KFC Assignment
KFC Assignment
Introduction
KFC is the largest and most famous brand in the quick service restaurants of the fast food
industry in Malaysia. The firm opened its first outlet in Jalan Tungu Abdul Rahman in 1973.
Today the firm boasts 390 restaurants nationwide and controls 35% market share of the fast food
industry in Malaysia. Source:
http://www.kfcholdings.com.my/English/Flashsite/BusinessUnits/Restaurants_KFC.asp
Company vision: “To be the leading integrated food services group in the ASEAN region
delivering consistent quality products and excellent customer-focused service”.
http://www.kfcholdings.com.my/English/Flashsite/AboutCompany/OurGoals.asp
Company mission: “To maximize profitability, improve shareholder value and deliver
sustainable growth year after year”.
http://www.kfcholdings.com.my/English/Flashsite/AboutCompany/OurGoals.asp
Company principles
(1) OUR PASSION: “To satisfy our customers every time they visit our restaurants and to do
it better than our competitors”.
(2) OUR FORMULA FOR SUCCESS: “People capability comes first - satisfied customers
and profitability follow”.
(3) HOW WE LEAD: “Know and drive the business, and build and align teams”.
(4) HOW WE WIN: “Be the best at providing customers with branded restaurant choice and
branded products”.
http://www.kfcholdings.com.my/English/Flashsite/AboutCompany/OurGoals.asp
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Internal environment
Market intermediaries
KFC is a franchise business model which the head quarter is in U.S. and many franchisees the rest of the
world. Actually the franchise system itself is the real market intermediaries that KFC is using to popularize,
expand and distribute its products and their business concept (model) to reach the rest of the global business.
For example KFC holdings Malaysia Bhd (KFCH) is their intermediary in Malaysia market for the corporate
KFC in USA.
KFC suppliers
KFC has integrated poultry system which consist breeder farm and hatchery which increases efficiency and
reduces reliance with outside markets. However some few firms are KFC suppliers;
Pepsi: provides all carbonated drinks to all KFC outlets
Malex paper products Sdn Bhd: provides products like Paper Cups, Paper Box and Fast Food
Takeaway Boxes.
Competitors
KFC is competing with almost all players in the fast food industry. Some of the competitors are as follows.
MC Donald: provides a range of similar products with KFC like burgers, chicken nuggets and French
fries.
Burger king: provides different varieties of hamburgers
Starbucks: provides different variety of coffee drinks that is competing KFC breakfast which is
sausage with coffee or tea known as sausage twister. (KFC a.m.)
Customers
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The initial target market was kids and young urban adults but has since evolved into family oriented food
chain and restaurants. In order to satisfy the changing taste and preferences KFC have come up with 3
segments: kids, teens and family.
Kids: Chicky meal is a menu targeting young kids
Teens: X-meal is another menu targeting the teens which consist of hot rods, burger and Pepsi drinks.
Family: KFC provides special menu targeting the family known as family feast.
Public
The public consist of various interest group and stakeholders that influences the organization to achieve its
objectives:
Citizen action: this can be environmental groups which campaign for clean environment. They are
can sue the firm for unfriendly packaging that is hazardous to the environment.
Financial public: these are banks which KFC is taking credit facilities for business expansion. They
are interested the loan repayment with the agreed time.
Internal public: they are the employees and the shareholders. The employees require better treatment
while the shareholders expect profit for their investment.
Local public: this are the neighbourhood residents therefore all the firm operation should not have
negative impact on them e.g. pollution
Media: they are always the public watchdog any negative news against the firm could affect both the
firms’ images and sales as the public trust them.
General public: they expect KFC to provide healthy food. For example the food must meet the Halal
criteria.
International public: they are concerned the business ethics of the firm for example the international
public avoid using the products of brands that are accused of child labour.
Company
KFC is a member of the quick service restaurants, they specializes pressured fried chicken, fries and burgers.
The company can only achieves its objectives of offering consistent service quality to customers if all the
departments work together with same goal of achieving the overall organization objectives.
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External Environment
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LEGAL FACTORS
Consumer protection Act of 1999
The consumer protection Act protects the consumers from exploitation from unscrupulous business firms and
entrepreneurs. The Act provides safety and standard measures which all business including fast food should
conform to safeguard customer interests. For example unfair pricing of the products.
Malaysian franchise association (MFA) 1994
The MFA is self regulating authority that is controlling all franchise business regulation in the country. Every
retail chain that is holding franchise agreement both in international and local brands must register with the
association before starting business in Malaysia. The authority develops strategies, train members and work
closely with ministry of Entrepreneur’s development.
Franchise Act of 1998
The act was implemented in 1998 to regulate and protect both the interests of the franchisors and franchisees. All
franchise agreement, registrations and dissolutions are done and regulated by the registrar of franchise (ROF)
under the ministry of Entrepreneurs. Source: http://www.malaysiamission.com/team.php?id=25
SOCIAL FACTORS
Ethnic composition
The Malaysian population stands slightly above 25 million (25,715,819). The Malays constitute the bulk of the
country’s population which is 50.4% followed by Chinese with 23.7% than the indigenous people 11%, the
Indians 7.1% and others 7.8%. On the other hand the population growth stands 1.75 in 2009.
Age structure
The age composition of the country as follows. 0-14 years consist 31.4% of the population while 15-64% years
make up 63.6% of the population and those of 65 years and above comprise the remaining 5%. In relation to the
age structure the bulk of the Malaysian population meet KFCs target market which is 6-45 years age bracket.
This segment consist mostly the active working population of the country that have stable jobs.
Source: http://www.indexmundi.com/malaysia/demographics_profile.html
TECHNOLOGICAL FACTORS
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Point of sale/services (POS)
KFC Malaysia introduced micros 2400 POS technology to the all restaurants in Malaysia Singapore and Brunei.
The machine helps to conduct all retail transactions by providing services like credit card processing and cash
transactions. The machine results secure transactions and speedy service delivery which creates customer
satisfaction. http://www.allbusiness.com/food-beverage/restaurants-food-service-restaurants-fast/6988065-1.html
ECONOMIC FACTORS
Malaysia economy
Malaysia practice open economy with a lot of government influences in some sectors. For instance the
government implemented price control and provision of subsidies to essential products like wheat, cooking oil
and rice to stabilize the costs of living. The following industries constitute the backbone of the county’s
economy: rubber and palm oil processing, light manufacturing, electronics, timber, tin mining, tourism, fishery
and agriculture.
GDP Growth
The GDP of Malaysia was constantly in growth trajectory from the 2003 to 2009. For example the growth rate
stood 4.2% at 2003 before it expands to 5.2% the following year and reach 7.1% in 2005. However the growth
slowed 5.2% in 2006 and finally reached 4.6% in 2009. From the positive economic growth the unemployment
level reached 2.6% and the GDP per capita reached $14,400. With secure jobs and increase in PPP Malaysians
will be having disposable income to consume fast food products from KFC and other chain of restaurants.
Source: http://www.indexmundi.com/malaysia/gdp_real_growth_rate.html
POLITICAL FACTORS
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Malaysia is a federal constitutional monarchy with 2 chambers of parliament and 3 level of government structure
namely the federal, state and local. The king is the supreme head of the country while the prime minister is the
head and who controls the day today running of the government.
The Malaysian government provided political stable business environment for business to flourish but also
implemented different initiatives for different sector. For instances the government introduced the 8th Malaysian
plan of 2001-2005 to establish 50 new franchises in the country. Empowering the Bumiputra entrepreneurs was
another initiative which increased the bumiputra franchise holders from 10% to 40% in the industry and thus
increased the KFC branches from 200 to over 390 today that benefited the government plan.
Source: http://www.malaysiamission.com/team.php?id=25
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Key success factors
Source:
http://www.kfcholdings.com.my/English/Flashsite/BusinessUnits/BizU_Poultry_Integration.asp
KFC Malaysia started an integrated poultry system complete with breeder, hatchery and broiler
farming to improve efficiency, stable source of high quality chicken and cost efficiency which
the cost advantage is passed to the final customer.
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The Secret recipe
The original recipe which is made up of fried chicken that contains 11 herbs and spices is what
gives KFC chicken unique taste and flavor that attracted millions of people worldwide. It’s
famously known the “finger lickin’ good”. The component are kept in secret place in the
corporate headquarter in Louisiana Kentucky.
Maintaining quality
To maintain and offer quality products KFC source all its raw material and components from
reputable organizations such as nestle, ayamas, UBF, Kerry ingredients and McCain.
Halal policy
KFC products fully complies the Islamic law. The QSR brands sheriah council strictly oversees
all their products to pass the halal procedures and requirements before they are provided the halal
certificate and JAKIM Logo. Source: http://www.kfc.com.my/about-halal.html
Healthy food
KFC provide healthy food by frying all their foods using non-hydrogenated palm oil that contain
less amount of trans-fat and 100% cholesterol free. KFC also maintain the minimum requirement
temperature level when cooking their meal as recommended by WHO (world health
organization) to avoid contamination and retention of nutrient.
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SWOT ANALYSIS
Strength Weakness
Opportunity Threat
Expansion and acquisition Health conscious customers
KFC should leverage and replicate their success to The increasing numbers of health conscious people
unexplored markets in both Africa and Asia. They can who tend to avoid fast food products are threat to the
also acquire smaller competitors like merry brown to firm’s customer base and revenue in future.
increase their market share.
Threats of substitute
Menu diversification They are a variety of available substitute product
Add more products to the menu to offer customers that is threat to KFC products. For example new
variety of choice and increase the target market for Mamak and Rasamas restaurant are opened every
example the old people. day.
Innovation
Introduce non-chicken products such as frozen Stiff competition
vegetables which have longer shelf life since people are KFC is competing different rivals for each of their
reducing the intake of both red meat and fried chicken products at the same time which increase their
for health reasons. advertising expenses eg KFC breakfast coffee (AM)
is competing with Starbucks while their burger is
competing against McDonalds and burger king.
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STRATEGIC THRUST CHART
• Added service
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• Broad product line
• Quality
Strategic
Thrust
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KFC will adopt differentiation, synergy and pre emptive strategies to achieve its mid term
marketing for the next 3 years. (2011-2013).
Differentiation
In a competitive environment organizations have to test and measure whether the strategies
adopted are able to assist the firm to achieve its objectives. The differentiation strategy will be
implemented for KFC to remain the market leader in the Malaysian fast food industry.
Product differentiation: will be one area the firm will be emphasizing by making sure the KFC
products will be one step ahead always from the rest of the competitors. This can be done by
either introducing new products or changing some of the components of the existing products.
For example the “Veg burger” which is vegetarian burger and the first in the Malaysian market
will be introduced by KFC in next year. (Koelling & Moeslein, 2010)
Service differentiation: the focus will be constant improvement of service delivery. This will be
done by reducing the average 4 minute taken to serve each customer to 3 minutes from next year.
Adding one additional counter cashiers during the rush will be one way of reducing the
turnaround time.
Personnel differentiation: employees play vital role in the success of the service sector. To
have the head start in the industry we will conduct in house training for all our employees in the
area of hygiene, health and safety issues, customer behavior and expectations to create customer
satisfaction.
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Synergy strategy
Internal synergy: one competitive advantage that we will focus will be collaboration of inter
departmental roles within the organization. For instances cases of labour shortfall in one section
will be stabilized by redistributing excess labour supply in other sections.
Customer involvement: the participation and cooperation of the customers in the service
delivery process will be focused in order to create customer satisfaction. Survey will be carried
out in the outlets with customer inputs to pinpoint areas of improvement from customer’s
opinion which will be the bases for the management’s next course of action. .(Liao,& Greenfield,
2000).
Location: is one crucial factor that is considered when opening hotel and restaurants. With this
factor in mind KFC mid term strategy will be opening all their new upcoming outlets in strategic
area. For example the focus locations will be near train station, universities and airports where
the traffic flow is high before any competitor. (Papathanasis & Vassillopulos, 1989)
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Product development: will be emphasized in the mid term plan for next 3 years. This will be
done by carrying out research and development focusing the changing customer taste and
preference pattern in order to produce goods that meets customer needs all time. For example
KFC is the first in fast food industry to introduce vegetarian burger to serve the health conscious
segments.
Products
KFC will introduce vegetarian burger known as “Veg burger” from 2011 to target the weight
conscious customer segments. The Veg burger will have the following ingredients beans,
chickpeas, carrot, celery, onion, avocado, wheat flour, salt and pepper to create delicious taste.
The beans will provide protein with less cholesterol to replace the meat components of the
burger. The burger will have 3 sizes the large, medium and small with simple wrapping.
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Pricing strategies
KFC will adopt cost based and penetration price strategies for the Veg burger in order to
capture half of the burger market share in the fast food industry in mlaysia in 2013. The
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cost based and the penetration pricing will be the best option since majority of the
competitors have burgers in their menu for instance burger king and Mac donald. The
fact that health conscious segment is small for the time being other price sensitive
individuals will also be targeted. For example large veg burger will RM8 which is lower
than the “Zinger chicken burger” that is currently offered RM10 in KFC oulets. The mid
will be RM6 and finally the original veg burger will be priced RM4.
Original RM 4
Place strategies
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KFC will adapt and employ different distribution strategies to take service closer to the targeted
customers. For instance the firm will be increasing the number of the restaurants from the current
390 outlets to 450 in the next 3 years. Most of this oulets will be opened or located places with
high traffic number of customers specially near train station, shopping centres and near
universities. (kotler, et al, 2007)
Extend the current working 16 hours to 24 hours to all oulets from the current 30 outlets only.
This will give opportunity to customers to enjoy their favourite meals everytime they desired and
this will lead to customer satisfaction, loyalty and retention. Introduce KFC delivery services to
customers who are busy or far away from any KFC outlets.
Create awareness and popularise the existing “meal on the wheel” programm to the customers.
The meal on the wheel was introduced to serve organisation with office functions like the annual
dinner, birthday parties and annual general meeting. This provides opportunity for companies to
have customised and tailor made corporate dinner for their parties.
Promotion
Sales promotion
In an effort to create product awareness and to persuade customers to buy our “Veg burger” KFC
will come up different promotion strategies to reach as many customers as possible. For instance
7% price discount will be offered to the first week of January in 2011 when the Veg burger will
be launched. (Kotler, et al, 2007)
The firm will work with health and fitness centres like fitness first and true fitness to encourage
and recommend their customers to eat the Veg burger as part of the fitness diet. Veg burger
pamphlets will be distributed to all fitness outlets to remind the customers the existence of the
products. Endorsement and testimonials from fitness instructors will be used to validate and
strengthen the promotion campaign.
Advertising
Newspapers and television will be another avenue to reach the targeted audience. The star and
the strait times will be used to reach the customers while on the other hand TV3 and RTM TV1
will be the used to convey the message during the prime news at night. Vehicle and train
advertising will be another option which will be exploited by signing exclusive contract with
RAPIDKL to advertise the burgers and other products both the buses and the trains.
VEG BURGER
HEALTHY FOOD!!!
Process strategies
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Time management
The fact that fast food industry serves similar food to the same targeted customers the main
factor for differentiation will be service delivery. Having this factor in mind KFC will be
emphasizing to reduce the overall time taken to deliver the service to every customer by
maximum of 3minutes. This will be done by increasing the number of employees during rush
hours to take the orders from the customers who are on the queue.
Customer involvement
Employees should always be alert and attentive when taking customers orders to reduce
wastages and increase customer involvement as part of the service delivery in order to increase
the customer confidence. The other option will be arranging customers in separate line for the
take a ways and those having their meals in the outlets for convenience.
People
People or human capital can be competitive advantage in the service sector if they are trained
well. KFC will have the following elaborate plan to achieve that success.
KFC will recruit employees with prior experience in the fast food industry and enroll them in
house training for one month courses leading to training in health and safety measures, hygiene
and food regulation. They will also be trained in customer handling practices, customer behavior,
expectations and characteristics. ( Aeker, 2007).
Employees of all KFC outlets will be a warded 20% salary increment from January 2011. This
translates to RM1440 per month from the current RM 1200 per month. They will be awarded
bonuses for working during the holidays. Teamwork will be encouraged all the time in order to
achieve organization objective.
Physical evidence
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Clean and attractive Ambience
The servicescape of all KFC outlets will be improved in order to be attractive and enjoyable
environment for the customers, clearly defined menus with clear information will be placed
every table, poster words “ welcome” and” have nice days” will be placed every corner with aim
of connecting the customers emotionally. (Kotler, et al, 2007)
Customer research
Every 3 months questionnaires will be distributed to the customers about their opinion
concerning the physical environment specially the areas that need change according to the
perspective, the chairs and tables will be changed once in every year from 2011. Stickers with
the words happy New Year and all other holidays will be pinned outside to all outlets. Finally
WIFI services will be extended to all outlets from the next year march.
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KFC 3 YEARS ACTION PLAN
Marketing mix Strategies Time frame Person in charge
Product Launching the burger 10th January 2011 Mr. Abdulla faiza
product to the market
Price The price of the 7th January 2011 Mr. Galal Mohd
burger will be set
before the launch
Physical evidence New dress code with 14th July 2011 Mr. Raj
KFC logo will be
launched
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ACTION PLAN CONTINUATION
Financial statements
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Income Statement
The revenue of the company will continue to increase in the next three years from RM
102,080,000 in 2011 to RM 112,543,000 in 2013. The gross profit also increases from
57,165,000 in 2011 to 64,149,000 in 2013. The company’s expenses are projected to rise in the
nest three years due to administrative and other expenses like advertising and marketing, while
the operating profit decreases from RM 24,499,000 in 2011 to RM 21,436,000 in 2012 and
increases to RM 23,633,000 in 2013. A 5 % growth projection was used for the next years.
Conclusion
KFC has to invest continuous product development in competitive industry like the fast food
industry to remain market leader. This can be done by carrying out research concerning change
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of customer needs and preferences all the time. The fact that differences between the competitors
is narrowing day by day the only way to survive is creating difference in terms of products,
people, service delivery and quality.
References
Books
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Aaker, D. (2007) Strategic Market Management, 8th ed. New York, Jhon Wiley & Sons.
Kotler, P., Brown, L., Adam, S., Armstrong, G., (2007) Marketing. (7th edition) Prentice
Journals
Koelling, M., Neyer, A., & Moeslein, K. (2010). Strategies towards innovative services: findings
from the German service landscape. Service Industries Journal, 30(4), 609-620.
doi:10.1080/02642060903078776.
Liao, Z., & Greenfield, P. (2000). THE SYNERGY OF CORPORATE R&D AND
strategy. Journal of General Management, 15(1), 83. Retrieved from Business Source Premier
database.
Websites
http://www.kfcholdings.com.my/English/Flashsite/BusinessUnits/Restaurants_KFC.asp
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http://www.kfcholdings.com.my/English/Flashsite/AboutCompany/OurGoals.asp
http://www.malaysiamission.com/team.php?id=25
http://www.indexmundi.com/malaysia/demographics_profile.html
http://www.allbusiness.com/food-beverage/restaurants-food-service-restaurants-fast/6988065-
1.html
http://www.indexmundi.com/malaysia/gdp_real_growth_rate.html
http://www.kfcholdings.com.my/English/Flashsite/BusinessUnits/BizU_Poultry_Integration.asp
http://www.kfc.com.my/about-halal.html
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