You are on page 1of 30

Table of content

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”.

(5) HOW WE WORK TOGETHER: “Our leadership principles”.

http://www.kfcholdings.com.my/English/Flashsite/AboutCompany/OurGoals.asp

2
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

3
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.

4
External Environment

5
 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

6
 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

 KFC WIFI HOTSPOTS


Some KFC branches have WIFI hotspots connection where the customers browse for free. This allows the
customers to stay longer hours in the restaurants while ordering food and drinks from the restaurants. The
objective is to create loyal customers and increase sales.

 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

7
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.

 Government policy ( 8th Malaysian Plan of 2001-2005)

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

8
Key success factors

Integrated poultry system

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.

9
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.

10
SWOT ANALYSIS

Strength Weakness

 Quality and clean restaurants  24 hours service


KFC ensures all their restaurants meet the KFC with more than 390 restaurants in Malaysia only
quality assurance known as CHAMPS which less than 20% work 24 hours which causes customer
stands for cleanliness, hospitalality, accuracy, dissatisfaction and defection of loyal customers to the
maintenance, product quality and speed of competitors.
service.
 Employee training  Inconsistence of service provision
All the KFC staffs takes compulsory food Not all KFC restaurants provide WIFI services. Some
handling courses carried out internally by restaurants offers while others don’t which indicate
KFC in collaboration with ministry of health. inconsistency and lack of uniformity in service
 Location delivery.
KFC ensures the restaurants are opened
where the customer traffic is high for  Lack of home delivery
example in shopping malls and near Most of KFC competitors provide home delivery
universities. services like McDonald and Pizza hut while they don’t
 Marketing & Promotion offer thus giving advantage to the firm’s rivals.
KFC organizes “chicky carnival” which is
nationwide tour to popularize their products  No flexibility in KFC Menus
and brands. They are a lot competition and Customers lack the freedom to choose randomly the
prizes given, the “Chicky school” is another food of their liking. For example you can’t order dinner
example for essay competitions for students. plate without the drinks you have to order the complete
set which is too rigid.
 Relationship marketing
KFC maintains close relationship with its
customers by offering cheaper packages
11
known as “Chicky birthday” for the younger
children. They also KFC facebook page
where they will update their fans &members.
 Innovation
KFC continuously innovate and come up
products that meet the customer’s needs and
taste. For example KFC introduced “Chizzy
meltz” the first toasted product to attract
teens. The breakfast meal known as “KFC
AM” is another one targeting the working
class.

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.

 Start delivery services  Point of parity


KFC should introduce the delivery services to cater this The narrowing differences between the competitors
segments who enjoy the services of the firm’s rival to in terms of quality, innovation and service delivery
increase the company revenue.
12
 All KFC outlets should be 24 hours service is reducing customer loyalty which is a threat to the
Increase the number of restaurants offering 24 hour company sales in future.
services to serve many people and improve bottom-
line.

 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.

13
STRATEGIC THRUST CHART

Innovation Focus Branding

• Permeates firm • Product • Brand equity

• Entrenched • Segment • Brand Association


processes
• Geographic focus • Perceived quality
• Product / services

Differentiation Low cost

• Ingredient or • No frills product


component
• Product design
• Superior product
offering • Experience curve

• Added service
14
• Broad product line

• Quality
Strategic
Thrust

Synergy Channel The preemptive move


management
• Enhance customer • Product
value • Control channels
• Production system
• Reduce operation cost • Relationships
• Distribution /
services

Mid term strategic options

15
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.

16
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).

Pre emptive move

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)

17
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.

Marketing mix strategies

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.

Large size “Veg burger”

18
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

19
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.

Large Veg burger RM 8 Mid veg burger RM 6

Original RM 4

Place strategies

20
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)

Testimonials and endorsements

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.

ADVERT MESSAGE FOR KFC


21
HEALTHY LIFESTYLE STARTS WITH

VEG BURGER

HEALTHY FOOD!!!

Process strategies

22
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.

Recruitment and Training

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).

Motivation and teamwork

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

23
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.

24
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

Place Opening 60 new 20th 2011 to 30 April Mr. Theo walcott


outlets 2013

Increase the 24 hours 30th February 2011 to Miss Nazlem


operating outlet from 30th July 2011
100 to 390

People Recruitment 200 new 2nd January 2011 Mr. Keith


workers

Launching in house 4th January 2011 Mr. Keith


training & salary
increment

Process One more counter 10th march 2011 Mrs. Sharon


employee will added
every outlet to assist
during rush hours.

Physical evidence New dress code with 14th July 2011 Mr. Raj
KFC logo will be
launched

New painting to all 20th august 2011 Mr. Raj


outlets, new menus,
posters and new
dining tables will be
introduced

25
ACTION PLAN CONTINUATION

Marketing mix Strategies Time frame Person in charge

Promotion Sales promotion 10th January 2011 Mr. Hafidh

Advertising on TV3 12th January to 10th Mr. Soon Boon


March 2011

Advertising on RTM 15 May 2011 to July Mr. Soon boon


TV1 2011

Advertising on The 20th August to Mr. Soon Boon


Star December 2011

Advertising on the 15th February 2012 to Mr. Soon Boon


Strait Times 30th March 2012

Advertising on 1st April 2012 to 30th Mrs. Lakacha


RapidKL buses and April 2013
train contract will be
signed.

Working with fitness 10th June 2012 Mrs. Lakacha


first to add the Veg
burger in the diet
program

Introducing 30th September 2012 Mrs. Lakacha


endorsement from
David the Menara
axis fitness first
manager, and
testimonials from the
gym members.

Financial statements

KFC Holdings (Malaysia) Berhad

26
Income Statement

2011 2012 2013

RM ‘000 RM ‘000 RM ‘000

Revenue 102,080 107,184 112,543.2

Cost of sales 44,915 48233 48,394

Gross Profit 57,165 58,951 64,149.2

Admin. Expenses (29,603.2) (33,227.04) (33,763)

Others (3063) (4287.4) (6753)

Operating Profit 24,499 21,436.56 23,633.2

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

27
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

28
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

Hall, Pearson education Australia.

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

COMPETITIVE STRATEGIES: AN EXPLORATORY STUDY IN AUSTRALIAN HIGH-

TECHNOLOGY COMPANIES. Journal of High Technology Management Research, 11(1),

93. Retrieved from Business Source Premier database.

Papathanasis, A., & Vassillopulos, C. (1989). Functional integration: an alternative pre-emptive

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

29
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

30