group like coke and Pepsi also had the support and advertised to gain the people’s attention. Their strategy of marketing mix applying the 4 ps model was proved to be successful in case of Nepal. Not only this with the opening of international brand many economist also stated that along with the quality food and services, KFC will also have an employment opportunity in the country. With their entrance and the expanding economy, Nepal will be able to attract other foreign market to join in.

Moreover, just after the opening of few months, KFC became the leading fast food industry in the country with the highest ever monthly turnover standing at Rs 30 Million. With this rapid growth and the customers support, KFC planned to open more outlets in other region of the country. However, having such quick development and making profits, KFC still had to be aware of its competitors and future development. There are many fast food industries running in Nepal since years. They provide the traditional Nepali favorite food like Momo, chatamari, achars and aloos. These are all time favorite food of Nepali people.

People also stated that the recent attraction of the people to KFC is due to the international brand name. Sooner or later, people will be outer of this fashion and will return to the same tradition style food. If that happens then this might be the severe threat to the KFC. Moreover, KFC should be more concerned about their sourcing of the product. Like in case of KFC and Mc Donald’s in India have their own source of product within the country. Government provided facility to make the product available in the country which also helped local to get the employment opportunity.

But in case of Nepal, KFC had to source their product from Brazil, staffs were trained in India and all the material would be imported to be used in restaurant. This is the great challenge for KFC which will increase the cost because this kind of system will not be profitable for the long run. So KFC in order to cut the expense of such things, they should use the strategy of technological development in Nepal with advancement in retail food industry, ware house formation and local food industry. KFC today is one of the leading food market industries in Nepal.

Despite of the local challenge and threat they faced in the beginning, they are able to boost in the foreign market like Nepal where they had to face political, social, technological challenge. In remarks of the SWOT analysis, let us see what strength, weakness, opportunities and threats did KFC faces: Strength: They have earned the good name and reputation by its products and services of its unique taste. Great customer service is their main asset by which they have gain good customer loyalty. Moreover, along with dine in value; take out services has also helped them to gain more interest.

Weakness: The only weakness KFC had while opening business in Nepal was the product outsourcing. They had to get chicken from Brazil which will definitely increase their cost. The tools to be used in fast food were also imported. They had also not invested much on R &D which might prove fatal to them because in order to meet the customer need they need to be updated time and on. Opportunities: KFC enjoyed the fullest advantage of entering the country being the first international brand. Good acceptance of American style fast food led them to grab the market position leading the old fast food industry.

Just the brand name helped them to get attraction of the people and within couple of moths they were able to earn their profits. Threats: Nepal has been expanding in its food industry. The buying power of the people has made positive influence in the food market. Likewise, KFC took the advantage of entering the food market in the peak hour. But there are also many food industries which are already established which were the main threats for KFC. However, with all these opportunities and threats, KFC was able to adapt in the complex market of Nepal.

Their patience and 2 years long struggle against the political, demographic and economic condition of Nepal finally proved out to be “boom” for them. Though, today KFC are enjoying the gain from the country, they should also make more approach in future for technology advancement, pricing policy in comparison to the competitors, distribution strategy by providing home delivery system so that people can enjoy the crispy chicken just resting on the their home, not only in the urban areas they should introduce their outlet even in the rural areas seeking the standard of the people.

Thus analyzing all the possible perspectives, we came to know how KFC adapted its strategy and policy to invest in the foreign market. The very inquisitive question might arise about why KFC was interested in investing in the country like Nepal where they were having many political and social issues? In general context, companies get engaged in globalization due to the countries demand or the domestic market gets saturated and companies see advantage in the comparative or technological.

In case of KFC entering was because of the comparative advantage in the fast food market. KFC saw the way of maximizing profit by taking the advantage as first-mover in the country which proved to be the most fruitful approach they made in the mean time.

Work Cited:

KFC corporation: http://www. fundinguniverse. com/company-histories/KFC-Corporation-Company-History. html Marketing Strategies :http://www. docshare. com/doc/128688/Marketing-Analysis3 KFC sales figure at bang bang : http://www. lexlimbu. om/2010/01/kfc-sales-figure-are-banging. html KFC, Pizza Hut come in Nepal. http://www. thaindian. com/newsportal/business/kfc-pizza-hut-come-to-nepal_100278399. html Marketing strategy in terms of Kentucky Fried chicken: http://www. scribd. com/doc/23243334/kfc-project-on-market-research Republic: Business and Economy: Global franchises ready for Nepal KFC, Pizza Hut to open on Wednesday UPIAsia. com: http://www. upiasia. com/Society_Culture/2009/11/30/kfc_and_pizza_hut_hit_kathmandu/8617/

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