Kfc International Business free essay sample

At first the Colonel started to implement the franchising business operation with the Chicken Secret Recipe by travel tower to tower. In 1960s because of the Colonel’s hard working Kentucky Fried Chicken had some 600 franchised outlets in US and Canada. The most important year was 1974. In 1974 the American giant, Heublein bought Kentucky Fried Chicken and the Colonel remained a public spokesman for the enterprise. Heublein was willing to support the Kentucky Fried Chicken’s aboard expansion plan and constantly implemented the franchising business operation. Kentucky Fried Chicken became more famous in the world.After that the enterprise was sold twice. Finally the Kentucky Fried Chicken was taken over by PepsiCo in 1986. In order to decrease the risk, PepsiCo remain the franchising business operation. Despite it decreased the financial risk, the local franchisees insisted to make the maximizing profits. Therefore the local franchisees did not care about quality, service and cleanness (QSC). We will write a custom essay sample on Kfc International Business or any similar topic specifically for you Do Not WasteYour Time HIRE WRITER Only 13.90 / page But the most important element that KFC got the success was Quality, Service and Cleanness (QSC). So the enterprise wanted to find out the balance between corporate and cultural sensitivity.Discussion and Analysis According to the case of Kentucky Fried Chicken and the Global Fast-Food Industry from Jeffrey A, this part of report will be divided into five main aspects to illustrate: International trade theories, FDI, Risk and Opportunities, Marketing, Strategies. International trade theories International trade theories help managers deal with the international business’s problem and influence the decision of strategies. And this part will be divided in to three parts: culture, political, legal and economics. Culture Culture situation for international business is a big problem.In 1980s KFC started to build the restaurants in German. But KFC filed in the German market because Germans did not like take-out food. However McDonald could get the success in German. McDonald made many changes to adapt the German market. Firstly McDonald changed the menu which Germans liked. Such as, German beer was provided in the restaurants. But KFC was more success in Asia and Latin America because chicken was the traditional dish in there. Political In 1994, United States, Canada and Mexico created the North American Free Trade Agreement (NAFTA). There were not any tariffs on goods traded between those three countries. KFC had a good chance to development because of NAFTA. Economics Mexico was a big market in Latin American for KFC. It had 98 million people and the transportation casts was low resulted in Mexico was near US. Also the wages in Mexico was lower than the US’s. In US the higher divorce rate was seen by the government. More and more individuals often ate out and mostly married women chose to ate outside because they had careers. The demographic changes created a good economic environment to expand the fast-food chain.Legal In 1990 Mexico acted a new law. The new law protected the technology transferred. The taxes about technology assistance were increased to 35%. During that time KFC built rapidly many franchised restaurants.. FDI Franchising and Licensing Licensing is a licensor grants a licensee right to in tangible property to use in a specified area for a specified period of time in exchange for a fee. Franchising is a specialized form of licensing in which the franchisor grants an independent franchisee. These two kinds of foreign direct investment have been implemented by KFC for a long time.In the last 1950s Colonel Sander started to expand KFC by the franchising operation. But when PepsiCo bought the KFC, PepsiCo made a new contract for the franchisees in order to control the franchised restaurants. In the meantime, PepsiCo spent a big cash flow on buying back the week franchised restaurants. However this operation needed higher levels of investment and KFC returned on assets slowly. The investors thought PepsiCo’s return on assets did not match returns delivered by Coca-Cola. Therefore PepsiCo sold back the franchised restaurants. MarketingThis part will explain the marketing of KFC base on 4 P’S: production, pricing, promotion and placement. Production KFC dominated the chicken segment in US. During 1990s Boston Market absorbed a lot of customers form KFC because of its roasted chicken. The Boston market’s chicken was more health and its menu was more broaden which included ham, turkey, meat loaf, chicken pot pie, and deli sandwiches. So KFC introduced a new product called Rotisserie Gold in 1993. But the new product was not responded well by the customers because the customers did not like take whole chicken away. So in 1996 KFC reintroduced a roasted chicken which could be sold by piece. Pricing The pricing of KFC always was not expensive. The pricing of the product contained the taxes, excise duties, profits and the cost. Promotion Promotion is very important for the fast-food restaurants in other words you can say that promotion is the key of success. During the late 1960s, KFC was the world’s famous brand image because of the promotion’s effect. One of KFC’s promotions was its Neighbourhood Program. Some restaurants offered special menu to the black community and the employees wore African-inspired uniforms. This program increased sales. Placement The placement also was essential for KFC. The sites were more and more expensive so that increased the cost and decrease the profit margins. So KFC implemented a mew three-pronged distribution strategy. Firstly KFC open the restaurants in the non traditional outlets such as shopping mail airport and railway station. Secondly KFC started to introduce the Home Delivery. Thirdly KFC and Taco BELL were restaurant co branding. In 1997 KFC restaurants added Taco Bell to the menus. So many customers came to KFC during the day. StrategiesExternal analysis KFC could not able to bring the new products to market and encountered a big setback in 1989. When KFC was experienced its sandwich, McDonald already sold its sandwich to the market. And then McDonald developed strong consumer awareness for it sandwich. In 1991 KFC supported many kinds of food to meet the customers’ need. These products included Oriental Wings, Popcorn Chicken, and Honey BBQ Chicken. Also KFC introduced its Neighbourhood Program. Some restaurants offered special menu to the black community and the employees wore African-inspired uniforms.This program increased 5% to 30% sales. And then KFC implemented a mew three-pronged distribution strategy to solve the problem that the sites were very expensive. Internal analysis In 1986 PepsiCo bought Kentucky Fried Chicken from RJR for 841 million pounds. Before 1986 the management of KFC was laid-back. The employees enjoyed the good atmosphere in KFC due to the efforts of Colonel Sanders to support for KFC’s employees’ wages, pension and other non income needs. However PepsiCo change the approach to the management. PepsiCo rotated the anagers of KFC, Pizza Hut, Taco Bell, Frito lay and Pepsi-Cola through these five sectors on average every two years. One PepsiCo manager said that:†You many have performed well last year, but you do not perform well this year, you are gone, and there are 100 ambitious guys with Ivy League MBAs at PepsiCo who would have to take your position. † However this kind of management put too much pressure on the managers of KFC. After PepsiCo controlled the KFC, some downsizings were happened. Many loyalty employees were fired. Even the turnover of the fired managers was higher than the other’s. As well as the KFC franchisees were treated badly by PepsiCo. PepsiCo made a new contract for the franchisees. According to the new contract stipulations, PepsiCo had more power to take over week franchisees and franchisees should pay more royalty fees. All the franchisees fought against the new contract because it damaged the benefit of the franchisees. The problem of the new contract was solved until PepsiCo agreed to change the objectionable parts of the new contract. PepsiCo’s products were divided into three markets: soft drinks, snack foods and fast-food restaurants.During the 1990s PepsiCo spent one-half annual found on the market of fast-food restaurants. But the market of fast-food restaurants only produced one-third capital every year. So the found was transferred from the market of soft drinks, snack foods to the field of fast-food restaurants. And then because of the transfer of the capital, PepsiCo was hard to compete with Coca-Cola and influenced the stock price. So PepsiCo built a new company which controlled the fast-food restaurants. Then the new company created 4. 7 billion pounds. Risk and Opportunities KFC suffered a variety of risks and opportunities in Mexico. In 1995 KFC closed all the franchised restaurants in Mexico and operated the company-owned restaurants. So KFC could provide more good quality, service and cleanness. But the company-owned restaurants needed more much money so that KFC could not expand rapidly. The peso crisis of 1995 influenced the economic in Mexico. But KFC’s business basically was not damaged by the inflation because mostly suppliers of KFC were in Mexico. Brazil was Lain America’s largest market. But McDonald was building first-mover advantages and KFC even had implement business in Brazil. KFC planed to expand into the economic market in Brazil.In Latin America KFC was more aggressively building franchised restaurants in order to build KFC’s brand. Conclusion and Recommendation According to the discuss and analysis, KFC should solve immediately the internal management problems to change the high performance, high accountability, highly driven culture and create a happy atmosphere that all the employees work comfortable in. PepsiCo could build more company-owned restaurants. It is easy control the Quality, Services and Cleanliness to improve the band image. Also KFC should open the restaurants in Latin America where is a large untapped market.KFC could develop the online shopping system that customers could buy products in the internet and delivery to the home. All in all, KFC is the second largest fast food restaurant. It is a successful enterprise and still is able to potential development. PepsiCo’s culture should better integrate into the KFC in order to increase the competitive and provide more health and better products to the world’s people. Reference Jeffrey A. Krug case34 Kentucky Fried Chicken and the Global Fast-Food Industry â€Å"KFC Corporation. †International Directory of Company Histories. 2008. Encyclopedia. com. 1 April. 2012