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Kentucky Fried Chicken

Published by Miranda Cobb Modified over 9 years ago

Presentation on theme: "Kentucky Fried Chicken"— Presentation transcript:

Chapter 2: Kinds & Characteristics of Restaurants & Their Owners

A Case Study Winter 2011 BADM 470

Ni, Shaowen Lou , Shanshan Abozenadah, Tony

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Home » Management Case Studies » Case Study of KFC: Establishment of a Successful Global Business Model

Case Study of KFC: Establishment of a Successful Global Business Model

By mid 1950s, fast food franchising was still in its infancy when Harland Sanders began his cross-country travels to market “Colonel Sanders’ Recipe Kentucky Fried Chicken.” He had developed a secret chicken recipe with eleven herbs and spices. By 1963, the number of KFC franchises had crossed 300. Colonel Sanders, at 74 years of age was tired of running the daily operations and sold the business in 1964 to two Louisville businessmen — Jack Massey and John Young Brown, Jr. — for $2 million. Brown, who later became the governor of Kentucky, was named president, and Massey was named chairman. Colonel Sanders stayed in a public relations capacity.

In 1966, Massey and Brown made KFC public, and the company was enlisted on New York Stock Exchange. During late 1960s, Massey and Brown turned their attention to international markets and signed a joint venture with Mitsuoishi Shoji Kaisha Ltd. in Japan. Subsidiaries were also established in Great Britain, Hong Kong, South Africa, Australia, New Zealand, and Mexico. In the late 1970s, Brown’s desire to seek a political career led him to seek a buyer for KFC. Soon after, KFC merged with Heublein, Inc., a producer of alcoholic beverages with little restaurant experience and conflicts quickly arose between the Heublein management and Colonel Sanders, who was quite concerned about the quality control issues in restaurant cleanliness. In 1977, Heublein sent in a new management team to redirect KFC’s strategy. New unit construction was discontinued until existing restaurants could be upgraded and operating problems eliminated. The overhaul emphasised cleanliness, service, profitability, and product consistency. By 1982, KFC was again aggressively building new restaurant units.

In October 1986, KFC was sold to PepsiCo. PepsiCo had acquired Frito-Lay in 1965, Pizza Hut in 1977 with its 300 units, and Taco Bell in 1978 . PepsiCo created one of the largest consumer companies in the United States. Marketing fast food complemented PepsiCo’s consumer product orientation and followed much the same pattern as marketing soft drinks and snack foods. Pepsi soft drinks and fast food products could be marketed together in the same restaurants and through coordinated national advertising .

The Kentucky Fried Chicken acquisition gave PepsiCo the leading market share in three of the four largest and fastest growing segments in the U.S., quick-service industry. By the end of 1995, Pizza Hut held 28 per cent share of $18.5 billion, U.S pizza segment. Taco Bell held 75 per cent of $5.7 billion Mexican food segment, and KFC held 49 per cent of the $7.7 billion, U.S chicken fast food segment.

Japan, Australia, and United Kingdom accounted for the greatest share of the KFC’s international expansion during the 1970s and 1980s. During the 1990s, other markets became attractive. China with a population of over 1 billion, Europe and Latin America offered expansion opportunities. By 1996, KFC had established 158 company-owned restaurants and franchises in Mexico. In addition to Mexico, KFC was operating 220 restaurants in the Caribbean, and in the Central and South America.

Many cultures have strong culinary traditions and have not been easy to penetrate. KFC previously failed in German markets because Germans were not accustomed to take-out food or to ordering food over the counter. KFC has been more successful in the Asian markets, where chicken is a staple dish. Apart from the cultural factors, international business carries risks not present in the U.S. market. Long distances between headquarters and foreign franchises often make it difficult to control the quality of individual franchises.

In some countries of the world such as, Malaysia, Indonesia and some others, it is illegal to import poultry, a situation that has led to product shortages. Another challenge facing KFC is to adapt to foreign cultures. The company has been most successful in foreign markets when local people operate restaurants. The purpose is to think like a local, not like an American company.

As KFC entered 1996, it grappled with a number of important issues. During 1980s, consumers began demanding healthier foods, and KFC’s limited menu consisting mainly of fried foods was a difficult liability. In order to soften its fried chicken chain image, the company in 1991, changed its name and logo from Kentucky Fried Chicken to KFC. In addition, it responded to consumer demands for greater variety by introducing several new products, such as Oriental Wings, Popcorn Chicken, and Honey BBQ Chicken as alternatives to its Original Recipe fried chicken. It also introduced a dessert menu that included a variety of pies and cookies.

Soon after KFC entered India, it was greeted with protests of farmers, customers, doctors, and environmentalists. KFC had initially planned to set up 30 restaurants by 1998, but was not able to do so because its revenues did not pick. In early 1998, KFC began to investigate the whole issue more closely. The findings revealed that KFC was perceived as a restaurant serving only chicken. Indian families wanted more variety, and the impression that KFC served only one item failed to enhance its appeal. Moreover, KFC was also believed to be expensive. KFC’s failure was also attributed to certain drawbacks in the message it sent out to consumers about its positioning. It wanted to position itself as a family restaurant and not as a teenage hangout. According to analysts, the ‘family restaurant’ positioning did not come out clearly in its communications. Almost all consumers saw it as a fast food joint specializing in a chicken recipe.

KFC tried to revamp its menu in India. Cole Slaw was replaced with green fresh salads. A fierier burger called Zinger Burger was also introduced. During the Navaratri festival, KFC offered a new range of nine vegetarian products, which included Paneer burgers. Earlier, KFC offered only individual meals, but now the offerings include six individual meals, two meal combos for two people, and one family meal in the non-vegetarian category. For vegetarians, there are three meal combos for individuals, and meals for couples, and for families.

KFC also changed its positioning. Now its messages seek to attract families who look not only, for food, but also some recreation. Kids Fun Corner is a recreational area within the restaurant to serve the purpose. Games like ball pool, and Chicky Express have been introduced for kids. The company also introduced meal for kids at Rs. 60, which was served with a free gift.

Over the years, KFC had learned that opening an American fast food in many foreign markets is not easy. Cultural differences between countries result in different eating habits. For instance, people eat their main meal of the day at different times throughout the world. Different menus must also be developed for specific cultures, while still maintaining the core product — fried chicken. You can always find original recipe chicken, cole slaw, and fries at KFC outlets, but restaurants in China feature all Chinese tea and French restaurants offer more desserts. Overall, KFC emphasizes consistency and whether it is Shanghai, Paris, or India, the product basically tastes the same.

Questions For Discussion

Analyse the case and determine the factors that have made KFC’s a success global business.
Why are cultural factors so important to KFC’s sales success in India and China?
Spot the cultural factors in India that go against KFC’s original recipe; KFC Fried Chicken.
Why did Kentucky Fried Chicken change its name to KFC?

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KFC uses demographic segmentation to serve the target market that has both vegetarian and non-vegetarian customer segments. Its offerings cater to kids, young adults, and almost all age groups. KFC's target audience can be categorized into four groups:

Teens and young adults
Budget customers

Its primary customer profiles incorporate teenagers and families because most teenagers are impulsive, and they love to dine out with friends or order online to have a meal with their family. The secondary customer profile includes adults, and the tertiary customer profile has people with lower budgets.

KFC started with an undifferentiated targeting strategy as it served the same menu worldwide. However, in recent times, it has started localizing its menu for better acceptability in the market. The KFC marketing strategy incorporates two types of marketing channels: Personal and Non-personal.

Personal channels involve communicating directly with the audience, such as a KFC salesperson introducing products to a customer in person or over the telephone. Non-personal marketing channels include the use of media both online and offline, such as

Promotion Campaigns
PR activities
Social Media

The KFC marketing strategy primarily includes SEO , content marketing , email marketing , social media marketing , and video marketing. However, the company pays special attention to social media marketing and uses the most popular digital marketing platforms to highlight its price and customer satisfaction.

KFC's Facebook and Twitter pages are extremely high on interactions with customers.

KFC's Facebook Pages

KFC uses Facebook as a medium to educate its customers with new offers, products, discounts, and other schemes. It also uses Facebook to address customer grievances. The brand ensures that they put across product-oriented content. It promotes online ordering facilities via social media.

KFC’s Official Facebook Page Displaying A Range of Meals

On festive occasions, the Facebook page has several animated photos that have often received tremendous responses and helped KFC connect with the audience on occasion. Their posts strike great engagement ratios, with likes soaring above 250,000 and comments reaching 5000+. On average, the total engagement level of the page is approximately 5% depicting quality interaction and engagement.

KFC's team that handles its Facebook page is extremely quick in responding to customers. They encouraged the audience to lodge a complaint of dissatisfaction at their outlets.

KFC's Twitter Handles

The Twitter handle of KFC is as interactive as the Facebook page. The team successfully pacifies unhappy customers and has an extremely high engagement level.

KFC’s Twitter Handle

To take interactions to the next level, the team organizes contests often integrated across Facebook and Twitter. They also promote new schemes and discounts via Twitter . Although the number of retweets or conversations on these tweets isn't quite high presently, the brand also seems focused on upscaling its business via Twitter.

KFC's Instagram Handles

KFC’s Instagram Post with the Latest Offers

KFC has several verified pages on Instagram for various countries besides its main page. It uses this digital marketing platform mainly to attract customers by posting luring images of food items on its menu. The brand also publishes posts about its present offers, new introductions, and other schemes.

KFC on Youtube

KFC India Youtube Channel Displaying Ads

Although KFC has video marketing on its list of digital marketing strategies, it uses its YouTube Channel for advertisements only. It has short videos of not more than two minutes, but the channel still has a good number of subscribers. The company uses Youtube as a secondary medium to show its ads.

KFC's Email Marketing Strategy

KFC restaurants create bulk mailings using the AMP technology to target its mobile phone users too. Its AMP emails are different from ordinary emails as these mails have interactive elements in the form of order buttons, product carousels, subscription forms, sliders, animations, an interactive showcase of meals, and more so that the emails do not get lost in the potential customer's inbox. The company also uses this strategy to segment its audience and personalize its email campaigns, targeting specific audiences. Their brand awareness campaigns lead to valuable conversions later.

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The KFC marketing strategy is strong and actively uses Twitter and Facebook to attract customers, share promotions and schemes, and solve customer grievances. The potential of YouTube has still not been completely explored by them.

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