CIA I

INTERNATIONAL BUSINESS

TOPIC

INTERNATIONALIZATION STRATEGY - KFC

By

RITIKA HALDER

SECTION: M5

REGISTER NUMBER

2127851

SUBMITTED TO:

Dr Sivakantha Shetty

SCHOOL OF BUSINESS AND MANAGEMENT

CHRIST (DEEMED TO BE UNIVERSITY), Bengaluru

DECEMBER 2022
 INTERNATIONALIZATION STRATEGIES - KFC

Kentucky Fried Chicken popularly known as KFC was founded by Colonel Harland Sanders
in 1952 and is a well-known international fast-food restaurant throughout the world. Fried
chicken, hamburgers, chips, cola, and other western-style fast food are among KFC's most
popular items. The biggest competitive power of KFC is its unique fried chicken which is
quite delicious and impressive. As a result, KFC gradually gains popularity and acceptance in
America and around the world. KFC has been a huge success in terms of internationalization,
with locations in virtually every country. With outlets opened in Canada, the United
Kingdom, Mexico, and Jamaica by the mid 1960’s it was one of the first American fast-food
chains to expand internationally.
It has created a superpower in the fast-food sector. At the outset of the firm, KFC's consumer
base was made up of youthful and working-class people. As of now the KFC franchise
consists of more than 25,000 store outlets in 145 countries employing over 750,000
employees.

Figure 1World map of KFC outlets, red showing current locations and black showing former locations
INTERNATIONALIZATION PROCESS

The first franchise of KFC was started at Salt Lake City in 1952 which can be accounted as
the beginning of the internationalization process of KFC. The company had expanded to
Canada with over 190 franchised outlets by 1962 and now the company had 400 outlets in the
US and Canada. In 1962 the first overseas outlet of KFC was opened in England and by 1970
had its presence in 48 different countries with 3,000 outlets. In 1982 PepsiCo acquired the
company and the brand was added to the company's restaurant division Along with Pizza Hut
and Taco Bell. KFC first entered China in November 1987, with a location in Beijing. KFC
had 5,149 locations in the United States and 9,407 locations worldwide by 1994, employing
more than 100,000 people.

KFC entering the Chinese market shows the learning process KFC went through to survive
internationally. In 1987 KFC opened its first outlet near Beijing's famous Tiananmen Square,
becoming the first American fast-food chain to enter the Chinese market. The Three-story
outlet was the largest restaurant under KFC in the world and it gave the company a strong
start for future success in the country. But the business strategy KFC used in America which
was of having a limited menu, low prices, and an emphasis on takeout did not work for the
Chinese market, so KFC took a different approach where they added localized products in
addition to their signature fried chicken buckets. Many of the Chinese-inspired options on the
international menu would be perplexing to American diners, such as egg tarts, shrimp
burgers, and vegetable soup. KFC even sub-segmented product offerings within China to
cater to these local tastes, recognizing Chinese eaters' fondness for the flavors of their own
regional cuisines.
KFC has continued with this strategy ever since and this is used in other countries as well.
The glocalization of products are also done in other emerging markets such India.

MODE OF ENTRY
KFC uses a franchise model as the mode of entry to new and emerging markets. The
franchise model is used when the parent company, in this case KFC, has a unique product and
grants permission to others to use his logo, brand name, operating methods, and so on
through licenses. Franchises that are allowed to use KFC's concept and trademark in their
business must pay a royalty fee of 5% of their sales. Before entering a new market, KFC
evaluates the local market and prospective expansion opportunities also make sure the
product portfolio adheres to the local culture and taste. The introduction of new dishes such
as Tandoori Chicken Zinger in India, Scoff EE Cup in the UK, Porridge in China that satisfy
the local tastes of the people of that location while preserving its original roots is an excellent
example for the same.

Franchisees have the right to operate KFC outlets in accordance with the franchisor's
procedures and techniques for using KFC trademarks under the provisions of the franchise
agreements. KFC franchisees also have access to the whole KFC product line. The KFC
franchisee is responsible for managing, developing, and administering their local market
business after being granted the rights to the KFC idea. This technique allows the
organization to benefit from local knowledge while simultaneously providing more control
and a minimal financial investment risk.

MULTI-DOMESTIC STRATEGY

KFC employs a multi-domestic strategy to penetrate both established and emerging markets
while maximizing local responsiveness by offering low-cost foods tailored to regional tastes.
This is achieved by delegating decision-making authority to local business units in each
country, allowing them to develop products and services tailored to their respective markets.
KFC does not open restaurants solely on the basis of the American model. Wherever the
corporation operates, it adapts to local tastes and effectively negotiates as cultural and
political climates shift. Even though the global menu stays the same, KFC introduces various
local exclusive products in their portfolio to attract the local customer base and tries to
localize as much as possible. For example, KFC sells tempura crispy strips in Japan. In
Northern England, KFC emphasizes gravy and potatoes, whereas fresh rice with soy or sweet
chili sauce is served in Thailand. The company creates a potato-and-onion croquette in
Holland. Pastries are sold alongside chicken in France. In China, the chicken gets spicier
towards the inlands.

This strategy has proved successful for the company around the world but it compromises the
standard taste it promised when it started out as different countries have different tasting
products.

EPRG FRAMEWORK

KFC's management perspective is geocentric when it comes to international business

considering KFC’s main activity, the franchising business. The company ensures that they
tailor the products according to the location and the culture of the customers present in that
location. For example, to cater to vegetarians in India, KFC offers a ‘vegetarian thali' and a
Chana snacker. It hires more people from these countries and plays games that reflect their
cultures. The company initially followed an ethnocentric approach and they stuck with the
American menu during expansion, but after entering China the corporation faced challenges
which made them progressively opt for a geocentric approach.

IMPACT OF BUSINESS ENVIRONMENT - PESTLE ANALYSIS

 POLITICAL FACTORS:
KFC is a well-known burger restaurant chain with locations all over the world. The
government rules that control fast food operations may have an impact on KFC's
operating and operations. The public's health is of high importance to the government,
and any fault with it can cause a slew of problems for the organization. To stay out of
controversy, KFC must have a positive relationship with the government.
 ECONOMIC FACTORS:
The global slowdown has resulted in a reduction in fast food consumption of the
people. This has put restaurant chains like KFC in a position of struggle to expand its
business in new and emerging markets. Moreover, the association of the brand with
chicken is an issue as there is a vegan trend and many vegetarians did not visit KFC,
despite the fact that it offers limited vegetarian option. another issue is that because
KFC is known for its chicken, it is unable to broaden its menu to include healthier and
more diverse dishes. However, the company has recently made a brave move and
 begun experimenting with Vegan goods in order to include more people into their
chain.
 SOCIAL FACTORS:
The company’s move of changing the brand name from Kentucky fried chicken to
KFC have had a positive effect as the word “Fried “is negatively associated with
unhealthy foods. With people becoming more health conscious, the brand can avoid
the negative impact through this. Even though the company is selling the same
product, simply altering the name has helped the company tremendously, as it has
removed the problematic “Fried” word and the abbreviation KFC has become catchier
and more popular.
 TECHNOLOGICAL FACTORS:
KFC is a tech-savvy corporation that is continuously seeking to improve its
technology in order to better serve its customers. It predicts what people will order
using facial recognition technology. It will gather data from many users, analyse it,
and then decide what a customer would buy based on their appearance through
machine learning. The company has launched a mobile payment system that allows
customers to pay in stores and at drive-throughs using Apple Pay, Android Pay, and
Samsung Pay. This will speed up the process and ensure that the meal is delivered as
soon as possible to the consumer. KFC also provides cutting-edge delivery
technology.
 LEGAL FACTORS:
Around 120 countries around the world are served by the company. It must adhere to
all applicable laws in the countries in which it operates. In its financial statement, the
company should provide all relevant information so that all stakeholders are aware of
the company's true position. Noncompliance with the law can place the company in a
difficult spot. Because KFC is in the food business, they must adhere to specific
safety and quality regulations set by many countries, which the firm must comply
with.
 ENVIRONMENTAL FACTORS:
When customers become more conscious of the environment, businesses feel
compelled to take steps to make their products more environmentally friendly and
long-lasting. KFC has taken many steps to minimize its carbon footprint and make its
supply chain more environmentally friendly, all while keeping the interests of its
 customers in mind. KFC has reduced its packing by 1400 tons by switching from
cardboard to recyclable and biodegradable paper. It partnered with Tidy Planets,
which developed the CHiP small-scale cogeneration system, which converts wasted
cooking oil into energy and hot water on the production site. It will result in each
store saving 1000 miles of garbage transportation and lowering carbon emissions by
more than 4000 tons per year.

According to the analysis, KFC is on the right track as it expands in the global consumer
market. The company has to adhere to its strategies at the same time improvise to survive in
the changing market and cater to the changing needs of the customer.
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