Table of Contents Introduction. 2 Market Analysis for KFC. 5 THREATS OF KFC IN MAURITIUS. 18 Opportunities to develop and create the following in Mauritius. 20 Reasons for KFC to go overseas. 26 PESTEL Analysis. 26 Competitors Actions. 29 THE problem that KFC is facing. 29 Strategies developed to overcome the crisis. 30 New Strategies that can be adopted for the Relaunching of KFC products. 31 References. 34 Introduction. Kentucky Fried Chicken, better known as KFC, is the largest chicken restaurant chain worldwide with almost 1000 outlets located in well over 70 countries.
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 which is one of the most leading multinational organizations in the world. Said to be the second most famous and largest fast food franchise in the World No 1 brand in Asia with the market leadership in Japan, China, Malaysia, Indonesia and Korea. Who in Mauritius don’t know about the KFC – well the basic history of KFC in
Mauritius is almost couple of decades old. Launched in 1983, the first KFC outlet in Mauritius has carved a solid reputation as a quick service restaurant which provides quality products and service. In the company’s 14 stores spread out across the island, customers can relax and enjoy their finger-licking favorites in the same consumer-friendly environment. A convenient drive-thru service is also available at some units. Pick N Eat is the company which operates the KFC franchise in Mauritius. The company has its own training centre and features regularly in the top performance league of the Indian sub-continent region.
Now every part of the world is much conscious about their health KFC too is thinking about major changes in the way they are going to promote and the way they will be cooking. Mauritius, a small island in the Indian Ocean but also one of the most popular tourist destinations in the world, is one such country where KFC is extremely popular. Fast Food in general is very popular in Mauritius although it is not as huge as in other major countries. However, like in those countries, it is the pioneer, as Mauritius did not have any major fast food shops before Kentucky Fried Chicken was established there.
KFC become so famous in Mauritius that the number of shops has since skyrocketed and all these shops are now full of people as soon as lunch and dinner times kick in. When it comes to the location of these branches, Port Louis, the capital of Mauritius, is the only city with two KFC branches. Otherwise, due to the small size of the island and its cities, the other towns only have a single branch. However, it is important to note that all of these are strategically located near the busiest parts of their respective towns. This explains the success they have achieved so far throughout the whole of Mauritius.
In 2011, KFC Mauritius finally went online. Due to the large number of Mauritians now having easy access to the Internet, whether at home, at work, or on their mobile phones, it was inevitable that the Mauritian KFC would soon have its own website. Unsurprisingly, the website is found at kfc. mu and has a true Kentucky Fried Chicken feel to it, with a red background and social features to encourage sharing. Market Analysis for KFC. In order to play safely in the ever competitive, volatile and turbulent business environment we have to carry out a market analysis.
Market analysis includes the following: * SWOT analysis * PESTEL analysis A SWOT analysis is an activity where an organization estimates its main important strengths, weaknesses, opportunities and threats. The SWOT analysis is a key for the firm to analyze its strengths, overcome or lessen its main weaknesses, avoid the main threats, and take advantage of opportunities. Both strengths and weaknesses signify the firm’s internal potentials, for example, in the operation of procedures, operating costs, human resources and planned target is important to manufacture its core products.
Whereas on the other hand, opportunities and threats start off from outside the organization, for instance, competition and poultry suppliers in the case of KFC. The worldwide famous multinational KFC is with no doubt powerful. The success and fame of KFC is heavily depended on its power and force. In this respect, strength of the company can be carefully used to make profits. It is a well-known fact that KFC has the strongest brand in the fast food industry as it is related to consumer loyalty and for attracting the right sort of franchisee. The correct franchise is essential for success.
KFC holds its strengths as its profits increase almost $1B each year. KFC continued to dominate the Chicken Segment, with sales of 4. 4 billion in 1999. KFC is popular, recognized and experienced all over the world and have strong markets in countries like UK, Thailand, Japan, Korea, China, Mexico and Middle East. 1. KFC Secret Recipe There are multiple strengths of KFC out of which its secret recipe stands out as the main strongest points. KFC really dates back long. It is one of the biggest multinational with real success story. Due to the continuous advertising and mediatisation, KFC has become so renowned as a matter of fact.
KFC came a bit before McDonald’s. The tasty and relishing recipe of KFC is a secret to everyone. This is what makes KFC so popular. The hidden recipe becomes a good medium to attract many clients and appealing to everyone. 2. Fame and Reputation The entry of KFC in the food industry brought loads of benefits along with it. It was in the year 1954 that KFC gained appreciation and identification. It has set its identity of its own. The real master or chief of the entire KFC Empire is the Colonel. The Colonel is a prominent personality in the United States of America as well as overseas.
He is a national as well as an international figure. As a matter of fact, it is due to its logo that KFC became so globally acceptable and appreciated. 3. PepsiCo’s success with the management of fast food chains. PepsiCo took over Pizza Hut in the year 1977. It also got hold of Taco Bell in the year 1978. PepsiCo adopted similar and multiple planning to promote his product. It launched the same promotional campaign that it was using for snack, food and soft drinks. When PepsiCo took over KFC in the year 1986; the enterprise had already manipulated the two of the biggest food-growing sectors. 4. Honesty and honesty of employee
It has righty been said that “honesty is the best policy. It is due to sincere dedication and loyalty that in the present era, KFC has become a success story. Good administration of resources, profits, pension and assistance is provided to the respective employees. KFC values honesty and loyalty. 5. Improving the quality of operating efficiencies by decreasing overhead and other operating costs can directly affect operating profit. In the food industry, profit making is commonly a big concern. Taking into consideration the fierce competition in the United States, the fast- growing food chains are hesitating to raise the prices.
Lots of food chains are being transformed into operating efficiencies for increasing the number of profits. On the other hand, for many enterprises, profits are depended upon good customer care, service, hygienic restaurants and good items for consumption. Along with strengths, an empire like KFC also possesses some drawbacks. One of the first negative aspects of KFC is the big confusion as far as trade of food is concerned. In the year 1971 till the year 1986, KFC was taken over by other companies thrice. It underwent lots of tribulations and crisis.
It is when PepsiCo took over KFC in the year 1986 that better changes came on surface. 1. Chicken was not such a big speciality of KFC. For example the famous food industry, McDonald’s also provided chicken to its clients in the view of profit making. McDonald’s posed as a threat to KFC. McDonald’s was offering god quality service and alongside it also provided other delicious items for consumption unlike KFC which was still stuck with the experiment on sandwich. 2. There was also clash of views concerning administration between KFC and PepsiCo which as a result messed up things.
PepsiCo is in favour of a practical and speedy system to increase profits. As a result, this gives rise to insecurity among employees concerning benefits. 3. Due to PepsiCo, KFC had undergone through a lot of crisis in terms of finance and stability in administering the resources. Many members of the KFC were transferred to other posts. This led to insecurity and frustration. As a result of this many workers left their jobs due to unfair working conditions and pressure. 4. . Disputes erupted between KFC and PepsiCo. This led to misbalance and confusion in the working conditions.
As per the set contact, PepsiCo had the right to make changes as well as to change locations of the branches of the empire. As a consequence, the bond between KFC and the United States deteriorated which brought loss. 5. The vital weakness to be noted is that KFC mostly cooks its chicken in vegetable oil names Trans fats (unsaturated fat) which is an unhealthy method of cooking. Moreover KFC makes use of genetically modified chicken, which seems to be very controversial amongst the educated and health conscience. Nowadays people are more worried about their health and they esire to consume healthy and good quality of food. Opportunities represent external finding which can enhance a company’s performance. Opportunities that KFC can take advantage of are as follows: * The Mexican market, which offers a large customer base, lesser competition, and close proximity to the US. The growth in the fast-food industry is limited due to the aggressive pace of the growth in the 70’s and 80’s. As a result, the market is saturated and “the cost of finding prime locations is rising. ” With the higher cost of the initial investment, the new restaurants are pressured to increase per-restaurant sales.
Many companies are realizing that in order for them to grow they need to pursue foreign market. One of the potentially profitable markets is Mexico. Mexico has over 91 million people and growing. This give companies a huge customer base to work with. Also, the companies are able to take advantage of the close proximity to the US. The transportation cost to Mexico compared to other countries is very minimal. Despite the advantages, US companies in general have not expanded much in the Mexican market compared to European or Asian market.
Therefore, the companies can expect lesser competition when expanding in Mexico. * Peso devaluation has made it less expensive for US to buy assets in Mexico. US companies are able to invest less money in buying assets in Mexico due to favorable exchange rate. This opportunity gives the companies a reduced risk in investing in Mexico. Also, the companies that are already in Mexico are able to import raw materials at a favorable rate by converting dollars into peso. * “Dual branding” helps to appeal to the wider customer base and also provide higher profit.
This strategy helps to “improve economies of scale within its restaurant operations. ” For many companies that own more than one fast-food chain, “dual branding” is an ideal way to expand quickly and increase profit. The companies no longer need to wait for the store to be built or spend time and money looking for the location. By adding a brand to the existing fast-food store, the companies are able to expand quickly and for less money. The companies are also capitalizing on the increased customer base due to the increased menu offering. Increased profit is another benefit of “dual branding. The companies are enjoying higher profit due to the low cost in expanding and the reduced advertising dollar spent by advertising the two chains together. * New franchise laws in Mexico give fast food chains the opportunity to expand their restaurant bases. In January 1990, Mexico passed a law that favored franchise expansion. The law provided for the protection of technology transferred into Mexico. The law also allowed royalties. Before 1990, there was no protection for patents, information, and technology transferred to the Mexican franchise. Also, before the new law royalties were not allowed.
This resulted in higher number of the company owned fast-food chains rather than the franchises in Mexico. However, with the new law, the companies are given an opportunity to benefit from selling franchises. The fast-food chains are now able to expand to other regions of Mexico by selling franchises to individuals rather than keep building company owned stores in centralized locations to keep the operation simple and effective. * Australian opportunity Growth in international profits was highest in Australia, which is now KFC’s largest international market. New distribution channels offer a significant growth opportunity. Especially in the last few years, consumers are demanding fast food in non-traditional locations, such as shopping malls, universities, hospitals, and other high-traffic areas. Consumers are demanding greater convenience when purchasing. The locations listed above are some of the most popular non-traditional locations that could be exploited by a fast-food chain. The fast-food chains are recording high sales in those areas due to high-traffic. Consequently, the companies are constantly looking and testing for new high-traffic locations to expand.
Threats to a company are those business characteristics that endanger the company’s position within its industry as well as jeopardize its profits. The threats that KFC faced with include the following: 1. Saturation of the US market. According to the National Restaurant Association (NRA), food-service sales in 1995 will hit $289. 7 billion for the U. S. restaurant industry. The NRA estimates the sales in the fast-food segment of the food industry will grow 7. 2% to approximately $93 billion in the United States in 1995, up from $87 million in 1994.
Although the restaurant industry has outpaced the overall economy in recent years, there are indications that the U. S. market is slowly becoming saturated. 2. Increasing competition and rising sales of substitute products. Faced by slowed sales growth in the fast-food industry, other segments of the industry have turned to new menu offerings. McDonald’s introduced its McChicken sandwich in the US market in 1989. Jack in the Box has introduced chicken and teriyaki with rice. Domino’s has introduced chicken wings to its menu. Pizza Hut has tried marinated, rotisserie-cooked chicken. . Changing preferences of consumers. During the 1980s, consumers began to demand healthier foods and KFC was faced with a limited menu consisting mainly of fried foods. In order to reduce KFC’s image as a fried chicken chain, it changed its logo from Kentucky Fried Chicken to KFC in 1991. In 1992, KFC introduced Oriental Wings, Popcorn Chicken, and Honey BBQ Chicken as alternatives to its Original Recipe fried chicken. In 1993, KFC rolled out its Rotisserie Chicken and began to promote its lunch and dinner buffet. 4. Obstacles associated with expansion in Mexico.
One of KFC’s primary concerns is the stability of Mexico’s labor markets. Labor is relatively plentiful and cheap in Mexico, though much of the work force is still relatively unskilled. While KFC benefits from lower labor costs, labor unrest, low job retention, absenteeism, and punctuality continue to be significant problems. Though absenteeism is on the decline due to job security fears, it is still high, at approximately eight to fourteen percent of the labor force. Turnover also continues to be a problem. Turnover of production line personnel is currently running at five percent per month.
Therefore, employee screening and internal training continue to be important issues for foreign firms investing in Mexico. Another area of concern for KFC has been the increased political turmoil in Mexico during the last several years. For example, on January 1, 1994, the day NAFTA went into effect, rebels (descendants of the Mayans) rebelled in the southern Mexican province of Chiapas on the Guatemalan border. Around 150 people were killed. The peso crisis of 1995 and resulting recession in Mexico left KFC managers with a great deal of uncertainty regarding Mexico’s economic and political future.
KFC’s approach to investment in Mexico is to approach it conservatively, until greater economic and political stability is achieved. THREATS OF KFC IN MAURITIUS. We got the news on 29 of September that the KFC outlet of Port Louis was closed due to strange odors in the storage room. However we got the news since some days about a private investigation in all KFC outlets in Mauritius and apparently this was NOT a rumor! Today 8 other KFC outlets have been closed and they are: * KFC Vacoas * KFC Goodlands * KFC Trianon * KFC GrandBay * KFC Mahebourg * KFC St Jean * KFC Rose Hill KFC Jumbo Adding to it the already closed KFC of Port Louis, this makes it to 9 already. To note that over 10 tons of meat has been seized at KFC and recent test on these proves that the bacteria Salmonella is present in the meat! This bacteria is commonly found in poultry, eggs, and in meat. Salmonella bacteria affect the stomach and intestines and may even cause blood poisoning. Below are some symptoms of Salmonella poisoning if you eat these meat: * Diarrhea or constipation. * Headaches. * Stomach cramps. * Nausea and vomiting. * Fever. * Possibly, blood in the faeces.
Now the question that many Mauritian must ask is since when is there this problem with KFC! Have we been eating poisoned meat all this while? KFC Mauritius is back to work after nearly 2 weeks of prohibition. 13 of the KFC outlets are operating today while the one at Quatre Bornes is still closed due to some sanitary issues. Apparently the outlet of KFC Quatre Bornes is going to switch to another location soon due to a problem with its Septic system which interacts with its Storage room and of course this is against the Food Act of Mauritius. Opportunities to develop and create the following in Mauritius.
Yum! Value Network We recognize there are many franchising choices out there and you need real value. You need strong brands that have demonstrated economic stability over time that offer growth opportunity and that give back to the community. Yum! offers all of this and more. It’s what we call the Yum! Value Network. The Yum! Value Network consists of many programs and support staff all focused on enabling you to compete, including: * Brand Recognition * Customer Attraction * Competitive Advantage * Franchise Value System * Multi-Unit Growth * Economic Stability * Brands that Give Back to the Community Development Expertise * Access to Financing * Solid Business Support * Quality On-boarding ; Training * Reliable Supply Chain * Return on Investment Millions of people have come to love his one of a kind chicken, home-style side dishes and hot and fresh biscuits. We believe there has never been a more exciting time to be a part of Yum! Brands and KFC! When we created Yum! Brands, we had the privilege of possessing a heritage of success established by the founders of KFC, Pizza Hut, Taco Bell, Long John Silvers, and A;W. Their leadership and innovation helped launch the quick service restaurant industry.
The brands they created enjoy worldwide recognition and popularity Yum! Brands is the biggest restaurant company in the world, and we are the worldwide leader in our product categories! KFC can operate in cities and town in Mauritius there are more development and job creation so that the business will flourish and people can also afford it. Through an analysis of the strengths, weaknesses, opportunities, and threats of KFC, the following potential problem areas were identified: 1. No defined target market. The advertising campaign of KFC does not specifically appeal to any segment.
It does not appear to have a consistent long-term approach. The U. S. has enormous changes in its demographics. Single-person households have increased from 12% in 1970 to 25% in 1995. With this kind of dramatic change, KFC does not have a proper approach to its target market. 2. Saturation of the U. S. Market. There has been an increase in the overall number of fast-food chains. Access to restaurants is now easier due to non-traditional locations, for example in airports and gas stations. Also, the age of Americans tends to change the frequency of eating out. 3. Health Conscious Consumers.
There has been a trend toward an increasingly healthy diet in America. This put KFC at an extreme disadvantage due to its fried product offering. 4. Increased Start Up Costs. Prime locations have increased in cost due to limited room for expansion. New technology has increased efficiencies, but resulted in greater increased start up costs. Restaurant and equipment packages range from $500,000 to $1,000,000. Salient Problem Low profitability and high risk of doing business in Mexico. Due to the current devaluation, profits are greatly reduced. This reduction in earning power has brought about much political unrest.
Mexico has a largely unskilled labor pool that provides little stability. Cultural attitudes toward punctuality, absenteeism and job retention tend to make managing employees difficult under present circumstances. High turnover rates lead to high training costs and can threaten the brand integrity. In the past, the Mexican economy has triggered violence toward American firms by frustrated nationalists. The culmination of all these problems led to low profitability due to a low profit product margin. Strategic Alternatives The strategic alternatives for KFC are as follows: 1.
Re-franchise all company owned Mexican units into franchises Advantages * Reduced risk—political and economical * New legislation promoting franchises and protecting patents and technology in Mexico * Increased cash flow from sale of units * Less day to day involvement by KFC * Less Administrative Costs for KFC * Steady royalties even after the sale of the units Disadvantages * Foregoing potential greater profits * Losing control of day to day operation of the franchises * Expansion through franchise endangers brand equity 2. Completely divest KFC of Mexican operations
This alternative includes canceling all franchises and selling off all company units in Mexico. Advantages * Eliminate risk in foreign markets–Mexico * Reduced currency rate exposure in Mexico * Protects brand integrity * Increased cash flow/capital for other investments * Would not have to oversee Mexico and would save operational and administrative expenses Disadvantages * Forgoing potential profits from the 2nd largest international market (Mexico is second behind Australia) * Ill will from franchises and Mexico consumers * Eliminate brand visibility in Mexico 3. Leave Mexico as is and grow other foreign markets.
Advantages * Focus investment on strongest growing segment in Australia * Less political and financial risks in other foreign markets * Still maintain a minimal presence in Mexico for further growth in the future when stability is greater Disadvantages * Still have not mitigated risk in Mexico * Forgoing potential growth at profitable market * Still have brand exposure * Still have to service Mexico units with no increased economy of scale Reasons for KFC to go overseas. KFC might have thought of moving from the domestic markets to international markets for the following reasons. Potential demand in foreign market. * Saturation of domestic markets. * Comparative advantage. * Availability of human resources. * Technological advantage. PESTEL Analysis. The PESTEL analysis in fact refers to an in depth scanning of the Political, Economical, Social, Technological, Environmental and Legal situation of a country. The Mauritian government have very well found KFC beneficial to the nation, as it is the pioneering western fast-food outlet. Training the joint venture partner, personnel and other institutions in the value chain has reduced learning and experience curves.
KFC’s operations have also inspired local competitors to increased service and quality of food. It has also help to create a competitive fast-food industry in Mauritius as new competitors responded to KFC’s ideas. Moreover, a joint venture agreement commonly produced goodwill and commitment between the host government and the foreign investor. The basic economic infrastructure consists of transportation, energy, and communication systems which are available in abundance as far as Mauritius is concerned. The degree of industrialization could provide a marketing segmentation variable.
As far as the Social situation is concerned, we can say that a fat-food chain like KFC could be considered a place to enforce a social connection. Furthermore, KFC could donate to some NPO as a part of the CSR program. When referring to the technological situation of Mauritius we will be talking about the communication facilities and also whether the types of machinery needed for the smooth running of KFC operations would be able to operate in Mauritius. The environmental situation consists of ensuring the sanitation of the environment.
In other words it is to see that the health of the people as well as the environment does not come to harm when deciding to purchase and eat KFC products. A joint venture would also significantly ease the entry to the Mauritian market. A new entrant would find it very difficult to form a local and personal network between businesses and government agencies, which are crucial to success and provide access to the local market and domestic suppliers. In addition, local business customs and laws can be quicker understood and established ways to cut bureaucratic red-tape can be further utilized.
Also, the local knowledge of culture, language and geography is beneficial for any foreign entrant into a relatively unknown market. Competitors Actions. In a competitive market, companies are not only dependent on their strategy but also on the strategy of their competitors. If the competition is exploring the Mauritius market and you aren’t, can’t that be risky? For example, if McDonald’s invest in the risky market X and KFC doesn’t, two situations may happen. First the investment succeeds, in which case McDonald’s gains the advantage.
Second the investment fails, in which case KFC gains the advantage from McDonald’s misfortune. To playing safe, KFC can follow the competition into the new markets. KFC competitors in Mauritius are pizza Hut; Debonaires; Steers; Nando’s which have just enter the market and is proving to be a fierce competition for KFC, among many others. THE problem that KFC is facing. As mentioned earlier KFC is facing a big crisis . Most of its outlets that is found in Mauritius are being closed down. The reason for that have been states that KFC products no longer guarantee a harmless result.
Many diseases have been associated with KFC. Furthermore, the environment in the restaurants is considered to be unhygienic. As a result the sales of KFC have been deeply affected. The profitability ratio was not as expected. Strategies developed to overcome the crisis. Over the past years many strategies have been developed in order to cover the losses. A new product has been launched name as the ‘Boxmaster’. Some adds-on such as a slice of pineapple, a slice of tomato, a slice of cheese, even the tomato and chilli sauces have been offered free on the purchase of a specific combo.
A bottle or a cup of soft-drink has been offered free with any meal purchased. There was also the introduction of the garlic bread. We must not forget the invention of the kid’s meal which was offered in an attractive package inside which there was a miniature toys or some stickers. The infrastructure of the building has also been renovated in order to attract more customers. There have been ads on the television which was being telecasted daily at some times in an attempt to increase the number of customers that are willing to buy KFC products. New Strategies that can be adopted for the Relaunching of KFC products.
Our first proposed strategy would be that KFC reinvented another variety of product with new flavour and spices. And then launch it with a price that will attract existing customers and even throw in new customers. Furthermore, KFC could derive the strategy of ‘buy one get one free’ which is a very common a successful strategy that are adopted by businesses and which have already been adopted by one of KFC competitor, Pizza Hut. For example it can offer two meal at the price of only one meal. The variety of desserts that are available could be improved.
KFC could sign a contract with a dessert company who is struggling to create a brand image. And by doing so KFC could increase its number of customers and the other party will have the benefit of acquiring a brand loyalty. Moreover, new outlets could be opened in other places around the island where there is great demand of KFC products and where it is not easily accessible. Having their desired product had arm length will encourage customers to change their purchasing routines. A campaign could be organised in order to regain the trust of those customers which was once loyal to KFC and which has lose interest due to the crisis.
They must be convinced that there are no immediate threats to their health if they choose to purchase KFC products again. The supervisors of the outlets of KFC will have to see that the toilets are being kept clean so that customers do not feel uncomfortable when going to such outlet. There must not be unpleasant smell coming out. So the employees must be notified of their duties and strict action needs to be taken in case of failure in attempting the duty. Play corners could be established so as to encourage family with kids to come to the outlets.
Families with kids will be able to enjoy a pleasant evening. There could be a station booth where customers could select their desired music to listen. Or even better an orchestra could be arranged as in Mauritius today there is no shortage of such artists. References. http://www. lexpress. mu/services/search. kfc http://www. lexpress. mu. services/epaper-66938-b-kfc- le colonel-sanders- a repris-son tablier-b-htm http://www. kentucky-friedcruelty. com//w. why kfc. asp http://alhetic. com/tag/mauritius http://www. island crisis. not/2009/09/kfc. port Louis closed
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