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INTERVIEW CHAPTER 2 & 3:
KENTUCKY FRIED CHICKEN

KFC introduction
KFC (Kentucky Fried Chicken) is a fast food restaurant chain. This
company headquartered in Louisville, Kentucky, in U.S. The company is
a subsidiary of Yum! Brands(), a restaurant company that also
owns the Pizza Hut and Taco Bell chains. The founder was Harland
Sanders. Its the worlds second largest restaurant chain (as measured
by sales) after McDonalds with 18,875 outlets in 118 countries and
territories as in 2013.
KFC was founded Colonel by Harland Sanders (born on Sep 9, 1890)
who began sell fried chicken from his roadside restaurant in Corbin,
Kentucky during Great Depression. He identified the potential of the
restaurant franchising concept and the first Kentucky Fried Chicken
franchise opened in Utah in 1952. KFC popularized in the fast food
industry, diversifying the market by challenging the established
dominance of the hamburger. By branding himself as Colonel
Sanders, Harland became a prominent figure of American cultural
history, and his image remains widely used in KFC advertising.
However, Harland sold the company to a group of investors led by John
Y. Brown and Jack C. Massey in 1964.

KFC was one of the first fast food chains to expand internationally. In
the mid of 1960s, KFC opened outlets in Canada, the U.K, Mexico and
Jamaica. Throughout the 1970s and 1980s, KFC went through a series
of changes in corporate ownership with little or no experience in the
restaurant business.
In the early 1970s, KFC was sold to the spirits distributor Heublein who
were taken over by the R.J Reynolds food and tobacco conglomerate,
who sold the chain to PepsiCo. The chain continued to expand
overseas. However, in 1987 became the first Western restaurant chain
to open in China, which is now the company's single largest market.
PepsiCo spun off its restaurants division as Tricon Global Restaurants,
which later changed its name to Yum! Brands.
Yum! Brands company owns 4491 stores in U.S, 4563sores in China
and 9821 stores across the rest of countries. They totally own the
18875 outlets in 118 countries in 2013. Their average annual sales per
unit is 1.2 million. In 2014, they already had more than 41000
restaurants in over 125 countries and global sales totaled more than
US$ 13 billion.

Question 1: What is the competitive implication that


KFC faces in its industry?
What is price war?
The implications

for

a price war are intense rivalry between

interdependent companies which occurs when one company makes a


move and the others react. this rivalry continues to increase as each

company tries to undercut the others price and offer more valuable
products, finally resulting in decreased industry profits.
What are the implications of price wars for KFC?
According to the definition of price wars, there must be a competitor to
compete with KFC. Once, the rivalry of a company such as MCdonalds
and KFC starts, KFC focuses more on differentiating, launching new fast
food product,

and marketing efforts to raise sales than bitter price

wars and advertising battles, while the other company is trying price
cuts. but on the whole rivalry in the industry remains moderate due to
the existence of numerous players operating in various sizes.
How KFC deals with the threat of price wars?
The most common way to try and deal with the threat of a price war
by seeking to consolidate the industry following the price of the
dominant company, however, price-fixing and collusion needs to be
avoided (the idea cannot be communicated between companies).
it is not very difficult to enter the fast food industry, but it is extremely
difficult to enter as KFCs competitor. So, for KFC, they overcome this
by differentiating its products, effective marketing and branding
efforts. In this way, KFC escapes from potential price wars. On the
other hand, KFC may want to reduce its cost so that it will survive in
case of price wars.

Question 2: What are opportunities and threats that


kfc has within the industry?
Risk of Entry by Potential Competitors

In fast food industry, MacDonald ranked as the most favorite food in


Taiwan, and follow by MOS BURGER and KFC. MacDonald that has been
developed since 1980 has become a closet rival of KFC. Operate a fast
food store must to investment requirements of equipment, and it is not
difficult to reach, so it is easy to invest
Bargaining power of buyers
Operation business in order to create the requirement of customer, and
the price and the quality inference consumer decision making.KFC use
the combining promotion, decrease their price, and give a discount of
their product to their consumer. The buyer power of KFC is high when
this is proved that the consumers able to influence the price when they
have many choices, so it presents high bargaining power of customer.
Bargaining power of suppliers
These are a lot of suppliers available for KFCs raw materials.KFC can
easily switch their supplier to another supplier since the materials need
in the process of producing KFC is easy to get such as chicken.In 2004,
KFC has some internal problems and issue regarding of their raw
chicken supplier.KFCs supplier was found doing something horrible
when slaughtering the chicken. KFC decided to terminate the contract
between them and thus find the new supplier to replace them.So
,chicken supplier cant easily increase the price for chicken since their
supplier power is low.
THREAT OF SUBSTITUTES

Including

todays

emerging

industry,

like

bakery,

Chinese

fast

food. .They are enough to achieve consumers needed. There are all
the substitutes, and they can replace KFC.
Power of complement providers
Complementors-companies that sell products that add value to other
product.Like PEPSI is strong complementors, if KFC revenue is
decrease, PEPSIs cola will decrease.

Question 3: How does KFC transform inputs into


outputs that customers value?
Value Chain
The idea that a company is a chain of activities that transforms
inputs into outputs that customers value

Primary activities
The primary activities is activities related to the design, creation,
and

delivery of the product, its marketing, and its support and after-sales
service.

Research and Development


The design of products and production processes.
R & D can increase the functionality of products, making them more
attractive to customers.
R & D function can help to lower costs or raise the utility of a
product and
permit a company to charge higher prices.
R & D KFC
The packaging material and carton design are all recycled paper ,
environmental concerns and litter.
Almost all of KFC packaging are labeling by their logo or name.
Production
The creation process of a good or service.
The production function of a company helps to lower its cost
structure.
The production function can also perform its activities in a way that
is
consistent with high product quality, which leads to differentiation (and

higher value) and lower costs


Product of KFC
The product that KFC sells are Egg bacon chesse burger, chicken
nugget,
chicken burger, Fried Fries, etc.
The different products that they sell than other product are Chicken
buckets
(This chicken buckets have 5 chicken in one bucket), they also sell an
egg tart,
and mexican salsa king roll( ), popcorn chicken,
American
BBQ sauce smoked chicken( BBQ )
Marketing and Sales
The function is to help a company to create value.
Through brand positioning and advertising
Marketing and sales can also create value by discovering customer
needs
and communicating them back to the R & D function of the company.
Marketing and Sales of KFC
KFC provides a family package like 6, 8 or 10 chicken with additional
meal. (If you choose the family package with 6 chicken you can get 2
additional meal, if you choose with 8 chicken you can get 3 additional
meal, and if you choose with 10 chicken you can get 5 additional
meal.)
For the additional meal you can choose whether you want drinks,
chicken
nugget, salad, soup, fried fries, or corn.

KFC not only provide the family package but also another package
like
two burger with two drinks. The package usually will more cheaper.
KFC advertising is simple and easy to understand, because they
want the
customer know what they are promote about.

Customer Service
Customer service can create superior utility by solving customer
problems and supporting customer after they have purchased the
product.
Customer Service of KFC
KFC provides delivery service
KFC also provides a clean place for the customer to eat.
Support Activities
Activities of the value chain that provide inputs that allow the
primary activities to take

Materials Management
Definition:

Controls the transmission of physical materials through the value


chain
Through production and into distribution
KFC:
Buys products in bulk to control purchasing costs and supply line
from suppliers
Regularly reviews delivery, quality and cost from their suppliers to
increase efficiency and streamline the process of the procurement
Directly linked with their franchise and receives orders for supply of
raw material
Can place orders through information system or by phone
Human Resources
Definition :
Ensures that the company has the right combination of skilled
people to perform its value creation activities efficiently
Ensures

that people

are adequately

trained, motivated

and

compensated to perform their value creation tasks


KFC:
KFC recruiting procedure is easy and they have online systems,
where they have all available vacancies by post, location or area.
Training includes:
+Workbooks
+Quizzes
+On the job
Employees work together as a team
KFC does their best to make the job interesting and exciting for
workers

Information Systems
Definition :
The electronic systems for managing inventory, tracking sales,
pricing products, selling products, dealing with customer service
inquires and so on.
KFC:
Each KFC outlet use MIS in accounting, knowing production
HR policies: helps them to rate their employees.
MIS systems let the KFC management:
To capture information and store it, whenever they are making bills
it helps them to count sales per day, per week and per month
because a copy of the bill is stored in the computer.
KFC has a comprehensive online websites: updating prices, latest
activities, promotions, advertisements and customer feedback
Company Infrastructure
Definition:
The companywide context within which all the other value creation
activities take place: the organizational structure, control systems
and company culture
KFC:
Highly impressive and uniform design structure.
Fascinating and charming all over the world
Ideal color schemes, pleasurable lighting outlets, comforting sitting
arrangement, special block for kids