The second part of the report consists of the evaluation and rationalization of the management and leaderships issues identified in part 1 by using the McKinsey 7S Model to help to identify what types of changes that should be made and implemented in order to help the company to improve. In the last phase of the report, an overview of the company situation will be presented followed by suggested sets of recommendation and actions for KFC in order to overcome the key issues identified.
Company Backgroup Kentucky Corporation (KFC), also known as Kentucky Fried Chicken, is a chain of fast food restaurants based in Louisville, Kentucky, in the United States which was started in the 1930 by Colonel Harland Sanders as a small franchise operation. Kentucky Fried Chicken is a very well-known restaurant in the world. It is rated at number 60 as the world most well-known brand by the BusinessWeek, while McDonald at number 9 and Nestle at number 23 (Badrishah, 2007).
KFC remained the largest chicken restaurant chain and third largest fast-food chain. It held over 50 percent of U. S market in terms of the sales number and ended the year 1995 with over 9,000 restaurants worldwide. By end of the 1995, KFC have opened 234 new restaurants and is operated in 68 countries. In the year of 1997, the company has become a brand of YUM! Brands Inc. which is the world largest fast food chain who also operates Taco Bell, Long John Silver and Pizza Hut. Currently, the company owns and franchises more than 16,200 outlets in about 100countries and have employees of more than 24,000. KFC was the first fast-food chains to enter international market and has now developed one of the worlds most recognizable brands.
KFCs early entry into the fast food industry allowed the company to gain a strong brand name in the industry and dominate the chicken industry. KFCs nearest competitor Boston Market (formerly Boston Chicken) and Popeyes held market share of 12. 3 and 10. 2 percent respectively while KFC held a market share of 58 percent in the chicken segment (KFC. com, 2007). KFCs global success is credited to its quality management which is the: Quality, Service and Cleanliness (QSC) program to review the quality of the service offered to the customers and to evaluate the company performance.
Other than that, the understanding of the customers and satisfying their needs also contributed to KFCs global success (Reynolds, 2001). Not only so, KFC also has also uses a special marketing tools to promote its product by means of combining PepsiCo product which is the beverage and the products of KFC itself, with these marketing idea, both company KFC and PepsiCo are both generating profits and it is an advantage for KFC since they no longer purchase beverages from outside company. KFC primarily sells chicken pieces, wraps, salads and sandwiches.
While its primary focus is fried chicken, KFC also offers a line of grilled and roasted chicken products, side dishes such as mashed potato, sweet corn, coleslaw and desserts. KFC also uses the localization strategy while designing the menu in KFC as a way to adapt to the local taste and culture by also offering beef based products such as hamburgers or kebabs, pork based products such as ribs and other regional fare. On the other hand, judging by the current market growth in China, KFC have absorbed the Chinese cultural elements into its western management style, hence forming an inter-cultural management mode.
Chinas rapid economic development has opened its door for the fast-food industry and enable KFC to use localization strategy to let Chinese to have the chance to experience western lifestyle with traditional Chinese cultural embedded in it (China Daily, 2004). At present, there are more than 1,000 restaurants in China and they are now increasing at the rate of average 200 stores per year. In 2010, Yum! Brand, the parent company of KFC Corporation expects 36% of their global $2 billion operating profits from 3700 restaurants in China.
The success of KFC in China has lead Yum! Brand Inc to be the most successful foreign company in China with 40% market share outstripping competitors like McDonalds (Turner, 2011). Such management mode by KFC has proved that the company has the flexibility to adapt to different cultural and environmental changes. SWOP Analysis SWOT is a tool for auditing the strategies and the environment of an organization for decision making. And it can be classified as Strengths, Weakness, Opportunities and Threats. (Pahl & Richter, 2007)
Strengths KFC is recognize as the second largest fast food chains in the world, the first which being took by its main competitor, McDonalds * Holding over half of the market shares in the fast food industry. * Occupied the china market, KFC defeat McDonald and become the largest fast food chain in China market which contain 1. 3 billion population. * It have been globally recognized and experienced and having strong market in Mexico, Middle East and Asia such as China, Japan, Korea, Thailand and Malaysia. * Earn huge revenue from the franchises and licensing fees. The most major strength of the company is their Brand Equity.
* Its secret recipe allowed KFC to set itself apart in the industry and maintained supremacy in the fast food market. * Every year, the profits of the company increases. * KFC have a quality management which called Quality, Service and Cleanliness (QSC) program use to judge the quality of its service offered to the customers and to measure the company performance. Weaknesses * Least focus about their product research and development, they more concerned about their branches expending. Inconsistent quality of services in many outlets by few of its franchises had damaging the brand name and company reputation.
* Inflexibility of prices makes it unaffordable to middle class people. * Imbalanced entrance of the franchises to different markets at one time especially too concern the Chinese market has extremely decreased its global growth rate. Opportunities * Besides expanded its target market focus to family and friends of all age brackets, KFC also targeting and tempting the young customer which age between 18 to 24 years old. Dependability of the chicken meat used as the people are scared of infections from eating beef globally.
* Focus in Chinese market which known as the worlds faster growing market. * Increased and effective services specially home delivery and drive though services * Induction of new products other than chicken including fish and vegetable in most of its menu in reality the whole menu is balanced and healthy which aim to attract the customers considerably. * Position itself strongly in the global markets, with a vision of increasing market value and market share.
Threats * Customer began to demand more healthy and fresh food but KFC was faced with a limited menu and majority consist of fried foods * Faced by slowed sales growth in the fast-food industry, other segments of the industry have turned to new menu offerings, as they have very few products other than their selection Fried chicken. * Customer shift to other brand that offering the same products which in lower rates on the prices. * Less economical deals are being offered compare to its biggest competitor McDonalds who offer more cost-effective products.
KFCs Key Challenges KFC Corporation, being one of the largest fast-food chains in the world usually will have challenges that the company will have to overcome in order to retain their market share and reputations. But however, KFC restaurants around the world have various complaints regarding its services provided. It has been reported in United States that a customer was offended by the manner in which she was served. Customers complained that the employees were rude, lazy and negligent to her family and other customers.
In the eye of management, a good services will help for t he long term customer relationships. But however, KFC in USA failed to realize the importance of it as employees were not given a proper training regarding good customer services (Eisenback et. al, 2008). According to some of the staff in KFC, there is a lack of communication between the marketing department and the operation of KFC. Marketing department may not give accurate details on the new promotions and new products to the KFC operation nor clearly explain to them about the campaign.
This lead to many problems for the operation team as they may be confused about the promotion or coupon and hence might not be able to explain the details to customers with enquiries. In addition, it could affect the efficiency and effectiveness of operation as crewmembers may not be familiar with the new marketing strategies and may not be able to sell the products as the corporate wanted them to be (Lan & Mahmood, 1995). Additionally, KFC in China has also been reported that some KFC restaurants have failed to change their frying oil for four days and also failed to provide fresh soybean milk for customers.
The restaurants has been caught for changing the dates for replacing the oil for the purpose of passing examination by district inspectors from the company, and whats more, the employees also ignore and changed the time on unsold items to make customers believe that they were eating freshly prepared products. The condition of kitchen is also reported to be very unclean and the employees did not follow the food safety regulation such as wearing caps when preparing foods. (China Times, 2009). Despite of the corporate rules on standard operation and regulations, employees at KFC often ignore them.
Such incident in KFC would destroy the companys brand reputation although KFC Corporation claimed that they did provide training booklets which include questions on cross-contamination of food, but because of the lack of supervision, the employees would act whatever they want and ignoring the rules set by the management. The mission of KFC is people be the first, customers be the focus (Yum! Restaurant International, 2003) but however, it is found that KFC did not take proactive approach on listening to customers and employees.
There is no systematic customer survey for its products and services. It relies on the branch managers and public relation officers to get the customers opinion. Although the website of KFC has a customer service comment box for customers to send suggestion, but KFC ignore those customers who are not computer savvy. Many customers were complaining that customer did not have access to a customer service number and those who were able to reach customer service often received no response.
The failure of KFC to deliver efficient service proved that the management does not show concern to their customers and did not make any improvement to take care of the customers complaints and thought. Customers are viewed as an important asset of a company and therefore any complaints or opinions from them should be valued by the company (Eisenback et. al, 2008) Other than that, even though KFC has adequate human resources but they are lacking the capabilities.
Its mother ompany, PepsiCo, makes wrong decision in its corporate level strategy. They centralize and tightens the control over existing KFC managers and such actions causes the drop of the employee morale. In addition, PepsiCo also limits the rights and powers of the franchisees right and power and intents to compete and acquire the franchisees units. Such incident has caused a dispute which last for 7 years until 1966. This also make the company performance to drop and drive down KFCs market shares (Chu, 2003).